7/1/2001 | 4 MINUTE READ

On Sustainable Mobility

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Is the automotive industry on the brink of a change the likes of which they haven't seen since the days of the Stanley Steamer?


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Has the time finally arrived? Is the automotive industry on the brink of a change the likes of which they haven't seen since the days of the Stanley Steamer? The environment appears to be maybe the most visible challenge—and opportunity—for manufacturers. With the energy shortages, including rolling blackouts in California, gas prices above $2.00 per gallon (yet still not near the prices of two decades ago when adjusted for inflation), and the increased belief the internal combustion engine has—possibly irrevocably—changed the earth's climate, has the industry awakened to the need to move toward a sustainable model? And if so, do U.S. customers agree, or are they more likely to believe that, as one representative of the Bush administration put it, we have the "inalienable right to cheap abundant energy"—at what appears to be significant cost to the environment? Or, if they do agree that the current model is not sustainable, when are they going to be willing to step up to the cash register and pay for the change? Jimmy Carter was the last politician of note to suggest that we Americans must accept a portion of the burden that would result from a reduction in energy consumption—and we all remember how that turned out for the former president. Since then we have had 12 years of nearly unrestricted energy consumption, followed by eight years of environmental talk, but little action, and now a President who some suggest is a bit biased toward the interests of Big Oil.

While the concept of the automobile as a part of a sustainable transportation infrastructure certainly includes more than energy consumption and emissions, the need to reduce both is currently the most prominent of the challenges. It also may be the most technologically achievable.

Technology for alternative powered vehicles is rapidly developing. Yet the cost for these vehicles will not likely be capable of matching the cost of internal combustion engines. Hand waving estimates of the cost for hybrid electric vehicle (HEV) technology suggest that initial low volume vehicles will carry a volume cost penalty of approximately $3,000. While reaching scale economies may eliminate this penalty, a cost difference between internal combustion engines (ICEs) and HEVs will likely remain. The cost of what is, in essence, two powertrains in one vehicle (one electric and one ICE)—will make HEVs more expensive than ICEs even at volume.

Manufacturers hope that consumers will be willing to determine the net present value of the increased investment compared to the savings in expenditures on gasoline over the life of the vehicle. An especially difficult chore when it is considered that the initial buyer will not likely keep the vehicle the 10 or so years necessary to recoup the investment. And there also remains uncertainty as to whether the used vehicle market will necessarily adjust to capture that value in resale. The other assumption is that the consumer will have had enough of the uncertainty of energy prices and availability, and become more concerned about reducing the amount of energy concerned.

Fuel cell powered vehicles also offer potential for significant environmental advances. Another hand-waving estimate suggests that—if the technology were completely feasible—the fuel cell powered vehicle would carry a $30,000 to $40,000 price premium over ICE powered vehicles. Yet many believe that in time, fuel cell will be the power source for automotive transportation. However, the fuel cell will have a much earlier impact on the electrical grid than the automobile.

One scenario presented is that the fuel cell vehicle becomes an integral part of the electric grid base. The premise is that in those times of rolling blackouts, you will be able to plug your house into your fuel cell powered vehicle. While this concept is fascinating, it presents a rather gloomy picture of the U.S. infrastructure. If consumers are so convinced that the electric utilities are not going to provide the required long-term delivery of services, it is likely that they will choose alternatives that are less mobile in nature than relying on a vehicle to power their house. More realistically, I believe such a scenario would lead consumers toward a stationary fuel cell, either for micro-generation facilities or residential applications. The technology for such micro-generation appears to be only a few years from economical commercialization, and a far more reliable method to power homes and businesses than hoping that the power doesn't go out while the spouse has the car at the mall.

The events of recent months have confirmed that the energy strategy of this country is in need of revision—and the automobile must be a part of that change. Bill Ford, Jr., has made his personal agenda of sustainable transportation that of the Ford Motor Company, and his actions have forced his competitors to be viewed as following. A year ago, many of his competitors viewed his questioning the viability of the current automotive paradigm as crazy, even blasphemous. Yet one year later, many of those competitors have found that environmental sustainability may in fact be a critical element of a long-term strategy.