THE FUTURE OF THE CARFINANCIAL TIMES SPECIAL REPORT | Monday October 4 2010

www.ft.com/car­2010 | twitter.com/ftreports

Fromhybrids toself­drivingvehicles

General Motors – withthe memory of theworst crisis in its his-tory still fresh –

indulged in a futuristic flight offancy at the Shanghai Expo.

The US carmaker and itsChinese partner SAIC unveiledin March their vision of a carfor 2030: a self-driving, net-worked bubble-car run on elec-tric power, and small enough topark in your living room.

It was called EN-V (for Elec-tric Networked Vehicle) andcame in three variants with Chi-nese names: Xiao (“laugh”), Jiao(“pride”) and Miao (“magic”)

“Miao will transport you mag-ically and seamlessly throughthe urban landscape,” GM andSAIC promised. “You can playyour favourite video games orhold a videoconference withyour colleagues around theworld.

In Europe, Audi, the Germanluxury carmaker owned byVolkswagen, this year staged acompetition for architects toimagine what urban landscapesand driving would be like twodecades hence.

Like GM and SAIC, the win-ner of the €100,000 prize offereda vision of automated driving in

cars wired up to the surround-ing environment.

“The car will transform frombeing a viewing machine formanoeuvring in traffic towardsa sensorial experiencemachine,” the architectural firmJ. Mayer H. said. Cars would“interact with the urban contextin completely new ways”.

The year 2030 is a long wayoff, even by the standards ofautomaking, with its long prod-uct cycles.

However, both projects indi-cate how automakers see thefuture of driving: electric-pow-ered, networked to the sur-rounding environment, anddecidedly urban.

The crisis that sent GM intobankruptcy court – and evendented sales at Germany’s more-resilient luxury carmakers suchas Audi – accelerated big, long-term changes already afoot inthe car industry, and suddenlybrought the future closer.

The industry’s centre of grav-ity tipped decisively to Asia,where China replaced the US asthe world’s largest vehicle mar-ket in 2009. Before the crisis,analysts had predicted thiswould take up to a decade.

By 2050, more than 2bn peoplein emerging markets willbecome first-time buyers,demanding low-cost cars,according to PA Consulting.

Many of them live in large cit-ies, where policymakers con-tending with smog and packedstreets are realising that auto-mobiles can no longer be large,costly hunks of metal that pol-

lute for a few hours of the daythen sit idle for the rest of thetime, occupying valuable space.

Electrification of cars, alreadya growing trend among auto-makers, accelerated during thecrisis.

Governments in the US, theUK, France and elsewhere ear-marked stimulus grants or softloans for producers of electricand plug-in hybrid cars andtheir batteries, and made subsi-dies available to early buyers.

Electrification will fundamen-tally change the way cars aremanufactured and sold, andtransform carmakers’ relation-ships with their customers.

BMW’s family of electric vehi-cles due out in 2013, code-named“Megacity”, will feature a light-weight carbon-fibre and plasticshell on an aluminium chassis.

It will mark an industry firstin terms of both materials andarchitecture, a radical departurefrom mass-produced cars’ usual“unibody” form.

Electric motors are mechani-cally simpler than internal com-bustion engines, and so willreduce some of the money auto-makers earn on service in theyears after they sell a car.

On the other hand, carmakerswill have to offer warranties onthe batteries through the life of

a car – an obligation, but onethat holds the promise of longerrelationships with their custom-ers.

But to keep new customersinterested, carmakers will haveto raise their game and makecars more like those most cov-eted devices of the digital age:smart phones, with their portalsto social networks and endlessupgradeability.

