Navigant Research Blog

Automakers Go for MPG Records

— July 10, 2014

Automakers have had some poor publicity recently, with safety recalls and financial penalties imposed for exaggerating fuel efficiency performance.  In the United States, Ford was forced to apologize and offer customers compensation when its vehicles did not deliver the promised number of miles per gallon.  Honda and Hyundai suffered a similar fate in 2012 in the United States, and Hyundai and Ssangyong have also recently incurred the wrath of legislators in their home country of South Korea.

Fuel economy has risen to the top of the list of factors that influence new car purchases, even in North America, where historically cheaper fuel has made miles per gallon a low priority for consumers, until recently.  Thus, many manufacturers have shifted their marketing emphasis from 0-to-60 miles per hour (mph) times to average miles per gallon (mpg) under standardized testing.

Taking the Long Way

The big problem with standardized tests is they don’t represent anyone’s actual driving, so the prospect of achieving the stated figures is unlikely.   Most people have bad driving habits (from a fuel economy perspective), such as hard acceleration and braking, driving with under-inflated tires, and carrying excess weight around without realizing that all of these factors affect how much fuel is used.   Others make it their life’s work to squeeze the most miles from a gallon of fuel, and there are competitions for those who want to be the best.

Mercedes periodically attempts long-distance driving feats with its production cars.  In July 2005, three standard Mercedes-Benz E 320 CDI cars drove from Laredo, Texas on the Mexican border to Tallahassee, Florida, covering 1,039 miles on a single tank (80 liters/21.1 gallons) of fuel.  This was part of Daimler’s introduction of diesel vehicles to the U.S. market.  In 2012, a Volkswagen Passat TDI made it 1,626 miles from Houston, Texas to Sterling, Virginia, again on a single tank of fuel.

Out of Africa

Now, a Mercedes-Benz E 300 BlueTEC HYBRID has driven the 1,223 miles from Tangier, in Northern Africa, to the United Kingdom in 27 hours, arriving at the Goodwood Festival of Speed with an estimated 100 miles of range still available.  The BlueTEC averaged 73.6 mpg on the journey.  This type of demonstration shows what can be accomplished in a production vehicle in driving conditions that included heavy rain, intense heat, rush hour traffic jams, and significant elevation changes.

This sort of feat is one of the biggest challenges facing electric vehicle sales.  Although few people would actually want to tackle a journey of over 1,000 miles on a single tank of fuel, many people are happy that their vehicles can do that, just in case.  And few would want to undertake such a journey where they have to stop every 100 miles to recharge for a couple of hours, even if there was a network of charging stations in place.

 

Luxury EV Sales Outpace Overall Market

— May 13, 2014

The plug-in electric vehicle (PEV) market continued to see strong growth in early 2014, and the high-end segment is likely to expand most quickly during the remaining months.  According to data from HybridCars.com, sales of PEVs in the United States grew by 24% during the first quarter of 2014 compared to the prior year and now make up approximately 0.6% of new light duty vehicle sales.

But if you look at sales from only the luxury vehicle segment, the penetration rate jumps to nearly 3% of new vehicles sold.  Nearly all of those sales (94%) came from just one company – Tesla Motors.  Two models accounted for the rest of the luxury EVs sold: the Cadillac ELR and the Porsche Panamera S E-Hybrid, both plug-in hybrids.

PEV Market Penetration by Vehicle Type, United States: 1Q 2014

(Sources: Navigant Research, HybridCars.com, AutoNews.com, Tesla Motors)

PEVs are doing well in the luxury market not only because the Tesla Model S is a great looking and performing vehicle, but also because its target audience is unfazed by its higher price tag.  Whereas Chevrolet, Nissan, Ford, and others are asking consumers to spend an additional $5,000 to $10,000 for a comparable looking electric compact or sedan (albeit with more features, such as navigation and telematics), Tesla and the other luxury makers are requiring customers to spend about as much as they normally would.  Upselling is always more challenging than asking customers to choose between equally priced options.

Top-Down Approach

Navigant Research projected that the luxury market would be an area of great interest and activity this year as part of our free annual white paper, Electric Vehicle Predictions: 10 Predictions for 2014.  Tesla, which reported sales of 6,457 vehicles during 1Q in its recent quarterly filing, continues to thrive, but competition is coming.  (Tesla does not identify how many of its vehicles were sold outside of the United States separately, so the PEV percentage in the United States is slightly inflated.)

Until recently, the only other luxury options have been the Cadillac ELR and Porsche Panamera S E-Hybrid (the Fisker Karma was also briefly on the market).  However, BMW will soon have two models available, and Mercedes just announced an aggressively priced battery electric vehicle.  And, within a year, Audi and Volvo will also be in the mix with new PEVs for sale in the United States.

While the styling from some of the luxury PEVs may not mirror their internal combustion engine counterparts, the interior creature comforts and vehicle performance will tempt consumers who are interested in avoiding paying more at the pump.  The rapid expansion of luxury PEV models available should enable the segment to stay well ahead of the overall PEV market penetration for the foreseeable future.  We can expect even more luxury PEVs to be announced before the year is over.

The overall PEV penetration rates will only grow if automakers pursue more segments and the high costs of batteries today makes moving from the top down a reasonable strategy.  Tesla and Chrysler are also eying other potential opportunities for PEVs – the SUV and minivan segments.

