Better safety systemsaim to cut accidentsVehicles will tell tireddrivers to wake up andsmell the coffeePage 3

FT SPECIAL REPORT

The Future of the Carwww.ft.com/reports | @ftreportsWednesday May 11 2016

Inside

Cloud hangs overdiesel and petrolRegulation meanschanges by carmakerswill be unavoidablePage 2

Alternative fuelsThe relative strengths ofthe rivals in the race forreplacementsPage 2

Young do not buyinto electric dreamsManufacturers face abumpy journey on theroad to success with EVsPage 2

E volution, rather than revolu-tion, has been the watchwordof the global car industry fordecades. Engine tweaks andfresh designs mask one

important fact: that the cars driven bymorethanabillionconsumers todayarebroadly the same as those that trundledalongtheroadshalfacenturyago.

But revolution — with a capital R —maybeontheway.

Traditional automakers find theirbusiness models under attack from ahost of assailants. This report will iden-tify these problems, how they threatencarmakers and how the world’s motorcompanies are rallying their interna-tionalandfinancialmight torespond.

The rise of electric vehicles, sup-ported by emissions regulation andchampioned by the likes of Tesla’s ElonMusk, is expected to eat away atdemandforcombustionengines.

Diesel has a black cloud hanging overit followingthe industry-shakingrevela-tions from Volkswagen in 2015 that itinstalled devices in 11m vehicles world-widedesignedtocheatemissionstests.

Other emissions investigations allover the world have implicated others,fromMitsubishi toDaimler.

The probes cast a shadow over theintegrity of the sector, says Stuart Pear-son, auto analyst at Exane BNP Paribas.“Consumers won’t know who they cantrust.”

The unstoppable march of technologyhas seen cars become increasingly con-nected, partly in an attempt to makethem attractive to young drivers moreconcerned with being online all the timethan with horsepower. With internetaccess comes the risk of online trouble-makers causing havoc. The dangers ofcyber attacks that could result in fatali-ties is the stuff of nightmares for autoexecutives(see storybelow).

Technology brings fresh competition.The shadows of Apple and Google loomover motors manufacturers that aresteepedinhistory.

Others are preparing to enter themarket. Samsung has developed vehi-cle-tracking telematics with UK tech-nology group Tantalum and is reportedtobedeveloping itsowndriverlesscar.

These brands are well known — areeven loved — and such technical chal-lengers threaten to upset older compa-nies for whom customer trust is every-thing.

At this year’s Davos summit, MaryBarra, the chief executive of GeneralMotors, said: “We are moving from anindustry that, for 100 years, has reliedon vehicles that are standalone,mechanically controlled and petroleumfuelled, to ones that will soon be inter-

connected, electronically controlledandfuelledbyarangeofenergysources.

“I believe the auto industry willchange more in the next five to 10 yearsthanithas inthe last50.”

Older manufacturers are respondingto these challenges. For many, the ques-tion is not how to make an electricmotor run or how to get a sensor to acti-vate the brake, but how to make thesetechnologiesaffordableenoughtoput infamily cars, rather than being gadgetsfor therich.

But one form of disruption — a SiliconValley term that for once is unusuallyapt — threatens to undermine car sales:the sharing economy, embodied by thelikesofride-sharingcompanyUber.

In future years, so the thinking goes,no one will own a car. Driving — or“mobility” — will be an on-demandservice, activated at the tap of a smart-phone,aserviceUberalreadyoffers.

One great fear of carmakers is thatownership is falling among youngergenerations, and there are worries that

Combustion era goes up in smokeTomorrow’s vehicleswill be defined by newtechnology and thesharing economy,writes Peter Campbell

1.1

1.31.6

1.7

1.8

2.2

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2.6 3.6

4.1

Russia

CzechRep.France

Brazil

UK

Spain

MexicoIndia

S. Korea

5.6Germany

7.9Japan

9.5US 44

20.4China

Canada

1.0Iran

FT graphic Source: IHS Photo: Dreamstime

Million units

Forecasts

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20

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2010 11 12 13 14 15 16 17 18 19 20

Greater China

Europe

North America

Japan/S. KoreaMiddle East/AfricaSouth AmericaSouth Asia

Passenger car productionTop 15 countries, million units (2016)

Passenger car sales

Shifting landscape Carmakers will face a changing world as new technologies, competition and consumer habits challenge their traditional business models.

individual cars will go the way of thehorseandcart.

“What we want from our cars ischanging,” says Tim Lawrence, manu-facturing specialist with PA ConsultingGroup. He adds: “Younger customerscare less about actually owning the car.Car sharing and hiring are back on theagenda.

“That means [established compa-nies] need to be looking at alternativebusiness models and using the potentialofnewconnectedtechnologies tomeetawider range of mobility needs indifferentways.”

Of particular worry are millennials,people in their 20s-30s, among whomcar ownership may be dwindling. Astudy from the University of Michiganthis year found 69 per cent of 19-year-olds in the US had licences in 2014, com-paredwith87percent in1983.

But other evidence suggests thesefears may be unfounded. In 2014 in theUS, the world’s second-largest car mar-ket, people aged roughly 21-38 bought4m cars or trucks, making the genera-tion second only to baby boomers(those born from 1946-1964) for vehiclesales, according to research group JDPower. Customers under the age of 34account for a fifth of GM’s sales, a figurethathas increasedby5percentsincethestartof thedecade.

