Hot, Thirsty and Crowded:

special report By John Wormald

Managing Partner, autoPOLIS

are the New Vehicle Technologies the Answer ?

Hot, Thirsty and Crowded: Are the New Vehicle Technologies the Answer ?

© autoPOLIS

April 2011

Dr. John Wormald is a global authority on the automotive industry and the debate on the future of sustainable mobility

No one has a more profound understanding of the automotive industry and its present challenges than Dr John Wormald who is regarded as a leading industry intellectual. With 30 years of intimate involvement in the industry, he applies his mind to the future of the industry and the time-critical challenges it faces and the path we should take to achieve sustainable mobility. He is the Manag-ing Partner of autoPOLIS, a strategy consulting firm which specialises in the global automotive industry. He has worked in most regions of the globe and most sectors of the automotive industry. He takes a particular interest in the industry’s structure and dynamics and in the forces shaping its future, including environmental protection, energy supply and new technologies. He is co-author of two major books on the industry – Driving Over a Cliff and Time for a Model Change -- and is work-ing on a third about the industry’s long-term future. He is a regular chair and speaker at industry gatherings. He holds degrees from Oxford, Harvard and INSEAD.

Dr. John WormaldFounder & CEO, autoPOLIS

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The automotive industry has been a runaway success. Everyone wants to own a car and more and more people in the emerging econo-mies are expected to acquire one. So we can expect the current parc of some 800 million to expand to some 2 billion by the year 2050. This is a common projection made by the automotive industry, which comforts it in its expectations of further market growth. Developed markets are mature, or even in decline in the case of Japan with its ageing and increasingly urban popula-tion. Markets in the emerging economies, led by China and India, are taking over. But is this sustainable, given the constraints to which motoring will increasingly be subjected? We are now run-ning into physi-cal limits to the growth of mo-torised mobil-ity. The cover picture of this article, taken on a US free-way during the evening rush hour, illustrates the theme of Hot, Thirsty and Crowded. The planet is getting hotter and hotter, because of man-made emis-sions of greenhouse gases, notably CO2. The growing vehicle parc is the largest consumer of crude oil, which is starting to run out. The high-way infrastructure is increasingly saturated, with

a decreasing appetite for building new roads. Are the new vehicle technologies the magic so-lution which will get us out of this impasse? This report explores what they are, what they can achieve for us under what circumstances, what we had better do, and the implications for the automotive industry.

The picture below is a humorous Australian view of climatic disruption. Poor old wombat! Not so humorous, really, given the catastrophic recent floods in Australia. Although there is as yet no direct proof that global warming is lead-ing to more exceptional weather incident, it is emerging as an extremely inconvenient reality.

There is gener-al agreement that stabilis-ing the tem-perature of the Earth’s atmos-phere requires an 80% cut in g r e e n h o u s e gas emissions. In his State of the Union mes-sage, President Obama set that goal for power generation in

the US by 2035 – an ambitious target indeed. Road vehicles are not the biggest source of GHG emissions but they do make a substantial and growing contribution to them. They will not get a special dispensation.

Are the New Vehicle Technologies the Answer?

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Most people have heard of Peak Oil. The pic-ture below is a Peak Coal chart, a coal produc-tion forecast made by Professor Kjell Aleklett of Uppsala University. Coal was the first fuel of

the fossil fuel era. This began with the inven-tion of the steam engine and the blast furnace 250 years ago. Coal is by far our largest fos-sil fuel resource and will outlast oil and natural gas. But it also is a finite resource, accumulated from photosynthesis millions of years ago. Like oil and natural gas, it is an inherited capital as-set, which we are rapidly running down. China’s burgeoning economy is particularly dependent upon it and national reserves of it will start to run out in less than 70 years.

What we have left will have to be eked out. In the long run, we shall have to live on renew-able energy, at much higher cost and in much smaller quantities. Life in 250 years’ time will be as different from that today as that today is from life before the industrial revolution. We are,

however, much better armed with science and technology than 250 years ago. Nevertheless, major change lies ahead, even if there is still some time to prepare for it.

