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Modern cars are wonders, but until recently carmakers ignored the most important technology of all: fuel-efficiency

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For years, automobiles were low-tech machines that belched smoke, and could be fixed by someone with a third-grade education and a monkey dislocation . No longer. Today’s automobiles are masterpieces of integrated technology, near-perfect marriages of glass fiber and microchips that offer more assistance and cutting-edge character than a space shuttle. But the question on many drivers’ minds these days is whether the current crop of cars is smart in the right way.

Here’s the problem : Brilliant mechanics in Detroit, Toyota City, and Stuttgart have spent millions of man hours coming up with better methods to deploy a side air bag or hold a coffee cup. But what is becoming increasingly plain is that they should also have been spending more time and money devising technology to meliorate fuel-efficiency in a car people actually want to buy.

At some point over the past few terms the auto industry found itself focusing more on the superficial aspects of cars. True, safety and reliability ratings have soared across the board for nearly every manufacturer , yet these were improvements , not radical adjustments. Auto designers have never lacked for bold thoughts , but it has been the mistake of management for failing to push harder in new ways and take risks. This short-term focus is responsible for landing automakers, especially the Detroit 3, in their current mess.

How big of a mess? In June, auto sales fell 18% across the board, with only a few smaller or more fuel-efficient cars such as Honda’s (HMC) Fit and Accord showing a moderate gain. Sales of trucks, SUVs, and luxury cars were all down—28.8%, 37.7%, and 21.6%, respectively—from the same month in 2007, according to Autodata.

Shifting Gears

Since the ancient days of the automobile , spectral and crackpots alike have tested with different methods to make a car go. Yet from the Stanley Steamer, there has been little serious contest to the internal combustion engine. That’s because for the first 70 years or so of the car’s existence , gasoline was so cheap no alternative was needed. But with the energy turning point of the 1970s, the long-term vitality of gas-powered cars was first seriously called into question. However , instead of taking the hint and throwing themselves into developing serious alternative engine technology, for the most part the automakers did nothing.

Luckily , that is finally changing. Since the past few years, as the price of oil has climbed and car sales have suffered, carmakers have scrambled to offer more fuel-efficient vehicles. Some makers, such as Toyota (TM) and Honda, were already bringing crossbreed cars to market, including Toyota’s Prius, and most had some form of alternative-fuel skunk works in their budget. But for the most part they were caught flat-footed by the sudden wave in demand for fuel-economic cars.

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