Consensus Roadmaps for LowCarbon Powertrain Technologies

J PROD INNOV MANAG 2014;31(1):33–42 © 2013 Product Development & Management Association DOI: 10.1111/jpim.12078

Where Firm-Level Innovation and Industrial Policy Meet: Consensus Roadmaps for Low-Carbon Powertrain Technologies* Matthias Holweg

Environmental mandates, energy security concerns, and societal demands place considerable pressure on automotive manufacturers to develop novel powertrain technologies that reduce energy consumption, and in turn, carbon emissions. The economic case for these novel technologies is far from clear, however, and firms often turn to the respective national governments for R&D aid and demand-side subsidies. Government on the other hand often feels unable to back any single technology for competition regulatory reasons, while at the same time being presented with conflicting messages from industry where to focus its support. This paper reports on an initiative by the U.K. Government that led to the establishment of a permanent forum for government-industry exchange, the Automotive Council U.K., in which the author has participated from the outset. In the course of the Council’s work, two “consensus roadmaps” have been developed jointly by industry and the U.K. Government to guide national efforts in the transition for both passenger car and commercial vehicle powertrain technologies toward low-carbon alternatives. This paper discusses the key technological development stages and projections outlined in these technology roadmaps and comments on the general determinants of an effective interaction between government and industry in the light of a technological discontinuity.

Toward a New Dominant Powertrain Design

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echnological evolution forces firms to adapt over time (Damanpour, 1991; Henderson and Clark, 1990). Arguably, the automotive industry faces a major technological inflection point at this very point in time, adding to a range of existing challenges related to depressed demand, increasing regulatory demands to meet ever more stringent emission targets, rising energy costs, and societal pressures to reduce tailpipe emissions, vehicle noise, and traffic-related fatalities. In many ways one could argue that it is the “worst possible time” to ask the automotive industry to abandon one of its core capabilities, the design and manufacture of internal combustion engines (ICE). Sluggish demand and narrow margins provide little financial room to invest in developing these new powertrain technologies. Moreover, as electric vehicle (EV) and fuel cell (FCV) powertrains that are the likely successors still lack a clear economic case, it

Address correspondence to: Matthias Holweg, Kühne Logistics University, Grosser Grasbrook 17, 20457 Hamburg, Germany. E-mail: [email protected]. Tel: +49 40 328 707-201. * I would like to thank the Automotive Council members and secretariat for their support. All opinions expressed in this paper are mine, and do not reflect those of the HM Government, the Automotive Council UK, or its member organizations.

remains unclear as to which technology, or technologies, will become the next dominant powertrain design. Regardless, the debate about what powertrain technology will eventually replace the internal combustion engine that powers virtually all of the estimated 1.1 billion passenger cars and commercial vehicles currently in operation globally (Ward’s Automotive, 2012) is already well underway, and has long preceded the current times of recession and recent oil price volatility (see DTI, 2000; EUCAR, CONCAWE, and Joint Research Centre, 2004). The main policy objective is clear: a reduction of the carbon dioxide (CO2) emissions of the transport sector, which contributes approximately 26% of global CO2 emissions, and 71% of which are caused by road transportation (Wiesenthal, Leduc, Köhler, Schade, and Schade, 2010). Less clear are the means by which these reductions will be achieved. The electrification of the automotive powertrain, continued weight, roll resistance and drag reductions, engine downsizing, and the introduction of lightweight materials are all facets of the ongoing transition away from a carbon-based fuel that powers an internal combustion engine, toward a new type of automotive powertrain technology or technologies, that will augment and eventually replace it in the long run (Committee on the Assessment of Technologies for Improving Light-Duty Vehicle Fuel Economy, 2011). For incumbent automotive firms this transition raises existential questions about their ability to retain, and

