Navigant Research Blog

Did CAFE Save Lincoln from Extinction?

— June 18, 2015

Wetpaint_webOne year after Mark Fields succeeded Alan Mulally as the CEO of Ford, the company’s premium Lincoln division is finally showing some signs of life after years of decline and ironically, fuel economy regulations may be part of the reason why. Not so long ago, it was appearing increasingly likely that Ford was going to allow Lincoln to simply wither away and die.

When Mulally moved to Dearborn in 2006 to take over the automaker that put the masses on wheels, Ford was in dire straits. He quickly formulated a restructuring plan that included divesting all of the premium brands that the company had acquired including Volvo, Jaguar, Land Rover, and Aston Martin—refocusing only on Ford. Even Mercury and Lincoln were put on the chopping block, although only the former was discontinued in 2010.

Ford was the first U.S.-based automaker to introduce hybrid electric vehicles (HEVs) in the 2006 Escape Hybrid and has consistently been second to Toyota in U.S. HEV sales since then. In 2010, Ford added a hybrid option to the Lincoln MKZ sedan, and it has consistently been a popular setup in the midsize luxury sedan. Despite the popularity of the battery-assisted MKZ, Lincoln has yet to offer any plug-in powertrains in any models, but that may soon change.

Changes Coming

2015 looks like it may be a turning point for plug-in hybrid electric vehicles (PHEVs) in premium vehicles. At the 2015 North American International Auto Show, the big three German premium brands—Audi, BMW and Mercedes-Benz—showed new production PHEV models, and all three have committed to adding plug-in options to all of their mainstream models in the coming years. According to Navigant Research’s Electric Vehicle Market Forecasts, luxury brands are expected to account for 50% of global light duty plug-in electric vehicle (PEV) sales by 2018.

Automakers are pursuing this strategy of creating premium PEVs for several reasons.  Fuel economy and CO2 emissions standards are getting increasingly stringent and mainstream cars have already adopted the most affordable technologies for improving fuel efficiency. To add plug-in electrification would significantly increase the cost, pricing these vehicles out of the market. However, the heavier, more powerful luxury vehicles still have a lot of room to improve.

Adding PHEV powertrains with more powerful engines to a Mercedes-Benz S-Class, the new Cadillac CT6, or potentially the upcoming Lincoln Continental enables manufacturers to dramatically improve efficiency while maintaining—or even improving—performance. Most importantly, customers in the luxury segments are more willing to absorb the cost premium for the additional hardware, allowing manufacturers to maintain profitability.

The Upside to Lincoln

For Ford, making an investment to revive Lincoln provides an opportunity make a significant contribution to its corporate average fuel economy while preserving the affordability and profitability of Ford-branded cars, trucks, and SUVs. Since current Lincoln products are closely related to Ford-brand equivalents with similar fuel economy and comparatively low sales volumes, eliminating the premium models wouldn’t have a notable impact on the fleet average.

On the other hand, Lincoln is revamping its entire lineup with all-new products in the next five years, starting with the MKX crossover this year and the new Continental sedan in 2016. No powertrain details of the production Continental have been announced yet, but it would be surprising if Lincoln doesn’t follow the lead of the rival Cadillac CT6 with a PHEV sooner rather than later. Using Ford’s established PHEV technology, Lincoln could quickly become more competitive and provide a boost to its parent with better margins and mileage.


Uber-CMU Deal Highlights Transition of Autonomous Technology

— June 16, 2015

FT_Advisory_webIn February 2015, Uber and Carnegie Mellon University (CMU) announced a strategic partnership to develop autonomous driving technology. It caused a bit of a stir in the auto industry because until that time Google was the only non-automotive company that had put serious effort into advancing automotive technology. Uber, however, identified a technology that could make a big difference to its bottom line in the long term and had decided to become an active participant in the engineering.

Then, in May, an article in The Verge claimed that Uber had gutted CMU’s robotics lab. Within a week or two, more articles were published about how Uber had “poached” staff and that CMU was “in a crisis”—all very dramatic. It turns out that Uber had indeed opened its own engineering center in Pittsburgh, just up the road from CMU, and that a good number of engineers and scientists had been given lucrative offers to work there.

CMU, however, seemed somewhat less excited about the situation than the journalists. Gradually, more reasoned articles made it into print, pointing out that there are many other more positive aspects to this story. Yes, Uber had diverted a large chuck of the CMU staff to work full-time on its autonomous vehicle project, but CMU enhanced its reputation as the source of advanced robotic development work. Additionally, the City of Pittsburgh has the potential to challenge Silicon Valley as an alternative site for automotive innovation. (It probably doesn’t hurt that SAE International is also based nearby.)

Universities have always been at the forefront of the latest technology development, and their role is usually to then spin off and partner with commercial companies that can take concepts into production. This is precisely what is happening now in Pittsburgh—another indication that autonomous driving is close to entering production and becoming a reality. There are plenty of new challenges for CMU to explore, and the establishment of an advanced automotive engineering center in Pittsburgh can only be good for the future because it will attract talented researchers who eventually want to end up in high-paying jobs.


As Smart Parking Market Expands, New Players Emerge

— June 15, 2015

Big_Periscope_webThe parking industry is being transformed by new technologies that are enabling cities to significantly reduce levels of congestion. It is estimated that drivers searching for parking are responsible for about 30% of traffic congestion in cities. Sensor networks that detect vehicle occupancy are providing the basic intelligence behind smart parking systems, but other players are emerging with alternative products and strategies for reducing congestion.

