I recently climbed out from behind the wheel of a 2013 Lexus GS450h. Fully loaded, this very luxurious hybrid will easily top $70,000 MSRP. And that’s not the most expensive hybrid offered by Toyota’s luxury brand. The LS600h L starts at $119,910.
Back to the GS450h: It’s hard not to be impressed with the car’s performance – delivered via 338 combined horsepower and a 34 mpg EPA highway rating, wrapped in a very stylish sedan with luxury appointments.
That got me thinking about the difficulty of bringing advanced technologies to the automotive market. We sometimes hear complaints that a powertrain or technology breakthrough ‘shoulda’ been out years ago. Truth is, it takes considerable time and money to bring any new idea to market these days. Big breakthroughs take even longer and often require a major capital investment on the part of the automaker.
The Prius is a good example. Toyota bet on a forward-thinking, long-term approach with this iconic gasoline electric hybrid. You can bet that Prius isn’t a profitable platform for Toyota when viewed in traditional automotive parameters. But now with over a million Prius models on the road, ‘Prius’ is used as a generic term when talk turns to hybrids. It’s difficult to measure the green halo that the Prius casts across the entire Toyota brand, but it’s certainly a marketing home run. Toyota has the resources to make that kind of multi-year investment. Many companies, especially smaller startups, need to be profitable early in the game.
That’s why we often see green technology introduced in cars that are much more expensive than the Prius. Both Fisker and Tesla took this approach with their launches working the ledger with high-end models eclipsing six figures. In a blog some six years ago, Tesla founder Elon Musk pointed out that his company’s strategy was to “enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”
At the time of his blog, Musk’s plan was to follow through with a second model that would be roughly half the cost of the $89,000 Tesla Roadster. As recent history has shown, that $89,000 MSRP ultimately became $111,000, which meant the cost of a more affordable coming sedan would likely be higher as well. That sedan is the highly acclaimed and awarded Tesla Model S. Initially, Tesla is only delivering the limited edition Model S Signature Series at a cost of $95,000 to $105,000. The plan is to next roll out less expensive Model S variants with an MSRP starting at $59,900 with smaller battery packs and shorter, although still exemplary, electric range.
Though battery cost is a prime contributor, this economic reality is not limited to hybrids or electric vehicles. Even clean diesel feels the influence of advanced technology running up cost. A diesel is generally more expensive to produce than a gasoline engine. When you add the cost of federally mandated high-tech pollution controls and exhaust aftertreatment systems, it’s easier to merge clean diesel into higher-end luxury vehicles and more expensive three-quarter ton and larger pickup trucks.
Clearly, the path to vehicles using highly-advanced technology is not a quick or easy one, nor as it turns out, one without cost.
Todd Kaho is executive editor of Green Car Journal and CarsOfChange.com
Automakers, and especially Detroit’s Big Three, will see greater sales and profits from stronger federal fuel economy standards.
That’s what a recent report by Citi Investment Research in collaboration with Ceres found. It looked at what Washington’s plans to boost fuel economy standards to 54.5 mpg by 2025 would mean for the industry in 2020.
The analysis found that in 2020, General Motors, Ford, and Chrysler could look forward to a 6 percent hike in profits – an extra $2.44 billion – under the proposed standards.
Foreign automakers would also benefit. They can expect a 5 percent rise in profits – an extra $2.31 billion in 2020.
As gas prices continue to rise, better mileage drives sales. Customers want cars that go farther on a gallon of gas. In fact, Kelley Blue Book's latest consumer survey found that 66 percent of people shopping for new cars are taking rising gas prices into account. Some shoppers are changing their minds about what vehicle to buy. Others say they’re considering more fuel-efficient cars they haven’t considered before.
These consumers can do the math. The Citi report finds that the added costs of technologies required to meet proposed fuel economy improvements in 2020 are extremely cost-effective. Even if gas prices sink as to low as $1.50 a gallon, drivers would still come out ahead. And higher gas prices would mean even greater savings.
All car companies selling in the U.S. will have to meet the standards, which means a level playing field. Buyers will be able to choose from a wide range of fuel-efficient vehicles.
American automakers will benefit the most. That’s because U.S. companies have historically relied on larger vehicles that guzzle more gas. The proposed standards will narrow that gap in fuel economy. Under the proposed standards, trucks and larger cars, in which the Detroit Three are more invested, will see relatively greater improvement in fuel economy, enhancing their consumer appeal. In addition, the prices, and therefore automakers’ variable profits, will be higher for trucks and larger cars than for smaller cars.
It’s important to note that U.S. carmakers can get most of the way to the new mileage standard simply by improving the internal combustion engines they already make – by using technologies already in play or almost market-ready. Variable valve timing and lift, cylinder deactivation, turbocharging, gasoline direct injection and other technologies – along with some increase in hybrid, plug-in and electric vehicles – will get us to the new national mileage goal.
The proposed standards will trigger a wave of innovation that will help U.S. automakers’ long-term global competitiveness. The Citi report found that suppliers of key fuel economy technologies would benefit as well. And what’s good for Detroit is good for America: a healthy automotive sector leads to more jobs across the industry’s huge domestic supply chain.