The internal combustion engine-powered, pe-troleum-fuelled road vehicle has been dominant for 100 years. This has been underpinned by the very positive factors of this combination. To start with, it is a low-energy, low- CO2 emissions route to putting fuel in the tank, well-to-tank, or WTT for short. It is not often appreciated what good energy carriers the petroleum-based mo-tor fuels are. Secondly, we have learned how to mass-produce these vehicles from mainly low-cost and easily available materials, at remark-ably low cost. Thirdly, the internal combustion engine, the gearbox that goes with it, the body shell and the other main functions, are all ma-ture technologies that are well-mastered and with some stretch potential still in them. The internal combustion engine is a funny old con-traption, when you think about it, but it works.

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So why change a winning formula? Because serious negative externalities have moved in on the industry. The supply risks inherent to a non-diversified primary energy source – 98% of road vehicles are propelled by petroleum-based fuels – are beginning to be felt again, as they were during the Oil Shocks of 1973-4 and 1979. There are serious supply-side inelas-ticies in the oil industry, which cause wild fluctu-ations in the price of oil. We have a non-trans-parent and volatile oil market, not helped by the lack of scrutiny over the national oil companies within OPEC. There are the obvious geopoliti-cal tensions. And, lastly, the fact is, the internal combustion engine is not that good on tank-to-wheels (TTW) efficiency in transients. Which is why we need those increasingly complex trans-missions and ever more sophisiticated driveline controls.

The conventional drivelines all involve an in-ternal combustion engine as the prime mover. We can, and shall continue to, improve the in-ternal combustion engine and also transmissions. We can use hybrid elec-tric vehicles – the parallel hybrids – in which the electric drive component is only an adjunct to the ICE, with very limited all-electric range. Oil will run out before coal. We can use biofuels, in as far as they do not constrain the availability of food. We can use compressed natural gas, while that resource lasts. Natural gas prices are at a low right now, following the discovery of how to exploit shale gas deposits. But the US Energy Information Agency has cal-culated that these new discoveries will supply

the country’s natural gas needs for … 34 years.

The current proposal is therefore to change to electric drive and to electricity or hydrogen as the energy carrier. This is generating a good deal of excitement in the industry today. All the alternatives to ICE-based drivelines are based on electric drive. The electric motor has much better characteristics than ICEs for traction. It needs no gearbox and is far easier to control. The catch, of course, is that electricity is diffi-cult to store in any quantity. As for hydrogen fuel cells, they remain very costly and require a new generation and distribution infrastructure, which will be enormously expensive. In both cases, the carrier energy has to be generated from primary energy sources and that’s where the problems lie.

Detailed US studies show negligible gains in overall energy use, compared with convention-al cars – see the chart below. The blue part of each column is well-to-tank energy consump-

tion, i.e. what it takes to make the secondary energy form that goes into the tank or battery. The red is what is consumed in driv-ing the vehicle. On the extreme left we have 2006 US vehicles. The biggest gain, one column to the right, is the 2030 vehicle number, assumed to be firmly down-

sized with no change in technology. This is because current US vehicles are so over-sized and inefficient. After that, they get some ad-ditional gains from turbos, diesels or hybrids. Biofuels would additionally eliminate at least some of the blue part of the columns. On the

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right we have the results for different forms of electric prime movers, assuming the current US electricity generating mix. The 10, 30 and 60 prefix for the PHEVs, or plug-in hybrid elec-tric vehicles, refers to the all-electric range they are given, i.e. increasing battery capacity. The BEV is actually quite unattractive.

The chart above shows the parallel assess-ment of the impact on CO2 emissions. The con-clusion is the same; BEVs and FCVs, on the right, generate none at the tailpipe but the gain is all wiped out at the power station and in the transmission lines. Which again goes to show that you cannot just count the TTW part of the equation, you must look at WTT + TTW = WTW (Well-to-Wheels). You also have to include the energy and CO2 consequences of building the vehicle and of disposing of it at the end of its working life.