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J PROD INNOV MANAG 2014;31(1):33–42

possibly increase, their share of value-added in the automotive supply chain. Vehicle manufacturers are unanimous in their assessment that it is not possible for any one firm to support all possible powertrain technologies. Overall research and development (R&D) intensity is between 3–6% for vehicle manufacturers, who at present spend an estimated one third of their R&D on alternative powertrains and greenhouse gas (GHG) emissions (Wiesenthal et al., 2010). The general feeling in the industry is one of being “stuck” in a setting with strong commercial pressures on the one side, and considerable uncertainty with regard to the viability and market reception of novel powertrain technologies on the other. This uncertainty is amplified by inhomogeneous national policies within Europe with regard to subsidies for alternative powertrain vehicles, or the taxation of alternative fuels, such as compressed natural gas (CNG), liquefied natural gas (LPG), and liquefied petroleum gas (LPG). Considering the magnitude of the R&D investment needed, it is not surprising that vehicle manufacturers often turn to their respective national governments for development cost and demand-side subsidies in support of this transition. While governments are keen to support environmentally friendly technologies, as well as retain the economic contribution their automotive industry provides, due to constraints set by European competition regulations they often finds themselves unable to back any specific technology as this in turn would disadvantage other firms backing a different one. As a result, the automotive industry is frequently complaining about governments’ indecision, while government in turn feels unable to respond effectively due to the conflicting messages from industry where to focus its support. In the United Kingdom, a forum that permits dialogue between all industry players and government has long been called for (Central Policy Review Staff, 1975; Gibson, 2002) but came to existence only in 2009 in the form of the “Automotive Council UK.” In this paper, I will report on my personal involvement in this development, which started with the “New Auto-

BIOGRAPHICAL SKETCH Dr. Matthias Holweg holds a joint appointment at Kühne Logistics University, Germany, and at Judge Business School, University of Cambridge, UK. Prior to joining Cambridge Judge Business School, Dr. Holweg was a Sloan Industry Center Fellow at the Center for Technology, Policy, and Industrial Development at the Massachusetts Institute of Technology (MIT), and a Senior Research Associate at the Lean Enterprise Research Centre at Cardiff Business School.

M. HOLWEG

motive Innovation and Growth Team”1 (NAIGT) in 2008 that brought together senior managers of the main domestic vehicle manufacturers (generally the chief executive officers or managing directors for the U.K. operation), senior representatives from the component supply industry, R&D providers, and the U.K. Government. I joined the NAIGT as the academic member in order to provide analytical support, conducting a series of surveys and benchmarking studies (reported in Holweg, Podpolny, and Davies, 2009). The NAIGT developed a 20-year vision for the automotive industry and its recommendations to the U.K. Government and industry to achieve this (Parry-Jones, 2009). Key among these recommendations were proposals to establish a joint industry-government Automotive Council to ensure that a strategic, continuous conversation between government and the automotive industry in the United Kingdom takes place. The Automotive Council is cochaired by the Secretary of State for Business, The Rt. Hon. Dr. Vince Cable MP, to ensure that the communication takes place at the highest level within government. Two additional workgroups have been established within the Council: the Supply Chain Subgroup, which aims to retain and build capabilities in the U.K. component supply chain, and the Technology Subgroup, which aims to develop “technology roadmaps for low carbon vehicles and fuels, and exploit opportunities to promote the UK as a strong candidate to develop these and other technologies.”2 This paper summarizes the key developments outlined in these technology roadmaps, specifically commenting on the barriers and steps needed to progress toward the emission reduction policy objectives set out by the U.K. government and the European Commission. The paper is structured as follows: the next section briefly reviews the regulatory framework within which the Automotive Council operates, then proceeds to outline the technology pathways and common comparison methods. The following section presents the technology roadmaps for both passenger cars and commercial vehicles, and then proceeds to outline the key learning points from establishing an effective mechanism for industry-government exchange. The concluding section offers comments on the likely temporal progression from the ICE, to electrification of the powertrain, toward the key barriers for EV and fuel cell vehicle FCV powertrains as possible next dominant designs. 1 For more details on the NAIGT, see: http://www.bis.gov.uk/policies/ business-sectors/automotive/new-automotive-innovation-and-growth-team. The final report of NAIGT is available at: http://www.bis.gov.uk/files/ file51139.pdf 2 For more detail on the Automotive Council UK, see: http:// www.automotivecouncil.co.uk/