While millions of people inChina, India and Brazil buytheir first cars, something elseis happening in the developedworld. Younger people in

A sector hit hard bythe downturn ishoping to exploitchanging urbanlandscapes, writesJohn Reed

Global light vehicle sales (m)

Source: JD Power Automotive ForecastingSource: JD Power Automotive Forecasting

Figures below areAsia’s contribution

to global growthover past five years

FT montage Photos: company; AP

20.2m18.9m

16.8m2..6m

5.6m

2005

2010

2015

2020

2025

17.7m14.0m

28.8m4.6m

5.4m

23.2m19.4m

40.7m6.6m7.0m

26.9m20.7m

48.6m7.2m7.4m

28.9m22.0m

52.0m7.7m7.8m

188%

45%

56%

46%

Europe N America Asia S America Other

188%1

45%

56%

46%

Continued on Page 2

Inside this issueSafety The once­popular visionof fully automated cars is beingresisted by drivers, says DanielSchaefer Page 3

Interiors Buyers aredemanding a home from home,writes Bernard SimonPage 4

TechnologyTwo­wheelerscan show theway, saysRohit JaggiPage 4

Low­cost productionSharing platforms acrossdifferent models offersmanufacturers big savings,reports John Reed

Batteries An infant industrybears the hallmarks of a

gold rush, saysBernard Simon

Connectivity Thecar that can compose

and send its owntweets is just the start,

writes John Reed

On FT.com

2 ★ FINANCIAL TIMES MONDAY OCTOBER 4 2010

The Future of the Car

Fromhybridsto highertech

Contributors

John ReedMotor Industry Correspondent

Bernard SimonNorth America Motor IndustryCorrespondent

Rohit JaggiAircraft and MotorcycleColumnist

Daniel SchaeferFrankfurt Correspondent

Jonathan SobleTokyo Correspondent

Rohit JaggiCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details, contact:Stuart Wakling+44 020 7873 4129stuart.wakling@ft.com

Europe have been telling poll-sters that the one device with-out which they cannot live isnot a car, but a phone.

Enter the smart car: an auto-mobile wired to the internet and– increasingly – other cars androadside infrastructure. Driversincreasingly demand a seamlesstransition from the social net-working, entertainment, andcommunications networks theyuse at home to their cars.

“If you look back over thepast 10 years, everything withinthe car got connected to every-thing else, with computerssteering everything,” says PeterSchwarzenbauer, Audi’s head ofmarketing and sales.

“The change over the next10 years will be that the cargets connected to its environ-ment.”

The car of the future, ratherthan just losing value in thedriveway, might do a better jobof earning its keep, too.

Utility companies are study-ing schemes that would see elec-tric cars recharging during thenight when rates are low, theneither using the power duringpeak hours or selling it back tothe grid.

If cars are inexorably converg-ing with phones, automakersare also realising that they needto make their products just asadaptable.

Customisation is already alucrative business line for car-makers – notably for urbanminicars such as Fiat’s 500. Forits forthcoming A2, Audi is stud-ying the possibility of sellingmobile phone-like “apps” allow-ing customers to download andactivate features already engi-neered to the car, such as stiffersuspension or heated seats.

Carmakers are also reachingout to the sceptical hard core ofyoung drivers unsure whetherthey want to own a car at all.

PSA Peugot Citroën recentlylaunched a scheme that allowsdrivers to pay for “mobilityunits” used to rent a car,scooter, or even a bicycle. Mostbig automakers now are study-ing “mobility” – a new industry-wide buzzword.

Amid all this blue-sky think-ing, profound doubts remainaround customers’ acceptance ofnew products such as plug-incars.

While decisionmakers clamberto subsidise “silver bullet” tech-nologies, for example electricpowertrains and lithium-ionbatteries, some of the industry’sbiggest technological strides arecoming in relatively prosaicareas such as downsized andturbocharged engines.

There is also the perennialquestion of what carbuyers willvalue enough to buy.

“The big question today is notthe technology,” says PatrickPelata, chief operating officer ofRenault. “The big question iswhat customers need, and howmuch they will pay for it – allour strategy is driven by that.”

Renault and its partner Nis-san announced in April a part-nership with Daimler allowingthe three companies to poolcosts in small and electric cars,vans, and other technologies.

