Navigant Research Blog

Autonomous Vehicles Drive Themselves toward Reality

— March 19, 2014

Australian startup Zoox made a splash at the LA Auto Show in December by hosting a stand at the Connected Car Expo to promote its ideas about autonomous vehicles.  Zoox’s view is that the best way to introduce fully autonomous driving is to start with a clean sheet of paper and develop a new type of transport from scratch, rather than incrementally changing existing vehicles.  The initial concept currently under development is a taxicab that uses a chassis made of four identical quadrants.  Each quadrant will have a wheel with its own electric motor, and all four wheels can steer.

The passenger compartment will have no steering wheel or pedal controls and will utilize a carriage layout, with passengers facing each other.  The design is being optimized for rapid prototype manufacturing techniques rather than mass production.  Zoox is targeting taxi fleets as its first customers, because the business model shows that the biggest savings come from eliminating the drivers’ wages.  The vehicles will be designed for low-speed travel on city streets.

Experience Not Required

At the Autonomous Driving conference in Berlin hosted by we.CONECT, the Zoox team actively sought feedback from the other participants.  They are in the first year of a 7-year product development plan, so there is no vehicle to sit in at present, but the overall concept is well thought out and some detail work has begun.  I am sure that the Zoox developers will be tracking progress of the Navia, a robotic driverless shuttle, and Tesla has shown what can be accomplished in the automotive industry without decades of experience.

One recurring theme in Berlin was how to develop an automated driving system that can return control to the driver safely when necessary, particularly when road conditions change beyond what the developers anticipated.  While driver assistance functions are steadily getting more sophisticated, there are huge advances to be made before people can safely be removed completely from the driving process.  Today’s incremental improvement process involves automating the control systems that have been developed over the last century for humans to use.  This seems to be the fundamental challenge that Zoox has identified, and it wants to approach the solution from the other direction.

Maps from the Cloud

In addition to the intriguing Zoox concept, the presentations at the Berlin conference were of high quality and networking opportunities were abundant.  Here are some of the highlights that I noted that gave me some fresh perspectives on the current state of autonomous driving technology:

  • Professor Emilio Frazzoli of the Massachusetts Institute of Technology pointed out that the biggest potential benefit from autonomous driving will be carsharing, far exceeding improved road safety.  His detailed analysis of traffic in Singapore indicated that 800,000 personal cars could be replaced by only 300,000 shared autonomous vehicles.
  • Dietmar Rabel, from digital map company HERE (formerly known as NAVTEQ and Nokia Location & Commerce), promoted the Internet cloud for continuous map updates and introduced the concept of crowdsourcing for accurate map data.  Rather than relying on map suppliers to continuously update the information, sensor data from connected vehicles could be shared through the cloud, thus providing near real-time updated map and road condition information locally.
  • Geoff Ballew of NVIDIA explained how his company has grown from a supplier of graphics boards for PCs into a high-performance computing specialist.  Rapid data processing will be a key requirement for self-driving vehicles to become a reality.

While the automotive industry makes slow but steady progress toward the goal of a self-driving vehicle, it’s also good to hear about new companies approaching the topic from a different perspective.  I shall continue to watch with interest as I work on an update to Navigant Research’s 2013  Autonomous Vehicles report.

 

EPA’s New Emissions Standards Will Save Lives

— March 18, 2014

In an earlier blog, I argued that disagreements over the scientific merits of climate change too often overshadow the immediate public health and air pollution impacts of fossil fuel consumption.  The Environmental Protection Agency’s (EPA’s) public statements on its new Tier 3 vehicle emissions standards have done an excellent job of focusing on the real public health benefits of the new regulations without engaging in the climate change debate.

As a result of tightening vehicle emissions standards and requiring refiners to reduce the amount of sulfur in gasoline by two-thirds, the EPA estimates that up to 2,000 premature deaths will be avoided each year, as well as thousands of hospital visits, not to mention countless missed days of work, school absences, and activity restrictions.  By 2030, the EPA concludes that the Tier 3 emissions standards will be saving Americans anywhere from $6.7 billion to $19 billion in health costs each year.  Costs to the consumer have been valued at less than a penny per gallon of gasoline and $72 per vehicle in automaker equipment costs.

