Could Change of Motive Power in Cars Change the Way Cars are Sold, Run and Used?

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We may, as this decade unfolds, find out. The internal combustion engine is far from dead. In fact, the competition of alternative propulsion systems and the spur of higher fuel costs has created a quiet revolution in engine design and economy. New diesel and even petrol engines are coming onto the market with fuel economy figures that would have been considered phenomenal just ten years ago. And not just fuel economy, levels of refinement in modern diesel engines and small four cylinder petrol engines are the equivalent of smooth six or eight cylinder engines of the late 90’s.

The industry has yet to decide where it is heading. Some 2.2 million Prius Hybrids have been built since their launch by Toyota in 1997 and the trend is rising (with the exception of last year’s recession inducing contraction in the US market). Toyota sold nearly 473,000 hybrid cars globally in the January to November period last year so while numbers are currently small compared to regular autos the numbers are rising fast according to the FT. But while some other majors like Ford, GM and Honda have all brought out their own hybrid cars with mixed reviews the question remains how big will this market become when the primary objective of greater fuel efficiency in large part calculated on gas per mile is constantly being raised by conventional engine design?

Some car manufacturers are by-passing the hybrid model and going straight into electric vehicles. Renault has cut back on research and development spending in the face of the industry crisis but they have continued to invest in all electric vehicles. In China, manufacturers are coming at it from the other end of the supply chain. Battery manufacturer BYD makes both plug in hybrids and all electric vehicles and may launch a car in the US this year with superior electric range to the GM Volt. In China they already sell a plug in hybrid for half the price of a Volt and while a few years ago Chinese cars would have been considered a joke in the US from a quality standpoint standards are now rising fast. The move to electric vehicles is also making car makers re-think their whole approach to the market, driving some unusual alliances. Because their fixed costs are considerably higher than those of traditional vehicles while their running costs are significantly lower, Renault believes electric vehicles will be leased rather than sold and battery supply could be part of that lease package possibly in a four way relationship between car maker, battery supplier, user and finance organization. And where finance is often provided for traditional vehicles by a purely financial company, we may see the entrance of different types of companies into the electric vehicle market. Renault for example is forging links with EDF, the French state owned energy group, in what could be a whole new market for both energy suppliers and other businesses with shared interests. McDonald’s for example could install charging points at its restaurants and sell power at the same time it sells Big Macs.

Of course widespread adoption of electric vehicles is still a long way off, if it will ever happen. Many car makers, including Toyota, believe electric vehicles will only ever be small urban commuter vehicles. Nevertheless the company is investing in next generation Lithium ion battery technology for its next generation of Prius hybrids due in 2012. Working with Panasonic, Toyota has 50 engineers working solely on battery technologies in recognition that the key to both hybrids and all electric vehicles is the range and power provided by the battery.

–Stuart Burns

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