The fears are based on the idea thatlower rates of car ownership will meanfalling sales for the manufacturers.However, analysis from Deutsche Banksuggests that, contrary to this view,sales may actually rise as the fall in vehi-cles numbers will be offset by more fre-quent replacements because sharedcarswillwearoutmorequickly.

“US sales nonetheless increase underevery scenario we’ve examined,” wroteDeutsche Bank analysts. Reports of thedeath of carmakers may therefore begreatly exaggerated as well as prema-ture.

BMW offers DriveNow, its car-sharingscheme which is available in Londonand Europe as well as the US, while Mer-cedes-Benz owner Daimler has itscar2go service. Audi is launching a car-sharingschemecalledAudiathomeandGeneral Motors has taken a share inLyft,Uber’sUSrival.

New entrants in this market face sig-nificant problems. As well as lack ofbrand recognition, they must have suffi-cient scale to rival car ownership. Build-ing this from scratch means either driv-ers deliver cars to customers or therearesufficientpick-uppoints tomaketheservice workable, something that willrequire significant outlay in big citieswheredemandwillbehighest.

Young people in cities can use metrosor Uber and many do not have off-streetparking. This adds to the hassle of own-ing an asset that research suggests willsit unused for more than 90 per cent ofits life.

Successfully tapping into that unusedvehicle time will be the step that pre-vents today’s big names from becomingtomorrow’sdinosaurs.

Having more skills ishow to stay in workRobots will destroyjobs, but newcareers will emergePage 4

When hackers took control of a JeepCherokee, assuming charge of its steer-ing, braking and even stopping the caron a highway, they confirmed industryfears that connected vehicles could besubject tothewhimsofonlinemenaces.

The incident, an experiment thattook place last summer in the US, was a“watershed moment”, according toMartin Borrett, chief technology officerfor IBM’sEuropeansecuritydivision.

“A lot of people thought you had tohave physical access,” he says. “Thisprovedthemwrong.”

The risks of cyber attacks are rising ascarmakers cram connected technologyintotheirvehicles.

The Jeep incident, which promptedthe recall of 1.4m vehicles, raised fearsthat this increased connectivity goeshand in hand with greater vulnerability.The simulated attack was the result oftwo years of work by hackers who

owned the Jeep and had access to itshardware before they gained entry to itssystems remotely, says Eric Friedberg,founder of cyber consultancy StrozFriedberg.

“Hacking the car itself is quite hard,”henotes.“Thebar isprettyhigh.”

Once hackers are inside, however, thescale of harm could be quite hugebecause they are able to move aroundthe car’s digital infrastructure with rela-tive ease. That said, do not expect aspate of cars to be halted on motorwaysas teenage bedroom tinkerers runamok, Mr Friedberg says. The real valueis inthedatathat thevehiclescontain.

“Intellectual property theft hasalways been a threat in an industry thathas high levels of technology,” he says.“Thecar industry isnodifferent.”

As vehicles become more connected,consumers will add more personal datato the car, from payments for apps orfilm downloads to passwords for Spotifyaccounts. It is the potential for stealingand reselling data that holds the realfinancialallureofhacking intovehicles.

“Getting someone’s car to crash isn’t agood way of making money,” says AndyDavis, research director at cyber secu-rity group NCC. “There’s only going tobe a very small percentage of attackerswhoare interested inthatkindof thing.”

This means cars are no different fromany other device connected by the so-called internet of things, ordinaryobjects hooked up to share informationoverthe internet.

If all the items in your household arelinked, your Tesla might as well be yourtoasteras farasahacker isconcerned.

This requires a change in the mindsetfrom companies that have mostly beenpreoccupiedwithpassengersafety.

“The challenge for car manufacturersis they have to shift from a manufactur-ing discipline to an IT discipline,” saysMrBorrettat IBM.

“You have crash systems and safetyglass but the same hasn’t been done inthe IT side of the discipline. A car is nowadatacentreonwheelsandthebadguysonlyhavetoberightonce.”

As awareness of the possibilities ofhacking become more prominent, thosewho could profit from it are listeningjustaskeenlyasworriedconsumers.

Mr Borrett adds: “What we have seenso far is well-intentioned good guysshowing what can be done. What weneed to be worried about is criminalorganisations.

“The level of effort is pretty high. Butonce they have [your details], peoplesell this on the dark web — with guaran-tees of your money back if it doesn’t

work. It’s a commercial shadow econ-omy.”

Carmakers are responding by invest-ing billions in research and bulking upcyber security teams. IBM believes theissue is so important for consumers thatit can foresee a time when having a goodsecurity provider could become a strongreasonforbuyingavehicle.

It is not just criminal organisationsthat will profit from the explosionof interest in car security. Companiesthat provide the chips that power

internal computers are rubbing theirhandswithglee.

Richard York, a vice-president forembedded marketing at FTSE 100 chipdesigner ARM, says the car security sec-tor could provide the company’s “thirdwave” of growth after it enjoyed boomsthanks to smartphones and networkequipment. “A cell phone is one thing with a few chips in it but a vehicle is acompletelydifferentproblem,”hesays.

Not only will better-connected carsneedmorechips,butconsumersandcar

companies will demand that those chipsoffer better security, a potential doublewinforchipmakers.

The car industry has also recognisedthat — based the cyber adage that youcan never build walls that are highenough — it cannot always keep hackersout. “Rather than thinking you’ve got tomake [things] watertight, which won’thappen, you’ve got to plan for attacks,”MrYorksays.

