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| Source: | LOHAS Weekly Newsletter |
| Published: | Saturday, September 01, 2001 |
The automobile industry may lobby for the status quo, but it isn't publicly championing the “there's no problem that can't be solved with cheaper gasoline and more highway dollars” mantra. It's too busy gearing up for 2003—the year that the new California Air Resources Board (CARB) regulations go into effect. And, as one industry observer puts it, the nation's most populous state “drives the world” when it comes to the automobile.
In the last decade, the industry has made remarkable progress developing cleaner, environmentally friendlier vehicles. Standard gasoline-powered cars are becoming more fuel efficient and are producing less carbon dioxide. This is a response to federal Corporate Average Fuel Economy (CAFE) regulations that impose an average miles-per-gallon standard on an auto manufacturer's entire fleet of new cars. CAFE currently does not cover light trucks—pick-ups, SUVs and minivans—which make up about half of all new car sales. So while new cars are getting more fuel efficient, the average fuel efficiency of all vehicles on our roads is actually decreasing due to the popularity of light trucks. In 2004, light trucks will be included in CAFE calculations. The industry is preparing, so we can expect to see more trucks with better fuel economy.
About $275 million worth of electric passenger and fleet vehicles were sold in 2000, according to a report compiled by Business Communications Co. Inc. of Norwalk, Conn. Anna Crull, a co-author of the report, predicts an annual growth rate of 17 percent, which means sales should reach $320 million this year and $603 million by 2005. Hybrid sales were $1 million in 2000 and should be $5 million this year. Crull forecasts hybrid sales to skyrocket to $3.5 billion by 2005. “What we've learned from Honda and Toyota is people are buying these things,” she says.
About $17.5 million in large electric vehicles (buses and trucks) were sold in 2000. With an annual growth rate of about 15 percent, this number should reach $50 million in 2005, according
to Crull.
The overwhelming consensus among industry observers is that the future of alternative technology transportation lies in fuel cells, which produce electricity by combining hydrogen with oxygen. Fuel-cell cars, trucks and buses essentially are still in the development stage. Namrita Kapur, an analyst with Boston-based investment banker Adams, Harkness & Hill, predicts fuel-cell engine sales will hit about $49 million in 2003, $4.2 billion in 2005, and more than $75 billion by 2020.
Tuning up CARB in California
While CAFE has spurred incremental changes, CARB could be sowing the seeds for a revolution. In 1990, CARB mandated that by 2003, 10 percent of all new vehicles sold in California must be zero-emission vehicles (ZEVs). It was an ambitious goal, and it captured the auto industry's attention. Californians purchase 1 million to 1.25 million vehicles every year.
“[California] has been a thorn in the industry's side, but it's also driving this industry to develop the technology and make the changes,” says Lindsay Brooke, executive editor of Automotive Industries magazine.
But recently California has become more accommodating to auto makers and CARB has modified its original mandate. The latest version, and the one likely to go into effect in 2003, is a complicated formula under which auto manufacturers can earn partial credits for some super-low-emission vehicles and extra credit for certain vehicles sold before 2003. Right now, only battery-electric vehicles qualify as ZEVs. Fuel-cell vehicles that run on hydrogen will qualify, but they aren't expected to be available by 2003. The bottom line is that at least 2 percent of all vehicles sold in California in 2003 must be ZEVs; 2 percent must be super-clean, advanced-technology vehicles such as hybrids and certain alternative-fuel vehicles, and fuel-cell vehicles equipped with reformers that produce hydrogen from another type of liquid fuel; and at least 6 percent must be super-low-emission gasoline-powered vehicles with warranties for 150,000 miles. CARB's ZEV requirement gradually increases to 16 percent by 2018.
New York, Massachusetts, Vermont and Maine have indicated that they also plan to adopt CARB standards in 2003.
None of that is music to the ears of automobile manufacturers, who claim mandates don't work. They attribute any recent technical advancements and new product introductions to their commitment to their customers and to the environment.
California is not just pushing for change, it's pulling as well, providing a state tax incentive to EV owners on top of a federal tax break. Many cities provide free parking for EVs, and single-passenger EV drivers have access to the state's high-occupancy vehicle (HOV) lanes.
The primary barrier to widespread acceptance of EVs has been a lack of recharging facilities for the vehicles, which typically travel 60 to 120 miles on a charge. That compares to gas-powered cars that get 300 to 350 miles per fill-up. Since the early '90s, California has been working to install public recharging stations, a campaign that to date has totaled about 450 public stations where drivers can charge up EVs for free. Most of those are in the L.A. area.
