Articles in Category: Automotive

Magna the Canadian car parts tier one is proving to be as innovative in the field of electric vehicles (EV) as they are in the conventional auto industry. Indeed so enthusiastically is the soon to be retiring founder of Magna, Frank Stronach about the new technology that he is forming a new JV between himself with 27% and Magna holding 73% in a new EV vehicles project according to a article. Magna has been developing EV power-train technology for the last three years, partly drawing on technology developed in the 1990’s by GM in the development of their EV1 and partly in cooperation with Ford to provide the power-train components for the EV Ford Focus due out in 2011.   According to a Wards Auto article, Magna worked with Ford to co-develop the Focus’ electric drive-train. In addition to providing the software and programming, Magna is supplying the power-train module, gearbox, electronics and some chassis components, as well as performing key design-integration work.

Stronach’s vision is for Magna to be a Tier 0.5 if such a thing is possible, designing and building a rolling chassis complete with all the drive and power train components for either the OEM to finish with body shell and interior or for Magna to do it for them. In so doing Magna can develop economies of scale across multiple OEM models based on their one rolling EV chassis design and greatly reduce the risk, barriers to entry and cost for large and small OEM’s wanting to get into the electric vehicle market. Stronach thinks this business will be worth US$20bn to the Magna JV within 10 years. When you look at Ford’s planned sales of just 5,000-10,000 vehicles per annum the economies of scale are not going to be there unless a sharing of platforms can be achieved in a manner like that planned by Magna.

Ted Robertson, Magna VP new product development and chief technical officer is quoted as saying Ford has no exclusive rights over the design and indeed are keen for Magna to develop further sales elsewhere in the interests of bringing down unit costs. When Magna started they thought they could largely take components from the shelf but found they were just not available, “we had to design everything from scratch he said. But he was also full of praise for GM’s EV1 development in the 1990’s saying it was a marvelous piece of engineering and Magna found many of the challenges had already been solved by the GM team. Magna has not decided if they will go into battery production or not. They have partnered with KoKam of Korea for the Ford Focus and developed a fast charging technology that can be fully replenished in 20 minutes, compared with 4-6 hours using a 220-volt line and 10-12 hours using a 110-volt feed.

It would seem the 77 year old Mr. Stronach has lost nothing of his passion, vision or audacity in the 50+ years since he formed Magna as a struggling immigrant. His latest venture will no doubt continue to set standards for innovation that others will struggle to match. Whether it will create greater certainty for the viability of electric vehicles remains to be seen but it has a logic to it that is compelling.

–Stuart Burns

The Wall Street Journal ran several stories earlier this week with rather rosy titles sure to put a smile on any manufacturer’s face “Consumer Mojo Lifts Profits and “Whirlpool’s Profit Soars as Consumer Demand Increases, to Manufacturers See Rebound. Now I don’t want to rain on this parade but it does remind me of a project I once worked on in which we (the large consulting firm) had identified a multi-million dollar savings opportunity through global strategic sourcing. It’s pointless to relay the facts of the project but suffice it to say that as I spent time with the client and studying the data, there was no way we would secure a multi-million dollar savings. Luckily, I had the ear of the lead partner and suggested (rather strongly) that well, uh guys, the emperor is sort of looking a little naked, if you will.  If we pursue this global sourcing project, we will not generate the savings that we thought we could garner. That story had a happy ending but not because of global sourcing savings. And today, I find myself troubled by some not-so-rosy data that I have tracked these past couple of months which tell me that consumer mojo doesn’t look likely to lift profits nor do we see consumer demand increases. So let me make my case.

A little while ago, we introduced you to the Consumer Metrics Institute. These folks track online internet consumer data. Of course this data has its own innate biases that I won’t review here (they are posted on the Consumer Metrics Institute web site). But what we find intriguing about their data relates to the 17-week lead time they have on national GDP for real consumer demand trends. We’d argue the consumer demand trends remain negative (and continue to drift negative). I love this quote from Rick Davis, founder of the Institute, “Instead of a “call 911 type of event in 2008 or the “hiccup witnessed in 2006, we may be seeing a “walking pneumonia type of contraction that has legs. To illustrate his point, check out this chart:

Source: Consumer Metrics Institute

According to Davis, “If that pattern continues to hold, we are currently about halfway through the consumer transactions that will drive the third quarter’s production and GDP. If the blue line shown in the above chart continues drifting laterally over the next 40 days, the 3rd quarter 2010 GDP will look a lot like what we have previously projected for the second quarter 2010 GDP, contracting at a mild but persistent rate. Let’s see what happens when Q1 GDP numbers are released on April 30.