ROADMAPS FOR LOW-CARBON POWERTRAIN TECHNOLOGIES

Context Regulatory Framework For any national government, a fundamental challenge in interacting with its domestic automotive industry is to balance employment needs and economic growth with climate change targets. As is the case for many other countries, the automotive industry is a significant contributor to the national economy: the sector represents 6.7% of U.K. turnover and 2.6% of gross value added (Holweg et al., 2009), and by the standard U.K. Government definition employs 194,000 people in 3300 businesses. It accounts for around 12% of UK manufactured exports, and 13% of manufactured imports; in 2011, 77% of the cars and 61% of the commercial vehicles produced in the United Kingdom were exported. National industrial policy is set by the Department for Business, Innovation and Skills, yet an added complication to industry– government relations are stringent European competition regulations that prevent semi-open to hidden incentives, subsidies, and tax breaks that are commonly used elsewhere in the world to attract and retain large manufacturing operations. While the economic mandate is clear, the UK government also balances national economy interest with meeting its climate targets at the same time. The UK has committed to reducing carbon emissions by the year 2050 to 80% of a 1990 baseline in the Climate Change Act 2008. This has to be seen within the wider European context for reducing transport emissions: under the new vehicle regulation, the fleet average to be achieved by all new cars is 130 grams of CO2 per kilometer by 2015 (equivalent to 5.6 liters per 100 km of petrol or 4.9 l/ 100 km of diesel), which is being phased as of 2012, and which will reduce to 95 g/km by 2020 (4.1 l/100 km of petrol or 3.6 l/100 km of diesel). According to the EU, the 2015 and 2020 targets represent reductions of 18% and 40%, respectively, compared with the 2007 fleet average of 158.7 g/km (European Commission, 2009).

Powertrain Pathways In order to outline the different options, it is important to understand that automotive powertrains are embedded in the architecture of the vehicle, the transportation system these vehicles are used in, and the fuel sources and infrastructures that provide the energy for these vehicles. To understand the issues associated with a major technological change in automotive powertrains, all three aspects need to be considered. Two methods are commonly used


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to provide this environmental impact assessment: Life Cycle Analysis (LCA) and Well-to-Wheel (WTW) assessments. Life Cycle Analysis methods consider the entire energy consumption, emissions, and cost of extracting the raw materials, manufacturing the components, assembling the vehicle, using it, and finally, disposing of it at the point of “end of life of vehicle” (ELV). Proponents will claim that this method is more comprehensive than WTW; however, there are considerable uncertainties in the estimates (Contestabile, Offer, Slade, Jaeger, and Thoennes, 2011). Nonetheless, a range of LCA studies of alternative powertrains have been published (MacLean and Lave, 2003; MacLean, Lave, Lankey, and Joshi, 2000; Wagner, Eckl, and Tzscheutschler, 2006). Well-to-Wheel analyses consider two main cycles in order to determine a vehicle’s energy consumption and emissions: first, the “fuel cycle,” which describes the process of extracting, refining, and distributing the fuel (the so-called “Well-to-Tank” [WTT] process), and second the “driving cycle” of the vehicle using the fuel for propulsion (the so called “Tank-to-Wheel” [TTW] process). Combining both WTT and TTW cycles provides a holistic understanding of the energy consumption and emissions generated by using a vehicle in standard conditions, but this does not allow us to make a statement beyond its usage. With regard to alternative powertrains, two key studies comparing alternative powertrains on a WTW basis have been conducted by GM and the National Argonne Laboratory in the United States (Brinkman, Wang, Weber, and Darlington, 2005), and by CONCAWE, EUCAR, and JRC in Europe (CONCAWE, Joint Research Centre, and EUCAR, 2007; EUCAR, et al., 2004). Figure 1 shows the main possible alternative pathways to the dominant ICE architecture in the passenger car and commercial vehicle setting (crude oil as energy source, diesel, and gasoline as energy carriers, delivered through a liquid fuel distribution infrastructure, for use within an internal combustion engine powertrain). As can be seen, a wide range of potential options is available for existing and renewable energy sources to be coupled with existing and new fuels and infrastructures. In fact, it is conceptually possible to connect any energy source with any energy carrier, infrastructure, and powertrain design. Despite this rich “offering” however, the fundamental problem identified by most studies is that none of these alternative pathways combine the many advantages of liquid fossil fuels (petrol and diesel) in terms of (1) availability, (2) affordability, (3) energy density by weight, (4) energy density by volume,