Sensors and Their Limitations

Sensor networks, which generally consist of sensor hardware, communications technologies, and software applications, provide real-time parking availability information to make it easier for drivers to find a parking space. Large cities such as San Francisco, Los Angeles, and Moscow, among others, have adopted these types of sensor-driven smart parking systems that have demonstrably improved the chronic congestion in their respective city centers. According to Navigant Research’s new report, Smart Parking Systems, the installed base of sensor-enabled on-street smart parking spaces is expected to surpass 1 million worldwide by 2024.

Sensors provide excellent accuracy into vehicle occupancy, and Navigant Research estimates that sensor costs are decreasing by 10% to 15% per year. Nevertheless, the primary barrier to more widespread adoption of sensor-driven smart parking networks is the high upfront cost for cities to buy, install, and run the sensors. It can cost cities anywhere from $200 to $350 in upfront costs per parking space to install a sensor network, in addition to monthly software fees.

New Solutions?

Some new players in the market, such as Parko and ParkAide, are looking to offer cities a different parking solution at a significantly lower price tag—but with much less accuracy than sensors. Israeli startup Parko raised $1.1 million in seed funding in mid-2014, and uses crowdsourced data to help drivers find available parking spots. The company uses advanced algorithms analyzing anonymous data from when people park on the street, which spot they park in, and when they leave. This data is combined with GIS land-use information, parking supply figures, road types, regulations, current traffic, day of the week, weather, holidays, and local events to determine which streets and parking spaces are more probable to have open spots. This creates scenarios on the company’s app such as “most probable” and “least likely parking availability.” Similarly, ParkAide’s Mobile Parking Availability product is a general public mobile application that shows and direct consumers to a probable open parking space.

While Parko and ParkAide offer an innovative and lower-cost parking solution compared to sensors, they are unlikely to replace the use of sensor networks for smart parking. The advanced algorithms, while likely helpful tools, do not provide the accuracy of sensors.  Above all, they do not provide city transport departments with the control over parking fees and regulation that smart parking systems do.

These companies will also need to prove their apps’ utility to drivers in real-world situations. Residents living in cities with high traffic congestion often already know which streets are more likely than others to have parking availability. Nevertheless, if these algorithms are able to provide help to drivers unfamiliar with an area, then they will have a role to play among the range of new urban mobility options that are emerging.


South Korea Looks to Jump-Start Its PEV Market

— June 10, 2015

South Korea has evidently tired of being a laggard when it comes to plug-in electric vehicle (PEV) adoption. Total PEV sales in 2014 were 850, well under one-tenth of 1% of the country’s 2014 light duty vehicle (LDV) sales. Compare this to its neighbor Japan, which had around 33,000 PEV sales in 2014. While that is still less than 1% of all LDV sales, Japan had around 110,000 PEVs in use as of the end of 2014, compared to around 1,800 in South Korea.

South Korea is now looking to jump-start the PEV market, announcing major investments in charging infrastructure and promoting technologies that can make PEV charging as easy as possible.

It’s somewhat surprising that South Korea’s PEV market has been slow to develop given the country’s reputation as a high-tech center and, more significantly, its strength in the lithium battery market. The lack of truly market-competitive PEVs has been a key factor. The Kia Soul electric vehicle (EV) was introduced in 2014 and quickly shot to the top of the PEV sales figures for South Korea. This year is expected to see the Hyundai plug-in hybrid go on sale, so Navigant Research expects faster sales growth of PEVs in South Korea. But a potential roadblock will be the difficulty of home charging in a country where much of the population lives in multi-unit dwellings.

Removing the Roadblocks

The government in South Korea’s largest city, Seoul, is looking to remove this roadblock with an innovative plan to support 100,000 new charging locations. As of the end of 2014, Navigant Research estimates there were fewer than 100 public stations in Seoul and around 700 to 800 privately owned stations.  So, at first glance, installing 100,000 stations seems challenging indeed, but the stations will really be standard 220 outlets, where a portable charger can be plugged in. South Korean company Powercube manufactures the chargers, which reportedly cost under $1,000 and can be equipped with an RFID reader that will allow Powercube to track the user’s electricity consumption.  The EV driver will be billed directly by Powercube. The RFID reader also transmits the time of the charging session, which suggests that the driver can take advantage of time-of-use rates.

The city government is looking to secure parking spots in garages and apartment complexes where drivers will have ready access to an outlet to plug in. The chargers, called  EV-Line, only charge at 3.3 kW/hour, so they won’t be especially fast chargers. This could hinder interest, if the drivers knows it will take up to 8 hours for a full recharge, and could also cause problems with drivers unable to access an outlet as an EV occupies the designated parking spot for many hours. The program seems to be a way to address the charging problem without the massive investment that would be required to install large numbers of Level 2 public chargers, which cost $2,500 and up and have significant installation costs, as well.

Making the Commitment to the PEV Market

South Korean company Kodi is also jumping in to the low cost charging market. The company is set to release a 3.3 kW mobile charger, the MTC, that will also use a standard 220V outlet and be made available for under $1,000. Drivers will be able to manage the charger through their smartphones, which will also allow them to be billed for electricity used.   Other initiatives include POSCO ICT’s commitment to installing its charging stations in hotels and across South Korea and telecom company KT Corporation’s pilot program to re-purpose unused telephone boxes into charging stations.  South Korea is showing a real commitment to making PEV ownership more attractive and significantly moving the needle on PEV sales.


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