Let’s take a look at a few more consumer trends from the Consumer Metrics Institute. My favorite comparison involves the automotive charts. We presented this first one on April 13:

Source: Consumer Metrics Institute

But look at what happened during April:

Source: Consumer Metrics Institute

Yikes! Now here is the holy-grail chart by which we can measure the April 30 GDP announcement:

Source: Consumer Metric Institute

Look, this could turn out wrong come Friday. But if it proves accurate and demand falters, I call Naked Emperor!

–Lisa Reisman

Our family recently spent ten days in Israel. For a country with a population of between 7.5 million, the innovation and entrepreneurship from many sectors appears impressive. During one of our trips up to the north of the country, where yes, yours truly drove her first ATV up the mountains of the Golan Heights (near the city of Qiryat Shemona, to be exact) with her small children in tow, a close friend (Israeli) mentioned in passing that the Israeli government evaluated the feasibility of switching some or a portion of its police fleet to hybrid electric vehicles to create greater fuel efficiencies and reduce carbon emissions but decided against it. Israel’s Ministry of Environmental Protection conducted an independent study, according to my friend (who by the way owns a Toyota Prius which I will come back to in a moment) that found that hybrid electric vehicles from several manufacturers exceeded the maximum exposure levels allowed by the Israeli government. I found myself shocked by the findings particularly because I had not heard of any of these claims in the States. A quick search led me to this article that highlights the controversy in detail, “According to Israel’s Ministry of Environmental Protection, this may be the case. A research committee funded by the ministry studied radiation from hybrid vehicles over the course of the last nine months, found Ëœsurplus’ radiation in some models sold in Israel and worldwide, reports Israel’s The Marker.

The controversial radiation in question involves the electromagnetic field (and AC current) coming from the battery pack (in the back of most hybrids) to the engine in the front of the car. And according to that article, “the medical implications of this non ionizing radiation, similar to radiation from cell phone antennas, are not yet clear.

But not everyone agrees with the study, its results (which by the way, we could not access anywhere on the net), or the rationale as to why the study was done in the first place. This article attacks the study on several grounds particularly around the quantitative findings, “What do the numbers mean?   Is it unsafe to drive a hybrid?   The numbers have little meaning without comparison to other objects and without medical proof that exposure to this type and level of radiation is harmful. The author goes on by making this point, “While it’s possible that radiation could be a concern, proof is needed before any undue determination is made. Publicly posting results to this study without concrete proof of proven medical concerns is irresponsible and ill advised.   Take the findings of this study with caution as hybrids have been on our roads here for more than a decade with no known radiation related illnesses reported.

So how should anyone weigh the data? We’d love to see what MetalMiner readers have to say. Some of you would probably argue more risk comes from taking children out on ATV’s or more radiation exposure exists from the air travel required to get to Israel than the average time a child spends in the back of a hybrid electric vehicle.

My gut tells me that like anything, too much of something is never a good thing. My friend who owns the Prius (by the way, the current model is expected to fall within Israeli radiation limits) put it to me this way, “had I known then what I know now, I might not have purchased one. And though her kids spend little time in the back of her car, when we consider all of the “new technology out there, it does make one pause to say, “with cell phones, iPods, new energy efficient light bulbs, more electronic gaming, video and vehicles, cumulatively, do these technologies raise a health concern? One local school in the city of Chicago has cell tower sitting on its roof. Do we know how safe that is? No, and I know that I wouldn’t want my kids exposed to that either. I’d be interested in hearing from some of you who develop these technologies. What do you think?

–Lisa Reisman

Supercars go Electric

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It seems electric fever has even caught on among the makers of supercars at the Geneva Motor Show the likes of Ferrari, Porsche and specialist British sports-car maker Lotus wheeled out concept cars that could be in the showrooms within a couple of years. In practice they will have to because in the future car makers will have to comply with average emissions levels across their range so if car makers are going to continue to produce gas guzzling super cars they will also have to produce much more economical models to bring the range into balance. That’s the cynics point of view. But when you look at the models on offer you begin to ask why wouldn’t they bring them to market, subject to price (rarely a major hurdle for buyers of Ferrari’s or Porsches) the models on offer combine phenomenal performance with new levels of control and almost unbelievable fuel economy.

