Threat to Charging Infrastructures – Emergence of New Super-Efficient, Conventionally-Powered Compact Models

The global banking crisis of 2008/9 resulted in many governments transferring debt from the banking sector to the private sector. This has resulted in widespread cuts in public spending, including investment plans for charging infrastructures for electric vehicles, especially in Europe.  As a result of the ongoing financial crisis, consumer demand for pure electric vehicles in certain European countries could potentially be dampened by the lack of charging points.

• The Republic of Ireland is one example of a recent slow-down in implementation.  According to the government plan, some 1,500 charging points and 40 fast-chargers were to be in place by the end of 2011 – but by October 2012, some 860 charging points (around 57 percent of the plan) and 30 fast-chargers were installed.  As one of the European governments under pressure to limit public spending, it is unlikely that further funds would be made available to complete the plan, especially when electric vehicle sales have not met expectations – at just 192 units since 2009.  The cost to Electric Ireland in installing the current network has estimated to be around €3.9m (US$5m).
• Better Place has responded to the lack of demand for electric vehicles by curtailing its infrastructure operations in countries such as Australia and the US and concentrate efforts in Denmark and Israel.
• The only recent announcement to build new infrastructure has been from the UK government.  However, such an investment is limited to covering 75 percent of the total cost of construction by private vehicle purchasers at their homes, local governments for use by apartment residents and at railway stations and government facilities. 
• Very few European countries have announced a charging infrastructure plan.  Major public infrastructure investments are limited to just France and Germany.

The resulting recession from the crisis has also made European consumers even more aware of fuel efficiency in vehicle purchases, but it has also lowered tax revenues among European governments.

• As a means of meeting greenhouse gas emission targets, European governments encourage consumers to purchase vehicles that emit less CO2, by way of purchasing subsidies and taxes (called bonus-malus in France for example) or from a varying annual road tax system (as in the UK for example).
• Other incentives, such as free entry to congestion charge zones, are also offered to low CO2 emitting vehicles, to limit congestion and air pollution in city centers.
• As European consumers try to save money by running vehicles that emit less CO2, then the level of purchase subsidies increase and the receipts from annual road taxes decrease.  Fuel sales are also decreasing in some countries, as drivers seek more efficient vehicles.  For example, in the UK, fuel stations sold 37.67 billion liters of fuel in 2007 but only 34.16 billion liters in 2012.
• As European governments try to limit public spending, then the offering of purchase subsidies and annual road tax discounts are changed to models emitting even less CO2.

Consumers’ desires for more efficient vehicles have yet to benefit EV sales in any large-scale way.  A lack of charging infrastructure and relatively higher costs over conventionally-powered models of the same segment has limited the market.  In addition, a new generation of super-efficient compact models are now entering the European market, which offer consumers many of the benefits of an EV without the drawbacks of high purchasing cost, patchy recharge infrastructure and limited range.

