Auto industry report reveals future for green vehicles

by Search Gate staff. Published Mon 10 Jan 2017 11:38
Still many years until cars like the Volt will be a common sight on UK roads

Petrol and diesel-fuelled vehicles will keep their dominant position in the auto market until at least 2020, according to a new report by analyst firm KPMG.

And the successful roll-out of electric cars will be dependent on heavy government subsidies and even then will still be too expensive to be commercially viable until 2016, according to a survey of 200 senior auto industry executives.

The KPMG 2017 Global Automotive Executive Survey reveals investment in new power train technologies such as hybrid and all-electric remains a key priority for 93 percent of auto executives

However, over half of the respondents believe the auto industry will not be able to offer an electric vehicle that is affordable as traditional fuel vehicles for mainstream buyers until after 2016 without government subsidies.

The report reveals that fuel efficiency is currently seen as the biggest factor in a consumer's decision-making, although this is “driven by bank balance not by environmental conscience”.

It explained: “With rising oil costs and fears over future supplies, it’s no real surprise that fuel efficiency is considered the single biggest factor for consumers when buying a vehicle, although its importance has declined considerably relative to the 2009 and 2010 surveys.

“Interestingly, despite a heightened focus on the green agenda, less than a third of respondents cite environmental friendliness as 'extremely important', suggesting that buyers are driven more by their bank balance than their conscience.”

Describing the future for cleaner motors, the report stated: “Given the desire for more economical engines, the vast majority of auto executives (around eight out of ten) believe that hybrids and electric cars will enjoy the biggest growth of any vehicle category over the next five years.

“However, total sales are still expected to lag well behind traditional internal combustion-powered cars over this period due to some significant challenges that have not yet been resolved, including: safety, reliability, comfort, image and, undoubtedly, cost.”

Describing the climate for research into cleaner fuels, the KPMG survey found: “The auto executives taking part in the 2017 survey show a clear preference for investing in hybrids and electric cars, which reflects the relative maturity of these technologies on the existing technology roadmap.

“Even if it is still quite far away from mass market production, hydrogen is often considered the most sophisticated propulsion technology to power e-cars and is still an area of investment for more than a fifth of the executives interviewed.

“Surprisingly, investments in liquid petroleum gas (LPG) and liquid nitrogen gas (LNG) options are not considered important, despite the fact that these fuels, especially LPG, are already readily available and the infrastructure exists in many parts of the world.

“As only two percent of all respondents envisage these alternative fuels attracting significant investment, the sector may be missing an opportunity to at least develop a larger niche.”

And it added: “The majority of auto executives surveyed acknowledge that the recent round of government subsidies has tailed off, with 43 percent expecting subsidies to decrease. Despite these observations, many feel the state has a role to play in accelerating the affordability of electric vehicles.

“Almost four in ten (38 percent) would like to see subsidies in this area, which could be in the form of direct contributions to R&D; or through tax breaks to buyers of electric cars. The United States is making a clear commitment by investing US$150 billion over 10 years to accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, encourage energy efficiency, invest in low emissions coal plants, advance the next generation of biofuels and fuel infrastructure, and begin transition to a new digital electricity grid.

“They have also allocated an additional US$2 billion towards the development of electric vehicle batteries and related components. Such an approach is also prevalent in China, as the government seeks to make the People’s Republic a leader in battery design and production.

“Beijing has pledged approximately US$17 billion to fund efficient drive train technologies, including R&D; support for automakers, as well as subsidies of as much as US$8,800 to electric car buyers in 26 cities.

“Many respondents believe electric cars will not be affordable without subsidies. Certainly it is unique in the history of automotive developments for the financing of new technologies to be mainly derived from subsidies.

“To get the most out of any subsidies, governments should let automotive engineers set the agenda. They should also avoid linking CO2 directly to any single technology, as this could hold back other potential solutions.”

And it provides a glimpse into the future: “Whereas in the past, the car has influenced the design of towns and cities, the reverse now appears to be true, with a rise in low-emission zones, declining numbers of parking spaces, charges for entering certain areas and the proliferation of car-free streets and neighbourhoods.

“New city concepts such as Masdar in the United Arab Emirates are effectively car-free, with (electric-only) vehicles confined to the underground. Seventy-six percent of respondents believe that urban planning will influence future vehicle design, which again points to a need to produce city-friendly cars and embrace alternative mobility solutions.

“However, when questioned on how to meet such challenges, only nine percent of the auto executives in the survey feel that car sharing mobility solutions will be an extremely important part of their future strategy.

“Of course, not everyone shares such a view; some businesses have already started exploring mobility service offerings, such as Daimler with its urban car-sharing service ‘car2go’,
and ‘Mu’ by Peugeot.

“Also Renault-Nissan is focusing on new business opportunities through an electric vehicle
car-sharing collaboration with Project Better Place.

“Such a forward-thinking approach could become the competitive edge that will accelerate these companies into a leadership position in a realigned automotive value chain.

“Interestingly, although the emerging markets still retain a strong emphasis on expanding car ownership, cities such as Shanghai in China are already restricting car usage. The logical next step could be to integrate mobility solutions.”

Mike Steventon, Automotive Partner at KPMG in the UK, said: "One factor is common worldwide: the need to continue to develop the technology that will produce efficient, affordable electric vehicles. Even though the industry is still in recovery mode, the pace of technical leadership intensifies.

“With the rise of oil costs and fears over future supplies, it's no real surprise that fuel-efficiency is considered the single biggest factor for consumers when buying a vehicle. The challenge is whether in this period of fiscal belt tightening, governments can afford to subsidise the introduction of electric vehicles.”

Around 80 percent of respondents say that hybrid and electric vehicles will see the lion's share of growth of any vehicle category over the next five years. Nonetheless, many respondents are expecting a continued support role from government, since they believe electric cars will not be affordable without subsidies anytime soon.

Over four in ten auto executives expect government subsidies to tail-off with only a quarter expecting it to increase but almost 40 percent of respondents think that the most effective way of making electric vehicles affordable for mainstream buyers sooner is through government subsidies.

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Comments about Auto industry report reveals future for green vehicles

@ Simon Rook LNG = Liquefied Natural Gas
Deogol, London around 11 months ago
'LNG'? It's CNG (Compressed Natural Gas), if KPMG really said LNG then that calls into question the competance of the whole report!
Simon Rook, United Kingdom around 11 months, 2 weeks ago

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