One benefit to the industry is thatover-the-air software updates wouldallow car companies to fix any potentialor real problems in their systems withinhours rather than days. This wouldavoid the current situation over vehiclerecalls, where many consumers refusetotaketheircarsbacktodealerships.

However, many of the computers cur-rently in cars are “rudimentary”, with“very,very low”security,MrYorkadds.

As a result, chip designers expect themarket to double in value in the next sixyears as on-board computers becomemorecomplexandbetterprotected.

“Most of the [security] technologyexists, [carmakers] just have to get out-side of the auto world and they will findit,”notesMrYork.Ayearagocompanieswere in denial about the security risksthey faced, he adds. “They’re certainlynot indenialnow.”

Data-hungry cyber hackers turn gaze to connected autosSecurity

Vital information housed invehicles will be the target fortechnology-savvy criminals,reports Peter Campbell

The future of dieselhas a black cloud hangingover it after the revelationsfromVolkswagen

A car crash waiting to happen: researcher Charlie Miller with the Jeep Cherokeehe hacked in the US last summer —Bill O’Leary/The Washington Post/Getty Images

FT Special ReportThe Future of CitiesRead it in the FT andonline on June 1ft.com/reports

Shedding the poundsThere is no singleanswer to the problemof how to make carsweigh lessPage 4

Graphic historyThe long road to theautonomous motorcarPage 3

2 ★ FINANCIAL TIMES Wednesday 11 May 2016

The Future of the Car

ContributorsPeter CampbellMotor industry correspondent

Leo LewisTokyo correspondent

Patrick McGeeFrankfurt correspondent

Michael PoolerIndustry reporter

Jane BirdFreelance technology writer

Mauro OrruIntern

Chris CampbellCover graphic design

Adam JezardCommissioning editor

Steven BirdDesigner

Alan KnoxPicture editor

For advertising details, contact:Liam Sweeney on +44 (0)20 7873 4148,liam.sweeney@ft.com, or your usual FTrepresentative.

All editorial content in this report isproduced by the FT.

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At last October’s Tokyo Motor Show,Nissan — Japan’s second-biggest auto-maker and cumulatively the world’sbiggest seller of electric vehicles —launched its showcase concept car witha frank admission: millennials do notlovecars thewaytheirparentsdid.

To win their custom, Nissan says, willrequire something like its Teatro forDayz — an all-electric concept vehiclethat keeps its passengers in a constantstate of “online connectivity, creativityand shared experience”. Such slogansare vague but Nissan’s message is not:the cars that inspire the next generationof drivers to be buyers will be battery-poweredelectricvehicles(EVs).

By the time the Auto China showopened its doors in Beijing in April, car-makers were desperate to illustrate thatthey had an electric, plug-in hybrid orfuel cell strategy in place, even if trickyquestions of fundamental design, bat-tery efficiency, battery pricing and driv-ingrangeremainedunresolved.

The global auto industry’s uncoordi-nated approach to a battery-drivenfuture has given brokerages such asAsia’s CLSA the chance to produce rank-ings that rate the strength and futureprospects of each company’s EV strat-egy. The disrupters, such as Tesla, Appleand Google, are coming to the industrywithnewrulesandthreats.

Companies that have not yet laid outtheir electric car strategies or who, likeToyota, have gone for an alternative fuelcell technology, are looking exposed tosuch rivals. The problem, as Nissan hasdiscovered, is that there still remains adifference between making an electriccarpeoplewillbuyandmakingmoney.

Right now, say analysts, it makes

sense for thegiants toexploit theirexist-ing supply chain and the significant costsavings theseproduce.

“Among the volume automakers rightnow, if you want to develop an EV youare going to be taking a combustionengine chassis and working aroundthat,” says Christopher Richter, an autosanalyst at CLSA in Tokyo. “That’s whatNissan did with the Leaf, and cost issuescontinuetodictate that.”

So incumbent carmakers base EVs ona chassis and other features that alreadyexist for their combustion enginemarques. This is what has allowed Nis-san to bring the price of its all-electricLeaf down to $21,500 from the 2011price of $35,430. Despite this, Nissan’sglobal EV sales, which were overwhelm-ingly driven by the Leaf, were down 9.8percent in2015.

However, sticking to this route, thesame analysts say, could potentiallysacrifice substantial efficiencies thatmay be achieved by redesigning electriccars fromscratch.

The dilemma facing battery EV car-makers, and the time it will take toresolve, could even provide a chance forcostly hydrogen fuel cell vehicles(FCEVs)toestablishafoothold.

“Recently there has been an increas-ing focus on battery electric vehiclesand battery technology but FCEVs couldalso play a key role in zero-carbonmobility,” says Ben Scott, senior analystwithIHSAutomotive.

“We are now in the third wave ofFCEVs . . . more hydrogen refuellinginfrastructure is beginning to be rolledout. This could be a ‘now or never’situation for FCEVs in mass-marketmobility.”

Mr Richter says sales volumes and theincentive to design electric cars fromnew fundamental principles are linked.Until electric car sales increase consid-erably, mass-market automakers face achoice between competing technologies(battery electric, plug-in hybrid, fuelcell)andcompetingdesignstrategies.

The most important catalyst forachieving the necessary sales volumes,say engineers from both the battery andthe incumbent auto industry, will be thepoint at which a 60 kilowatt per hourbattery can be made small enough andproduced at a cost low enough to put theoverallpriceof thecaratabout$30,000.