Take for example the Porsche 918 Spyder, it’s a hybrid in name but not like any Prius or Volt you may have looked at before.

According to this report the 500 hp 6.2-liter V-8 mid-engine super sports car marries the petrol engine to an electric motor in Porsche’s own version of the plug in hybrid concept. Combined with the 218 horse power electric motor together achieves 78 mpg. This provides the raw power needed to propel it from a standing start to 100 km/h (62 miles per hour) in under 3.2 seconds with just 70 grams of CO2 emissions per kilometer. Power is transmitted to the wheels by a seven-speed Porsche-(get this for a name) Doppelkupplungsgetriebe (PDK) transmission that feeds the power of the electric drive system to the rear axle. However in pure electric mode it can cover a distance of just 25 km or 16 miles Porsche clearly isn’t expecting their clients to cruise silently round the streets in electric mode.

Porsche is also bringing out a hybrid version of their 911 GT3 and of the SUV Cayenne S.

Ferrari’s offering uses regenerative braking developed directly from the Formula 1 race track to recharge the battery on its hybrid model helping the car achieve a modest 35% reduction in CO2 emissions. You will have to do better than that Ferrari, even little Lotus has brought out an experimental model named the Evora 414E which uses two electric motors each providing 400Nm of torque.

The car is fitted with a small range extending combustion engine which tops up the batteries if they look like they are going flat. A recent Economist article explains that going electric doesn’t mean you have to forgo the pleasures of a gearbox or the noise of a V8. The Evora has a virtual gearbox that replicates the jolts of acceleration and deceleration for those drivers who just can’t bear to part with their stick shift.

In short they are all at it and like it or not we will find in a few years that the showrooms of even the world’s most exotic car makers will have petrol engined and hybrid powered offerings if not outright all electric cars. Perversely the premium cost of a hybrid may find greater acceptance among the moneyed buyers of Porsches and Ferrari’s than among the rank and file buyers of Fords and GM’s for whom purchase cost is more important than total cost of ownership.

–Stuart Burns

Two of the (several) fundamental problems of all electric cars is they have limited range and are generally slow particularly if you want to optimize the limited range. Accepted the technology is at an early stage, although electric motors have been in use for a hundred years or more the lithium battery technologies have been in development first for small appliances and more recently for vehicles realistically for some 15-20 years. They will get better but as a Financial Times article observes batteries follow the rules of chemistry rather than the rules of physics that have allowed computer processing power to double every two years. It has taken almost 15 years for the capacity of consumer lithium-ion batteries to double. A kilogram (2.2lbs) of gasoline contains about 13,000 watt-hours of chemical energy of which an internal combustion engine might capture about 4,500 watt-hours. But a kilogram of today’s lithium-ion battery stores only 100 watt-hours of electricity. Cost apart, for the same amount of energy, today’s lithium-ion batteries are 45 times heavier (and 16 times bigger) than gasoline even if lithium-ion makes rapid progress, the theoretical upper limit on the chemistry is between 400-500 watt-hours per kg still only a 10th of petrol and the practical limit is likely to be much lower.

So electric car manufacturers are faced with two (among many) challenges. First, they have to develop batteries capable of storing, releasing and quickly recharging much greater densities of power that is largely a challenge for battery manufacturers and they are pouring millions into research. The other is making the most of what is currently produced by the batteries available. And this is where an interesting project in Japan is showing the way.

SIM-Drive (Shimizu In-Wheel Motor-Drive) a company set up between Toyo’s Keio University and a group of investors including 34 car (including Mitsubishi and Isuzu) and electric power companies to develop the ideas of Hiroshi Shimizu the professor in charge of the research at Keio and now CEO of the company. As the company name suggests the direction of SIM-Drive’s research is in developing electric motors that directly drive each wheel rather than the conventional approach, which is to merely replace the gas engine with an electric motor and largely work through existing drive trains.  Each wheel has its own dedicated electric motor mounted adjacent to the wheel and controlled electronically rather than mechanically. Eliminating the conventional transmission system saves huge amounts of power otherwise lost by gears, shafts and mechanical joints making SIM-Drive’s approach 30-50% more efficient than other electric cars according to this article by the Financial Times.

