Is 2015 the year that will transform the auto industry and change the world as we know it? Analysts, technologists and business visionaries believe that in the next 10 years more innovations will happen in the auto ecosystem than in the previous 100. The Volkswagen scandal, meanwhile, has accelerated the march towards the traditional Auto Armageddon.
The tipping point?
Malcolm Gladwell describes the tipping point as that magic moment “when an idea, trend, or social behavior crosses a threshold and spreads like wildfire.” At this moment in history, global megatrends are converging with technology disruptions within the auto sector.
Always online, always connected
By 2050, 66% of the world population will live in megalopolises. Sprawling urbanisation is bound to drive the emergence of new social models: more decentralised, less compact, accelerated. Moving from one suburb to another, immeasurable distances change the nature of urban transportation planning. Integration, predictability and interoperability are driven by the Internet of Things (IoT) while Smart Industry platforms redesign manufacturing processes. Vehicles, like humans, are always online, always connected.
Not only a breeding ground for economic opportunities and innovation, megacities dramatically contribute to resource depletion. Today, 70% of primary energy consumption and 80% of global greenhouse gas (GhG) emissions are derived from cities, 30% of it from transportation.
Newcomers to the market, together with the most innovative traditional automotive players, build interdependent digital platforms that: 1) redesign the very concept of car as a product (e.g. Google, Amazon, Apple); 2) create new go-to-market networks (e.g. UBER, Car2Go, Amazon); 3) tear down barriers between industry sectors and pave the way to cross-sector collaborative alliances.
TESLA, for instance, has taken a step into the energy utility market with storage solutions that can reduce the strain on the grid. Like other industries, the car is entering an age of miscegenation. As early as 2018 about half of the existing companies may have been washed away by insurgent competitors. Whilst traditional players may soon be consigned to the history books, the mobility market of tomorrow may be dominated by these mostly digital invaders. Unsurprisingly, automakers fret about growing competition; yet some of them are choosing to buy time.
All things are difficult before they are easy
When the North America CEO of BMW, Ludwig Willisch, said earlier this year, “With the introduction of every new model, there will be a plug-in hybrid version of that, too.” the automotive world took notice. Intergenerational hybrids, however, are mainly used to adapt to the changing market ecosystems, without embracing risk-ridden, game-changing solutions. Ultimately, hybrids allow more “conservative” automakers to defend market segments from erosion before disruptive technologies undo their markets. Even if Jean-Yves Jault, Head of Corporate Communications at Toyota Motor Europe considers that “the best and the most versatile solution in the short-term remains hybrid, whilst plug-in hybrids will prevail in the mid-term.
From another perspective, early adoption of radical innovations often causes firms to fail. (枪打出头鸟) or “Shoot the bird that takes the lead”, as our Chinese friends would say.
Zero Emission Vehicles
On January 15th, in Tokyo, TOYOTA’s CEO Akio Toyoda delivered the company’s first commercially produced Mirai – a breakthrough hydrogen-powered car – to the Japanese Prime Minister Shinzo Abe. This October, the Mirai was launched in Hamburg, as part of a global strategy for market creation. In Europe, aside from Germany, only the UK, Belgium and Denmark are targeted, because these countries are establishing reliable refueling infrastructures. Industry transformation, today more than ever, requires multi-party collaborative efforts and government support.
Yet, when the automaker that made the Prius an unexpected top seller in its market niche puts its considerable weight behind a new technology, you’d better watch out.
TOYOTA’s Environmental Challenge
Whilst skeptics say that the Mirai’s future is more hype than a commercial reality, sales figures may reinforce their doubts. To date, the Japanese automaker received 3000 orders for the H2 powered sedan. While exceeding current production plans (700 in 2015; 2000 in 2016 and 3000 in 2017), still the numbers are those of a small sized industry pilot.
Toyota, however, seems serious about the move. Evidence of it can be found in the bold environmental plan announced by the company in parallel with the launch of the Mirai in Germany. The innovative keiretsu has laid out what looks like a blueprint for a green revolution, crossing over industry boundaries to design: “ever-better cars, ever-better manufacturing, and enriching lives of communities.”
Support from the government
Nevertheless, creating Fuel Cell vehicles for a mass market – as Toyota’s CEO reminded us at the event in Tokyo – is not something that can be done by a single automaker. Intelligent roads and fuelling infrastructures, for example, need to be built from scratch. States can help a lot by addressing competitive issues, setting up incentive schemes and focusing on regulatory reform and standardisation. Surely, Toyota enjoys the full backing of the Japanese government. In Shinzo Abe’s words, Japan is “ready to usher in a hydrogen society”. Is this the onset of a new energy era? Tokyo will be spending significant amounts of capital to increase the use of H2 energy before the 2020 Olympics.