When an electric or a fuel cell car sellsabout 250,000 units worldwide a year,Mr Richter says, “that is when thingsstart to get very interesting in terms ofthe major carmakers taking aground-up approach to the chassis andotheraspectsofanelectricvehicle”.

However, a handful of carmakers,such as Kyoto-based start-up GLM,which casts itself as Japan’s answer toTesla,hasdevisedways toadaptnomat-ter what the technology outcomes. Thisis by creating interchangeable vehicle“platforms” that can be tweaked to sup-portwhateverbuyers finallywant.

GLM, which makes a high-perform-ance electric sports car and is planningan initial public offering this year, doesnot see the market in the same way astheanalystsdo.

The company takes the view that thenext generation of cars must bedesignedfromthebatteryor fuelcellup.Doing so, say its founders, allows thecompany to use any powertrain tech-nology — which connects the engine toaxles — while the market decides whichit likesbest.

Sota Nagano, GLM’s chief financialofficer and co-founder, does not see adirect correlation between falling bat-tery prices and a general lowering of theentry threshold to rivals from SiliconValley, China and elsewhere. They will,he says, enter the market anywaybecause the whole concept of how carsare built and supply chains are estab-lishediseffectivelyupforgrabs.

The car GLM has in the showrooms ofKyoto and Osaka, he says, is mostly ashowcase for the creation of vehicle-making platforms that will allow multi-ple varieties of powertrains and othertechnologies tobeusedin itsvehicles.

These, Mr Nagano believes, will turnitscar intoamagnet for innovation.

“Do we start with the battery or thefuel cell, or do we start with a chassis?Neither, you start with the vision,” saysMr Nagano. “That is what the big carcompaniesareslowlyrealising.”

Manufacturersface a bumpy roadto electric successEVs

Automakers dither overhow to raise young buyers’interest as new rivals entermarket, reports Leo Lewis

On show: Nissan’s Teatro for Dayzis packed with display screens

‘Dowe startwith thebatteryor the fuel cell, or dowe startwith a chassis?Neither, youstartwith the vision’

T he phrase “high octane” isoften used to describeblockbuster action films orrollercoaster rides. It is aterm rooted in chemistry,

where the octane levels of a substancetranslate directly into its power outputandefficiencywhenburnt.

The words are much spouted by thosewho say ethanol is a way of reducing carpollution. The biofuel, which has ahigher octane level than petrol or diesel,joins the list of technologies vying toanswer the question that has dogged thecar industry, namely how to reduceemissions(see storybelow).

Electric motors, advances in batterytechnology, hybrid vehicles and hydro-gen fuel cells all clamour for marketshare in a future being ushered in withspeedbyregulatorswhoare introducingtougher emissions targets for car manu-facturers.

By the end of the decade, the US, theEU and China will have brought in rulesthat it will be impossible for car manu-facturers to comply with unless theyembracenewtechnologies.

This follows the Volkswagen fuelemissions scandal, in which the com-

pany last year admitted it equipped carswith software that understated emis-sions when the cars were being tested.As a result, fossil fuels’ century-longgriponcarmakers is slipping.

“If the EU misses the opportunity thatthe transport decarbonisation strategygives us, Europe will not achieve itsgreenhouse gas targets,” says CarlosCalvo Ambel, an analyst at Transport &Environment, thegreenlobbygroup.

Carmakers face deadlines for averagefleet performance relating to nitrogenoxide emissions (NOx) in the US andfuelefficiencyandcarbondioxide(CO2)in the EU. European targets are for CO2

emissions of 95 grams per kilometre by

2021, compared to a 2015 level of 130gfor each km. US targets are for NOxemissions of 58 milligrams per mile by2021,comparedto86mgamile in2017.

This discrepancy is one of the reasonswhy diesel use has grown rapidly inEurope and remained stubbornly low inthe US. Diesel engines on average pro-duce 20 per cent less CO2 than their pet-rol equivalents, one of the reasons car-makersweresokeentopromotethem.

Of the 11m VWs around the worldaffected by the scandal, about 500,000are intheUSand8.5mare inEurope.

Automakers are now looking to moveawayfromdiesel, althoughthis isdrivenby regulations that were in place beforetheemissionsscandalstarted.

In a note published at the start of2015, more than seven months beforeVW’s admissions, analysts at ExaneBNP Paribas said diesel was “facingextinctionfromairqualityregulation”.

Euro emissions limits had aimed tocut NOx from new diesel cars by 85 percent between 2000 and 2014. Discrep-ancies in testing, however, where carspollute more on the roads than in labo-ratories, meant that the reductions havebeenlower inpractice.

As a result, carmakers have evenmore ground to make up to hit the nextround of targets. They are respondingby increasing production of hybrid andelectric cars to lower the average emis-sions of their total fleets by the time thenewregulationstakeeffect.

Some manufacturers have releasedfully electric models, such as the BMWi3. This year Hyundai began offering itsIoniqmodel indifferent fuel formats.

In order to reduce average emissions,carmakers will have to persuade con-sumerstobuymoreof thenewmodels.

This is a particular problem for theluxury brands with their larger — andthirstier—vehicles.

For now, inner-city electric car

projects are springing up. In London,the French company Bolloré hasdesigneditsownlithium-polymermetalbattery and built its own cars in anattempt to start an electric car-sharingschemecalledBluecity.

The group already operates similarschemes in Paris, Lyon and Bordeaux.The project will use the Bluepoint Lon-don charging network, which is ownedbythesamecompany.