California is easily the most EV-friendly state. Between 1996 and 2000, 4,017 EVs were sold in the U.S., according to the Electric Automobile Association of America, and most of those were bought by Californians. The Postal Service in April purchased 500 electric mail trucks built on Ford's Ranger EV platform; almost all will be used in California.
More EVs would be sold if car makers built them, say some observers. “The technology works, and people who use it, love it,” says Jon Bertolino, a project manager for Sacramento Municipal Utility District, which has 100 public recharging stations at 35 sites. “Now it's time for the auto manufacturers to commit. There's a pent-up demand for these vehicles. We get calls every day from people asking, 'Where can I get one?'”
Sales people from Ford and DaimlerChrysler are waving arms in the air. Both car giants are making electric neighborhood and commuter vehicles to replace the older second car that many households own. Designed for short trips close to home, neighborhood cars are lightweight EVs with top speeds of 25 mph. They are street-legal in 38 states but limited to roads posted at 35 mph or less.
Ford's Th!nk division is rolling out its Th!nk Neighbor (see sidebar). DaimlerChrysler has sold about 6,000 GEMs (Global Electric Motorcars) since 1998. The GEM comes in four models: a two-passenger and a four-passenger, and a miniature pickup with a choice of two sizes of utility beds. Mike Clement, director of alternative-fuel vehicle sales and marketing for DaimlerChrysler, says they work well for security guards and meter readers, and in gated communities, business parks, airports and military bases. He also knows of a company that's outfitted a GEM with firefighting equipment for use in large warehouses. “We think these things will be like microwaves,” says Clement. “Once they're out there, people will discover new uses for them.”
Commuter cars are very small—usually two-seater EVs with top speeds of around 60 mph. They're inexpensive, easy to park and economical to operate. While they make ideal second vehicles, they are not suited to freeway driving or long distances. Ford Th!nk Mobility in 2002 will introduce its Th!nk City in the United States. The vehicle already is sold in Norway. Toyota is developing a similar vehicle called the e.com. The company has not announced a production date.
CARB spokesman Jerry Martin estimates that 4,500 to 5,000 EVs will be sold in California in 2003, while some observers believe the number may be closer to 10,000. Martin forecasts that Californians will buy an additional 4,500 to 5,000 advanced-technology vehicles and 80,000 to 90,000 super-low-emission vehicles in 2003.
By 2018 when the CARB requirement reaches 16 percent, it's estimated that as many as 51,000 ZEVs could be sold in California annually. Many of those vehicles will run on fuel cells rather than batteries.
Futuristic Fuel Cells
Most major car companies currently have fuel-cell vehicle (FCV) prototypes in testing and are creating partnerships with other car and energy companies.
“Two years ago, if you wanted a fuel-cell vehicle, you needed a bread truck with a laboratory filling up the entire back,” Brooke says. “Today there is essentially no packaging penalty.”
There is, however, substantial cost. A fuel cell capable of powering a standard automobile currently costs about $40,000, compared to an internal combustion engine that runs around $4,000, says Adams, Harkness & Hill analyst Kapur.
“Fuel-cell technology has come further and faster than we could have imagined,” says Ken Stewart, brand manager for advanced-technology vehicles at General Motors. “Now it's less about physics and more about cost. Fuels cells still require a lot of precious metals. That's what's driving up the cost.”
Given the industry's continuing research push to reduce fuel cells' content of platinum and other metals, the cost of engines should fall steadily from the present level of 10 times the cost of an internal combustion engine to a 5-to-1 ratio in 2005—a level that will allow car makers to begin priming the market by selling models at a loss, says Kapur. She expects fuel-cell engine costs to equal those of internal combustion engines by 2020, when she projects more than 2 million vehicles sold.
GM has a goal of getting 100,000 fuel-cell vehicles to the streets by the end of the decade. Kapur estimates that car makers will have about 75 test FCVs on the road by the end of 2002.
Such projections will be influenced by unpredictable variables, including how quickly hydrogen fueling infrastructure is built, how strictly government enforces clean-air standards and regulations, and to what extent government provides incentives and subsidies to buyers of FCVs.
“Consumers are unwilling to pay a premium [for fuel cells],” Kapur says. “Right now people are happy with their cars and haven't made a clear connection between fuel economy, emissions and air quality. The government is making that connection for people and allowing the playing field to be leveled.”
Battery-powered EVs will pave the way for FCVs. Other than their power source, the technology is essentially the same. “Fuel-cell cars are 95 percent electric vehicles and 5 percent fuel cells,” Bertolino says. And as EV technology improves and EV production increases, the price of FCVs will come down.