• Since August 2012, the French bonus-malus system now offers a €400 bonus (US$516) to vehicles emitting less than 90 g/km.
• The London Congestion Charge Zone offers free entry for vehicles emitting less than 100 g/km.  Future plans to amend the system are being discussed, which include the lowering of the exemption limit to 80 g/km, adding a group of models for congestion charging that are currently entering the Zone for free.
• The current UK annual road tax exempts vehicles emitting less than 100 g/km.  It is also likely that the tax exemption level will also be lowered to 80 g/km, as receipts from the annual road tax decrease further as British consumers turn to more efficient models that are taxed less.
• While plug-in hybrids, such as the Opel Ampera (Chevrolet Volt) and Toyota Prius PHEV emit less CO2 (27 and 49 g/km respectively), they are costly vehicles that essentially use two powertrains.
• Models benefiting from a change in government policy would be those sub-compact or compact hatchbacks that can be modified by adding stop-start systems, adjusting compact diesel engines with reduced torque and variable vane turbochargers, using manual transmissions with longer gearing (but could also use re-programmed automated transmissions, as on the Peugeot 208), modifying the accelerator pedal mapping, reducing weight, use low rolling resistance tires and better aerodynamic features, such as grille shutters, extended tailgate spoilers and wheel deflectors.
• Included amongst these models are the new Toyota mini-hybrids, with the Hybrid Synergy Drive powertrain modified to suit the smaller model.
• But such modifications must not be at the expense of comfort and convenience features, such as power windows and air conditioning, nor mandated safety features, such as airbags.
• Retail prices for these models are still at an affordable level, of between US$15,000 and US$20,000 (with sales taxes), and compare well against used cars that are more costly to run, as fuel economy of the efficient models reaches 60-67 mpg (US).
• Examples include the Toyota Yaris Hybrid (79 g/km, T-Sprint 85 g/km), the Renault Clio dCi 90 Stop & Start ECO (83 g/km), the Hyundai i20 1.1 CRDi Blue (84 g/km), the Kia Rio 1 1.1 CRDi EcoDynamics (85 g/km), the Peugeot 208 Access+ 1.4 e-HDi Stop and Start EGC 70 (87 g/km), the Ford Fiesta Style ECOnetic 1.6 TDCi Start Stop (87 g/km), the Citroen C3 1.4 e-HDi (87 g/km), the Ford Focus ECOnetic 1.6 TDCi (88 g/km), the Opel Corsa 1.3 CDTi ecoFLEX (88 g/km) and the Skoda Fabia 1.2 TDI CR Greenline II (89 g/km).

The Strategy Analytics System Demand Forecast, to be updated later in April already includes this increased demand for stop-start systems and for full hybrid systems among Toyota’s compact segments.  But should the European Sovereign Debt Crisis end, likely to be some time in 2014, this growing demand is unlikely to fall away – it is more likely to accelerate deployment of stop-start and other fuel savings features in other regions and in other model segments in greater volumes.  The OEM Hybrid and Electric Vehicle Strategies Report will be updated in September 2013.

This analysis was conducted following recent updates to the EV/HEV Technologies Supply & Fitment Database and the Hybrid Technologies Legislation/Support Database.

The North American International Auto Show was opened in Detroit on January 9th, 2012.  In comparison to earlier shows, Detroit revealed greater optimism in the automotive industry, following the crippling recession of 2008-2009.  LMC Automotive (formerly JD Power Automotive Forecasting) released its Q4 2011 sales forecast, showing US light vehicle sales rebounding for 2010 and 2011.  However, with the arrival of Volkswagen at Chattanooga, Tennessee, and the growth of Hyundai in the US, such as the Elantra winning the 2012 North American Car of the Year Award, the Detroit-based auto makers face stiffer competition to regain their market shares in their home markets. 

Compact Luxury – The New Battleground
While light truck sales have recovered, the North American market is seeing a particularly faster growth in compact models.  This will result in higher production volumes for them.  According to LMC Automotive, the C-Segment will see the largest unit increase in production from 2011 to 2018, followed by the D-Segment, while the A- and B-Segments will see fastest percentage rise.

• The Show’s top launches were the Cadillac ATS sedan, the Dodge Dart sedan and the Buick Encore compact crossover. 

Not only do the above models come from the compact segments, two of them come from luxury brands.  As many North American consumers downsize, in order to lower their fuel consumption, they still demand a high level of comfort and convenience in their future vehicle purchases – and with this, electronics demand in the North American market will continue to grow.

• The Cadillac ATS aims to compete against more successful German branded sedans, in particular the BMW 3-Series.

Fuel Economy
Growing demand for fuel economy will also result in the adoption of direct injected gasoline engines across the industry, as on the Buick Encore and the Cadillac ATS.  The Dodge Dart, however, will come equipped with the new Tigershark gasoline engine, developed with FIAT’s MultiAir exhaust gas recirculation (EGR) and variable valve timing (VVT) technology, although MultiAir is expected to be deployed on gasoline direct injected engines in the future. 