These results are based on calculations that assume the current US electricity generating mix. This is heavily coal-based today and is likely to remain so for some time to come. See

chart on the next page. China, India, Australia and a large number of other countries are at least as dependent on coal for electricity gen-eration.

Despite all this evidence, the Electrification Co-alition wants 75% of US vehicle miles travelled per year to be electric by 2040. This would re-quire an extremely rapid build-up of the EV + PHEV parc, to reach 75% by the same date. To get there means that 90% of new vehicle sales would have to be EV + PHEV by 2030. This is plainly unrealistic. The real motivation is geo-political, to eliminate US dependence on imported oil, with no regard for the environmen-tal consequences. Blow the tops off all those mountains in Appalachia, burn that coal! The National Academy of Sciences’ assessment projects only 20% penetration by 2035. That’s the reddish bits at the top of the right-hand col-umn in the 2nd chart on the next page, of which half is PHEVs – and GM don’t tell us how much of their driving will be on the battery and how much gasoline-powered.

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Primary energy mix in US electric power generation

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Is the outlook any more promising elsewhere? Asia is heavily dependent on coal for electric power generation. Europe has some “islands” of decarbonised electricity but is still heavily reliant on fossil primary ener-gies. See the chart to the right; the data is for 2006 but the mix has not sig-nificantly changed since then. In this, countries have been grouped as a function of how much of their elec-tricity generation is carbon-free. Yes, France’s electricity is 79% nuclear and about another 10% hydro, which may explain Renault’s enthusiasm for BEVs, but it’s an excep-tion. The UK, Italy, Turkey and Poland, are at the other extreme. The UK intends to shut down coal-fired power stations and go massively for renewables and nuclear. But this will take time and be very expensive. Electric cars are interesting in con-junction with this, if we can use all that battery capacity to smooth out the fluctuations in wind power. But that re-quires much more than a plug-in battery charg-er in each garage or simple street recharging outlet. It means a two-way operation of the whole electricity distribution network, which again requires both time and much investment.

The cost hurdle for electric vehicles is very large at present. The lower chart (also taken from Kramer’s analysis) shows the cost of the bat-

tery as a function of vehicle electric driving range. How far and how fast will it diminish with growing pro-duction volumes? There is wildly op-timistic talk about the degree of ca-pacity increase and weight and cost reduction, but no firm num-bers. The safety

issue has also not yet been resolved, although R&D is being put into this. The more energy you pack into that battery, the closer positive

and negative charges are to-gether. In this respect, a bat-tery resembles a chunk of TNT, in which the fuel and the oxi-dant are close-packed together within each mol-ecule, which is what makes it a high explosive.

Owners of con-ventional ICE-powered vehicles are used to enjoying effectively unlimited range, with re-fueling taking 5 minutes or so, with filling sta-tions accessible in a dense network. Lack of this infrastructure and long recharging times are a real stopper at present, at least for BEVs. PHEVs get around this problem but suffer from the cost of both an ICE driveline and a signifi-

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cantly large battery. Stations at which batteries can be quickly exchanged have been proposed as a solution to the range problem. The cost of the stock of spare batteries alone would be enor-mous and the whole proposition would require vehicle manufacturers to accept the standardi-sation of batteries and docking systems across brands and models. This goes completely against the grain of the industry’s whole culture. In the very early years of the automobile, before 1914, electric cars were actually in the lead in the US. They, and steam cars, were quickly displaced by ICE-powered ones, for the reasons of range and convenience just described. We have been there before!

There is no significant market for EVs today. For a new market to emerge, one or other of these conditions must be met: a set of users with an unsatisfied need or a better solution to an existing need. Neither of these conditions is being met today – or likely to within the next 10 years. 99% of car, light commercial and heavy commercial vehicle buyers are satisfied with the automotive industry’s current offering. The alternative so-lutions are simply not yet market-credible. The industry is demanding that governments provide enormous cash incentives – USD 7,500 for exam-ple – to encourage early adoption. This may be acceptable at the scale of a technical demonstra-tion. The willingness to provide this will rapidly evaporate, as soon as volumes become signifi-cant, particularly in today’s financial and fiscal en-vironment. Electricity is also much less heavily taxed than conventional motor fuels in many mar-kets. This would not be tolerated for very long by finance ministries were a substantial switch to electric drive to take place. This is a problem that is not mentioned by EV enthusiasts. As an illustration, both the market for and the parc of electric vehicles in the UK, has actually been fall-ing in recent years. All of 55 were registered in 2008. These were not even true cars but quadri-cycles, which are below the weight threshold for the application of normal crash safety standards.