In China, where Beijing has pledged toimprove air quality, electric vehiclesales are sluggish despite tax breaksintendedtogarnerpublicsupport.

Furthermore, calculations from thebrokerage Bernstein suggest that a verysignificant proportion of all electricsales involvetheChinesegovernment.

In December 2015, electric vehicleregistrations hit 83,200 units — almostas many as were sold during the rest oftheyear.

Robin Zhu, an analyst at Bernstein,has calculated that direct purchases bygovernment, including ministries andstate-owned enterprises, “account foralmosthalfofannualvolumes”.

To predict the death of diesel may beoverstating the rise of new technologies,someanalystssay.

“The diesel engine is a good technol-ogy,” says Daniel Hirsch, automotiveexpert at PA Consulting. Alternativefuels might affect its sales over the nextfew years a little bit, “but I am quite sureitwill recover.”

Cloud over diesel and petrolas emission deadlines loomRegulationCarmakersmay find big changessimply unavoidable,writes Peter Campbell

Petrol and diesel will be supplantedeventually as the fuels that power ourvehicles. Among the alternative tech-nologies that may replace them are:

Lithium-ion batteries Found in laptopsand mobile phones, this is the dominanttechnology in the electric car batterymarket. Prices have been falling, allow-ing General Motors and Tesla to unveilcars expected to cost $30,000-$35,000and capable of driving more than 200miles at a time, an improvement on costanddistanceoverpreviousmodels.

But the batteries pose difficulties.They are highly flammable, need to beisolated from water and require coolingwhen being transported. They arechunky, so the car base has to be builtaround them, and there are concernsabout how much more powerful theycan become To overcome such limits,Tesla adds more batteries, which is whyitsModelXSUVweighsalmost3tonnes.

Lithium-air batteries Non-flammablelithium-air batteries solve several of theproblems of their lithium-ion cousins.They can operate at any temperature,donotcatchfireandhaveatheoreticallyhighenergydensity.

Exposure of their electrodes to the airbrings problems, such as reduced per-formance in humid climates. They arebehindlithium-ionindevelopment.

Solid-state batteries Often called the“holy grail” of batteries, solid-statetechnology offers the potential for high-energyoutputwithflexiblebatterysize.

Unlike liquid-based batteries, theycan be small and divided into evensmaller elements, making it much eas-ier to integrate them into existing cardesigns. Harnessing the technology isdifficult because of the low levels of cur-rentpassingthroughthebattery.

Last year, Dyson, the vacuum cleanermaker, bought Sakti3, a solid state bat-tery business, for $90m saying theacquisition had “developed a break-through in battery technology”. Dysonaims to use the batteries in cordless vac-uum cleaners. According to documentsaccidentally disclosed by the UK gov-ernment this year, the company isbuildinganelectriccarof itsown.

Hydrogen fuel cell Running cars on theplanet’s most abundant element wouldbe sustainable. Rather than using a bat-tery to power an electric motor, hydro-gen is mixed with oxygen to create a fullcell thatrunsthemotor.

A fuel cell combines hydrogen andoxygen to produce electricity, heat, andwater. Unlike a battery that needsrecharging but does not need its coreingredients resupplied, a fuel cell willnever lose its charge as long as a con-stantsupplyofhydrogenisavailable.

Toyota, which has launched a

hydrogen-powered vehicle, says thetechnology “can help us contribute tothe next 100 years of the automobile”.

While charging infrastructure forelectric vehicles is limited, rolling it outis inexpensive compared with hydro-gen. Electric cars only have to beplugged into a power supply but settingup hydrogen pit stops requires expen-sive pressurised tanks to be sunk intothegroundateachstation.

Although hydrogen may be thefuture, it is far frombeingpractical.

Ethanol This works with existing inter-nal combustion engines, rather thanreplacing them. Mixing ethanol withother fuels reduces harmful emissionswhile increasing power output and itactsasacoolingagent intheengine.

There are concerns over the sustaina-bility of ethanol, which is powered bycropscriticssayshouldbeusedfor food.

Supporters say unused land is used togrow the crops ethanol is derived from.However, much of it is produced inSouth America and flown across theworld, reducing itsgreencredentials.

Ethanol advocates say it has not been

rendered obsolete by electrification,and add there will always be demand forhybridorpetrol-drivenvehicles.

Hybrid There are three main types ofhybrid that use both batteries and fuel-drivenengines.

Full hybrids use batteries that drivethe car up to certain speeds. The enginethen kicks in and is used both to drivethecarandrechargethebattery.

In mild hybrids, the battery runs withthe engine to reduce emissions by mak-ingtheengineworkmoreefficiently.

The cheapest version, 48V hybrids,are small, which means 1l turbo enginescanpower largesalooncars.

It is possible to get 70 per cent of thepropulsion from a full hybrid enginefor 30 per cent of the cost, according toDelphiAutomotive,acar-partsmaker.

Overall, hybrid engines are expensiveas they require a battery and an internalcombustion engine. But they can cutcarbon emissions by 10 per cent com-pared with non-hybrid engines, whileincreasing the torque — the wheel-turn-ing measure loved by adrenalin-seekingmotorenthusiasts—by25percent.

