Navigant Research Blog

‘Not Invented Here’ is Good for Automakers

— February 1, 2015

Not so many years ago, the auto industry was afflicted by a phenomenon known as “Not Invented Here,” or NIH.  As one of the less desirable relics of the massive vertical integration that provided tremendous economies of scale and profits, NIH also led to technological stagnation.  Fortunately, the drive to reduce fatalities, fuel consumption, and emissions has helped push automakers to look beyond their proprietary engineering labs to adopt and fund innovations from both established suppliers and more recently tiny startups.

“Four decades ago, 90% of the intellectual property [IP] in the auto industry originated from inside the OEMs,” said Dr. David Cole, chairman and co-founder of the AutoHarvest Foundation and an engineering professor at the University of Michigan.  “In those days, suppliers would basically build to print, but today they generate more than half of the IP that goes into new vehicles.”

OK to Fail

As Cole observes, as manufacturers have grappled with integrating state-of-the-art electronics, automated driving systems, and electrified powertrains, they have expanded the scope of their collaboration beyond traditional suppliers that are equally inexperienced in these areas.  In 2005, Ford began a development partnership with Microsoft that led to the SYNC in-vehicle connectivity system.

In 2011, General Motors (GM) and BMW took inspiration from Silicon Valley and established GM Ventures and i Ventures.  Both of these venture capital (VC) funds make relatively modest investments in startup companies that have promising ideas that could enhance future mobility.

For example, GM Ventures put $5 million each into Powermat and Bright Automotive and $4.2 million into Sakti3.  Like all VC investments, a certain percentage are expected to fail, while others will catch on.  Electric van builder Bright went bankrupt in 2012, while GM introduced wireless phone charging mats based on Powermat technology into several vehicle lines in 2014.  Sakti3 is still developing a new type of solid-state battery that shows tremendous promise for reducing the cost and improving the range of future electric vehicles (EVs).  Companies that have received funding from BMW i Ventures include JustPark.com and Coulomb Technologies, the company behind the ChargePoint EV charging network.

Opening Up

Ford doesn’t have a separate venture funding arm, but has made strategic investments in companies like Michigan-based software firm Livio.  Ford bought the startup in 2013 and has incorporated its technology for connecting smartphone apps to the vehicle into its new third-generation SYNC system, scheduled to debut later this year.  In 2013, Ford also contributed the code for its SYNC AppLink system to the open-source GENIVI project, so that any automaker can use the system in its vehicles.  In December 2014, Ford announced a partnership with Techstars to launch a mobility startup incubator in Detroit that will also get funding from Verizon Telematics and Magna International.

From newcomers like Tesla Motors to century-old companies like GM and Ford, everyone has recognized that NIH inhibits innovation, and that no one knows where the next great idea that revolutionizes mobility will come from.

 

New Momentum for Fuel Cell Vehicles

— December 15, 2014

Somewhat unexpectedly, fuel cell cars were in the spotlight in November, with Toyota and Honda each unveiling their fuel cell vehicles (FCVs) in Tokyo and several FCVs displayed at the Los Angeles Auto Show.   The media responses ranged from skeptical interest to disbelief that FCVs will ever become a reality.  So let’s look at what happened and what it says about where FCVs are going.

The biggest announcement was Toyota’s presentation of the Mirai, a four-seat fuel cell coupe that will be available to Japanese consumers in early 2015 and later in the year in the United States.  Although Hyundai is first to market with a production fuel cell car, Toyota generates the most excitement, mainly because the company is assigned almost magical powers to create a market for new clean technology thanks to its launch of, and continued dominance of, the hybrid vehicle market.  Toyota is clearly swimming against the tide on zero emissions technology by going with fuel cells instead of batteries, and the company’s moves attract attention.

5 Minutes or Less

Toyota’s announcements were the most positive of the recent announcements.  I’ve said before that two remaining hurdles for the fuel cell car market come down to cost (of the car) and infrastructure, as the technology has largely been proven.  Toyota demonstrated this with the Mirai, which will have a 300-mile range and will refuel in under 5 minutes.  While Audi has said it is going the plug-in hybrid fuel cell route because a pure fuel cell car would be underpowered at just 130 horsepower (hp), the Mirai will have 153 hp, in line with Toyota’s conventional vehicle lineup.  Toyota announced that the sticker price for the Mirai in the United States will be around $57,000.  When tax credits are added in, the price will drop below $50,000.  That’s still a high-priced car, but at this price point, it’s at least competitive with the high end of battery vehicles.

Toyota also said that it will support infrastructure investment in the northeastern United States.  The company is already investing in hydrogen station deployment in California through California hydrogen infrastructure startup FirstElement.  While this move can be seen as simply supporting the introduction of zero emissions vehicles (ZEVs) in the Northeast states that have adopted the ZEV mandate, it’s the first sign of real progress on U.S. infrastructure buildout outside of California.

Full Speed Ahead, Slowly

Honda’s news was more mixed.  Honda unveiled a five-seater fuel cell concept car – a positive step in showing that FCVs won’t have to start small like battery vehicles did.  In addition, Honda joined Toyota in supporting FirstElement in California through a letter of intent to invest $13.8 million.  But the company took a step back by announcing that it would not release its first commercial FCV offering until 2016.  Moreover, Honda’s president, Takanobu Ito, said that his vision was of FCVs in significant numbers on the road in 30 years.