If you’d like to hear more on the future of electric vehicles, I’ll be speaking at the Electric Drive Transportation Association annual conference on May 20 in Indianapolis.

 

Improving the Performance of Hybrids

— April 23, 2014

The fundamental goal of a hybrid powertrain is to improve fuel efficiency by recovering kinetic energy from the vehicle as it slows down and storing it to reuse later.  Traditional vehicles convert that energy to heat in the brakes and then let it disperse into the atmosphere.  Hybrid electric vehicles (HEVs) generate electricity via an electric motor and store it in batteries or ultracapacitors.  The resistance of the motor slows the vehicle.

An understanding of how the hybrid powertrain works is helpful for drivers who wish to maximize their efficiency on the road.  Being careful not to accelerate too hard and slowing down steadily without using the foundation brakes are techniques that have been used since HEVs first went into production in the late 1990s.  As they became more popular, some original equipment manufacturers had to deal with complaints from drivers who didn’t achieve the promised fuel economy.  Some of the deficit was due to driving technique – if you hit the brakes hard when driving, then the regeneration cannot take place and energy will not be saved for reuse.

Hills Ahead

The basic hybrid system will deliver more fuel economy benefits to drivers who understand how to get the most out of it.  But there are limits.  Once the battery is fully charged, no more energy can be stored and the vehicle is then no more efficient than its conventional counterpart.  It’s very difficult for a driver to work out how to get around this limitation.

However, Mercedes-Benz has done just that with its latest Intelligent HYBRID operating system, which was introduced in the S-Class in summer 2013 and is now available in the new 2014 C-Class.  These cars use data from their navigation systems to look ahead for hills.  When the vehicle detects a downhill stretch coming up, it knows that the hill presents a good opportunity to capture energy, so it activates the electric motor to start draining the traction battery.  Taking more of the power from the electric drive means that the engine uses less liquid fuel, improving fuel economy.

This advanced technology is a first for the consumer market.  Another application that uses the latest digital map data is Audi’s adaptive headlight system, which can anticipate upcoming curves to better illuminate the road ahead without dazzling oncoming vehicles.  Continental’s eHorizon system optimizes gear shifting to best handle the upcoming terrain.  Mercedes is the first to offer map-based efficiency technology in consumer vehicles.

These innovations will undoubtedly benefit vehicle owners by delivering improved fuel economy in real-world usage.  However, the standardized tests used by government agencies to help consumers compare vehicles are unlikely to register an improvement because they do not include going up and down hills and are typically conducted on a chassis dynamometer, or rolling road.  Another reason to reevaluate how comparison testing is done.

 

EIA Foresees Fossil-Fueled Future for Transportation

— December 20, 2013

The U.S. Energy Information Administration (EIA) released an early version of its Annual Energy Outlook (AEO) for 2014, depicting an energy future overwhelmingly shaped by the development of new oil and natural gas reserves.  Cumulative production of natural gas from 2012 to 2040 in the AEO2014 report is about 11% higher than in AEO2013, reflecting the continued growth in shale gas production from increased horizontal drilling and hydraulic fracturing.

Some of the highlights for transportation-specific forecasts from AEO2014 include:

  • Light-duty vehicle (LDV) energy consumption will decline sharply through 2040, due to slow growth in vehicle miles traveled (VMT) and accelerated improvement in fuel efficiency.
  • Energy consumption in the transportation sector overall will decline from 26.7 quadrillion Btu in 2012 to 25.5 quadrillion Btu in 2040.
  • Electric vehicles, including battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and hybrid electric vehicles (HEVs), will account for just 7% of total vehicle sales in 2040 (This sharply contrasts with Navigant Research’s report, Electric Vehicle Market Forecasts, which forecasts the same 7% penetration being reached by 2020).
  • LDVs powered by gasoline will remain the dominant vehicle type, retaining a 78% share of new LDV sales in 2040, down just 4% from an 82% share in 2012.

It is important to note that this reference case scenario released by the EIA is limited because it assumes current laws and regulations will remain generally unchanged through 2040, which is a shortsighted assumption.  For example, even major U.S. oil companies, such as ExxonMobil and ConocoPhillips, are already including a price on carbon emissions in current business planning.  Exxon reported that it anticipates a cost of $60 per metric ton of carbon by 2030.

Additionally, we have seen the rapid development of California’s zero-emission vehicles (ZEVs) mandates in recent years, which is pushing the automotive market toward 1.5 million ZEVs in California by 2025.  With nine other states expected to follow California’s lead, there’s no telling how much these mandates and a potential carbon tax will increase the market for electric vehicles – but there’s no doubt that it will have a significant impact that is largely unaccounted for in the EIA’s Outlook.

Finally, the EIA’s less than bullish outlook for clean transportation technologies is based largely on its assessment of future gasoline prices.  The EIA predicts that the real end-use price of motor gasoline in the United States will decline to $3.03 per gallon (2012 dollars) in 2017, then will rise to just $3.90 per gallon in 2040.  This conservative forecast may be underestimating the increasing difficulty and financial cost of drilling for unconventional oil sources, such as oil sands and extra heavy oil, as conventional oil reserves, which are generally easier and cheaper to produce, continue to diminish.  While the world is certainly not running out of oil, it is running out of oil that can be produced easily and cheaply.

 

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