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M. HOLWEG

Energy Source

Energy Carriers

Infrastructure

Powertrains

Gasoline

Coal

ICE

FT Gasoline

Crude Oil Natural Gas

Liquid Fuel Infrastructure

Diesel

ICE Hybrid

FT Diesel Biomass

Biodiesel (e.g. Carbazole)

Ethanol

Fuel Cell (FC)

Methanol Butanol Coal Crude Oil Natural Gas Natural Gas

Gaseous Fuel Infrastructure

DME CNG

‘Plug-in’ FC or ICE Hybrid

LPG Hydrogen

Electric

Electricity

Nuclear

Fuel Cell Hybrid

Electric Infrastructure

Figure 1. Automotive Powertrain Pathways. Adopted from WBCSD

(5) handling safety, (6) storage ability, and (7) operating temperature range. Petrol and diesel both offer a very compelling package across these fundamental criteria against which any new fuel/powertrain pathway will have to be judged. Neither hydrogen nor electricity—the commonly proposed main competitors—have properties that are even close to the performance of petrol in terms of energy density, as shown in Table 1.

The main obstacles for electricity and hydrogen as energy carriers are obvious from this table, namely the inability to store enough energy by weight and volume to provide sufficient range for the vehicle, leading to the commonly cited “range anxiety” for electric vehicles and safety concerns over liquid or gaseous hydrogen storage in the vehicle. Although novel battery technologies possess the theoretical energy density to rival traditional

Table 1. Energy Density by Weight and Volume for Different Fuel and Storage Types Energy Carrier Gasoline Diesel Natural gas

LPG (Propane) Methanol Hydrogen

Electricity

Form of Storage

Energy Density by Weight [kWh/kg]

Energy Density by Volume [kWh/l]

Liquid Liquid Gas (20 MPa) Gas (24,8 MPa) Gas (30 MPa) Liquid (-162°C) Liquid Liquid Gas (20 MPa) Gas (24,8 MPa) Gas (30 MPa) Liquid (−253°C) Metal hydride Pb (lead acid) battery NiMh battery Li-Ion battery (current) Li-Ion battery (projected) Li-Air battery (projected)

12.7 11.6 13.9 13.9 13.9 13.9 12.9 5.6 33.3 33.3 33.3 33.3 .58 .04 .08 .19 .40 2.00

8.76 9.7 2.58 3.01 3.38 5.8 7.5 4.42 .53 .64 .75 2.36 3.18 .09 .30 .60 1.45 2.00

Values shown are indicative, individual battery packs will deviate from these values. Sources: Royal Academy of Engineering (2010); Christensen et al. (2012); Whittingham (2012).


ICE powertrains on a WTW basis, field trials consistently show that batteries fall far short of their theoretical capabilities in practice (Christensen et al., 2012; Whittingham, 2012). So-called “metal air” batteries promise a step change in terms of energy density, but so far lack the level of maturity needed for any serial production in the medium term. On a WTW basis, current electric and fuel cell vehicles consistently produce between 90 g CO2/km and 140 g CO2/km in field trials, which is on par with the most efficient internal combustion engines and hybrid vehicles available at present (Contestabile et al., 2011; Royal Academy of Engineering, 2010). The most important variable in this respect is the grid energy mix, as both EV and FCV technologies rely on increases in alternative energy sources, or nuclear power, to drastically reduce the WTW carbon emissions they produce (Holdway, Williams, Inderwildi, and King, 2010). To illustrate the sensitivity of EV carbon emissions on the carbon intensity of the energy mix, let us consider the Tesla roadster: on the United Kingdom’s energy mix (which has a carbon intensity of c.545 g CO2/kWh), it produces 130 g CO2/ km. Using the same car in France, however (where the high content of nuclear energy reduces carbon intensity to c.117 g CO2/kWh), it would only incur 26 g/km. Equally, if electricity were entirely produced from lignite, the Tesla’s CO2 emissions would even rise above 220 g/km (Medawar and Holweg, 2011). As a result of this dependency, currently available “alternative powertrain” hybrid electric vehicle (HEV) and EV vehicles perform on par with the best-performing ICE vehicle. Comparing four compact vehicles under the U.K. energy mix, the Toyota Prius, Nissan Leaf, GM Volt, and the Golf Bluemotion, the Toyota performed best at 107 g CO2/km, followed by the Nissan Leaf (111 g/ km), the Golf Bluemotion (121 g/km), and the GM Volt (petrol mode: 131 g/km; U.K. electric mode 126 g/km) (Medawar and Holweg, 2011). A sensitivity analysis shows very clearly that the grid carbon intensity is the crucial determinant for overall HEV and EV emissions. It is against this background that any new powertrain technology needs to be assessed. In the following section, the technology roadmaps will be presented, outlining the key stages and barriers, as perceived by industry.

