We tend to focus on the energy we put into the car – you know, that liquid energy we currently use as fuel – rather than look at the total energy budget of the car. Which of course would be fuel over lifetime of car+car manufacture+car repairs and maintenance+fuel to move raw materials+share of cost of infrastructure and so on. That would include roads, ships that transport cars, port facilities for cars, car parks and even the family garage. It would include opportunity costs as well (you know, what you could have done with all of that land and money if it wasn’t tied up as freeways and so on). People install fluoro lightbulbs and offset their petrol expense and then declare themselves ‘carbon neutral’, when of course they are not even close. Worse still they buy a hybrid car and think ‘job done’. Baloney, it’s just job started.
Now it has been said that roughly 40% of the total energy budget of a car is expended just in its manufacture. Other people have suggested 60%, some much less. It depends of course on the size of the car, the cost of raw materials and fuel and how far that car travels in its life time. But is it true? Could so much of the energy expense actually occur just in manufacture? Now if you extend the life of the car (and continue to drive it, of course!) you increase the likely absolute cost of the fuel whilst diminishing the proportion of energy used in manufacture. But of course nothing is ever that simple, is it? You should factor in a share of the infrastructure, too. Can’t drive a car without roads after all (even off-road vehicles end up on road at times).
Unless of course we make it simple, just to prove a point. So let’s calculate how much energy is expended in making a car by setting aside the (probably!) much larger infrastructure costs for the moment. We could calculate this by breaking the car into material types by weight and looking up melting points of metals and so on and calculating back from there, but let’s just do a rough calculation simply based on retail price. We will assume that there are no energy subsidies (when of course there are) and that the price is fair, i.e. not below cost (or “dumped”). Big assumptions, yes. But we can’t be too far off, surely? (He writes, hopefully.)
Anyway if we choose 3 cars – a Hyundai Getz, a GM Commodore and an Alfa Romeo Brera and make a few more rash assumptions we may get some answers. The recommended retail of these cars in Australia is $A15,490 for the Getz 1.6l; $A39,900 for a Commodore Berlina V6 and $A87,990 for the Brera AWD v6. We will assume that the dealer makes 3% on the Getz, 8% on the Commodore and 15% on the Brera. (I’m assuming a very competitive market where more money is made on servicing and value-adds than selling the car itself – I could be way out!) There are many such layers of margin and tax to peel away, so here’s a table to show my calculations…

I have to tell you I was somewhat surprised at the estimated factory cost of the Alfa Brera. It must be wrong, surely? Somewhere my assumptions have gone awry, because seemingly the prestige European sports luxury car has a lower base cost per vehicle than the locally built sedan. But then I wondered if the still-somewhat protected nature of the small Aussie car manufacturing industry may have distorted the real cost of manufacture. So I bumped up the factory margin for the GM Commodore; but perhaps I should also knock the Alfa factory margin down somewhat? I thought a prestige car must attract a good margin, but maybe not so much when it’s an Alfa?

So let’s peg the Alfa back…

OK, these figures are still fantasy and probably out of kilter all over the place, but it’s still remarkable that the $80K+ RRP Alfa Romeo comes so close to the factory costs of the local Aussie sedan and the imported Korean small car, but there you go. You can play with the numbers yourself and get a somewhat different result – but it does illustrate how taxes alone distort pricing. And I didn’t even factor in the now-small import duties. Oooops – well you can do it yourself, and it just shows again why we probably shouldn’t be making cars in Australia. It may well say something similar if we chose to decompose US car prices, but I’m too lazy to go to further trouble.

Anyway, our aim here is to estimate energy costs, and you can see immediately that the factory’s raw material + transport + energy costs are going to be quite small individually, but proportionately larger for the ironically more economical small car. If I was to hazard a guess I’d say transport of resources currently would be 20%, energy 20% and raw materials 60% – but that is a guess.

Which would in any case give us this result:

If that breakdown is even close it means that the fuel cost will quite quickly overtake the cost of the energy used in manufacture. Of course we aren’t dealing with a level playing field at all, in fact various governments at times make decisions to subsidise development and infrastructure for export industries, so the real numbers are probably a few – maybe many – percent higher. I’m still surprised at the moderately low manufacturing costs overall, but that’s modern manufacturing at work isn’t it? Note also that if we ramp up energy costs we’d certainly change the nature of the whole manufacturing game. Transport costs would go through the roof for starters and the percentages will go south. But so will fuel prices…