The standards will also create jobs across the economy. Ceres’ More Jobs per Gallon report found that boosting gas mileage requirements will lead to 484,000 new jobs across the country, with net job gains in 49 states. That’s because the money consumers save on fuel will be diverted to the broader economy, flowing to a broad range of sectors.
So strengthening the national fuel economy standards will create a rising tide that lifts all boats. Car companies and their suppliers will see greater profits and sales. Consumers will save money at the pump. Employment will rise and boost the larger economy. And the U.S. will gain a greater share of the world’s rebounding automotive business.
It’s no wonder the major car manufacturers, investors, businesses, consumer groups, and auto workers’ unions are supporting the federal proposal to boost fuel efficiency. It will benefit the industry, its customers, and the economy.
Carol Lee Rawn directs the Transportation Program at Ceres, which mobilizes a network of investors, companies and public interest groups to tackle sustainability challenges. Ceres also directs the Investor Network on Climate Risk, which supports 100 institutional investors with assets totaling $10 trillion.
Though natural gas vehicles (NGVs) have been around since the 1930s, they have never been able to break through the barriers to their widespread application in America – special infrastructure requirements, a shortage of fueling stations, and awkward, expensive fuel tanks that must be filled at pressures as high as 3600 psi. Moreover, until just a few years ago, the U.S. was importing natural gas, so there was no strategic benefit to converting our transportation fleet to its use.
But in the last two years, a major change has occurred in the energy market. Natural gas reserves have started growing…and fast. The Energy Information Administration has revised its Annual Energy Outlook (AEO) for 2011 to reflect a 25 percent increase in natural gas production in the lower 48 states, relative to its 2010 forecast. Further projected increases in well productivity lead to a near-doubling for predicted shale gas production in 2035 compared to the 2010 reference case.
Most new natural gas comes from deep underground rock structures, including shale. Recent improvements in hydraulic fracturing, or ‘fracking,’ a controversial process that some critics claim can hurt the environment, have made it economical for natural gas companies to extract a greater supply of such gas from unconventional sources.
Unlike those for gasoline, the compressed natural gas (CNG) markets are relatively insulated from geopolitical shocks. The price of CNG has been, and will likely continue to be, cheaper and more stable over the long term than that of gasoline. CNG currently costs the equivalent of about $2 per gallon, roughly half the current price of gasoline. What’s more, natural gas burns cleanly, emits far smaller amounts of criteria pollutants, and is already available to half of all homes in America through existing connections. Most important, America has sufficient natural gas and does not have enough oil.
The combination of increasing natural gas supplies and low cost compared to conventional motor fuels provides a unique opportunity to reduce our dependence on imported petroleum by using CNG as a vehicle fuel.
The drawbacks to natural gas: It has been tried in cars before and has failed. The liquefying of natural gas consumes too much energy. There are currently fewer than 1,000 publically available CNG refueling stations in the United States, in comparison to nearly 200,000 gas stations. The moment you leave the driveway, you will suffer from massive range anxiety. Where is there another natural gas station?
So we need solutions that will allow us to use our new-found natural gas wealth. We cannot pay for infrastructure. We need low-cost fuel that comes without range anxiety, big storage tanks, and the need for expensive compressors in every house. No sacrifices.
A possible solution: Bi-fuel natural gas/gasoline vehicles, with low pressure/low cost home refueling. The argument to create PHEVs (plug-in hybrid electric vehicles) has already been convincingly made. Yet in a side-by-side comparison, home-fueled NGVs might be much cheaper, and much simpler, than home-charged electric vehicles.
Bi-fuel vehicles that run on both gasoline and natural gas can use a fairly simple parallel-injector architecture. Bi-fuel allows the use of a relatively small, inexpensive CNG tank designed for a driving range of 50 miles on natural gas (the average driver only drives 27 miles, so why make the tank any bigger?). A bi-fuel vehicle also has a gasoline tank, so range anxiety is not a problem. And there is no need to compress the gas to 3600 psi, because gas volume is no longer a concern – home compressors can be made both inexpensive and durable.
The solution to America’s oil dependency involves using a range of alternatives to replace gasoline. This means using every American advantage to reduce our use of petroleum. Adding natural gas to the arsenal of alternatives will do much to break our oil addiction and increase our energy independence.
Don Hillebrand is Director of the Center for Transportation Research at Argonne National Laboratory
I am excited to update you on the recent progress that we’re making at Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) in the compressed natural gas (CNG) vehicle market. This technology is here now, and the future is bright!
I’m extremely bullish about natural gas as a transportation fuel. Compared to other fuels, CNG is cleaner, less expensive, abundant, and domestically produced. Along with our customers, we are taking the lead in developing the Southern California market, which plays a significant role in the development of the U.S. market as a whole. Let me share with you a few of our initiatives and successes.