Ford has made major strides in electrifying the powertrain with the announcement of its roll-out of stop-start systems, starting with the 2013 Ford Fusion.  Ford’s common platforms will also enable its customers to opt for electric, hybrid and plug-in hybrid versions of various models, such as the Ford Focus compact and C-MAX compact minivan.  The GM eAssist mild hybrid system has already been offered on the 2012 Chevrolet Malibu, so perhaps the Buick Encore will follow suit? 

And there may be the possibility that Honda and Toyota may assemble hybrid models in the US – following the unveiling of the Acura NSX sports car equipped with new all-wheel drive hybrid powertrain technology, the auto maker announced that development and future production will occur at its Marysville, Ohio, facility.  The Acura ILX compact sedan also featured a hybrid concept.

• Should tensions in the Arabian Gulf escalate, then demand for hybrids will rise rapidly in the short term.  However, auto makers must bear in mind the revisions to the CAFE mandate, such as proposals by the Obama Administration to raise the level to 54.5 mpg (4.3 l/100 km) by 2025, a level that will certainly require more powertrains to be electrified in the long term, especially if the model segment mix remains unchanged.  An an example of making hybrids more affordable for wider consumer adoption is the Toyota Prius C compact ('Aqua' in Japan).

Comfort and Convenience
Despite their size, the new or recently-launched compact models have many features that would only be offered to larger segments.  Examples of these luxury features include passive keyless entry and start systems (PKE), dual-zone automatic HVAC (heating-ventilation-air conditioning) systems as standard, electric parking brakes (EPB), RLT (rain-light-tunnel) sensing for automated lights and windshield wipers and electrically-adjustable, heated and ventilated seats. 

• Examples of compact models with PKE that are assembled (or will be assembled) in North America include the Acura ILX, the Cadillac ATS, the Chevrolet Cruze, the Dodge Dart, the Hyundai Elantra and the Nissan Tiida.

Infotainment
Consumer demand for connectable systems for smartphones and the use of the Internet as a gateway to various features has led to the development of new all-encompassing, software-based infotainment systems.  The launches at Detroit are no exception, which will further lead to growing electronics demand for Bluetooth, voice control systems and HMI systems controlled by color displays and touch screens. 

• Examples of new infotainment systems include Cadillac CUE, Chrysler UConnect, Ford SYNC, Hyundai Blue Link and Toyota EnTune.  The Cadillac ATS and Dodge Dart are equipped with large color touch screens.

Safety
As side airbags become mandated in North America, the focus for safety applications in new models has been advanced driver assistance systems (ADAS). 

Blind spot detection (BSD) and rear cross traffic assist (RCTA) have been key additions in the North American market, as consumers there tend to drive into perpendicular parking spaces and need assistance when backing out of them – the new Cadillac ATS and Dodge Dart will offer radar-based systems. 

Front windshield camera-based systems offer greater value-for-money, offering both distance warning and lane departure warning (LDWS) from the same module – the Cadillac ATS and the Buick Encore are likely to offer the same Magna-supplied system, as already being offered on some GM crossovers. 

Other features making a greater appearance in North America will be adaptive front-lighting systems (AFS) and high intensity discharge (HID) headlamps, as well as head-up displays, as on the Cadillac ATS.  In line with the Kids & Cars mandate, the HMI displays enable the Cadillac ATS and the Dodge Dart to play back park assist cameras.

Implications
According to the latest (January 2012) edition of Strategy Analytics’ Automotive Electronics System Demand Forecast (2009 to 2018), North American demand for the above applications will grow the fastest, mirroring the trends seen at the Detroit Show.

• Among the fastest growing applications were Collision Warning (+26.9 percent CAAGR by $M value), Passive Keyless Entry (+15.8 percent) and Engine Control (+14.9 percent).