Consensus Roadmaps Roadmap Development The technology roadmaps were developed through iterative focus groups of vehicle manufacturer R&D staff,


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component supplier representatives, as well as Government representatives. The objective was to detail a commonly agreed technology roadmap to the United Kingdom in prioritizing its R&D investments in meeting the nationally set CO2 reduction challenge. Vehicle manufacturers pursue different technologies individually. The roadmaps were thus developed as “lowest common denominator” in order to share common views on the different powertrain technologies, and to recognize that the same technical and commercial barriers apply to all vehicle manufacturers alike. The roadmaps are neither binding, nor are they expressions of intent. Their main purpose is to provide a joint statement that helps government to guide its policy efforts in defining research funding priorities for the national research councils, R&D subsidies, skill development, and taxation in order to support national policy.

Technology Roadmap for Passenger Cars The technology roadmap for passenger cars, shown in Figure 2, shows the progression from a traditional internal combustion engine toward mild and full hybrids, and subsequently toward electrical vehicles and fuel cell vehicles. The roadmap deliberately features both electric vehicles and fuel cell vehicles, as these are not seen as competing technologies at national level (although they are of course at the firm level). These progression paths have been linked to the relative CO2 targets and their respective timings. As the famous “sailing ship effect” (Rosenberg, 1976; Utterback, 1996) predicts, the initial step is based on evolutionary developments of the existing combustion engine in terms of weight and drag productions, as well as continued innovations of the internal combustion engine itself, such as heat gas recovery. This step will also include the introduction of structural composites, active aerodynamics, and a new generation of small lightweight vehicles for urban use, as well as larger low drag vehicles for larger distances. It should be noted that the shared view is that the current ICE will remain in full production until 2040, and possibly beyond. The next interim step will be the continued expansion of micro- or mild hybrids (HEV), which includes beltmounted and crank-mounted starter generators, as well as small lead acid, NiMh and Li-Ion batteries to store the energy. These micro- and mild hybrids will be replaced by full hybrids as and when battery costs are reduced significantly from the current levels of €600/kWh. On-board electric voltage is then likely to increase to 40–150 V and the battery technology based on lithium

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M. HOLWEG

Figure 2. Technology Roadmap for Passenger Cars. Source: Automotive Council UK

ion technologies. It is unlikely that Li-Air batteries will be available for the mass market by 2020. A further step change in battery cost and weight reduction is required to expand to a mass market, while alternative energy storage solutions such as flywheels, capacitors are thought to be further enabling technologies. The third step in this transition toward plug-in hybrids (PHEV) and EVs will take place if accompanying changes in electric energy storage have also occurred, and the battery cost and battery life are acceptable to the private consumer. Furthermore, it is noted that grid supply needs to be both available, and “green” enough to provide sufficient fuel at an acceptable carbon emission level. The high cost for initial PHEV and EV vehicles are likely to require fiscal intervention for a mass market adoption. Interestingly, the shared view is that ICE components will remain compatible with increasing bio- and synthetic fuel content. The fourth step toward the introduction of massmarket EVs, as well as FCVs, will first and foremost require charging infrastructures for electricity and hydrogen, respectively. For either electric or hydrogen technology to take a major share of the transportation fuel sector, a substantial use of renewable energy is needed to provide

a favorable CO2 balance for the energy generation. Longer term CO2 reduction is seen as fully dependent on greening of the electricity supply. While several manufacturers that contributed to the technology roadmap are pursuing different powertrain technologies, there was a common view as to which condition will favor electricity over hydrogen in the long run: the key metric is the relative performance of battery cost and energy density versus the cost per kilowatt for the fuel cell. Similar to batteries, the cost and range for hydrogen storage will determine its relative performance, and will only become feasible for the mass market if the cost per kilowatt of fuel cell power reduces significantly over current values. The one advantage that hydrogen possibly carries is the reduced refueling time, in particular if a liquid organic carrier can be developed (such as, for example, an improved version of Carbazole/9azafluorene, which due to its toxicity is no longer being considered as a viable candidate by industry). In conclusion, all vehicle manufacturers could agree on a common high-level powertrain technology roadmap that recognizes a set of common technical and commercial barriers. Also, it was very clear that in the near to medium term, there is no alternative available to replace


EU Fleet Average CO2 Targets (g/km)

130


39

??