First, there are about 80 public-access CNG refueling stations across SoCalGas’ and SDG&E’s service territories. Every month, we hear from owners of gasoline stations who want to add CNG capability to their existing stations. These opportunities are especially exciting in that they create awareness of CNG vehicle technology among owners of gasoline vehicles. These stations have prominent locations, full retail signage, snack shops, and all of the other expected conveniences. Without a doubt, development of this public infrastructure will help drive the adoption of light-duty natural gas vehicles (NGVs) by individuals.
On the commercial side, there are nearly 200 private CNG refueling stations across our service territories. These stations serve major fleets including over 2,200 transit buses in use by Los Angeles Metro, more than 400 buses operated by the Los Angeles Unified School District, as well as other fleets such as Waste Management, UPS, and AT&T. This past fall, SoCalGas announced plans to purchase approximately 1,000 new dedicated NGV trucks to support its fleet operations. In addition, Los Angeles Department of Transportation began deploying its new fleet of 95 new CNG-powered Commuter Express coaches.
But the transit and heavy-duty segments are just the beginning. Elsewhere on the vehicle front, we are playing an active role in the Drive Natural Gas initiative sponsored by the American Gas Association and America’s Natural Gas Alliance. With this initiative, we are collaborating with other NGV industry partners to address the most pressing issues in the marketplace. Among other tasks, we are working closely with vehicle original equipment manufacturers to develop prototype CNG vehicles in new segments, such as a sport utility vehicle, mid-size sedan, and even a sports car! We are also working to identify potential manufacturers who can develop a more affordable home refueling appliance, which we hope in turn will help stimulate the market for personal use light-duty CNG vehicles.
Finally, SoCalGas is also taking the lead in innovation. In October, we unveiled a new modular CNG refueling station at the SoCalGas Riverside base. Developed by Galileo, this station represents dramatic reductions in space, time, and potentially cost to provide compressed natural gas for transportation applications. We also recently filed an all-new Compression Services Tariff application with the California Public Utilities Commission that, if approved, will allow SoCalGas to construct, own, and operate gas compression equipment on customer facilities for NGVs and other applications, such as Combined Heat and Power systems. The new Tariff will be attractive to a wide range of customers, including those with limited capital budgets who will be able to avoid most of the up-front equipment and construction costs. The growth outlook is very positive for natural gas vehicles and the fueling infrastructure, and we expect that this momentum will continue to increase. We feel fortunate to have so many positive and energetic partners in the industry and we look forward to continue to foster its growth here in the U.S.
Hal Snyder is Vice President of Customer Solutions for Southern California Gas Company and San Diego Gas & Electric
I am a car guy and can attest to this: It is thrilling to go fast. And it’s also exciting to see a fuel economy display hit 50+ mpg. Similar feelings are experienced when behind the wheel of a truly stylish car, when a favorite song pops up unexpectedly on Sirius XM, or when deplaning after yet another long flight, exhausted, and sliding in the back seat of a car knowing I won’t have to be negotiating heavy urban traffic in an unfamiliar city. I don’t even have to be driving to appreciate that car.
I noted with interest an auto review that recently criticized an all-new model designed to look fast and sporty as being anything but, with a performance threshold that was disappointing. That got my attention. The car was sharp-looking and would surely find its share of young buyers thrilled to be behind the wheel, at speed or not. My question, then, is this: Would all those buyers really care about going fast? Or would they be just as excited driving a sharp, eye-catching ride at everyday speeds without the ability to churn serious g-forces, with a great audio system cranked up with their favorite tunes?
I know the answer to that one…and my intuition is right.
Consider this: Among the many cars I have owned over the years, there was a serviceable but somewhat unstylish Porsche 914. Essentially, it was a low-slung box on wheels powered by a 1.7-liter four-cylinder engine producing 79 horsepower, with a Porsche emblem on the hood. It was targa-topped and peppy, but not what anyone would call fast. If I wanted that then I would have opted for the 914-6, powered by a 2.0-liter engine sourced from the 911T model, serving up an additional 31 horsepower with markedly better torque.
Did I want the additional horsepower? Not really, since the 1.7-liter powered car was spirited though not fast. But I did want a more stylish, faster-looking car to go along with my high-power Kenwood stereo system and daily open-top touring. I got it by customizing my 914 with a sleek Chalon fiberglass styling kit, custom paint, lightweight Center Line racing wheels, and beefier B.F. Goodrich tires. I had the look, the feel, and the excitement I was seeking. Did I need to go faster than my 79 horsepower four-banger would take me? Nah. That wasn’t the point.
But it is the point I’m making in this column.
There is a ready market for the hundreds of vehicle models sold in the United States, for good reason. Ours is not a one-size-fits-all auto market. We all have our requirements and desires, and these range from safety, quality, and value to performance, status, and luxury. To some, a car is an appliance used to get from one place to another. To many others it is more personal, reflecting an important part of our lifestyle.
Many seeking a sleek-looking car are perfectly happy owning one without ever moving far beyond the speed limit or jumping from one stoplight to another. It’s the overall experience…the feeling…a vehicle imparts that’s important, not necessarily raw horsepower. And with that more conservative approach comes greater potential for maximizing fuel efficiency.
Hmmm…could I be on to something here?
Ron Cogan is editor and publisher of Green Car Journal and editor of CarsOfChange.com