So their owners are in fact risking life and limb, in return for privileged use of bus lanes and park-ing spaces – which will also not endure, should electric vehicles become common. The most op-timistic projection for the UK is for 5% penetra-tion of the new car market by 2022, assuming a continuing and growing commitment of govern-ment subsidies for buying them – which is highly unlikely, given the huge public expenditure cuts now underway.

The present misplaced enthusiasm for EVs is in fact a poor choice of time and circumstance. They are seriously disadvantaged in the short term but will probably come into their own later on. There are some short-term advantages: zero tailpipe emissions, which, however, are only being transferred to the power station; silence, which is not often mentioned, except as a threat to care-less or deaf pedestrians; regenerative braking, which is limited by battery charging rates; and energy cost, with no-one mentioning that electric-ity is much less taxed than are motor fuels. The short-term disadvantages are severe. First cost, which leasing can disguise but not change, like a sub-prime mortgage; complete uncertainty about residuals (which makes leasing risky for its providers); limited range; long recharging times; and limited charging point networks. Long-term, it could all reverse: the match to decarbonised and intelligent electricity supply is potentially very beneficial; petroleum-based fuels will become scarce and expensive at some point in time; EVs could form the basis for quite new transportation systems. The uncertainties perhaps have less to do with technology than with the availability, cost and timing of alternative primary energy sources. The fossil and renewable energies cost curves will cross, but at lower volumes and higher prices than people like to think, and not all that soon.

The range problem can be overcome, if we ac-cept specialisation of vehicles by role. The chart on the left shows the distribution of miles travelled per capita per year, segmented by length of trip,

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for two time periods in the UK. Results for other countries are fairly similar. Most trips are fairly short. Cars have their greatest market share (right-hand scale) for short-to-medium ranges, but they are inefficiently used. Just stand by the roadside in the rush hour and see how many cars with an empty mass of 1 tonne or more are carrying a single 70 kilo occupant. We have become ac-customed to buying cars for their univer-sality, rather than being the best fit for a specific use, which becomes possible with multiple car ownership. The key is to get people to use smaller cars for commuting and shopping trips, rather than buying the largest they can afford.

To address our environmental and ener-gy supply problems, it would be prudent to work from the market end first, rather than through technology push – which is alien to the automotive industry in any event. The chart on the left is my road-map, which aims to minimise the risks. Start at energy consumption and CO2 emissions at 100 in the top left box. Get down to 80 in a 5 to 10 year Stage 1, in-volving existing technologies but small-er, slower vehicles, some limited modal shifts and modest restrictions on driving, which we are already seeing. In Stage 2, aim for a 50% reduction 10 to 20 years out, through strong specialisation of vehicles – individual, shared and pub-lic – which opens the door to EVs and matches decarbonisation of electricity better, with new transportation packages and more planning and control of trans-port networks and infrastructure. Stage 3, aiming at an 80% reduction, is a long way out, as it involves new habitats and mobility habits, and a decoupling of mo-bility from GDP growth.

Data source: UK Travel Surveys

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We have already had the model for Stage 1 for a number of years. The Smart car (1st picture) was an idea in advance of its time. It took several years for its sales to take off. The key element is that the Smart cuts the dead mass to payload ratio almost in half. Mass reduction is the most powerful lever we have for reducing energy consumption and CO2 emissions.