Automakers, while offeringcustomers endless variants inthe showroom, are radicallysimplifying their manufactur-ing, building more cars on fewerplatforms with a greater com-monality of parts.

Ford’s new Focus midsizedcar, for example, will have 80per cent of parts in common inits different versions around theworld.

And amid all the doubts aboutthe future, there are reasons foroptimism too: while the politi-cally correct term these days is“mobility”, it looks like drivinghas a future. All the entrants toAudi’s urban design competitionincluded cars.

Continued from Page 1

Sales feed offhype and subsidy

After years of develop-ment – and substantialamounts of hype – anew wave of battery-

powered cars will begin arrivingin Japan and the US by Decem-ber, led by Nissan’s Leaf andGeneral Motors’ Chevrolet Volt.

All the big carmaking groupsplan to produce battery-poweredcars over the coming threeyears, from China’s SAIC toGermany’s BMW – which plansan entire new sub-brand forelectric cars from 2013.

Electric and plug-in hybridcars have captured policy-makers’ imaginations, prompt-ing governments around theworld – even in the fiscallystretched US, Spain, Portugal,and the UK – to pledge big sub-sidies to early buyers.

Electric cars have alsogalvanised private investors,allowing Tesla Motors and Bet-ter Place, Silicon Valley start-ups in electric cars and charg-ing infrastructure, respectively,to raise hundreds of millions ofdollars for untested businessesduring the depths of the creditcrunch.

The technological bandwagonforming around plug-in carsis remarkable, given the seriousdoubts about whether consum-ers will accept the cars’ highprices and short range. Evenwith subsidies worth $7,500 inthe US and £5,000 ($7,900) in theUK, the Leaf and the Volt will

be priced more like small luxurycars than mass-market vehicles.

In a poll carried out for theFinancial Times by Nielsen inSeptember, three-quarters ofrespondents in the US and theUK said they would considerbuying an electric car. However,more than half in each countrysaid they were unwilling to payany more for them.

The oil price and the rate atwhich lithium-ion batteries’ per-formance will improve are twoother variables affecting theadoption rate for electric cars.

Japan’s car industry mightseem a good place to look forclues about what is to come.However, even there, opinionsabout what customers will wantare sharply divided.

On the one hand CarlosGhosn, chief executive of

Nissan, plans to launch fourelectric cars for Japan’s thirdlargest carmaker by 2014, andanother four at its French allyRenault. A long-time scepticabout hybrid cars – which hesees as an interim technology –he has predicted that one in10 cars globally will run on bat-tery power alone by 2020.

Toyota, for its part, agreed inMay to invest $50m in Tesla,and plans to introduce a bat-tery-only city car in 2012. How-ever, Takeshi Uchiyamada, whoheads the carmaker’s productdevelopment, says it will pro-duce only “a few thousand” ofthe small commuter vehicles tostart, and bets that moreconsumers will want the hybrid

cars, whose global sales Toyotadominates and in which it hasinvested billions of dollars.

Both companies can pointto recent achievements intheir home market to supporttheir favoured technology. TheLeaf, due to arrive in dealer-ships in December, exceededNissan’s first-year Japanesesales target of 6,000 vehicles injust two months. The Prius wasJapan’s best-selling car of anykind for the 16 months endingin August.

But the numbers say littleabout real consumer demand –and highlight the extent towhich plug-in cars will remaincreatures of subsidies for yearsto come.

The Prius took Japan’s topsales spot only after the govern-ment introduced subsidies lastyear worth more than Y400,000($4,770) for low-emission vehi-cles. The incentive expired inSeptember and Toyota execu-tives are braced for a sharp fallin sales.

JD Power, the consultancy,recently revised upward its fore-cast for electric vehicles, whichit now predicts will overtakehybrids by 2015, mostly becauseof government incentives. Evenso, it says both pure electric andplug-in hybrid cars will accountfor a scant 3 per cent the overallworld market by 2020.

