Is the Automotive Industry In a Second Malaise Era?

Growing up around car lots, I heard a lot about the Malaise Era and have always been fascinated by the exodus of muscle cars from the American way of life.?

If you think the contrast between the Chevy Chevelle and a compact sedan today is stark, consider how it must have felt to have gone from the big-horsepower Mustangs touting 390s and 428 Cobra Jets to the pitiful Mustang II, with its maxed-out horsepower of 139 hp.?

Long gone were the glory days of American exceptionalism, muscle cars, movies like Bullitt and American Graffiti, rising wages, and cheap gas.

The Malaise Era encompassed many facets of changing American life, from economic stagnation to cultural unrest and a general pessimism in the air. While we escaped that era with a return to bigger and more powerful engines, many people fear that we could soon fall back into it once again.?

Today, CAFE regulations continue to hamper production, and the breakneck speed in which EVs are being forced to market could threaten a similar crisis. Pair that with all of the other problems we currently experience, from rising fuel prices to stagnant wages, and it’s becoming clear that if we are not currently in a second Malaise Era, we are fast approaching one.??

What Is the Malaise Era?

In automotive terms, the Malaise Era was a period between 1973 and 1983 when car production had declined significantly in quality and value as a whole host of external forces converged in the automotive industry simultaneously.?

Stricter emissions standards brought by the Clean Air Act and new CAFE standards required manufacturers to lower horsepower to save on fuel. Before the age of digital engine controls, this simply meant creating smaller engines.?

The 1973 oil embargo tripled the cost of fuel overnight, leading demand toward more compact cars anyway.

Further regulations also seemed to converge that year, such as new gasoline standards that excluded lead and required retailers to adjust. Insurance companies demanded that new cars be outfitted with new bumpers that could stand a 5 mph impact, leading manufacturers to make even more adjustments. All of these regulations not only shrunk the engines inside of cars from this era but also impacted their design.?

Large muscle cars were replaced by slimmer, subcompact vehicles that were more utilitarian than aesthetic. Take note of the 1975 Dodge Charger and its previous counterparts.?

A proposed law regulating rollover standards and declining sales also resulted in the disappearance of convertibles for a brief period between 1976 to 1984.

Another hallmark of the Malaise Era was the rapid decline in manufacturing quality, demonstrated by a string of recalls and defects that plagued the market throughout the 70s. While some gems could be scraped from this era, it was a regrettably forgettable one and marked the decline of not just the industry as a whole but also great American cities like Detroit and American exceptionalism across all industries.?

Parallels Today to the Malaise Era

Rising prices, stagnated wages, increased fuel costs, and an overinflated new car market are just some of the broader economic reasons for pessimism in the industry.

Despite the continuous output of new and somewhat innovative vehicles, my fear is that these innovations are not being fully optimized and are channeled into some of the wrong technologies.

First, let’s examine the broader economic conditions:

• Average new car prices hover around a $730 monthly payment and luxury car prices can be significantly higher. While these cars come with great safety features and some amenities, there is not much else that separates them, say, from a car manufactured a few years prior.?
• Used car prices are also near an all-time high, though used EVs continue to fall rapidly.
• The highest cost of fuel in American history in 1981 would have been equivalent to $2.42 a gallon today. In 2022, the cost of gasoline escalated to $5.02 a gallon. Prices today still hover well above $2.42 a gallon.?
• As inflation continues to sting consumers, wages in the US have been stagnant since the 1970s (the previous Malaise era).?

In geopolitical terms, you could certainly say we’re in a malaise era, which is contributing to negative consumer sentiment in the automotive industry.?

The biggest culprit, however, is the increasing electrification of vehicles, not just limited to EVs.?

Electrification Comes with a Whole Host of Challenges

Before we get into EVs, I think it’s important to discuss electrification across the industry in general. It’s no secret that modern vehicles are equipped with dozens of wires, sensors, and computer parts that dictate performance.

The problem, of course, is that with more parts–especially complicated computer parts–more can go wrong. While computers are not solely to blame for worsening quality, it’s keen to note that car recalls jumped by 46% between 2012-2022.?

An article from Scientific American makes the case that these “computers on wheels” have made vehicles more expensive to repair and pricier to purchase, all for little benefit. While such cars are notably safer and help assist drivers, they can also be distracting, thus undoing much of the good they promise. Furthermore, there are real privacy concerns that come with modern vehicles equipped to the gills with microphones, motion detection devices, and cameras.?

The biggest problem with the increasing complexity of vehicles is that fewer people know how to work on them, including drivers themselves. Part of the appeal of an older truck or Jeep was that these things could last a long time with a little bit of maintenance. Today, most people don’t know how to change their oil, no less diagnose a faulty sensor or computer part that is preventing their car from starting up.?

Ask any modern truck enthusiast whether they would take an older RAM or Silverado from twenty years ago or a brand new one, and I’m sure that half would take the former.?

The EV Revolution Still Has Ways to Come

Perhaps the biggest concern among auto enthusiasts is the breakneck speed at which EVs are being pushed to market despite small range sizes and the lack of infrastructure to support them.?

In California, where the state aims to make all new vehicles that come to market electric by 2035, it would cost $50 billion to upgrade the electric grid just to support this shift. This doesn’t include all of the charging stations that need to be implemented, nor the people who need to be trained to work on these things.