100

Demonstrators

Fuel Cell Vehicle

H2 Infrastructure

Fuel Cell Stack & H2 storage Breakthrough

Niche EVs

Mass Market EV Technology

Charging Infrastructure

Energy Storage Breakthrough

Demonstrators

Plug-In Hybrid Energy Storage Breakthrough Full Hybrid

Micro/Mild Hybrid IC Engine and Transmission innovations (gasoline/diesel/ hydrogen /renewables) Vehicle Weight and Drag Reduction

2000

2010

2020

2030

2040

2050

Figure 3. Technology Roadmap for Commercial Vehicles. Source: Automotive Council UK

the internal combustion engine. Efforts will be confined to weight, drag, and displacement reduction, as well as a continued innovation of the existing technology. The introduction of increasing levels of hybridization and electrification is highly dependent on the availability of batteries, hub motors, and power electronics technology that offer a higher energy density and lower cost.

Technology Roadmap for Commercial Vehicles The technology roadmap for commercial vehicles is characterized, first and foremost, by the diversity of duty cycles that commercial vehicles operate. It was seen as most useful to categorize commercial vehicles into four categories: light-duty vehicles up to 3.5 metric tons, medium-duty vehicles up to 26 metric tons, buses and coaches, and heavy-duty vehicles up to 44 metric tons. Second, it was made clear that the duty cycles for on-highway and off-highway are a key distinction between these commercial vehicles that is of utmost importance when it comes to the definition of low-carbon powertrain options. Figure 3 shows the joint technology roadmap for light-, medium-, and heavy-duty cycle vehicles. Core technologies that apply to all duty cycles include advanced aerodynamics, selective light-weighting, and

intelligent vehicle logistics that increase operational efficiency on- and off-highway. In terms of technological advancements, IC engine improvements, the introduction of biofuels, and ancillary electrification are seen as beneficial for all commercial vehicles. Further technological advances include friction reduction, downsizing, advanced boost combustion, and emission control systems, as well as a focus on total powertrain efficiency including transmission drivetrain and actuator systems to optimize the use of energy. For heavy-duty vehicles that are used on-highway there, at present, does not seem to be any alternative but to use carbon-based fuels. The energy density and range requirements simply cannot be met by any other current technology. One potential change may be a reduction in carbon intensity for the fuel used for long-haul duty cycles. In terms of medium-duty vehicles, such as trucks of up to 26 metric tons or backhoe loaders and other construction equipment, there was a perceived possibility to introduce micro- and mild-hybrid vehicles for medium-duty applications, where “stop-start”/“accelerate-decelerate” dominates in the duty cycle. The adoption is dependent on both the charging infrastructure and advances in battery technology, as well as the duty cycle to be performed. Particular opportunities for hybrid technologies are seen for mixed-duty cycles, as well as urban deliveries.

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For light-duty vehicles and inner-city applications, the progression toward low-carbon powertrains is very similar to that of passenger car technology but generally lagging in timing. Also, it was noted that a comparatively lower energy storage requirement was needed, which enables a more rapid rate of electrification of light duty commercial vehicles. Compared to passenger cars, the more predictable duty cycles and the ability to recharge the vehicle overnight at a fixed location are key enablers for the introduction of electric and hybrid vehicles with a lower energy storage capability. In conclusion, the key distinction between passenger cars and commercial vehicles is the duty cycle for the respective application, and the resulting power requirements that will determine the applicability of alternative powertrains. Second, refueling and range requirements— particularly for higher power and heavy duty cycles—are likely to stand against current technical restrictions in energy storage and range associated with electric and hydrogen vehicles. Third, the total cost of ownership will be the determining factor for the introduction of new powertrain technologies, as institutional buyers apply stringent commercial criteria for their vehicle fleets. While long-haul vehicles and high-power products will continue to depend on innovations of the existing powertrains and transmissions, the shift toward alternative powertrains will first and foremost start with lightduty vehicles on short range (e.g., urban delivery) cycles that benefit most from technologies developed in the passenger car market. Centrally refueled vehicles and urban usage cycles offer tremendous opportunities for the introduction of low-carbon powertrains, as here the reduced range requirement will significantly reduce the overall cost of the powertrain system. This is seen as a distinct advantage over the passenger car market, where the variety of duty cycles (from daily commute to holiday trip) requires a range comparable to that of an ICE powertrain.