Price aside, driving rangeremains a formidable barrier topure electric cars. For this rea-son GM is including a petrol“range extender” on the Volt forlonger trips. Even so, GM iskeeping expectations for electriccars modest.

Battery limitations will holdback the “electric revolution”says Frank Weber, head ofcorporate and product planningat GM’s Opel unit, who played acentral role in the Volt’s

Electric and hybridLimits to range willprove crucial forthese vehicles, sayJohn Reed andJonathan Soble

development. “It is a partialanswer for a particular use:there will be a lot of batteryelectric vehicles in the futurefor urban usage.”

He adds: “When we ask peoplewhat they are expecting froman electric vehicle, they say‘500km of range, absolutelyquiet, doesn’t emit anything,and I’m willing to spend €1,000more for that vehicle than myconventional one’.”

Yet the technology could

surprise. Analysts say a freshspike in petrol prices as theworld economy recovers couldlower the break-even point forelectric cars. Early drivers ofelectric cars have also ravedabout their high torque and lackof engine noise. Some havefound their limited ranges eas-ier to accept than they hadthought.

BMW recently tested 600 elec-tric versions of its Mini smallcar in Germany, the UK and

the US in one of the industry’sbiggest tests of battery-poweredcars to date. It found that mostdrivers charged the car only twoor three times a week andmostly used charging points athome or at work.

“Before they drove the car,they wanted us to install acharging pole every mile,” saysUlrich Kranz, the BMW execu-tive heading its “Project i” elec-tric cars programme. “After aweek this [desire] was gone”.

Live wire: General Motors is hedging its bets with a ‘range extender’ on the Chevrolet Volt Mark Blinch/Reuters

‘There will be a lot ofbattery electricvehicles in the futurefor urban usage’

Utilities hope vehicles will open electric avenues

Cars have a lot of attention and moneylavished on them but they spend muchof their time idle – expensive, depreci-ating deadweight taking up preciousurban and household space.

But with time, say power companies,electric cars will be able to store elec-tricity overnight, when it is cheaper,then during the day – when rates arehigher – sell it back to the grid or feedit into your home. Cars could thus helputilities smooth out the daily spikes inpower demand and allow owners tobenefit from lower rates.

While such vehicle-to-grid schemesare still only being studied, utility com-panies are already teaming up withcarmakers to explore the opportunities– and future demands on their powersupply – posed by cars that run onelectricity rather than petrol.

“It’s a business – not only for new

electricity, but to develop infrastruc-ture and provide services to our cus-tomers,” says Andrea Valcalde, head ofinnovation and environmental activi-ties for Italy’s Enel. The notion of carsstoring power as part of a “smart grid”scheme could work, he thinks, in about10 years’ time.

For now, the utility is working withDaimler, Renault and Piaggio onprojects to develop charging infrastruc-ture for electric vehicles and to studyhow drivers use them

Enel is joining Daimler in a pilotof 100 Smart-brand electric cars inMilan, Rome, and Pisa, for which it isdeveloping 400 public and privatecharging points.

Unlike some early electric vehicleschemes in Europe, where powerwas offered free at charging points,Enel will charge for what it supplies.“We want to send a clear messagethat this is a real business,” saysMr Valcalde.

In Britain, EDF is also investing inon-street infrastructure. In partnershipwith Elektromotive, a Brighton-basedprivate company, it has installed about85 charge points in the UK and plansanother 550 in London as part of thecity’s “Plugged-in Places” initiative

that will link to EDF’s sponsorship ofthe 2012 Olympic games.

EDF also has a partnership with Toy-ota, which in July began testing 20 ofits Prius plug-in hybrid cars with fleetcustomers, including London’s Metro-politan Police Service, Transport forLondon, broadcaster Sky, and the Gov-ernment Car and Despatch Agency.

“We’re looking to understand howthe vehicles are used, and how we can

incentivise users to recharge at specifictimes,” says Bethan Carver, an EDFexecutive. As the company brings morenuclear power online in coming years,it wants to flatten the “spiky” demandprofile for power to match supply fromnuclear plants, which is flat through-out the day.

