Perception vs. Reality

Last week I had a very interesting meeting with Mr. Norman Johnson, Director of External Affairs for the North American division of Robert Bosch GmbH, the massive German electronics and auto parts supplier. While receiving a helpful update on advanced automotive technology, I was struck by the contrast between the low-profile efforts of companies such as Bosch to increase the efficiency of internal combustion engines, which power 99.9% of all the cars now on the road, and the media hype that greeted the launch of Honda's new FCX Clarity fuel cell vehicle, of which apparently 200 will be leased within the next three years. Although I remain receptive to the possibility that fuel cell cars will ultimately deliver on their promise of clean, practical personal transportation, improvements in existing vehicle types offer a much larger opportunity for energy and emissions reduction in the near-to-medium term.

In the course of an hour-long conversation, Mr. Johnson filled in some of the gaps in my knowledge on the efforts to make internal combustion engines more energy efficient, while reducing their environmental impact, in terms of both local and global emissions. I've written periodically about the rapid penetration of the European car market by high-performance diesel engines, and I was interested in Bosch's perspective on their potential market here. The company sees its new technology enabling diesels to capture 15% of the US new-car market by 2015. That forecast, however, predates the recent dramatic shift in the price of diesel fuel relative to gasoline. Although even at these prices, diesel still delivers better miles per dollar, seeing ultra low sulfur diesel average more than 50 cents per gallon above unleaded regular, year-to-date, must reduce some of the attraction for consumers that were accustomed to diesel selling at a discount to gas.

In addition, it appears that the arrival of this wave of advanced diesels, including new models from VW and BMW later this year, won't necessarily create the vast market that US biodiesel producers have been waiting for. Mr. Johnson stressed that while these vehicles should run well on blends containing 5% biodiesel (B5), higher proportions of first-generation biodiesel (FAME) would interfere with the engine and exhaust technology that enables these cars to meet tailpipe standards in all 50 states. Biodiesel derived from biomass-to-liquids technology, on the other hand, ought to be fully compatible.

During the course of our chat, I got a sense of the seismic shift underway in the global car business. As auto companies see their customers demanding higher efficiency and lower emissions, the suppliers on which they rely for many of the systems that go into their cars are gearing up to facilitate this. Bosch is branching out into lithium-ion batteries and other aspects of vehicle electrification, while also working on further improvements to the efficiency of diesel engines, partly in response to aggressive European targets for greenhouse gas emissions from vehicles, which look especially challenging for the German car manufacturers. Diesel's efficiency advantage over conventional gasoline engines could increase from about 30% to roughly 40%. Nor are these the only fuel economy tricks in Bosch's kit-bag--hardly surprising for a company that spends 10% of revenue on R&D. I learned about a cheap software/hardware patch to modify the way conventional cars recharge their batteries, saving around 2% of fuel. There's also stop/start technology, sometimes referred to as a "mild hybrid", and gasoline direct injection, which offers diesel-like fuel economy gains.

As promising as all this technology is, I can't help wondering whether consumers will regard it as passé in a world increasingly focused on not just using less oil, but getting off oil entirely. Plug-in hybrids, electric vehicles and fuel cells all seem to offer zero-oil/zero-emission options, even if their ultimate energy sources render them a good deal less green than they appear, at least for now. When I put this to him, Mr. Johnson seemed confident that reality would beat perception, particularly when consumers compared the actual costs and benefits. Bosch is pushing for a level playing field--"technology neutrality" in their parlance. The arithmetic of fuel economy, in which the first big increment of savings is worth more than all the rest, generally favors the lower-cost improvements that companies such as Bosch offer, at least for car owners who drive less than the national average. Of course, cars in this country have never just been about economics. Putting high-performance diesels in packages as sleek as the Audi R8 could go a long way to erase their image deficit. And as a potential buyer--though not this year--I find the ultra-cool Mini Clubman D (55 miles per US gallon but not slated for the US market, alas) as appealing as any current hybrid.