Green Car Tech: Workhorses Trump Thoroughbreds?

Fisker Karma at 2013 DC Auto Show

Yesterday I made my annual trek to the Washington Auto Show, which hosts a media day before opening to the public.  Between the show's focus on policy--a natural draw inside the Beltway--and the opportunity to connect with OEM contacts, it's always worthwhile.  Besides, the cars never look the same on a screen or printed page as they do in person.  Yet despite all of that, this year's show left me with what I regard as a healthy form of disappointment: Unlike past years, which provided my first opportunities to see--and sometimes drive--cutting-edge cleantech cars like the Chevy Volt and Nissan Leaf, I saw ample signs of evolutionary change but no new revolutions in the offing. 

A few data points to support that conclusion: First, the Fisker Karma, undeniably sleek and reminiscent of my favorite Hot Wheels® car of long ago, was arguably the most exotic car there.  It sat unattended and largely ignored.  More significantly, the 2013 Green Car Technology Award announced at the show by Green Car Journal went to Mazda's "SkyACTIV" suite of technologies.  These include improvements in engines, transmissions and chassis that Mazda plans to roll out across its fleet, along with the North American launch of a clean diesel version of its Mazda6 sedan later this year.  Among the other finalists were Ford's stop-start and EcoBoost technologies, Fisker's "EVer" plug-in hybrid powertrain, and Fiat's Multi-Air gasoline engine efficiency package.  Half the candidate technologies related to EVs and hybrids, while the other half focused on making conventional cars incrementally more efficient--in the process raising the bar that EVs and hybrids must vault.   

Yesterday's policy day also provided a chance to meet with the team from Robert Bosch, LLC, which among its many business lines supplies under-the-hood gear for clean diesels and efficient gasoline cars, as well as hybrids.  Our conversation focused on clean diesel, which remains the least-appreciated big-bang fuel efficiency option in the US, despite its wide adoption in Europe, where diesels enjoy about a 50% share in "take rate", reflecting consumers' choices when more than one fuel option is available in a given model.  Diesel take rates range from 30-60+% here, too, but with only 20 diesel models available in the US last year--many of them German luxury models--overall diesel penetration in new cars was just under 1%.  That could start to change this year. Bosch's Andreas Sambel, Director of Diesel Marketing and Business Excellence, indicated 22 new models slated for 2013 introduction, with the total increasing to 54 models by 2017. 

We also discussed future improvements in diesel passenger car technology.  Bosch sees ample opportunities to maintain diesel's edge over steadily improving gasoline-engine efficiency.  Possible enhancements include engine downsizing, higher injection pressures (already 29,000 psi), the addition of stop-start, and combustion improvement via something called "digital rate shaping"--my jargon takeaway of the day.  I was surprised to hear that diesel-hybrid models are already available in Europe, since conventional wisdom holds that doubling down on two expensive efficiency strategies can't be cost-effective.  Mr.Sambel offered the view that hybrids are becoming a distinct market segment, and that fuel choice within that segment will appeal to some buyers.  I'll have to watch for further signs of this intriguing development.  I certainly concur with his take that there is unlikely to be a one-size-fits-all solution.  Don't expect an imminent winner among the proliferating powertrain and fuel choices available to motorists, including biofuels and CNG/LNG.

This year's DC Auto Show includes a wide selection of nicely sculpted steel and glass, but at least from a "green car" perspective the technologies that made such a big splash a few years ago are becoming a bit mundane.  That's just as well.  EVs still haven't taken off, yet, with only 53,000 sold in the US last year out of a much-recovered 14.4 million car total, despite lavish tax incentives.  However, with oil prices stubbornly high and US gasoline prices on the verge of setting new records for this time of year, the evolutionary improvements in fuel economy that were honored and displayed at the DC Convention Center will find plenty of takers.  For the near-term they'll contribute far more to saving oil and reducing emissions than a few more EVs could.

A Clunkers Look-back

Somehow I missed last week's minor tempest concerning this summer's Cash for Clunkers program (CFC.) It apparently started when auto industry publisher Edmunds, Inc. issued a report indicating that the effective cost to the government of the incremental sales stimulated by the program averaged roughly $24,000, rather than the $4,000 or so per car that participating buyers actually received. That's based on Edmunds' estimate of the sales they conclude would have occurred in the absence of CFC, shrinking its net contribution from 690,000 vehicles to only 125,000. This prompted a snarky response from the White House, questioning not only Edmunds' analysis but also their motives and basic competence, leading to a polite-but-firm rejoinder from Edmunds. Having expressed support for the CFC concept and its reported results in previous postings, I can't resist adding my own two cents on this affair.

