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 reports suggest that fuel economy mandates, such as Corporate Average Fuel Economy (CAFE), may soon be implemented in more emerging markets, while the US is to impose tougher mandates for the long term.

• There have been conflicting reports on how China will set future fuel economy standards, but at present, minimum fuel economy standards are set for 16 different weight categories.  Plans for the next phase are to set tougher minimum levels for an averaged equivalent of 42.2 mpg (5.6 l/100 km) by 2015 (an 18 percent improvement), with reports suggesting an averaged equivalent of 52.3 mpg (4.5 l/100 km) by 2020.
• India will also be planning a fuel economy mandate on car makers, also with varying limits depending on the weight of the vehicle.  This will replace the current Vehicle Excise Duty that varies on the size and engine capacity of the vehicle.  The change marks a shift in government policy, to persuade car makers to use technology to raise efficiency than merely to force consumers to buy smaller vehicles.
• The US Department of Transportation and the Environmental Protection Agency are planning to raise US CAFE levels to 62 mpg by 2025, having recently implemented the 35.5 mpg level for 2012.  Consultations are under way for a possible, additional carbon dioxide (CO2) emission mandate.
• Japan and Korea have also implemented fuel economy mandates based on vehicle footprint, while Europe has corporate average mandates on CO2 emissions.

Should more fuel economy mandates be implemented in emerging markets, this will mean that vendors have to quickly prepare to offer fuel efficiency systems at a lower cost and in greater volumes than is presently been offered to mature markets.

• Stop-start is now being featured on almost every new model launched in Europe, since the summer of 2010, realizing greater volumes and cost reductions through economies of scale.  According to the Strategy Analytics System Demand Forecast (Q3 2010), penetration rates for these systems are rising rapidly.
• As a result of these and other improvements, OEMs, such as FIAT and Toyota, are likely to lead the way in meeting the first European CO2 target of 130 g/km by 2012.  This is according to a report on new cars manufactured in 2009 by the European Federation for Transport and Environment. 
• The recently-launched tandem starter-alternator from Denso promises a more compact solution over current belt-driven systems.  Denso’s new stop-start starter motor is also lighter than its predecessor.
• Johnson Controls and its subsidiary, VARTA, are offering a more cost effective Enhanced Flooded Battery (EFB) as well as their current Absorbent Glass Mat (AGM) battery for stop-start applications.
• In North America, the General Motors eAssist mild hybrid system was previewed on the Buick LaCrosse. It uses a smaller battery pack and electric motor to realize a 25 percent fuel saving over the conventional four-cylinder version.  As more unit sales come from China than from the US for GM, then eAssist may see wider deployment there.
• At the same time, more hybrid and electric concepts are being previewed.  Chinese domestic car makers, such as Jianghuai (JAC), have launched EV models on the back of the Chinese government’s US$15bn plan to promote EV technology.  As consumers have less disposal income to purchase vehicles in China than elsewhere, then developments in hybrid and electric vehicles will be more cost driven.  For further details, go to the Strategy Analytics report, China Aims High For Plug-In Electric Vehicles.

This analysis is drawn from the latest Strategy Analytics EV/HEV Technologies Supply & Fitment Database and Hybrid Technologies Legislation/Support database.