General Motors’ focus on four brands – Buick,Cadillac, Chevrolet and GMC – indicates for the near term that light-duty trucks and SUVs will continue to be a part of the product mix, with new SUVs in the form of a Cadillac SRX crossover, Chevy Equinox compact SUV, and the GMC Terrain compact SUV among six new models announced for 2010.

While touting leading-edge design, technology, engineering excellence and quality in their ‘re:invention’ strategy, GM might see a glimmer of hope in a recent survey from J.D. Power & Associates, entitled “Automotive Emerging Technologies Study”, released this month. The study, which is designed to measure familiarity, interest and purchase intent for emerging automotive technologies, polls consumers before and after an estimated market price is revealed. For example, in the survey, 67% of the 19,249 respondents indicated that onboard navigation systems to guide them to the nearest Starbucks or other destinations were of interest.When the cost of a factory-installed navigation system was revealed at $1,600, interest dropped to 20% overall, while 45% of those who owned premium vehicles still chose the factory onboard systems versus lower cost off-board systems.

Mike Marshall, J.D. Power director of emerging technologies said, “Although the factory-installed options are considerably more expensive than an off-board navigation system, the price difference is not reflected in a proportionate decrease in consumer interest levels. Among consumers who express interest in both types of navigation system, seven out of ten indicate they would choose a factory-installed navigation system rather than an off-board version—despite the cost premium.”Other technologies fared about as well, and among consumers who listen to their portable digital music player in their vehicle, more than one-half use an auxiliary input jack, while approximately 20% use a wireless FM transmitter. Nearly 2/3s of consumers indicate that they would like the ability to listen to a portable digital music player through their vehicle’s speakers, while 27% express a desire to use a smartphone’s music capabilities in conjunction with their vehicle’s audio system.

Among consumers currently utilizing their vehicle’s Bluetooth functionality, initial interest for wireless connectivity in their next vehicle is 68%, compared with just 47% among those who have the feature but do not use it in their vehicle.Premium surround sound systems garner the highest interest rate among near-term vehicle intenders at 72%, while just 61% of consumers who plan on purchasing a new vehicle in two years or more indicate interest in this feature. “Consumers nearing the final phase of the vehicle purchase process are often more well-versed on vehicle options and features than those in the early stages of shopping, and likely have recently researched the available vehicle specifications,” stated Marshall, who added, “The increased familiarity of the possible benefits and conveniences of these technologies may lead to an increase in interest.”

How this bodes for an industry accustomed to making their profit on all the bells and whistles, and GM in particular with a plethora of trim levels and options, remains to be seen. In addition, how does the automotive aftermarket deal with consumers who are increasingly more interested in having the OEMs integrate these entertainment and connectivity technologies into the new vehicles? Time will certainly tell – but that’s oneluxury automakers don’t have, and a gamble they can’t afford to take.

As a fixed cost of car ownership, automobile insurance currently competes for financial resources with car payments, registration fees, and property taxes. If we were to make insurance a per-mile cost of driving, however, operating costs, which now are dominated by gasoline, would approximately double. Why make such a change? Two reasons are obvious: to enhance affordability and to reduce externalization of accident costs. A third and less obvious reason is suggested by the fact that this change would reduce annual ownership cost by several hundred to several thousand dollars for all drivers and cause operating cost to increase by a similar range in amount. We will see, however, that the insurance increase in operating cost for most drivers would either be greater or less but not the same as the insurance decrease in their ownership cost. An important political question is which groups would spend more for insurance and which would spend less than they do now.

A more fundamental question, however, is which system—fixed cost or operating cost—can more accurately measure and charge for the risk of driving an automobile. Economists generally agree that insurance cost pressure should provide individuals with incentives to control accident risk (Williamson et al., 1967, Vickrey, 1968, Calabresi, 1970). We will consider how well the current system provides this risk control function and whether a change to per-mile charges would do a better job.

Insurance  would be changed to an operating cost if mandated by a one-sentence amendment to insurance rate regulation law, introduced but not enacted several years ago in Pennsylvania (Butler, 1993a, National Organization for Women, 1998) and proposed in other states. The amendment would require companies to convert their price unit—and thus their cost unit—from dollars per vehicle year to cents per vehicle mile. But what would this change mean for women? This question is especially relevant since the system now in use has been defended for several decades as a benefit to women and used to justify resistance to any civil rights measure to prohibit pricing by driver sex (recently by Brown, 1995, but see also Butler, 1995). As a lower mileage group, women might on average spend less for auto insurance, but insurers argue that price classes are already tied to the annual mileage of cars and also to women’s lower accident involvement and better driving records.

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