Let's start with a basic fact: No matter how rigorously Edmunds or the federal government analyzes car sales data for this year, the number of cars that would have been sold during the months in question without the clunkers program is inherently unknowable, just as it is inherently unknowable how many jobs have been "saved" to date by the total stimulus program, of which CFC was only one small, belated aspect. This dispute hinges on differences of opinion and underlying assumptions, and the statistical projections of both sides must be taken with a grain of salt. However, any notion that it is somehow out of bounds to look back on the outcomes of such a program to assess its effectiveness should be rejected forcefully. Project look-backs, or post-completion reviews, are among the best tools that corporations have to learn from mistakes and improve future performance. These techniques are no less appropriate in the public sphere, particularly when the government is undertaking so many initiatives that would ordinarily be left to the private sector.

It's important to frame any look-back analysis with a clear understanding of what the project in question was intended to achieve. In this case, CFC was meant to boost car sales and consumer confidence at a time when both were at extraordinarily low levels. It was also aimed at improving the fuel economy of the US car fleet by retiring some of the least-efficient vehicles on the road. Judging it on the cost-effectiveness of the incremental sales it generated reflects a subtle but significant distinction in interpreting those goals, though as a taxpayer I'm certainly interested in knowing how CFC measured up against that criterion. Still, on the basic question of increasing sales, even the data presented by Edmunds are unambiguous.

Looking at the monthly car sales figures included in Edmunds' report, it is clear that US new-car sales jumped from a depressed annual rate of around 10 million units pre-Clunkers--a level too low to sustain the North American car manufacturing capacity now in place--to over 14 million, approaching the typical pre-recession sales for the industry. After the program ended, sales fell back to around the 10 million mark. Although CFC hardly restored the industry to good health, it provided the expected temporary boost in sales at a time when the recent bankruptcy filings of GM and Chrysler had raised new uncertainties for consumers. The fuel economy uplift on the average transaction was also significant, though as I mentioned at the time this amounted to a very small change in the overall fuel economy of a vehicle fleet numbering around 240 million cars and light trucks. So while CFC in retrospect looks to have been a very expensive way to help the industry sell more cars, its performance against the metrics most relevant to its conception stacks up pretty much as advertised.

The larger question raised by the Edmunds analysis concerns the degree to which the government can compensate for weak economic conditions in the private sector, and how expensive the incremental contribution of such efforts can prove, compared to the natural recuperative powers of the economy. Their assessment might also have implications for how we should evaluate the ongoing incentives for advanced technology vehicles. In that light, I have to wonder how much of the heat generated by this episode is instinctive bridling at perceived Monday morning quarterbacking, and how much relates to its potential to undermine the case for a second stimulus that is building in some quarters.

Auto Restructuring Implications

An article in this week's Economist does a good job of explaining the global nature of the restructuring of the automobile industry, and in particular the role that Fiat wishes to play in aligning with the weakest US carmaker, Chrysler, and GM's ailing European arm, centered on Adam Opel GmbH in Germany. Fiat sees a global consolidation coming, driven by the need to rationalize vehicle manufacturing overcapacity. The enthusiasm of the US government for this match-up is driven by factors that go beyond Fiat's apparently providing the only viable option for extracting Chrysler's assets and employment base from Chapter 11, rather than progressing to liquidation. We've heard a lot about Fiat's fuel efficiency technology, with little specificity about what that means, other than the occasional photo of Fiat's cute retro-style 500 model. I believe the US government, with its new focus on climate change, sees the opportunity to transform America's least energy-efficient domestic car line into its greenest. That seems at least partially feasible, though it depends as much on changing Chrysler's US sales mix as on the infusion of technology the carmaker could probably have acquired just as easily from third-party vendors such as Bosch.

A quick review of the March 2009 corporate average fuel economy data on the NHTSA website reveals that for model year 2008, Chrysler had the lowest fleet average of the Big 3 at 25.4 mpg, compared to 26.3 for Ford and 25.8 for GM. Although final sales for the 2009 model year aren't in yet, the gap appears to have widened, with GM and Ford's passenger car lines improving by about 1 mpg, while Chrysler's fell from 29.5 to 28.3 mpg. Although they have all focused heavily on trucks and large SUVs in recent years, GM and Ford also had a better selection of more frugal models for consumers to shift to, when fuel prices spiked last year. Compare that to Fiat's fleet fuel economy for 2007 of roughly 42 mpg, and the appeal of the Fiat/Chrysler transaction for the US administration seems clear.