Despite vehicle downsizing, demand for automotive electronics in the North American industry remains strong.

The Automotive Electronics System Demand Forecast 2009 to 2018 – January 2012 Update, can be downloaded at: http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6985.

Updates on the following databases will be published in February / March 2012:
- ADAS Supply & Fitment
- Advanced Entry and Start System Supply and Fitment
- EV/HEV Technologies Supply & Fitment
- Hybrid Technologies Legislation/Support

Recent Tier 1 design center openings in Asia suggest the market has moved eastwards to where car sales and production are growing.  Evidence of this trend, over the past year, can be seen in the latest Strategy Analytics "Tier 1 Vendor Regional Design Center Database": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5943.  Examples of new openings include:  China Bosch is to open a technical center and manufacturing facility in Changsha, Hunan, by 2012.Hangsheng-Intel joint venture will develop and supply of remote keyless entry systems from Shenzhen, Guangdong.Harman is to open two technical centers in Dandong, Liaoning and Suzhou, Jiangsu.

• Furthermore, new players in the global automotive industry have arrived, in the form of Delphi divestments: BWI (Beijing West Industries) - the former braking and suspension business; Nexteer - the former steering business was recently acquired by Pacific Century Motors.

India Denso is to open a technical center in December 2011 at its facility in Gurgaon, Haryana.  Japan Autoliv has recently expressed its intention for a possible acquisition in Japan.  Gentex opened its Kitakyushu technical center to offer electro-chromic mirrors and high beam assist systems to its Asian customers.

• Furthermore, Bosch has opened two software development centers in India (Bangalore and Coimbatore) and another in Vietnam by 2015.

Strategy Analytics has linked the increased R&D activity with growing car production in Asian markets: 

• According to JD Power, both sales and production volumes in China will increase dramatically - destined to become the world's largest market by volume. 
• India, a fellow emerging market, is also experiencing increased activity.  This includes: the launch of the market-specific Ford Figo and Toyota Etios models; the OEM expansions that have taken place with General Motors (engine plant in Talegaon) and Toyota (assembly plant in Bidadi) and those that have been planned by Ford, Kia and Maruti-Suzuki; as well as the Tier 1 vendors who will supply this expansion, such as new assembly plants from Autoliv and Brose.

Some renewed activity has also been observed in Japan and Korea.  Foreign Tier 1 vendors are making further in-roads at supplying Japanese OEMs, while Korean OEMs are keen to expand their market shares in Europe and North America.  As with Chinese OEMs, albeit on a larger scale, Korean OEMs like Hyundai-Kia are adding more electronic features.  The Strategy Analytics report "Chinese OEMs: Rapid Advance In Quality Bodes Well For Automotive Electronics", covers the rise in automotive electronic demand among Chinese OEMs: http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5501, while worldwide electronics demand is covered by the "Automotive Electronics System Demand Forecast 2008 to 2017: Q3 Update": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5815.    While there is a rush to bring R&D capability in order to serve their customers' needs, Tier 1 vendors need to be aware that such growth will be more uncertain for 2011 - Incentives in certain markets will be curtailed and thus affect car production growth.  For example, the sales tax reduction for engine capacities below 1.6-liters will not continue in China beyond December 31, while the incentive for fuel efficient vehicles in Japan has already ended.    Strategy Analytics advises caution before vendors commit to further expansion. 

Strategy Analytics has recently updated its Advanced Entry and Start System Supply and Fitment Database.  It revealed increased interest for Passive-Entry-Go (PEG) systems in the emerging markets, in particular from Chinese car makers following model launches at the 2010 Auto China (Beijing) show.  The updated Advanced Entry and Start System Supply and Fitment Database is now available from the Strategy Analytics website.  The new entrants in the Advanced Entry and Start System Supply and Fitment Database include various new models launched at the 2010 Auto China show.