Effective Government–Industry Collaboration In addition to the actual outcome, the process of developing the technology roadmaps discussed above also provides insights into the nature of government–industry relationships. The U.K. Government has a checkered history with its linkages to the automotive industry: a recurring issue of complaint has been the apparent lack of support of the U.K. Government for manufacturing as a whole, while the perception has been that services in general, and financial services in particular, were much more supported (Central Policy Review Staff, 1975;

M. HOLWEG

Gibson, 2002). Recent surveys confirm that this perception persists to the present day (Holweg et al., 2009). Thus, from an academic standpoint, the establishment of the “Automotive Council” as a formal body to enable this strategic dialogue offers a first-hand opportunity to study the interaction of firm-level innovation strategy with national industrial policy. Most interesting in this respect has been to observe the simultaneous complementarity and conflict between the government’s position and that of the different industry players. From the government’s point of view, the fundamental requirements for any interaction with industry are twofold: first, that it meets the political objectives (as related to economy issues such as employment, but also environmental regulation such as climate change), and second, that this interaction is auditable and fair, in as far as it abides by national and European competition regulation. This latter point is important, as individual firms often will argue for subsidies on the basis of their individual contribution to the national economy. While the government does not dispute this contribution, interacting on a “one-to-one” basis behind “closed doors” is problematic as this could be construed as favoritism. In the past, recurring UK governments have erred on the side of caution, which led to the perceived lack of interest and support. In this regard, the key lesson for the U.K. Government has been that “nonfinancial” initiatives are as important as financial initiatives related to tax policy or subsidies of various kinds. Germany and France are commonly mentioned by industry as good examples of how national governments maintain a continuous strategic dialogue with industry. As France and Germany are bound by the same European competition regulation as the United Kingdom, the key difference is indeed nonfinancial support, whereby a constant dialogue between industry and ministers at state and federal level are the norm. This dialogue is not need or project driven, but ongoing, and extends into the national research council to align national research spend with industry priorities. The main lesson for industry has been that the Automotive Council has required firms to shift their attention away from individual company needs and toward the collective needs faced by all industry players. The technology roadmaps are a good example of this “lowest common denominator” of views shared by all firms what phases and barriers there are in the transition toward low-carbon powertrains while still reflecting areas of the R&D activities of individual firms. Rather than asking for specific firm-level subsidies, the focus has shifted toward precompetitive strengthening of the U.K. automotive industry as a whole, which in turn reinforces govern-


ment’s ability and willingness to contribute to the Automotive Council. By taking the Council’s activities into the mutually agreed precompetitive stages of supporting the automotive industry through the national research councils, the local development agencies, and the R&D support scheme, the government has provided the coherent approach to industry support it was so frequently criticized of lacking in the past.

Outlook Contrary to commonly held public perceptions, the transition toward a low-carbon transportation system will be a long and gradual one. The internal combustion engine will remain the main source of propulsion for motor vehicles for the first part of this century, both in its current form as well as additional range extender in HEVs/ PHEVs, and it is likely that it will not be displaced at all for certain commercial applications that require highenergy density and long range. The reason is simply that we still lack a clear alternative for carbon-based transportation fuels and powertrains: both EVs and FCVs are likely contenders without any clear favorite at this point in time. Both technologies suffer from structural disadvantages—in terms of energy density, weight and cost of the battery pack for EVs, and in terms of storage and distribution infrastructure for hydrogen in case of FCVs. While EV and FCV reduce TTW emissions to zero, on a WTW basis they are about even in terms of CO2 emissions on the United Kingdom’s current energy mix. It is clear that the adoption of a new dominant powertrain design is intrinsically linked to the way in which energy is provided. Unless large-scale alternative power generation will provide a significant reduction in carbon intensity per kilowatt hour, on a WTW basis, none of the presently proposed alternative powertrain technologies can deliver the significant reduction in carbon emissions they promise. Within the European context, biofuels are not a sustainable alternative either, unlike in countries like Brazil (Gallagher, 2008). Thus, one has to conclude that the move away from the ICE as the main source of propulsion in our transportation systems is inversely proportional to our ability to generate affordable, alternative low-carbon energy. In this respect, the perceived risks by industry seem indeed justified, as the economic case for investing in these new technologies is anything but clear. Several studies foresee the turning points of alternative powertrains outselling traditional ICE vehicles as early as 2020, however in 2011, the market penetration of electric vehicles in the largest automotive markets ranged from .4% (in Japan) to as little as