At the Los Angeles Auto Show, other OEMs that have largely stayed out of the fuel cell development path had concept vehicles on display.  The Volkswagen Group showed a hydrogen Golf and a plug-in A7 e-tron for Audi; both are still concepts, so this looks more like hedging against future need for a FCV once Toyota, Honda, and Hyundai have tested the waters.

So progress continues on the two major challenges for FCVs, but it continues to be slow.  The price points are the most positive development, and may leave hydrogen infrastructure as the final obstacle for fuel cell cars.

 

Hybrids Need a Refresh

— September 18, 2014

Worldwide sales of hybrids through August were off 9% over sales during the same period in 2013.  The drop contrasts starkly with the last 3 years, which have seen January-August sales rise 65% from 2011 to 2012 and 24% from 2012 to 2013.  While the market for hybrids is certainly not going away – 2014 sales will likely hit 400,000 by year-end – it is becoming significantly more competitive, and expansion outside of the midsize hatchback segments that hybrids crowd is just not happening.

Toyota’s introduction of the Prius family in 2012, alongside a market for plug-ins that was limited to few costly models, signaled a revival of the hybrid market.  Since then, though, plug-in makers have cut costs sharply, and the number of available models has grown considerably.  Only 1/20th the size of hybrid market in 2011, sales of plug-ins are now one-quarter of hybrid sales.  Meanwhile, the difference between hybrids and conventional gas- and diesel-powered vehicles in terms of fuel economy is shrinking.

Weight Loss

Driven by Corporate Average Fuel Economy (CAFE) standards, automakers are introducing vehicles with stop-start systems that are already widely popular in Europe and have significant weight reductions through materials engineering and engine downsizing.  Tracked by the University of Michigan Transportation Research Institute (UMTRI), the average new vehicle sold in the United States hit 25.8 mpg last month ‑ 5 mpg higher than the 2008 average.

All of this means that, for new hybrids to succeed, they must show significant fuel economy savings over conventional competitors ‑ and at a price point significantly lower than plug-in rivals (minus government subsidies).  Or they must be new: they have to fill a segment outside the densely populated small hatchback or offer cutting-edge technologies that can grab some of the spotlight that Tesla, Nissan, BMW, and Chevrolet eat up with each new plug-in electric vehicle (PEV) introduction.

Ford has announced it will introduce a new dedicated hybrid – another small hatchback — to compete with the Prius in late 2018, and industry sources believe that Hyundai may also soon join the fray.  But the wisdom of these introductions is questionable if current trends continue.  Breaking into the cross-over market, as plug-ins are poised to do next year with the Model X and Mitsubishi Outlander PHEV, would do much to keep hybrids relevant.  Bringing a diesel hybrid over from Europe would also help capture car buyers’ imaginations.

 

Toyota Commits to Active Safety Features

— September 18, 2014

If the world’s largest automaker gets its way, by the end of this decade, we can expect advanced active safety and semi-automated driving features to become as familiar as anti-lock brakes and stability control have in the past 10 years.

During an advanced safety systems seminar near Toyota’s North American technical center in Ann Arbor, Michigan, the automaker challenged its competitors when it committed to offering advanced active safety systems across its lineup by 2017.  Toyota also increased its commitment to advanced safety R&D by extending the initial 5-year mandate of the Collaborative Safety Research Center (CSRC) from 2016 through 2021 and adding $35 million in new funding.

At the same event, Simon Nagata, senior vice president of the Toyota Technical Center, announced an expansion of the scope of the CSRC, which was launched by company president Akio Toyoda in 2011.  Nagata described the program as unique in the industry because “all findings are openly shared in order to benefit people everywhere.”

CSRC research initially focused on three areas: driver distraction, active safety, and helping to protect the most vulnerable traffic populations, including children, teens, and seniors. Automated and connected vehicle technologies are now part of the CSRC scope of work. To date, CSRC has initiated or completed 34 projects with 17 universities and research hospitals.

Join the Crowd

Ford has drawn attention in recent years for offering a full suite of driver assist capabilities, including active park assist, blind spot information, lane departure warning and prevention, and adaptive cruise control on the high-volume Fusion midsize sedan.  Some of these features are even available on the smaller Focus and Escape.  Other manufacturers, including Nissan, Honda, and even Hyundai, have since added some of these features to mainstream products.  Toyota, on the other hand, has largely restricted these technologies to its premium Lexus brand.

“Many of these capabilities will be added to Toyota brand vehicles starting in 2015 and with the goal of becoming the first full-line manufacturer to offer these technologies across the entire lineup by 2017,” said Bill Fay, Toyota group vice president and general manager.  Fay didn’t provide details about exactly which vehicles will get what features.  However, the updated 2015 Camry sedan, announced in April at the New York Auto Show, will offer radar-based adaptive cruise control, blind spot monitoring, cross traffic alert, lane departure alert, and a pre-collision system.

Toyota’s increased emphasis on active safety and automated driving is likely to inspire both the competition and regulators who may well see this as an opportunity to begin mandating the technologies that are building blocks for autonomous vehicles, just as they did previously with stability control and rear cameras.  And it will provoke a wider discussion of how we incorporate automated vehicles into the transportation ecosystem.

 

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