Navigant Research Blog

Chevy Cruze Delays Could Also Mean Delay for Volt Launch

— October 30, 2009

Yesterday, the Detroit News reported that General Motors has announced a delay in the launch of their new, small car, the Chevrolet Cruze to Q3, 2010. Most analysts and those in the blogosphere agree that the Cruze is a critical vehicle for GM to get right. A delay like this may in fact just be something as mundane as what GM tells us – “to ensure a flawless launch”. And, it is certainly not uncommon for any manufacturer to delay the launch of an all-new vehicle.

However, put in context of the financial problems GM and its suppliers have had, it would not be too much of a stretch to imagine that there are supplier issues driving this delay. As recently as last month, GM delayed another important launch, the Buick LaCrosse due to unspecified “quality issues.” This all seems to me to be pointing to a supplier base and production system that is challenging for GM. (I would be remiss in not pointing out that relating to the link above, American Axle did announce this morning a quarterly profit in Q2, so apparently GM’s financing worked out for them.)

The Cruze and the Volt are both based on the same platform – GM’s global Delta platform. Without having too many details on either the reason for the Cruze delay or how much of the underpinnings are shared between the Cruze and Volt, it is speculation (but likely not too far off-base) to assume that this is trouble for the Volt team as well. The Cruze is now expected to launch Q3, which is very close to the previously anticipated Q4 launch of the Volt. As an aside, I find it interesting that GM delayed “3 months” from April 2010 to “about Q3” 2010 – which makes me wonder if that word parsing means it will actually be a longer delay than 3 months. After all, September is still Q3.

Obviously, GM wants the Cruze launch to go off spectacularly, and no doubt it wants the Volt to do the same. My gut says that Chevrolet program and marketing managers alike would rather have the Cruze in the U.S. market for a few months before launching the Volt. This combination makes me think that there is likely a delay coming to the Volt launch. However, at the same time, there is some outside pressure that GM has to keep an eye on – that pressure has a name: the Plug-in Prius. However, if it were me, I’d advise GM to get the launch right, rather than worry about being first.

Finally, to get back to the Cruze, GM tried to put a good face on this delay announcing that variants of the Cruze will be available to launch at the same time with the first version in Q3. The variant is expected to be an upgraded 1.8L engine, a more powerful engine than the 1.4L 4 cylinder turbo of the base vehicle (which I assume will also get slightly lower fuel economy than the base vehicle). GM won’t want to delay the Cruze too much, because it has its own outside pressure in the form of two giants in the US small car market: a redesigned Ford Focus expected in late 2010 and a redesigned 2011 Honda Civic (timing not yet officially announced, but late 2010 seems likely).

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Ford Van to Go All-Electric in 2010

— October 30, 2009

Ford is driving closer to its goal of producing an all-electric car with the announcement of an electric van for North America for 2010. The Ford Transit Connect BEV will incorporate a drivetrain from Azure Dynamics and lithium ion batteries from Johnson Controls-Saft.

The van will get 80 miles before needing to be charged and will be sold into fleets, according to Ford manager of corporate news Jennifer Moore. She said Ford will produce the van in low volumes and has not announced any customers so far.

Azure Dynamics, which Ford had worked with before, was brought in to replace Smith Electric Vehicles as the drivetrain partner. Moore said that Smith has decided to focus on medium duty trucks. Today Smith Electric Vehicles announced it was working on a prototype electric postal delivery vehicle with AM General for the U.S. Postal Service.

Ford hasn’t committed to Azure Dynamics — or anyone else — as a long term partner for its other EVs in development. Moore said Azure Dynamics’ extensive experience in building components for electrified vehicles made them an attractive partner.

Johnson-Controls-Saft will be the company’s battery partner moving forward. In development are a Ford Focus EV for 2011, as well as an unnamed PHEV vehicle for 2012.

Ford is moving quickly in turning its successful Transit Connect, which only debuted this year, into an EV.

Delivery van fleets that operate on shorter routes are likely applications for EVs and PHEVs since they can be charged centrally overnight and provide sufficient driving range to complete a day’s work.

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Honda Hybrid Lawsuit Offers History Lesson

— October 27, 2009

Honda is now offering a $500 rebate to customers who purchased a Civic Hybrid between 2003 and 2007 but aren’t happy with the gas mileage they are getting. This offer, which must be used towards the purchase of a new Honda (alternatively you can take $100 cash) is the result of a lawsuit by musician and disgruntled Honda Civic Hybrid (HCH) owner John True. True said he was only able to achieve 32 miles per gallon on his vehicle.

I know this story well as I am a former HCH owner, having purchased one in 2003. I similarly didn’t achieve the EPA’s estimated MPG that is required by law to be the only mileage quoted in advertising by the car companies.

I was the first to write about this issue for Wired News (see the details here and here) and in my reporting discovered that all hybrid vehicles were receiving generous MPG ratings because the EPA’s decades-old testing procedure spent an unrealistic amount of time “stopped,” at which point the hybrid-electric vehicles’ engines turned off.