The new regulations, which will take effect in 2017, have been largely supported by automakers.  The rules harmonize EPA and California standards, removing the need to develop and certify two types of vehicles.  The oil industry has been aggressively opposed to the standards, arguing that they add prohibitive costs.  However, analysis from the EPA and even some oil industry analysts shows that this concern is overstated.  The oil industry made the same claim over Tier 2 sulfur reduction requirements, which were achieved successfully and cost-effectively.

From Vehicles to Power Plants?

While regulating greenhouse gas (GHG) emissions from motor vehicles is an accepted use of authority from the EPA, the same cannot be said for stationary sources of pollution, such as factories, oil refineries, and power plants.  A crucial upcoming decision from the Supreme Court will determine whether the EPA has the jurisdictional authority under the Clean Air Act to regulate pollution from these stationary sources.  The court’s decision is expected to be handed down in June of this year.

As regulations of GHG emissions get increasingly stringent, cleaner burning alternative fuel vehicles and electric vehicles (EVs) will become more attractive.  According to Navigant Research’s report, Light Duty Natural Gas Vehicles, global annual light duty natural gas vehicle sales will grow from 2.3 million vehicles in 2014 to 3.8 million in 2023.  These increasingly demanding emissions standards will continue to make internal combustion engine vehicles less polluting, even as the overall environmental impact of EVs decreases as the electricity that powers them comes from cleaner sources.  If the Supreme Court rules in favor of the EPA’s jurisdictional authority over stationary sources of air pollution, natural gas usage in power plants could see a large uptick as well, and the coal industry may see the days of building new power plants in its rear view mirror as a result.

 

Keystone Opponents Should Focus on U.S. Oil Consumption

— March 17, 2014

Last month, the contentious debate over the Keystone XL Pipeline resurfaced as the U.S. State Department concluded its final environmental impact analysis, finding the construction of the pipeline will have no significant impact on U.S. greenhouse gas emissions.  The assumption underlying the analysis is that the oil, derived from Athabasca oil sands in Canada, is going to be consumed regardless of development of the pipeline.  Opponents of the Keystone project decried the decision, but they are overlooking a key lever for slowing production from the oil sands: just use less oil in the United States.

Canada is determined to develop the resource, which has been slowly ramping production since 2003.  As such, advocates of the pipeline point out that if not transported via pipeline to the United States, it will be transported via rail (as is the current method) or via a combination of rail and tanker.  An additional scenario involves exporting the oil across the Pacific to meet growing demand in China.  While this is not a near-term prospect, its realization would increase global carbon emissions, not to mention the potential for oil spills because of increased oil tanker transport.  And, oil demand in the United States that would be met from a stable partner, and the largest source of U.S. petroleum imports, would have to be sourced from unstable supply lines from the Middle East.

Opponents argue that oil sands development is not yet a done deal, since alternative transport options besides the pipeline also face opposition.  Opponents take particular exception to the oil sands, as their development is far more carbon-intense than other forms of oil  production.  However, if it is true that the pipeline itself is irrelevant to oil sands development, then opposition efforts should shift to confronting consumption in end-use markets – specifically the U.S. road transportation sector.

Demand Side

In 2012, the United States  accounted for almost 20% of global oil consumption, the majority of which is consumed by vehicles on the roads.  Government programs and policies designed to blunt U.S. demand for oil, such as the Renewable Fuel Standard, can be highly influential on global oil prices, since the United States is the world’s largest consumer.  An increase in global oil supply, due to either increased domestic production of non-oil sand liquid fuels or a significant fall in U.S. demand, would lower the global price of oil.  A price dive in oil would dampen interest in costly oil sands development.