In fact in the latest report I found, Fiat tied Peugeot/Citroen for the best fuel economy in Europe, although it's not reported in quite those terms. Instead of fuel economy standards, the EU has tailpipe CO2 emission standards. They have been coming down steadily, from the recent voluntary standard of 160 grams CO2 per 100 kilometers to 140 and eventually to a mandated level of 120 g/100 km--equating to an average of 49 mpg. Fiat's 2007 performance on this measure was 141 g/100 km, and GM-Europe came in at 156 (37.9 mpg). So far, so good. But when you look at how these companies achieve these levels of efficiency, it's not so obvious how much of that will be transferable. Start with size. Fiat sells a wide range of cars in Europe, but few of them are as big as the most popular models Chrysler has been selling, like the 300 sedan--a very well-behaved car that I've enjoyed as a rental--Dodge Caravan mini-van, Durango SUV, and Ram trucks. Fiat's line includes a few larger, van-type models like the Doblo and the 26 mpg (combined city/highway, after converting to US gallons) Multipla, but it is strongly skewed towards the compact and sub-compact classes. Does the White House imagine a future Chrysler model range that looks like this?

Next, consider engine technology. The number one fuel efficiency strategy in Europe has been dieselization. I've commented on this periodically, highlighting the excellent performance and near-hybrid fuel economy improvements enabled by the common-rail turbocharged diesels in wide use there. But converting American consumers to diesel still looks like a tall order, other than for brands with a loyal diesel following like VW, or for large pick-up trucks, where it's prized for its towing torque. Diesel fuel is widely available, and Ford and GM could have brought this technology over from Europe--where half their sales are diesels--any time they wanted. I have yet to hear either one announce a diesel passenger car model for the US, and I can only wonder what their consumer research on this topic has told them. (And by the way, recent losses by Toyota and Nissan should put paid to the notion that US carmakers have been uniquely myopic about market trends.)

So what should we and our leaders realistically expect from a marriage between Fiat and Chrysler? First and foremost, we ought to see a leaner company that is more attuned to younger car buyers, exemplified by Fiat's clever "eco-drive" software that monitors driving habits. We're also likely to find a much deeper infusion of European design and fuel economy philosophy than Chrysler received from Daimler-Benz, which currently ranks worst of European makers on their grams CO2/100 km scale. It's not clear whether Fiat could qualify any of its current models for sale in the US faster than it could remake Chrysler's model line, but in any case the end result will probably include a bit of both. However, the hybrid company will still be selling into a US market that until quite recently has chosen acceleration and roominess over gas mileage, hands down. We also can't forget that Fiat left the US market in the 1980s with an abysmal reputation for quality and reliability. How far the ultimate outcome of this deal will go towards delivering on the government's apparent expectation of a new, green Chrysler will depend heavily on consumer preferences, and on whether the folks who have bought the company's distinctive offerings in the past will see its new Italian flair as appealing or off-putting.

Building Bridges to Greener Wheels

It's a heck of a time to hold a car show, when new figures indicate car sales last month were off 37% compared to the prior January, and with a brand new administration for which cars must surely seem to be a much bigger problem than opportunity. But then the 2009 Washington Auto Show, with its theme of "The Automotive Seat of Power", had a very different feel from most of the car shows I've attended in the past. While there was no shortage of glitzy new models and concept cars, the emphasis was squarely on making cars much more efficient and environmentally-friendly. Visiting dignitaries included the new Administrator of the Environmental Protection Agency. In remarks at a presentation on the new EcoCar competition--the follow-on from the Challenge X competition I described last year--one of her deputies emphasized three overarching imperatives for the industry: economic stability, energy security, and emissions reduction. The auto company officials I spoke with were already on board with that message.

I can't fit all my experiences and a proper assessment of the issues involved into a single posting, so instead I'll just recount the highlights of attending the media-only preview of the show, and a dinner for a small group of bloggers organized by General Motors the previous evening. I hope to expand on much of this in subsequent postings.

The GM dinner was certainly a highlight. I met the head of the Chevrolet division and had a lengthy conversation with Tony Posawatz, who leads the design team for the Chevrolet Volt plug-in hybrid, the latest prototype of which was on display at the show. I had a chance to ask all of my questions about the Volt's configuration and how it will perform once its approximately 40 mile electric-only range is exhausted. I was particularly impressed with the Chevy team's underlying philosophy on the eventual electrification of most vehicles, which would greatly diversify the sources of transportation energy, and by their understanding of the complexity of the larger energy and environmental challenges involved. Cost remains a crucial hurdle for EVs and plug-ins, with battery packs still tremendously expensive and fuel so cheap, just now. I was assured that the Volt is on-track for its launch in the latter part of 2010.

A brief conversation at the Honda display underlined that cost concern, in the context of Honda's redesigned Insight hybrid, which is aimed at reducing the price premium of hybrids over non-hybrids and making them more affordable for a mass market. The new Insight has more than a few styling similarities to the Prius--"The same equations have the same solutions", as the great physicist Richard Feynman once said--and has no non-hybrid version to compare with. Both are probably smart moves on Honda's part. I also saw the new, third-generation Prius, which will apparently get even better fuel economy than the current model. If you liked the look of the old one, you will probably find this version sleeker and more graceful. Otherwise, it's yet another jellybean.