• BYD’s new models have been deployed with PEG systems.  They include the electric minivan E6 now being offered to fleets, and the gasoline-driven G3 compact sedan.
• Geely also announced on May 02, 2010, that its new Emgrand EC8 mid-size sedan, among its new model line-up, will come with a PEG system.

Furthermore, joint venture car makers linked to global OEMs are also offering PEG systems, as well as other electronic systems.

• The deployment is not confined to high segment models like the Buick LaCrosse luxury sedan, but also the compact segments such as the Chevrolet Cruze.  Both models are assembled in China by Shanghai-GM.
• The Chevrolet Cruze is also being assembled in India and Korea by General Motors.  The PEG feature will also be offered to these markets, thus enabling a greater spread for PEG systems.

This strategy is in contrast to previous models assembled and sold in emerging markets, namely to reduce specifications in order to be more affordable.  The average Chinese consumer is not only more discerning than before, but has a higher disposable income and greater willingness to purchase vehicles with more features.  Recent information on the Chinese automotive market is available from the following Strategy Analytics reports,  Chinese OEMs: Rapid Advance In Quality Bodes Well For Automotive Electronics and Chinese OEMs Fast Catching Up On Powertrains.  Further updates in the Database include more car models assembled in Korea with PEG systems fitted.

• Renault Samsung Motors has PEG on its models, based on common platforms with the Renault Laguna and Nissan Teana.
• New models from the Hyundai-Kia group with PEG systems include the YF generation (MY 2010) Hyundai Sonata being assembled in Korea and in the United States.

Penetration rates and demand levels of PEG systems by region, and other types of entry systems, is available from the Strategy Analytics Automotive Electronics System Demand Forecast 2008 to 2017: Main Data Tables.  Finally, Delphi launched its new key fob in April 27, 2010 at the 2010 SAE World Congress.  It boasts two-way communication to approximately 1 kilometer (3,333 feet).  Using Bluetooth connectivity with the driver’s mobile handset, much of the vehicle’s systems can be controlled remotely through applications downloaded on to the mobile handset.  Near Field Communication (NFC) enables similar functionality for the European market.  Delphi’s new two-way communication fob can enable the driver to:

• Discretely locate the vehicle, with additional GPS support if beyond the 1 km RF range.
• Remote readings of vehicle diagnostics and thus provide warnings should the vehicle need servicing or repair.
• Remotely control infotainment systems prior to entering the vehicle, such as selecting radio channels.
• Remotely control operation of the doors, seat positions, sunroof and windows.
• Remotely start the HVAC system, to cool or to warm up the cabin, with temperature read-outs.
• Remotely start the engine to defrost windows and windshields.
• Warn of doors being left unlocked, and of the sunroof and windows being left unclosed.
• Warn of intruders either in the cabin or in the near vicinity of the vehicle through exterior and security cameras fitted to the vehicle.
• Warn of low fuel levels and low tire pressures, as well as electric vehicle support.

Further information on PEG systems is available from the Strategy Analytics report, Vehicle Entry and Go: Passive Systems Set To Challenge RKE, while information on the Delphi fob is available from the Strategy Analytics Automotive Blog, Delphi Smart Key Fob Enables App Access Without Subscription.  Model availability for PEG systems is beginning to expand beyond the mature markets and beyond the luxury segments.  This could lead to greater volume demand and result in lower cost and widespread demand for Passive Entry systems. 

• At present, the higher costs in purchasing PEG systems over the standard Remote Keyless Entry (RKE) systems has precluded widespread uptake from consumers.

As for two-way communication fobs, this is yet another functionality where the mobile handset has made in-roads into the automotive space.  Development of these systems has only just started, but in the future such systems will surely make an impact on the automotive industry.  Further information on mobile phones in the automotive space is available from the Strategy Analytics Automotive Blog, including articles such as InkaNet – Mobile-Based Infotainment Comes To Chinese Autos.