Fuel replacementsjostle on start lineAlternative power supplies

Peter Campbell assesses thepros and cons of the mainrunners in the dash toreplace old favourites

Smog warning: Beijing has pledged to improve air quality in China and has introduced measures to boost sales of electric vehicles —Lintao Zhang/Getty Images

‘If the EUmisses thisopportunity, Europewill not achieve itsgreenhouse gas targets’

Battery power: Tesla’s Model X SUV—Peter Campbell

Wednesday 11 May 2016 ★ FINANCIAL TIMES 3

Level 0Ford Model T (1908)No automation

Level 1Jaguar XK with Adaptive Cruise Control system (1996)The system speeds car up and slows it down to maintain a preset distance to the vehicle in front

Level 2Mercedes-Benz S-Class with Active Lane Keeping Assist system (2013)If the car wrongly crosses road lane markings, Active Lane Keeping Assist takes control of the brakes to rectify the error

Level 3GM Cadillac CT6 with Super Cruise system (due on market in 2017)Super Cruise may take control of the car on motorways, but can hand back to the driver

Level 5Google self-driving car (possibly on the market by end of the decade)Designed to be fully autonomous in all situations, with no steering wheel or pedals

FT graphic Graham Parrish, Lloyd ThatcherSources: IHS Automotive; FT research

Level 4Ford Fusion with autonomous system (due on market in four to five years)The autonomous system should be able to handle entire journeys without human intervention

The road to the self-driving car

The Future of the Car

D rivers whose attention wan-dered off the road caused3,179 deaths in the US in2014 and injured a further431,000 people, according

to the Department of Transportation.The percentage of people sending textsor manipulating handheld devices atthe wheel increased from 1.7 per cent in2013 to 2.2 per cent in 2014, theNational Highway Traffic SafetyAdministrationsays.

UK road deaths rose by 3 per cent, inthe year to September 2015, to 1,780, theDepartment for Transport said. Safetycampaigners say drivers being dis-tracted by messages and data on mobilephones or on-board electronic informa-tionsystemsisabigcauseofaccidents.

In response, the industry is looking athow smartphones and driver assistancesystemscanbeintegratedtohelppeopleassimilate complex information morequickly and easily. Glen De Vos, vice-president of engineering at Delphi, anautomotive technology supplier, says:“As your car becomes more connected itwill act seamlessly with your mobiledevices to understand where you wantto go, automatically find the best routeand warn of traffic delays so you canplan ahead, leave on time, get there andfindaplacetopark.”

All this will happen without the driverbeing distracted by giving instructionsto the on-board computer system andwill probably involve development oftechnologies such as Apple CarPlay andAndroid Auto. These let motorists usesteering wheel switches or touchscreenstocontrol theirphoneswhiledriving.

That is only a first step, says Mr DeVos, because there are still lots of thingsthatcandivertadriver’sattention.

Research is focused on technologieslike gesture and voice recognition, eyetracking, touchcontrolsandaugmentedreality. The approach is “multimodal”saysMrDeVos,“togiveasmanyoptionsas possible and make interacting withthevehiclesimple, intuitiveandsafe”.

Gesture control is available on BMW’s7 Series, allowing hand movements tocontrol radios. This will graduallybecomeavailableoncheapermodels.

Voice recognition systems are availa-ble but Mr De Vos says they struggle tounderstand what people say withoutusing specific commands. Developersare working on infrared cameras thattrack the position of the driver’s head oreyes and check if they are watching theroad or being distracted. These willlikelybeonsale inthenext twoyears.

Facial scanning and head and eyetracking can tell if a driver is upset,angry or tired and can raise an alert toconcentrate more on the road or take acoffee break. The technology needs togive the driver the right information atthe right time, says Alexander Klotz,head of research and development forinterior electronics solutions at Hano-ver-based Continental, an automotivetechnologycompany.

Continental is developing a system to

take into account the state of the driverand that of the traffic ahead. Thedriver’s line of vision is analysed beforea collision warning sounds. If the driveris paying attention, the warning can besuppressed until the situation becomescritical. If the driver is distracted thewarningcanbe immediate.

Drivers will be able to forget aboutcontrols for windscreen wipers and foglights because adaptive systems willautomate their use based on individualpreferences. “But we will have to lookcarefully at which functions we auto-mate,” says Mr Klotz. “Seat heatingcould cause drivers to become drowsy,so we have to keep them in the rightstate.Personalisation iskey.”

Continental is also working on touchtechnology, or “haptic feedback”, suchas an accelerator pedal that gives coun-ter pressure if the driver is going toofast. The company is building dash-board screens that use pulses to simu-late the feel of real mechanical buttonsto the finger. “All our research is aimedat keeping the smartphone out of thehandsof thedriver,”saysMrKlotz.

Some vehicles, such as the BMWSeries 7, project information on to thewindscreen inthedriver’s fieldofvision.BMW foresees the end of the road fordashboards. The windscreen wouldserve as “one giant augmented realitydisplay”, BMW says, adding it has theability to create fully autonomous cars.But regulatory change is needed beforesuch vehicles can be produced. Manu-facturers will be liable if the technologycauses accidents, says Daniel Hirsch,automotiveexpertatPAConsulting.

“The regulation is in a mess at themoment and there are problems withvariations between countries,” Mr Hir-sch adds. “People don’t want their carsto behave differently just because theycrossedaborder.”

Drivers will also need to be able tooverride automatic systems in an emer-gency,MrHirschsays.

Perhaps most importantly, Continen-tal’s Mr Klotz says, automatic systemsneed to help drivers and not add to thepossible distractions: “Otherwise peo-plewill resist themandturnthemoff.”