DAIMLER, FORD, NISSAN, SUZUKI, HYUNDAI in the race of H2 powered cars
DAIMLER plans to pool resources with Ford and Nissan to manufacture their first mass production Fuel Cell engine for road-vehicle use by 2017. SUZUKI’s well established joint venture with UK based Intelligent Energy is working to scale up Fuel Cell production and further develop their patented air-cooled Fuel Cell systems. HYUNDAI, the largest Korean carmaker, for its part, believes that hydrogen Fuel Cells represent the future of zero emission vehicles more than electric cars. First to launch an H2 powered SUV, the Tucson Fuel Cell Crossover, the manufacturer is not discouraged by the slow pace of sales. Last year, only 273 of the forecasted 1000 vehicles were actually sold or leased.
Electric cars versus H2 cars : TESLA versus TOYOTA
Earlier this year at the Automotive News World Congress in Detroit, Elon Musk, Tesla’s motor founder voiced his sonorous contempt for hydrogen-powered Fuel Cells. These, as he said flatly, are “extremely silly”. Hydrogen, he claims, is merely an energy carrier and way less efficient than electric cars. One of his concerns, alongside many other industry experts, was safety.
Commenting on the latter, in connection with the Mirai, Jean-Yves Jault was not delighted. “H2”, he explained, “is stored at 700 bars in two carbon fibre reinforced plastic pressure tanks. These are very solid - we fired bullets at them and they remained intact. They last 20 years. A system of shutoff valves ensures that in any impact the H2 supply is cut off. In the eventuality of a leak there are multiple sensors (...) In the same way, the design of H2 gas stations is much more stringent than for current petrol or diesel cars today.”
Two major technical constraints, instead, affect the driving of electric vehicles dependent on batteries: the range and the long charging time. In this regard, Fuel Cells have an advantage.
However, a lot of work and research is still to be put into Fuel Cells and infrastructure before we enter the hydrogen era foreseen by the Japanese Prime Minister.
No single way to win the race
In spite of the almost ideological clash between the evangelists of electric and Hydrogen Fuel Cells vehicles respectively, the two technologies are more complementary rather than in competition with each other.
In much the same way as no single renewable energy source currently replaces fossil fuels, also in the mobility sector, the answer lies with the energy and technology mix. Every solution plays a role under different environments. What needs to be taken into account is the overall carbon footprint along the manufacturing chain. A combination of solutions may thus well be the winning approach, keeping in mind that in the hyper-dense urban landscapes of tomorrow’s megalopolises, no emissions must be produced. TOYOTA considers that “hydrogen Fuel Cells have more advantages than drawbacks. As H2 becomes green over time - like today in Denmark where all H2 must be carbon free by law, for example - then it becomes a pure zero emission solution without the inconvenience of range or recharging times. The caveat of course is that the H2 network needs to be deployed which will take many years.”
TESLA, on its part clearly advocates that the new Model S advanced electric powertrain is an evolution in zero emissions automobile engineering, supported by “superchargers” that charge Model S in minutes instead of hours.
Shifting the energy paradigm within the Smart Grid
There is one point in which the otherwise drastically different visions of TESLA and TOYOTA converge. Both companies potentially see their products as power generating units to be easily integrated into the coming Smart Grid. In the case of Fuel Cells, there is an immediate link. With FCs, cars become efficient power stations. Once parked, which is most of the time, vehicles can be used to generate electricity. Clean water can be collected in addition, as the sole “waste product” of FC engines.
500 FC vehicles in a car park, for example, will be equivalent to an electricity power station of 40 MW, provided an average engine has a capacity of about 80kW. According to an industry white paper, like EVs, FC power stations will also be able to be combined with renewable and fluctuating sources, such as solar and wind. Both technologies thus contribute to maximise and optimise utilisation of the electric infrastructure. In the case of EVs, off-peak charging may help utilities to shift peak demand and defer capacity upgrades to their distribution network. In the future, EV batteries will also provide a source of stored energy for release to the grid without the need for utilities to add additional capacity.
It thus comes to no surprise that in May this year, TESLA brought to the market batteries for residential and commercial and utility usage respectively. Powerwall, for residential installations in 7-10kWh; and Powerpack in 100kWh. For commercial installations the latter can be scaled to over 10 MWh. The rechargeable lithium-ion battery would be based on the same technology the company uses for its electric vehicle products, industry analysts say.
The German Clean Energy Partnership. Collaborative efforts to foster innovation
The so called European Innovation Partnerships (EIPs) – a new EU approach to Research & Innovation - are established on the very same premises. The EIPs are industry driven initiatives that aim at accelerating transformative processes within sectors and creating new markets. Established in 2002, one such partnership was set up in Germany under the aegis of the Ministry of Transport and Industry to test the suitability of hydrogen as a fuel. The 19 industry partners have been effectively collaborating since the kick off of the “lighthouse project” to pave the way for market launch of H2 vehicles. The value of taking a long-term approach to market creation will be assessed within the next decades. For now, suffice it to say, the investment seems to be paying off. On October 13th, Shell, which opened its first hydrogen fuel station in Germany in 2011, has today signed a declaration of intent with the H2 Mobility Germany joint venture partners and Germany’s federal transport minister, Alexander Dobrindt. It will lead to hydrogen fuelling pumps being available at around 400 locations across the country by 2023.
“Where there is no vision the people perish,” Proverbs 29:18
(written with Arvea Marieni, innovation manager, Hamburg-Germany)