Living up to its futuristic looks the prototype car, called the Eliica (short for Electric Lithium-Ion battery Car), has two significant differences for the user experience from a conventional electric car. First, because there is no front or rear mounted motor and transmission system all the batteries, motors and controls are mounted within the chassis making the center of gravity very low (good for handling) and freeing up everything above the chassis for the passenger cell and luggage. As a result, cars could look fundamentally different with the possibilities more restrained by public acceptance then the limits of no holds barred design options. The second issue, certainly in the case of the Eliica, is in addition to an exceptional (for electric cars) 300 kms (180 mile) range is the performance. According to the car is blisteringly quick, in fact faster than a Porsche 911 Turbo with the 8 x 100bhp electric motors capable of accelerating the car from 0-60mph in 4.1 seconds and 0-100mph in 7 seconds in almost total silence. Top speed is 370kph or 230mph in spite of a prototype vehicle weight of about 2.4 metric tons (5300lbs). Production models would be lighter and almost certainly optimized for range, unit cost and a wider sales market than the technology development test-bed that Eliica represents. SIM-Drive believes that with the backing of a major car company bringing mass production techniques and economies of scale they could produce a four wheel version for five people and with a 180 mile range for US$16,500 plus the cost of the battery, which would probably be leased.

Where do I sign up?

–Stuart Burns

Platinum, Further to Go?

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Automotive, Precious Metals

Gold, the darling of 2009 appears to be the ugly duckling of 2010 as investors’ focus switches to platinum and palladium. In spite of incessant broker promotion the gold price has stagnated over the last month after reaching a peak of nearly $1220/oz in December before becoming range bound either side of $1120/oz.

Gold Price

Investor interest has shifted to platinum and palladium as automotive manufacturing has finally come out of the parking lot in North America and Europe. Sales are predicted to pick up some 5-7% according to supplier to the industry Alcoa in their 4th quarter earnings report but some boosters are predicting an even stronger rebound. Automotive will expand output by 20% this year, Evan Smith, who helps manage $2 billion at U.S. Global Investors is quoted as saying in this blog.

One of gold’s principal supporters over the last two years have been Electronic Traded Funds, but this year ETF Securities launched their metal backed platinum and palladium funds and saw a surge in demand lifting their holdings to a record 594,465 ounces. Standard Bank called out the upside for platinum late last year in their Commodities Daily reports, largely on the back of the stronger fundamentals of restricted South African supply and returning automotive demand.

So far the price has risen strongly this month only to be knocked back by President Obama’s comments about the banks, few seem to think that set back will be enough to slow platinum’s rise.Platinum Chart

There seems to be no end to some supporters enthusiasm Joerg Ceh, head of commodity trading at Landesbank Baden- Wuerttemberg in Stuttgart, Germany’s biggest state-owned lender is reported to have said prices could reach $2,400/ounce one wonders just what kind of a long position he is sitting on.

–Stuart Burns

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

China looks like it will be going through its own kind of post cash for clunkers hangover in 2010 that Europe and the US has experienced in the 4th quarter of 2009. Sales surged in 2009 by an average of 40% to some 13.6 million cars and trucks boosted by a halving of the tax on vehicles with engine sizes less than 1.6 liters. Sales of car with sub 1.6 liter engines made up 85% of the growth in the overall vehicle market according to the China Association of Automobile Manufacturers quoted in Bloomberg. But such sales growth cannot continue forever and the government’s plans to withdraw the stimulus have already had a profound effect on projections for 2010. Miao Wei, vice minister of industry and information technology said China’s vehicle sales growth may slow to 15% this year although some analysts are forecasting even lower growth of 5-6% according to Marketwatch.

SAIC Motor Corp’s. stock price, China’s biggest automaker, has tumbled 12% this year, (after the stock more than quadrupled in 2009) when the car-maker forecast an increase for 2010 of less than 15% in industry wide sales this year. Ford seems to agree. After seeing sales at their passenger vehicle joint venture, Changan Ford Mazda Automobile Co., rise 55% to 315,791 units in 2009 and sales at their commercial vehicle joint venture, Jiangling Motors Corp., total 114,688 units, a 21% rise in 2009, Ford is only predicting an industry-wide rise of 10% according to Nigel Harris, general manager of Changan Ford Mazda. Even so, Ford is predicting their share of the market will rise and following the introduction of new models is predicting double digit growth for the company in 2010.