Expect orderstowakeupandsmell the coffeeSafetyNew systemswill target driver distractionto reduce accident numbers, reports Jane Bird

Trouble ahead: the BMW augmentedreality display at work

4 ★ FINANCIAL TIMES Wednesday 11 May 2016

The Future of the Car

A uto engineering studentsare learning that future-proofing their jobs meansbroadening their horizonsbeyond the confines of

their subjects and into technology,communicationsanddesign.

Take the carmakers who sponsor thegraduate programme at the ClemsonUniversity International Center forAutomotive Research in Greenville,South Carolina. They no longer wantmechanical, chemical or computerengineers — they look for recruits whohave all of these skills and can integratethinkingfromeach.

“We need engineers that link acrossdisciplines,” says Paul Venhovens, BMWendowed chair in automotive systemsintegrationat theuniversity.

The jargon is “T-shaped” graduates:the vertical line represents depth ofexpertise, while the horizontal is anability to communicate across techno-logical and cultural barriers to spurinnovation, so-called “soft skills”. MrVenhovens says these will becomeincreasingly important, adding: “I can-not teachthat fromatextbook.”

His solution to these changingdemands was to ask students to con-ceive, design and build a concept carfrom scratch within two years. The lat-est vehicle to emerge from the pro-gramme is the Deep Orange 6, unveiledin April. The Toyota-sponsored vehicleachieved weight savings by using ultra-thincarbonfibrewhereverpossible.

The prototype is a youth-oriented,multifunctional vehicle that aims to domore than go from point A to B. Seatscan be reconfigured to carry passengers,deliver cargo, or become a mobile office,while its electric powertrain — themechanism between the engine and theaxle — can serve as a power source forelectronicdevicesor tools.

The concept car underlines how tech-nology is transforming the industry.What powers a car, how it is built andwho the buyer will be are all being

re-evaluated. In the short term, thisshould be a boon for jobs as carmakersand suppliers boost spending onresearchanddevelopment.

“Everybody’s hiring,” says David Rie-menschneider, a director at HampletonPartners in London, a mergers andacquisitions company focused on tech-nology. “All the tier-one suppliers aretryingtooutmanoeuvreeveryoneelse.”

Mr Riemenschneider says GeneralMotors aims to buy its way into the newera, taking a $500m stake in car-sharingservice Lyft and paying more than $1bnto buy an autonomous vehicle start-up.Ford has been building its own technol-ogy in Detroit. “It’s like the wild west.Everyone isdoingtheirownthing.”

In the US, automotive jobs have beensteadily increasing since mid-2009, ris-ing from 623,000 to 920,000, accordingto the Bureau of Labor Statistics. Near-termproductionisexpectedtorise, sup-portingmore jobs.

“TheUSisnearacyclicalpeakbutglo-bally demand is still rising and China isunder-penetrated,” says Efraim Levy,equity analyst at S&P Global MarketIntelligence.

Even if robots increasingly take overmanufacturing roles, there should be anet increase in global production for thenext fiveto10years,headds.

The longer-term outlook is less com-forting. The move towards automationwill tend to force down the wages of the

lowskilledand“impingeontheemploy-ment prospects of middle-skilled work-ers”,warnsresearchfrombankUBS.

Demand for adaptable workers willincrease, as BMW showed this yearwhen it revealed that software engi-neers would make up half of its 30,000research and development team withinfive years, up from a fifth today. But UBSsays robots and clever software wouldreplacecostly labour-intensive jobs.

Michael Brecht, chairman of Daim-ler’s general works council, has calledfor “a new humanisation policy” toensure that machines work hand-in-hand with people, not instead of them.New jobs such as “robot consultant” or“dataartist”couldbetheresult.

The disruption will be profound. Ana-lysts for Barclays reckon that US carownership will halve by 2040 as self-driving cars proliferate in a sharingeconomy. As drivers become commut-ers and owners become users, jobs thatfocus on differentiating one brand fromanothercouldcomeunderpressure.

Mr Riemenschneider envisages a“pod model”, in which self-driving vehi-clesdriveandparkwithin inchesofeachother. The only differentiation betweenvehiclesmightbetheir interiors.

“Thereareabsolutelygoingtobemas-sive job losses in the manufacturing ofthe vehicle,” he says. “If everything isdesigned for optimal driving flow andparking, you start to lose the need for aparticularbrand.”

Fresh jobs will arise in software andservices that did not exist before. Ride-Cell, for instance, is a San Franciscostart-up focused on “autonomous fleetmanagement” — software to managethe flow of cars and drivers. Here, too,however, the efficiency it aims for willdisplacetraditionalwork.

“One of the things that’s less under-stood in the transportation world is howmuch manual effort is involved in a car-sharing service,” says Aarjav Trivedi,RideCell’s chief executive. It is typical,he says, for a car-sharing service to relyon one worker for every 40 rides. Ride-Cell’s programs aim to reduce that ratiotooneforevery10,000.

Massive job losses “seem likely andunavoidable,”hesays.Thereshouldalsobeaprecipitousdropinthecostof trans-portation, allowing more people totravel for their basic needs. “I don’tthink we can underestimate the value ofthat tosociety,”hesays.

Arunprasad Nandakumar, analyst atconsultants Frost & Sullivan, says thebiggest job killer is automation and notjust for manufacturing. In the taxiindustry, the driver accounts for 60 percent of the cost of a commute, he says.“Oncethecarbecomesautonomous, theservicesaves60percent.”