Realizing the error of its ways, the EPA at long last updated its testing methodology in 2007, which brought down the MPG estimates of hybrids much more than internal combustion engines. The EPA even established revised fuel economy estimates for existing vehicles, which were available online to Mr. True around the same time he filed suit.

In addition to the flawed EPA test and a break in period (hybrids tend to get better mileage after few thousand miles of driving), driving habits play a major role in the actual-versus-estimated MPGs. “Your mileage may vary” is not just a cliche, which some folks who drive aggressively or in constant traffic fail to realize.

History could be repeating itself with the advent of the plug-in hybrid, and automotive OEMs should learn the lesson from this lawsuit. Honda was following the law in advertising using EPA estimates, yet the company is curiously willing to potentially pay hundreds of thousands of dollars in a settlement. (Several happy HCH owners have posted online that they won’t take the money and are objecting to the settlement offer.)

Offering $500 towards the purchase of a new Honda vehicle is an oft relied upon tool for auto makers that could generate some additional business for the company. Even though Honda denies any wrongdoing, offering money under the auspices of a court settlement sends a negative signal that hybrids aren’t all they are cracked up to be to prospective buyers who may not be familiar with the history of the EPA’s testing procedures.

General Motors recently claimed that the upcoming Chevrolet Volt plug-in hybrid achieved 230 miles per gallon based on internal tests, but then the EPA quickly questioned that figure.

Plug-in hybrids and EVs have the potential to reshape the transportation market, but auto makers have to carefully manage expectations. The new vehicles’ cost effectiveness will come into question, and the performance characteristics and driving experience of electrified vehicles require a steep learning curve. The last thing the troubled U.S. auto industry needs is a new round of lawsuits from customers who don’t understand their vehicles.

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Economics, Emissions to Determine Turbocharger Growth

— October 19, 2009

American cars with turbochargers are currently few and far between, but that may soon be changing. While a significant and sustained increase in the price of fuel would greatly boost demand for turbochargers, auto manufacturers’ need to comply with carbon emissions and fuel economy targets will be the primary drivers of the domestic turbocharger market.

When compared with cars with similar horsepower, those with turbocharged smaller engines can reduce emissions by 20 to 40 percent, and can increase fuel economy by 15 to 20 percent.

As is often the case, the U.S. lags Europe in adoption of this technology, partly because it has primarily been used with diesel engines. Turbochargers are now used in about half of all European cars. By comparison, U.S. penetration is at just five percent.

The rising CAFE requirements has convinced automakers to announce a slew of electric vehicle and hybrid models, but in coming years turbochargers are likely to get more attention as a less-costly way to increase their fleet average performance.

A few new U.S.-market cars are featuring turbochargers, which enable smaller engines (such as four cylinder engines instead of six) to approximate the power of larger engines. Ford is now running television spots to promote its EcoBoost technology, which includes a Honeywell turbocharger. EcoBoost will be showing up in the 2010 Lincoln MKS, Ford Flex, and the Taurus SHO.

We are likely to see a gradual shift to more 4-cylinder sedans that emphasize performance, as well as 6-cylinder cars replacing 8s. This “transparent downsizing” is good from a fossil fuel and emissions standpoint because even small improvements in fuel efficiency will have a much greater net impact than similar reductions in higher MPG vehicles.

Honeywell Turbo Technologies’ Vice President of Marketing David Paja projects that turbocharging will grow to 25 percent of all new vehicles in the U.S. within 5 years. Paja says the European market could grow from 50 to 70 percent during the same time. Honeywell looks to benefit from any growth as the company supplies turbochargers to most of the world’s largest automakers, including but not limited to Audi, BMW, Chery, Citroen, Dodge, Ford, Honda, Hyundai, Mercedes, Renault, Tata and Toyota.

Paja said that Japan hasn’t been as receptive to turbochargers because of government incentives that make hybrids attractive for increasing fuel efficiency. Turbocharger company Borg-Warner is also like to get a share of an expanding market. The company recently signed a deal to supply vehicles to First Automotive Works of China.

However, turbocharging won’t do much for improving the fuel economy in the today’s compacts, which already feature smaller 4-cylinder engines. Adding turbocharging brings more power, but usually at the cost of greater fuel consumption. For example, Subaru recently announced that it is offering a turbocharged version of its Legacy sedan, which gets slightly worse gas miles (18/25) than its standard model (19/27).

For that reason, a 25 percent U.S. market share in the U.S. might be on the optimistic side. With new hybrids, EVs, and compacts coming to market, there simply won’t be enough people interested in paying the premium for diesel and performance-oriented vehicles. If there were a turbocharged 3-cylnder car on the market (like BMW’s plug-in concept), then we might see higher penetration.

Turbochargers and electric motors can work hand in hand with electric motors to satisfy power-hungry drivers. BMW’s new X-6 and Series 7 Active Hybrids will feature turbochargers and generate an impressive 480 hp. The combined cost premium of hybrid motors and turbocharging will probably exceed $5,000, but performance-minded consumers are less price sensitive.

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