While manufacturers were initially gungho about the shift to EVs, many are starting to back away from previous commitments. Ford recently wrote off $1.9 billion to opt out of producing an all-electric SUV in favor of a hybrid, and Hertz made headlines when it announced it was going to sell much of its 30,000 EVs after experiencing record losses.?

Despite top-down pressure from the Biden administration to increase EV sales by 50% by 2030, fewer consumers are interested in buying EVs in 2024 than ever before. Jeremy Clarkson infamously referred to EVs as “rubbish,” echoing the sentiment of many consumers.?

The price of new EVs is still notoriously high and inaccessible to many consumers who would even prefer EVs. The massive chip shortage that began during COVID has still wrecked the bottom line of many EV manufacturers, such as Ford, which has lost billions of dollars trying to scale its battery production.?

Perhaps it's the declining resale value that reflects the long-term concerns of consumers with EVs. Despite already having short ranges, EVs notably decline in range over time and often require new batteries after 10-20 years, according to JD Power, which cost on average between $5,000 and $15,000.?

In the United States, where highways are dominated by Ford and RAM trucks, the practicality of all-electric vehicles, especially when it comes to commercial use, is equally untenable. The EV with the largest towing power is the Silverado EV 3WT, with a max capacity of 12,000 pounds. For comparison, the 2024 Ford Super Duty F-450 can tow 40,000 pounds.???

Until battery technology and their supply chains improve, EVs will remain an impractical investment to most Americans.?

Repeating the Same Mistakes

Almost 60 years after the first emissions standards were introduced in 1973 and the muscle car era ended, the Biden administration aims to make all passenger vehicles introduced to market by 2032 have an average fuel economy of 53.5 mpg. This was actually lowered after criticism for their initial goal of a 58 mpg fuel economy, but it will, nevertheless, place great pressure on manufacturers.?

Under previous standards, manufacturers estimated that they would pay over $14 billion in non-compliance penalties as 1 out of every 2 light-duty trucks would not meet those standards through 2027-2032.??

Chris Douglas of the Mackinac Center has published some statistics about the negative externalities caused by CAFE standards over time.

• Due to CAFE standards increasing emphasis on compact cars and light trucks, vehicles become less safe and the rate of fatal vehicle accidents increases.?
• For every 10% reduction in gasoline consumption, CAFE standards cost consumers between $2.2 in value and manufacturers up to $1.2 billion in profits.
• Lower gas consumption results in a rebound effect that actually encourages drivers to drive more, resulting in more gas consumption, busier roads, and more air pollution. This amounts to $2.2 billion in damages from negative externalities associated with CAFE standards.?

My fear of this convergence between new CAFE standards and EV production is that by 2030, when many of the standards phase-in, we could enter a new Malaise Era, especially as car prices are bound to increase drastically with these changes.?

So Are We In a Second Malaise Era?

Part of the Malaise Era was not just the material conditions that hampered the automotive industry and killed off the muscle car wave; it was the general pessimism that people felt toward automobiles and the future of the country as a whole.?

Anyone can argue that modern EVs are certainly more on par with their combustion engine counterparts than the stark transition to sub-compact cars, like the Mustang II or 1975 Charger, represented in their era. Yet, it’s the general distrust of consumers toward modern trucks, the overstepping of federal regulations, and the general geopolitical situation we find ourselves in today that does feel like a second Malaise.?

Even if we are not in one yet–as there are many vehicles on the market I am still excited about–the EV push and new CAFE standards will start to stifle production over the next few years and force manufacturers, once again, to focus on subcompact cars and light duty trucks.?

A Path Forward: Can Technology Get Us Out of this Second Malaise

Thankfully, the Malaise Era was only just an era, and it ended in 1984 as cars like the Mustang were able to achieve a net horsepower of over 200hp once again. Even though the new car market is a bit overpriced and stifled, increased competition and new technological innovation provide a path forward.

On the EV side, solid-state batteries, which increase battery ranges by 2x to 10x longer, could bring EVs directly on par with modern combustion engines. Likewise, Group14, an organization Porsche recently invested in, created a silicone-ion battery that could bring charging times down significantly. In such a world, you could charge your EV as fast as it would take to fuel up your car–hopefully in broad daylight and not in some hidden place where many chargers are stowed.?

Even aftermarket manufacturers have come up with some nifty innovations to make modern vehicles feel more futuristic and less cumbersome. For example, RealTruck manufactures electric running boards that automatically retract after you step inside your cab to make your truck more aerodynamic.?

On the design side, future-retroism has made a comeback in recent years as a design trend across most industries, including the automotive. Some brands have executed this trend very well–think the Santa Fe, Land Cruiser, and N Vision 74–while others have been less than spectacular–the Fiat 500. In many ways, this is a result of brands trying to virtue signal the end of a Malaise Era and cash in on nostalgia. However, most consumers agree that the bold design trends of the late '60s and recaptured in the early '80s feel gone for good, especially for the broader consumer market.?

While we still have a long way to go to meet ambitious regulations and make modern vehicles more reliable, there will be some pain for consumers along the way. However, the automotive industry is one of the most resilient. With enough innovation and expertise, we can break through this second Malaise Era and make newer vehicles more appealing to consumers and more reliable.