Mr Nandakumar remains hopeful therevolution will not kill jobs. “I wouldnever say that autonomous driving willbe bad for jobs. Yes, it will take jobs fromdrivers but there will be a new skill setthat emerges. One door closes, anotherdooropens.”

Automation revolution puts focus on ‘soft skills’CareersBooks do notteachwhat bosses seek,reports PatrickMcGee

Welding power:automation islikely to affectthe prospects ofmiddle-skilledworkersMatthew Busch/Bloomberg

‘There aregoing to bemassivejob lossesin themaking ofthe vehicle’

The fight against climate change is driv-ingautomakers intoaracetomaketheirentire fleets lighter, because one of themain ways of lowering emissions is byslimming vehicles down. “Every gramhas to have a purpose in the car, other-wise it’s waste and needs to come out,”says Sandra Walker, engineering groupmanageratGeneralMotors.

Withfueleconomystandardstighten-ing in Europe and the US, this involvesensuringstructuralsafetywhilekeepingproduction costs low. It is an engineer-ing challenge not only to carmakers, butalso to component manufacturers andraw material suppliers. Materials usedtoreduceweight include:

Aluminium Producers of aluminium sayits lowdensitycanleadtoweightsavingsof up to 50 per cent and that its corro-sion resistance makes it suitable forbody panels. But its cost, about threetimes more than steel as a raw material,means it has been mostly associatedwithpremiumproducts likesportscars.

So Ford’s decision in 2014 to use analuminium body for its F-150 pickuptruck was a sea change. It was thebrand’s first all-aluminium bodied vehi-cle and the best-selling vehicle in the USfor more than three decades. It weighed700lb less than its steelpredecessor,evi-denceof themetal’sweightadvantages.

The UK’s Jaguar Land Rover hashelped to develop high-strength alu-minium alloys over the past two dec-ades. Aluminium is used in engine blockcasting,wheels,hoodsandfenders.

Charlie Klein, an executive director atGM, says a key application issuspension, where lightweighting canmakespringsandshockabsorbersmoreeffective.

Compared with steel, however, alu-minium is difficult to join and repair. In2012, GM developed a breakthroughwelding technique for the metal, usedon its Cadillac CT6, which it says caneliminatenearlytwopoundsofrivets.

Another obstacle to adoption is theneed to reconfigure supply chains, fac-tory tooling and retrain workers. This

requires large capital outlays that mustbe justified by a decent return. Themetal’s use “will continue to rise butperhaps not as much as the aluminiumindustry had expected”, says MichaelRobinet, managing director at researchcompanyIHSAutomotive.

Steel As the predominant material ofchoice for carmakers, steel is stronger,stiffer, cheaper, easier to repair andmoresoundproof thanaluminium.

Since the F-150 went aluminium,ArcelorMittal, the world’s biggest steel-maker, has concentrated on developingnew high-strength grades. This year

aims it to unveil varieties with tensilestrengths of about a third higher thanthe best steels available and more thanthree times as strong as leading automo-tivealuminiumalloys.

“It doesn’t mean a tonne of steel willweigh less, but the amount of steel used[in a car] will be lower,” saysGregory Ludkovsky, head of researchanddevelopmentatArcelorMittal.

In the past decade, press hardening —

where high-strength steel is heated to950C and stamped into shapes — hasbecome a key lightweighting technique.This greatly reduces the “spring-back”,or deforming, of high-strength steelswhilebeingmadeintocomplexshapes.

About 40 per cent of the body weightof Volvo’s XC90 is press-hardened steel— the most in any vehicle — and indus-try figures expect other brands toincrease their usage. However, as withaluminium, start-up costs of installingmanufacturingplantarehigh.

“Many carmakers will stand back andsay if I need to do hot stamping, can I dothe same with aluminium?” says MrRobinetof IHS.

Composites These combine two ormorematerials tocreateonewithdiffer-ent characteristics and are, for some,thegreathopeofcar lightweighting.

While fibreglass has been used fordecades inboatsandsportscarbodies, itiscarbonfibre-reinforcedpolymersthatexperts say have most potential becauseof their high strength-to-weight ratios,corrosionresistanceandworkability.

Well established in aerospace andmotorsports, composites’ biggest hur-dle is cost, which can be more than 10times that of aluminium, says ProfessorRichard Dashwood of Coventry Univer-sity. This is less problematic for high-value niche brands produced on lowvolumes, such as Aston Martin. Butadoption for mainstream models is notyet economic because composites takelongertomake.

Christophe Aufrère, chief technicalofficer at Faurecia, one of Europe’s topautomotive components suppliers,believes carbon fibre for mainstreamvehicles will arrive by 2025 and that upto half of structural components couldbe made from it: “If you do a completecar floor with composites, the weighttodayis50kgandyoucouldsave25kg.”

The French company has developed abio-based plastic composite with hempfibres toaddstability.

Thishas ledtoweightreductionsofupto 20-25 per cent compared to tradi-tional parts and reduces overall envi-ronmental impactby20-25percent.

Cars of the future will probablybe based on a variety of materials,depending on suitability, cost andmarketsegment.

“Our big picture is a mixed materialstrategy,” says Mr Klein of GM. “Thereisn’tonethatwillanswer itall”.

Materials vie for pole positionin the lightweighting stakesManufacturing

There is no single answerto the problem of how tomake vehicles weigh less,reports Michael Pooler

Metal trade: rolls of aluminium in afactory in Russia

‘Every gramhas to havea purpose in the car,otherwise it is waste andneeds to come out’