EDF is also working with Daimler toinstall charge points to serve a pilot of60 electric Smarts in Britain. “We’restudying how customers charge when

left to their own devices,” says MsCarver.

Most of Europe’s big utility comp-anies, from Germany’s RWE to Swe-den’s Vattenfall, have similar partner-ships with automakers on electric cars.They are also working together tostudy the impact on Europe’s powergrids of the coming wave of electricand plug-in hybrid cars under a projectcalled G4V (Grid for Vehicles).

Given most analysts’ forecasts of amodest adoption curve for electric cars,power companies do not have to worryabout an early surge in power needs.However, as more plug-in cars arrive,utilities will have to meet the demand –and be prepared to answer tough ques-tions about where the power comesfrom.

Sceptics about EVs question the netenvironmental benefit of running carson electricity produced by “dirty”sources such as coal and oil. Whileelectric cars’ true carbon footprint issmallest in countries such as France,which derives most of its power fromnuclear plants, it is larger in Britain,the US and China, with their highershare of power generated from non-renewable sources.

Most automakers and utility

companies – and independent studiessuch as the UK’s King Review on low-carbon cars – have concluded that elec-tric cars have a lower carbon footprintthan conventional ones, whatever thesource of their power. “Even based onthe current-generation mix, EVs arearound 30 per cent lower-carbon thanan internal combustion engine equiva-lent”, says EDF’s Ms Carver.

Renault, which is launching fourelectric models by 2014, is not duckingthe fact that its cars’ “well-to-wheel”impact is not zero. In the UK, when theFrench carmaker recently showed aplug-in version of its Kangoo van topotential fleet customers, it offeredestimated carbon dioxide counts for thecars. “We put in a fair disclaimer: ‘Zeroemission when used’,” says ThierryKoskas, Renault’s head of vehicle elec-trification.

In France, he says, electric cars willemit about 12 grams of CO2 per km butthe European average will be more like60-70 g/km. This will change as morecountries decarbonise their grids tohelp meet international commitmentsto reduce greenhouse gases.

“We need to see things in a dynamicway,” says Mr Koskas. “The picturewill be very different in 10 or 20 years.”

Power companiesElectricity providers aregearing up for veryuncertain levels of demand,reports John Reed

‘EVs are around30 per cent lower­carbonthan an equivalentinternal combustion engine’

Hydrogen car plans go off the boil

In 2008, a battle for the future ofautomotive propulsion seemedto be shaping up in Japan.

On one side were Toyota andNissan, which were promotingelectric motors powered byrechargeable batteries as thebest alternative to internal-com-bustion engines: Toyota with itsPrius petrol-electric hybrid, andNissan with the Leaf, a forth-coming all-electric car that wasthen still on the drawing-board.

On the other side was Honda,whose president, Takeo Fukui,dismissed electric vehicles asunderpowered “golf carts”.Although Honda was developinga new version of its hybrid – theInsight, launched last year – MrFukui insisted the technologywould be limited to smallermodels and said Honda had noplans for a battery-only vehicle.

Instead, Honda was backingan even more futuristic technol-ogy: hydrogen fuel cells, whichharness the chemical energyproduced when hydrogen, storedon-board, is mixed with oxygenfrom the air.

Powerful as well as super-clean – a hydrogen car’s only

tailpipe emission is water – fuelcells stood the best chance ofreplacing today’s petrol engines,Mr Fukui believed.

In June 2008, Honda startedleasing its first hydrogen fuel-cell vehicle, the FCX Clarity, toa few hundred drivers in Cali-fornia, becoming the first car-maker to put the technology inthe marketplace

Two years later, however, andHonda executives rarely men-tion hydrogen. During the reces-sion, the company slashed fund-ing for the Clarity, which costsmore than $1m each to build.Takanobu Ito, who succeededMr Fukui as president in 2009,says the infrastructure neededto process and distribute hydro-gen “isn’t moving forward”.