Growth of 5 to 15% depending on who turns out to be correct is still respectable for what should remain the largest auto market in the world. At 10.6 million in the US and 13.6 million in China, growth in both markets of this magnitude will only increase the gulf between them. Good news for GM and Ford’s Chinese subsidiaries but let’s hope the phenomenal growth in sales during 2009 hasn’t spurred excessive investment in domestic component suppliers. Such dramatic swings in growth have lead in the past to over-investment in other industries. After such a surge in growth and filled with confidence for the future the last thing the Chinese auto industry needs is to follow so many other Chinese industry segments into over investment.

–Stuart Burns

With the exception of a post we ran on Spiderman’s new titanium webs (satirical), few posts have generated as many readers as our posts covering the auto sector. The industry, for all practical purposes, still makes up between 18-25% of overall domestic steel demand along with substantial aluminum and copper demand as well. But besides the “big 3 industrial metals of steel, copper and aluminum, MetalMiner received thousands of visitors on our coverage of new electric vehicles, lithium-ion batteries and new product introductions.

Just last week, we published some forecasts and commentary on where the automotive industry may be headed in 2009 along with our thoughts on the product mix (small vs. large, electric/hybrid vs. gas). We re-post some of the most popular ones here:

Renault Announces the Line-up All Electric Vehicles

Segway and GM Unveil Two Wheel Electric Car of the Future

All Electric Nissan Leaf Unveiled

A Different Take on the GM Volt Announcement

We will endeavor to cover the automotive space in even greater detail in 2010. We’ll examine monthly sales numbers including the make/model of what sells and of course all of the metals information pertaining to those product developments. As a key economic indicator, automotive demand will tell us much about the overall health of the US economy.

–Lisa Reisman

Yesterday my colleague Stuart penned a piece following on a report released by suggesting US consumers might not buy all of the small cars currently in production from US auto makers. Yet despite that report, the analysts have gone on record in recent days suggesting that auto sales, “may rise 20% on enormous pent-up demand. And one analyst firm, the highly respected Center for Automotive Research (CAR), suggested a number of 12.4m cars for 2010. Other industry analysts including CSM Worldwide Inc, JD Power & Associates, and IHS Global Insight Inc also project auto sales of between 11.3 11.8m units in 2010.

All of this sounds like a rose garden compared to 2009 with a projected meager 10.3m units expected to sell. We have seen conflicting reports though about the automakers own forecasts. In this article, Ford suggests, “we’re not planning for a huge pickup next year. If we get one, great, we’ll ride it(puns intended I’m sure) but in a meeting with President Obama, Bill Ford, suggested the company would move conservatively, albeit with its smaller car fleet to include the Fiesta and the Focus. Yet the CNN Money article quotes Ford as projecting 12.5m units for 2010, closer to the CAR projection. According to the Bloomberg article, however at 11.3m 11.8m light vehicles for 2009, both GM and Chrysler would make money. The break-even point for GM requires sales of 10.5m units (of course we don’t know the specific market share assumptions used by each of the Big 3 to determine absolute break-even).

So, assuming these analyst firms are correct and demand reaches the low end of the range 11.3m units in 2010, will the Big 3 reach profitability based on their current product mix? (Isn’t that the billion-dollar question?) Arguably, the next issue becomes one of cost and product selection. I’d contend (and I know that I have been very wrong in the past, particularly for the Cash for Clunkers program) that people still make buying decisions based on total life cycle costs. True, the Prius, when it came out, carried a higher price tag than other cars in its class (though no other hybrid vehicle initially compared) and attracted the early adopters. Since then, the buzz factor created a superstar, sales remained brisk and costs eventually came down. After all, one can purchase a Prius for $22,400 today. But how will costs impact plug-in hybrid electrical vehicle adoption?

According to a a recent study conducted by the National Research Council, “hundreds of billions of dollars in government subsidies will be needed over many years to make plug-in hybrids cost-effective for consumers. The report also indicated it would “take several decades before the fuel savings offset the higher initial costs. In all fairness, the Prius has nearly “made it (check out this total cost of ownership with a few vehicles I selected).  The Prius does not do too badly I have to say. The question becomes how quickly will other OEM makes and models reach mass market economies of scale and cost structures that make those types of cars the consumer’s Ëœbest’ buying decision? I’m not sure but if that “enormous pent-up demand” gets released in 2010, we’ll sure get a good idea. 

–Lisa Reisman

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