It is unrealistic to expect a massive shift back towards public transport, but better use can be made of it through proper plan-ning. The picture below is of a stop on the integrated bus network in Curitiba, Brazil. With clever applications of information and communication technologies, we can make much better use of mini- and micro-buses, and of the old communal taxi concept, still common in many emerging economy cities. Again, though, the key is the load factor, i.e. getting more passenger-kilometres out of each vehicle-tonne-kilometre. Once the specialisation of road vehicles really starts to be accepted, in Stage 2, then we are free of the range inhibition for the great majority of journeys and we can seriously deploy the new drivelines technologies.

Ultimately, in Stage 3, we have to control the demand for mobility itself, through habi-tats such as those, which already exists in Freiburg-im-Breisgau in the Black Forest, where housing is high-density and energy-efficient. It is close to the town centre and linked to it by efficient and convenient pub-lic transport. It offers a far more neighbourly and civilised form of life than spread-out suburbs, wholly dependent on motorisation. In crowded Asia, it is in fact the only realistic option.

We cannot entirely dispense with individual motorised mobility but we can maintain it in a much more sustainable form, through

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new systems approaches. Here is the picture of the title page of a recent book by three GM and ex-GM engineers. Their starting premise is that there is simply no space for a full population of conventional automo-biles in crowded Asian cit-ies. Simply parking them would occupy the whole central district of Shang-hai. Interestingly, the mayor of Beijing has just introduced severe restric-tions on the registration of new cars. Their solution, in the authors’ words, is to change the DNA of the automobile. They propose ultra-small, ultra-light vehicles (which solves the congestion problem), automatic and co-ordinat-ed rather than individual driving (which solves the safety problem without the mass penalty we incur to-day through passive crash safety), and electrically propelled.

China may have to lead the way, given the problems it faces with the environment and energy sup-ply. The chart here shows the results of three scenarios for energy consumption by passenger trans-port: Road Ahead on the left is full-scale motorisation with conventional vehicles; Oil Saved in the middle is alternative drivelines; In-tegrated Transport on the right is, in effect, my Stage 3. Given the scale of the environmental

and energy supply problems that China faces, I would put my bet on the third option. The cur-

rent new car market in China is large and grow-ing and the automotive in-dustry sees it as a bonan-za. But the vehicle parc is still very small and China has only just begun to experience the problems that mass motorisation will bring to it. 70% of the current new car market in China is controlled by for-eign joint ventures. They are carrying the risk of a change of government policy in favour of national investment in alternative

transport systems.

While I really do not foresee an early rush to buy EVs, the long-term consequences for the industry will be profound. We all know its present business model. In very short summary, it is led by the vehicle manufacturers; it is very much product-driven, to the point of obsession; it is very competitive, exag-geratedly so, in fact. Vehicle manufactur-ers over-compete on product prolifera-tion and premature replacement, which

ruins their financials. They try to make up for it by milking those parts of the service and re-pair aftermarket that they can control, i.e. over-pricing to captive customers. This brings both

Source: China Motorisation Trends, Wei-Shiuen Ng and Lee Schipper

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consumer dissatisfaction and punitive reactions from regulatory authorities. The model certainly has its imperfections but it is also well estab-lished, based on huge legacy investments and formidable industrial disciplines. I do not see it disappearing in the next 10 years, or even long-er. Forcing new technology onto the market is not the industry’s style. I think there is a real risk that a premature attempt to push into EVs on a large scale will fail, with painful consequences.

There will ultimately have to be a new transpor-tation model. This will clearly have to be con-sistent with the new energy infrastructures and

these cannot come about quickly. It will have to be integrated into the new habitats and be con-sistent with them, which is a long-term project. It will be solution-based, by which I mean sets of transport offerings, not just selling people cars and letting them get on with it. It will be systems-led. This sounds like another innocu-ous platitude but the implications are profound, in terms of who has access to, and control over, the market. New technologies will be deployed, and not just on board the vehicles. There will very likely be a new set of leaders, different from the vehicle manufacturers of today.

Published by:John Wormald / autoPOLIS54 Plainwood CloseChichesterWest SussexPO19 15yBUnited Kingdomtelephone: +44 1243 780 036Fax: +44 1243 774 441email: jwormald@autopolis.com

website: www.autopolis.com

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