Study Hits Near-Term Electric Car Chase

WSJ.com 6/15/11 By JEFF BENNETT



Auto makers could cut vehicle emissions and hit government fuel-efficiency targets over the next decade by improving the internal combustion engine rather than rolling out fleets of electric cars, according to a new study.



Technologies such as turbochargers and friction-reduction components can make gasoline-powered engines more efficient, damping electric-vehicle purchases, especially in the U.S., according to data released Tuesday by management consultants Boston Consulting Group.



The findings offer a counterpoint to the current push behind electric vehicles as the superior alternative to weaning Americans off their reliance on oil. The study suggests that downsizing the engine and using technologies to stop and restart an engine when idling could use the government aid now supplied to alternative-fuel vehicles.



The study also found that China and Europe—helped by government incentives—will be the largest markets for electric vehicles by 2020 rather than the U.S. BCG's study, which updates a January 2009 report, said it used its own funds to conduct the study.



"Electric cars will undoubtedly play an increasingly large role in many countries' plans in the decades ahead as energy independence and environmental concerns intensify," said Xavier Mosquet, a Detroit-based senior partner, global leader of BCG's Automotive practice and lead author of the study. "But they will gain only modest ground to 2020. Gas- and diesel-powered vehicles are improving faster than expected and will continue to dominate the global landscape."



The BCG study's key conclusion is auto makers can hit most of the future fuel-efficiency and emissions-reduction targets that governments are imposing on the industry in the next 10 years, and do it by introducing or improving known automotive technologies. "I'm not saying it's easy, but it's feasible," Mr. Mosquet said.



BCG estimated fuel-saving improvements such as electronic power-steering systems, light-weight materials and more efficient transmissions would add about $2,000 to the price of vehicles.



The need for car makers to pursue electric vehicles in the near-term is "minimal," the study said. However, auto maker must continue to develop electric vehicles since they will "undoubtedly" play a major role in meeting 2035 to 2050 emissions, it added.



Electric vehicles face stiff competition from gas engines and won't be the preferred option for many consumers based solely on the total-cost of ownership, according to the study. Battery packs needed to power the vehicles are expected to cost between $360 to $400 a usable kilowatt-hour by 2020. However, to the consumer, this still represents a cost of $9,600 a vehicle for the typical battery.



Consumers, BCG said, will pay between $50 and $60 on average for each new technology that reduces greenhouse gas emissions by one percentage point. The cost gap gives auto makers less incentive to push electric vehicles to meet 2020 emission regulations.



The effect of more efficient engines can be seen on the sales of hybrid, gasoline-electric models. In May, hybrids made up only 1.6% of vehicle sales, even though gasoline was more than $4 a gallon in many areas, according to automotive information website Edmunds.com. That's compared to an all-time-high of 3.56% in July of 2009, during the government's cash-for-clunkers campaign, which provided discounts on the purchase of fuel-efficient cars.



Bill Reinert, Toyota Motor Corp.'s chief advanced technology researcher, said in an interview Tuesday the competition between fuel efficient internal combustion engines and diesel engines has made it more difficult to sell the benefits of more expensive hybrid technologies.



"You really, really have to make a value proposition," he said. Making the same proposition to much more costly electric vehicles that have limited range will be difficult.