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.03% (in China). Equally, the lack of a hydrogen infrastructure means that FCV vehicles so far are largely confined to inner-city commercial applications, with very few passenger car models on sale. The decision of whether electrical or hydrogen vehicles will become the dominant powertrain design has not been made, as so far too many technical uncertainties provide unclear economic cases on either side. This competition will eventually be decided by the relative improvement of battery capacity, weight, and cost per kilowatt hour in relation to the ability to store, distribute, and retrieve hydrogen within the vehicle at considerably less loss than at present. Battery cost is commonly predicted to drop from €600 per kWh to €250 per kWh by 2015, while metal-air batteries promise another step change in energy density in the medium term. Yet, any battery technology will always suffer from a relative disadvantage in terms of refueling time, unless a widespread network of stations can be built to exchange modular battery packs (also referred to as the “Better Place” model, based on the now defunct firm of the same name that offered this service). In this regard, the potential development of an organic liquid carrier for hydrogen may well sway the balance in the long run, as this would mean that the existing petrol distribution infrastructure could be harnessed for hydrogen distribution. While the long-term decision of which powertrain technology, or technologies, will become the next dominant design is yet to be determined, the “sailing ship effect” is noticeable in as far as that the rate of improvement of the existing ICE technology has clearly accelerated in the light of the new powertrain technologies under development. The interim stage in this transition is in fact already well defined, as all manufacturers agree that a gradual electrification of the ICE powertrain (from ancillary electrification toward mild hybrids, full hybrids, and eventually plug-in hybrids) are the likely interim stage toward a new vehicle architecture. Electrification has several advantages: first, any powertrain that uses electric energy only (even if only for short distances) has zero tailpipe emissions, and can thus be used in areas that are sensitive to emissions (such as inner cities). Second, internal combustion engines are not well suited (that is, most inefficient) to operate in stop–start traffic patterns. Most importantly however, bringing in an electric powertrain allows for the merger of vehicle systems: mechanical and electrical systems such as for braking and steering can be combined within the traditional vehicle architecture. Hub motors, for example, could provide propulsion, braking, anti-lock braking (ABS), and electronic stability program (ESP) functionality—all in one

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system. This allows for further content and weight reduction of the vehicle, which results in increases in fuel efficiency (Schäfer, Heywood, Jacoby, and Waitz, 2009). As the “last gasp” of the ICE, the combination of a partly electrified powertrain working in conjunction with a small traditional ICE in a HEV or PHEV layout offers considerable potential for the passenger car market, where customers suffer from “range anxiety” and show an unwillingness to shoulder the financial risk inherent in battery pack degradation. For light commercial vehicles, this transition will be even easier, as the regular and predictable duty cycles of commercial vehicles will reduce the need for an energy storage that provides highway-distance range, which will in turn greatly reduce the cost of the new powertrain configuration. On the other hand, it is also clear that for on-highway commercial and heavy duty cycles, there is no alternative to liquid carbonbased fuels at present. In conclusion, the adoption of new powertrain technology in the automotive industry is, for the foreseeable future, likely to be an incremental change away from one technology, to many operating in parallel. This transition is likely to be led by the incumbents leveraging their complementary assets (Teece, 1986), working with new partners on the electrification within the boundaries of the existing vehicle architecture. The decision as to which powertrain will replace the ICE in the long run however is not an endogenous one to the automotive industry, but one that will be enabled only by a general shift toward low-carbon alternative energy generation that can provide the basis for a new transportation fuel. Until then, it will be more of the same, but better.

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