The first commercially viable application for fuel cells most likely will be in city buses and shuttle vans, because a fleet will support a hydrogen refueling system. Fuel-cell buses have successfully been tested in Chicago and Vancouver. DaimlerChrysler has promised delivery of 30 fuel-cell buses to 10 European cities in 2002. This year three fuel-cell-powered buses are expected to be sold, each with an engine that Kapur estimates to cost around $315,000. Kapur projects sales of fuel-cell bus engines to be $17.2 million in 2005 and $7.5 billion by 2020.
Hybrids: Two Ways Better
Hybrids are another major force in alternative transportation technology, combining electric motors with gasoline or diesel engines to create the best of both worlds—low emissions and improved fuel economy without the need for recharging.
The American public got its first glimpse of hybrids at the end of 1999 when Honda introduced the Insight, a two-seater that gets 61 to 68 mpg. About 6,000 of the vehicles have been sold. Next spring in the U.S., Honda will roll out a hybrid version of its Civic targeted at prospective buyers who want a backseat, perhaps taking a cue from the Toyota Prius, a four-passenger sedan that gets 45 to 52 mpg and which has had sales of more than 11,000 since it debuted in the U.S. showrooms in July 2000. Sales of both vehicles have been concentrated on the West Coast.
“Our typical buyer is a baby boomer,” says Ming-Jou Chen, Toyota's product news administrator. “It's a male between 35 and 54 years old. It's people who are early adopters and comfortable on the Net. They're concerned about the environment but they don't want to be inconvenienced. They don't want a vehicle that they have to plug in.”
People only recently started buying Insights for their fuel economy, a result of the recent spike in gas prices, according to Kevin Bynoe, public relations administrator for Honda America. “The No. 1 reason people say they buy the car is aesthetics. People say they like the looks and the styling. The next reason is they're technically inclined individuals who are intrigued by the technology. The next reason is for the environment.”
American car companies are focusing their hybrid efforts on light trucks and SUVs. Dodge is coming out with a hybrid Durango, Ford with a hybrid Escape, and GM and Dodge with hybrid versions of full-sized pickups. It's a logical strategy: Give Americans what they seem to want—only cleaner and more efficient.
The Durango hybrid will cost about $3,000 more than the standard model but gets 30 percent better mileage, according to Max Gates of DaimlerChrysler Advanced Technology Engineering.
And buyers will be gaining rather than giving up performance, car makers promise. Both the GM and Dodge hybrid pick-ups will have all the power, performance and cargo capacity of a standard pickup, as well as the added bonus of mobile electricity generation—a feature the car makers believe will appeal to contractors and tradesmen and anyone else who could use an electric source in the field to power tools or equipment.
Toyota is working on going American car companies one better with a hybrid fuel cell SUV. Combining a 90-kilowatt fuel cell stack and a nickel-metal hydride battery that allows regenerative braking, the FCHV-4 can do 95 mph and has a range of 155 miles—all with zero emissions. Although it's now being road-tested, the vehicle isn't projected to be mass-produced for another 10 years.
Last year, 38 hybrid buses were sold in the U.S., including 20 to New York City. “Buses are great applications because hybrids love a stop-and-go duty cycle,” says GM's Stewart. “The electric engine starts the vehicle from a stop and the regenerative braking captures energy for recharging.” GM's hybrid buses use half the fuel and produce half the emissions of a standard diesel bus, adds Stewart.
Flex Fuels Muscle Up
Alternative fuels have well-established niche markets. There are about 2 million flexible-fuel vehicles on American roads, which run on any combination of gasoline and ethanol up to 85 percent ethanol. Since ethanol is mainly made from corn, most of these vehicles are located in our corn belt. While clean and renewable, ethanol is expensive and heavily subsidized by the federal government.
Clean and cheap natural gas has found a solid niche in heavy-use vehicles that remain within range of a refueling station. The one stumbling block of the compressed gas is the fuel tank, which must be cylindrical, a shape which demands a lot of space from passenger cars or light trucks, although it poses less of a problem in buses or larger vehicles. A heavy-use compressed natural gas (CNG) vehicle can save $3,000 a year compared to a gasoline vehicle. They're ideal as airport shuttle vans or city buses that never stray too far from a refueling station. In the U.S. there are about 100,000 CNG vehicles, most of which are operated in fleets.
“The key is to match the technology to the customer,” Stewart sums up. “You can't just thrust technology on people. They have to need it.”
Government mandates won't create market demand, he points out. Discovering what buyers need is the natural role of car makers. “Remember, car companies love to compete,” he adds. “It's what they do best.”