There has been much recent speculation about a potential tie-up between PSA and Mitsubishi, with the two OEMs confirming that they are indeed discussing what has been described as a “strategic partnership”. Strategy Analytics data shows that PSA is currently the 8th largest OEM group customer for automotive ECUs.  It is responsible for an estimated 4.8% global ECU dollar demand.  The much smaller Mitsubishi is down in 15th place, with an estimated 1.5% share.  The combined PSA/Mitsubishi share of 6.3%, however, would fail to overtake 7th placed Hyundai-Kia, which is responsible for an estimated 7% of the global automotive ECU spend. Therein lies a bit of a problem for PSA.  Mitsubishi’s EV technology is attractive, and some would say essential, for PSA to remain competitive with domestic rival Renault.  However, in almost all other areas Mitsubishi is a relatively niche player, and its overall benefit to PSA is far from clear.

Chrysler has given extensive insight into its future plans in a series of presentations that were released recently.  Its future roadmap shows the introduction of Chrysler Group-branded Fiat-based models from 2012, with a C-segment compact sedan to be built by Chrysler for both the Dodge and Chrysler brands leading the way.  This will be joined by a couple of Fiat-based commercial vehicles the same year.  2013 will see more new products, including:

• A Fiat-built B-segment small car for Chrysler and Dodge
• A Fiat-based B-segment small SUV for Jeep
• A Fiat-based Patriot/Compass replacement for Jeep
• A Fiat-based D-segment sedan for Chrysler and Dodge
• A Fiat-based Liberty replacement for Jeep
• A Fiat-based mid-sized crossover for Chrysler

These new models, along with the launch of the Fiat-branded 500 from 2011, are hoped to help revive Chrysler’s US market share from a low point of under 9% in 2009 to approaching 14% by 2014. This will not be easy, with competitors such as a resurgent Ford, chastened Toyota and ambitious Hyundai-Kia keen to fight hard for market share as well. One key part of Chrysler’s plan is the rapid adoption of many of Fiat’s powertrain technologies.  Strategy Analytics believes that Chrysler has fallen somewhat behind the curve in the US, with engine line-ups such as Ford’s EcoBoost having no current Chrysler-derived competition. In its powertrain strategy document, Chrysler states that is wishes to implement a “Rapid introduction of all Fiat Group technologies: downsize/turbo, MultiAir, start/stop, Gas Direct Injection”.  By 2014, Chrysler envisages offering a wide range of downsized units, including a 400+ hp 3.0-liter 6-cylinder direction-injection turbocharged unit based upon Fiat MultiAir technology. The result is that by 2014, Chrysler Group predicts that 38% of its products to be fitted by a 4-cylinder gasoline engine, up from an expected 19% in 2010.  Diesel demand will also expand, up from 9% to 14%.  The 6- and 8-cylinder gasoline units will see sharp declines, down from 54% to 38% and 18% to 10% respectively.  By 2014, only 12% of powertrains are expected to be Chrysler legacy designs. Chrysler is less forthcoming when it comes to hybrid and electric vehicle technology.  Although its short-medium term strategy includes “Electrification/hybrids to complement advances in conventional technologies”, this would appear to be limited in ambition with a longer-term strategy stated as “Electrification/hybrids will expand once they become a cost effective proposition to final customer”. Firm commitments to the electrification roadmap are few and far between, and include a stop-start Jeep Wrangler diesel for late 2010.  The Chrysler Group electrification plan slide contains little of substance, other than asserting that “Chrysler Group is lead engineering center for hybrid /electrification for Chrysler & Fiat Group”, as shown below. Strategy Analytics is not surprised by this approach.  It is highly pragmatic, and concentrates the engineering resource on what needs to be done: getting a highly-competitive range of conventional powertrains on the road soon.  However, there is a danger.  GM has generated huge numbers of column inches with the Volt, and Ford now has its electric Focus on the Jay Leno Show.  Chrysler is getting done what needs to be done, but risks losing out on what needs to be seen to be done.