Although the existence of the oil sands has been known for almost a century, widespread development has not been economically viable until the last decade.  The cost of oil production from the oil sands is higher than production from more accessible reserves elsewhere.  Past oil price spikes have sparked interest in tar sands development, but those spikes have been short-lived and interest has faded with falling prices.  The steadily increasing price of oil over the last decade has sustained interest in the oil sands, leading to the development now taking place.  However, oil sands development is still a risky gamble, as shown by the losses incurred by Total and China Investment Corporation in 2013.

Increasing oil supply and cutting demand through increased domestic production of shale gas, rising biofuels penetration in the fuel supply chain, improved fuel economy of conventional gasoline- and diesel-powered vehicles, and spreading adoption of electric and other alternative fuel vehicles could effectively slow, if not halt, further development in Canada’s tar sands.  Oil consumption in the United States has declined since its peak in 2005; accelerating that decline, to more than offset increasing consumption in China and other growing economies, could displace much of the economic rationale for tapping Canada’s oil sands.  That would be more effective than asking the federal government to cancel a pipeline.

 

Another State Bans Tesla’s Sales Model

— March 14, 2014

This week the New Jersey Motor Vehicle Commission (NJMVC) voted to ban Tesla’s direct manufacturer-to-customer sales model, starting April 1.  The move places New Jersey alongside Arizona and Texas as the only states to ban direct sales of the Tesla Model S.  The upstart automaker has been selling its Model S through showrooms where customers can experience the vehicle.  They are then directed to the company’s website to purchase the vehicle.  Subsequently, it is delivered to the customer’s home directly from Tesla.  This sales model bypasses traditional dealers altogether, much to the dismay of state dealer associations across the country.  Accordingly, since Tesla first began production and distribution of the Model S in 2012, it has been fighting legal battles in many states to permit its sales model under existing dealer franchise laws, with varied success.

Dealer franchise laws exist in almost all states and were first created to prevent automakers from forcing excess inventory unlikely to sell on dealer lots.  Tesla’s rationale for the allowance of its direct sales model under state franchise laws is premised on the unique characteristics of the company’s Model S and future vehicles.  Tesla argues existing dealers are not adequately incentivized to sell the company’s vehicle due to the lower servicing requirements of electric vehicles; thus, the direct sales model is critical.  While this may be true, Tesla’s struggles with state franchise laws raise questions about the legitimacy of the laws and the value of the dealerships they protect.

Between You and the Automaker

The president of the New Jersey Coalition of Automotive Retailers (NJCAR), a primary opponent of Tesla’s sales model, has claimed that an important reason for franchise laws (and therefore dealerships) is that car dealers act as consumer representatives vis-à-vis the automaker.  If that argument is true, then it follows that if all vehicles were sold directly to the consumer rather than through a dealer, consumers would lose their primary automotive advocate and be more susceptible to automaker abuse.

The validity of NJCAR’s argument assumes that consumers are ill informed about manufacturers’ products, warranties, etc.  While that’s sometimes true, it’s hardly absolute, particularly in the Internet age.  Consumer preferences are strongly shifting toward online purchasing platforms rather than brick-and-mortar retail – a sign that consumers are not always interested in dealer interactions in the first place.

Clean My Windshield

As my colleague Dave Hurst points out in a blog on this matter, dealers provide “important services within the new vehicle purchase process” that may not be as easily or adequately provided by automakers or by the web.  That’s undoubtedly true, but whether these services are indispensable is a question best answered by consumers rather than politicians.

Allowing Tesla to demonstrate that its innovative (and yes, disruptive) sales model is beneficial for both the consumer and the automaker is an appropriate step in determining whether dealer franchise laws are actually meaningful or simply protectionist.  It’s possible for the direct-to-consumer sales model to exist alongside the dealer retail model.  The Internet hasn’t put realtors out of business; it has just changed their business practices.  Requiring Tesla to sell through dealers is akin to requiring gas station attendants to pump gas rather than allowing vehicle owners to pump their own gas.  Interestingly enough, New Jersey is also one of the two states that still have this law.

 

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