The other big highlight for me was the opportunity to drive three different European-style diesel cars, courtesy of the folks at Bosch, which makes the components that transform today's diesel engine from the smoky, noisy, balky device that Americans normally associate with this fuel into a smooth, clean and relatively quiet powerplant. The Mercedes ML320 and VW Tuareg and the 41 mpg (highway) Jetta TDI were all fun to drive, and their advanced particulate control systems meet the air-pollution requirements of all 50 states. I was also impressed with the Jetta's "double clutch" electronic transmission, which shifts almost imperceptibly. This model, which qualifies for a $1,300 fuel economy tax credit, will certainly be on my short list when I next go car-shopping. The other treat provided by Bosch was a ride in a test car that integrates advanced safety features with radar-based adaptive cruise control. If you haven't experienced it before, it's a bit eerie watching the cruise control handle city traffic, coming to a full stop without driver intervention. We are rapidly approaching the point at which computers can drive our cars better than we can, or at least make better use of their capabilities, including achieving the car's maximum fuel economy potential.

The emphasis on fuel economy and green credentials yesterday was pervasive, if not necessarily in all the models filling the DC Convention Center's halls, then at least in the ones that the companies emphasized. I found it remarkable that Chevrolet's new Camaro was touted for the 27 mpg (highway) fuel economy of its standard V-6--an engine unlikely to have been of much interest to the car's target demographic prior to last year's fuel price roller coaster--rather than its acceleration. And the new 40 mpg Cruze non-hybrid compact, already on sale in Europe, garnered as much attention. The proximity of so many cars delivering appreciably better mileage than most of those on the road in the US today to the really high-tech cars such as the Volt, Fisker Karma, Tesla Roadster, and Mini-E kept reminding me of a phrase I heard several times from the engineers from Bosch, in the context of their diesel technology: a bridge to the future, in the form of cars built with the best of today's technology, at an affordable cost, while the engineers and early adopters drive down the cost of the next generation everyone wishes we could all have now, but can't.

Smarter Stimulus

As the US Senate debates its version of the $819 billion economic stimulus bill passed by the House on Wednesday, I hope they will give consideration to a smarter alternative to sweeping income tax cuts, the stimulative effect of which seems questionable. An op-ed in yesterday's Washington Post by economist Martin Feldstein offers a better idea: "a temporary refundable tax credit to households that purchase cars or other major consumer durables." In fact, I'd like to modify Professor Feldstein's idea for a car rebate to ensure that it not only boosts sales, but moves us in the direction of higher fuel economy. Let's offer consumers a one-year, $2,000 per car refundable tax credit, but only for vehicles that exceed the Corporate Average Fuel Economy of the 2008 model new car fleet: 31.4 mpg for passenger cars and 23.6 mpg for the light truck segment that includes SUVs.

Although this criterion stops short of pushing large numbers of Americans into hybrid vehicles, there are good reasons to keep the bar broad, low and technology-neutral, here. In a recession and with gas as cheap as it is, fuel economy is unlikely to be the paramount concern of potential car-buyers, even if memories of $4 gasoline are seared in their brains. Despite high gas prices for much of the year, hybrids only accounted for 2.4% of sales in 2008. Carmakers can't possibly ramp up hybrid production by enough this year for them to affect overall car sales by a meaningful percentage, relative to the crippling industry sales decline of 18% last year. Moreover, there are already tax credits in place for both hybrids and plug-in hybrids, though subsidies for the former are now phasing out. By contrast, roughly half the cars sold last year already beat last year's CAFE performance, and I'll bet Detroit and the imports would be very happy to sell more of those models, even if they didn't generate as much profit per car.

Shifting the average fuel economy of a whole year's sales up by an mpg or two doesn't nearly sound as "green" as doubling the sales of 50 mpg hybrids, but in fact it would save a lot more oil and reduce emissions by a larger proportion, as well. Recall that the biggest, juiciest target for fuel savings is not the shift from 35 mpg subcompacts to 100 mpg plug-in hybrids, but getting drivers out of 15 mpg SUVs and into 25 mpg crossovers and minivans. And if Detroit is going to get back on its feet sufficiently to repay those government loans any time soon, it must quickly resume selling large numbers of the cars it already makes, even as it infuses more energy-saving technology into future models.

We want our stimulus dollars to boost the flagging economy as effectively as possible, without making other problems worse in the future--beyond the unfortunate but unavoidable consequence of larger deficits. Targeted tax credits for efficient cars and appliances make more sense in this context than stuffing $500 into the pockets of every American, who might prudently save it or use it to pay down debt. Those are worthy outcomes in the long run, but not what an urgent fiscal stimulus is intended to accomplish.