Navigant Research Blog

Tesla Breaks into Japan

— September 25, 2014

Last week Tesla opened its Japan sales operation with Elon Musk handing over nine keys to the first Model S owners in the country.  The event is significant because foreign automakers, especially U.S. ones, sell very few vehicles in Japan.  Although the country’s vehicle market officially opened to limited foreign participation in the 1970s, despite extensive automotive trade negotiations between the United States and Japan, the country has effectively remained closed.  Nearly 96% of all vehicle sales in the country come from Japanese companies, while the remaining 4% come from German automakers, with a barely visible blip of around 1,000 vehicles coming from GM.  This has been frustrating for foreign automakers – but it’s also hindering Japan’s plug-in electric vehicle (PEV) market.

As of 2013, Japan is the third-largest vehicle market and the second-largest PEV market in the world.  PEV sales were initially strong, thanks to infrastructure developments and vehicle deployments by Nissan, Mitsubishi, and, to a lesser extent, Toyota.  However, Toyota and Honda have since scrapped most of their PEV development programs, and no new PEVs were introduced in 2014, until Tesla did so last week.  To provide some context, there have been 24 different PEV models sold in Norway in 2014, while only 7 (including Tesla and three variations of the Mitsubishi i-MiEV) have sold in Japan.

Flat through ‘14

As a result, despite significant growth in every other PEV market, PEV sales in Japan will likely remain flat in 2014, at around 30,000 units.  This means that the country’s market will fall to third behind China; it may also lose ground to Germany, France, Norway, and the Netherlands, winding up in seventh in 2014.  Given Japan’s significant foreign energy dependence issues (Japan essentially imports 100% of its oil), this is a problem.

PEVs have substantial energy efficiency improvements over conventional vehicle platforms that, if adopted en masse, could do a lot to reduce Japan’s dependency issues.  Additionally, the country’s subsidy program, large vehicle market, significant price differential between electricity and gasoline on a per mile basis, and well-developed public charging infrastructure present the optimum conditions for the PEV market.  Unfortunately, Japan’s traditionally isolationist national automotive policy is inhibiting its own national energy security and greenhouse gas (GHG) reduction goals.

 

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.

 

Smoggy Skies Drive City Innovation

— September 16, 2014

The air pollution caused by rising vehicle numbers and coal-fired power plants in Chinese cities has been well documented.  But these issues are not limited to cities of the developing world.  In March, smog levels in Paris reached levels that forced the city government to limit vehicle access to the city and make public transportation free.  Subsequent analysis suggests that this drastic measure had a notable impact on air quality, if only temporarily.

Paris is not alone among European cities in suffering from deteriorating air quality.  London and other U.K. cities, for example, have been under the spotlight for failing to meet European Union (EU) standards on air quality.  A report in July suggested that Oxford Street in London was one of the most polluted roads in the word with regard to nitrogen dioxide (largely produced by diesel buses and cars), with levels 3 times the EU-recommended amount – and higher than Beijing.  London and some other U.K. cities are not expected to meet EU targets for air pollution reduction until 2030.

Fewer Vehicles, Cleaner Air

The World Health Organization estimates that outdoor air pollution causes 3.7 million premature deaths worldwide each year; this mortality rate is due to exposure to small particulate matter of 10 microns or less in diameter, which cause cardiovascular and respiratory diseases and cancers.  Of particular concern in cities are fine particulate matter below 2.5 microns, referred to as PM2.5, which can lodge deep within the lungs.  This life-threatening type of smog is created by burning vehicle fuel as well as other fuels such as coal and wood.

The need to address air pollution is becoming a significant driver for the adoption of electric vehicles in cities, restrictions on the worst polluting vehicles, and the introduction of technologies that can monitor and improve air quality.  Madrid, for example, is using parking fees to target the worst polluting vehicles, while also introducing an electric bike rental scheme.  Boston is piloting high-tech city benches that can collect information on air quality and provide solar-powered charging for electronic devices.  Other high-tech attempts to improve air quality have been less than successful: a project supported by the Mayor of London that used a form of glue to collect contaminants proved to be largely ineffective in capturing vehicle pollution.  More recently, the Mayor has suggested that diesel vehicles, responsible for much of London’s damaging air pollution, may face additional charges for driving in the capital under the city’s congestion charging scheme.

Looking East

In the future, western cities may look to China as a leader in air quality improvement.  In 2013, the Chinese government launched its Airborne Pollution Prevention and Control Action Plan, which will see it invest $277 billion in an attempt to reduce air pollution by up to 25% in selected provinces and cities (including the municipality of Beijing) by 2017 compared to 2012 levels.  Beijing alone is expected to invest around $160 billion.  Beijing is also working with IBM on a 10-year project called Green Horizon that will employ sensor technologies, big data analytics, weather modelling, and other advanced techniques to help the city monitor and address air pollution.  The project will also integrate renewable energy forecasting and industrial energy management.

In North America and Europe, air pollution is often associated with a previous age of industrialization, but the growing public awareness of the continuing threat to public health is accelerating policy and technology innovation.  Ultimately, air pollution in our cities needs to be addressed through a combination of transportation and energy policies and the general adoption of clean fuel vehicles and other clean technologies.

 

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