Instead, he has steered Hondainto the battery camp, expand-ing the company’s line-up ofhybrids, and plans to launch anall-electric vehicle in 2012.

Honda’s move is symbolic of abroader shift in the fortunes ofhydrogen fuel-cell cars. In theUS, the Obama administrationcancelled $100m in annualresearch funding last year,reducing overall public spend-ing on the technology by 60 percent. California’s “hydrogenhighway”, was meant to have150 filling stations serving carssuch the Clarity by this year,but only 30 have been built.

“Hydrogen cars look even fur-ther off than they did a coupleof years ago,” says Koji Endo,

an analyst at AdvancedResearch Japan.

Not everyone is giving up onthe fuel. Hyundai, the fast-risingSouth Korean carmaker, hasannounced plans to sell a fuel-cell car in 2012, while GeneralMotors hopes to have a produc-tion-ready version by 2015.

Perhaps the deepest well ofenthusiasm is in Germany. Lastyear, a consortium includingDaimler, the energy groupEnBW and the industrial gasmaker Linde agreed plans tobuild 1,000 hydrogen stations inthe next five years, at a cost ofup to €2bn. The first 25 will

appear in large cities such asBerlin and Hamburg next year.

Andreas Opfermann, head ofinnovation at Linde, says thehype around hydrogen’s mainrival, lithium-ion batteries, hasoutgrown their capabilities.

“Today’s combustion-enginecars are all-round-vehicles.There will be a fragmentation ofdrive technologies, just as wehave seen a fragmentation ofcar segments.”

The German initiative is being

pushed hard by Daimler, whichhas spent billions of euros devel-oping fuel-cell technology.

This year the premium car-maker started production of ahydrogen drive module that fitsinto a B-class compact car andits Citaro city bus.

In 10 years, the company will beselling “a few hundred city buseswith fuel cells“ a year, says Chris-tian Mohrdieck, head of fuel-celldevelopment, adding that “severaldozen” have been ordered.

Daimler plans to begin massproduction of hydrogen-poweredpassenger cars once the refuel-ling network is completed, MrMohrdieck says. He is adamantthat the company can sell thevehicles at a profit – somethingmany industry experts doubt.Annual output of 80,000 to100,000 units would be needed tomake production economicallyviable, he estimates.

According to Mr Opfermann,“We will have to bring 500,000 to1m cars on to the roads before2020 to utilise fully the plannedhydrogen station capacity.”

In Japan, meanwhile, thetechnology is being kept alive inthe housing sector, where agroup of natural-gas utilitieshas joined hardware makers tosell fuel-cell units for residentialheating and power generation.

Manufacturers include Pana-sonic and Toshiba, and Toyota –which for all its current focuson hybrids, may yet see a futureuse for hydrogen infrastructure.

Fuel cellsJonathan Soble andDaniel Schaefer notea shift in sentiment –with some exceptions

Tough cell: Honda has cooled to its fuel­cell Clarity Bloomberg News

‘We will have to bring500,000 to 1m carson to the roads before2020 to fully utilisethe planned capacity’

FINANCIAL TIMES MONDAY OCTOBER 4 2010 ★ 3

The Future of the Car

Buyers seekassistance notloss of control

If one technological featureof a car ranks high on cus-tomers’ shopping list, it issafety.

Carmakers and their sup-pliers around the worldhave been investing heavilyin safety features over thepast decade, and a slew ofnew products will soonstart to trickle down fromhigh-end cars.

After a first wave of elec-tronic systems such as anti-lock braking systems (ABS)and electronic stability pro-grammes (ESP), customersare starting to adapt tosafety systems that becomeeven more actively involvedin a driver’s reactions.

The new buzzword in thecar industry is “driverassistance”. This decadewill see the roll-out to themass market of a number ofthese “active” and highlyadvanced safety featuressuch as emergency brakingsystems or lane departurewarnings.

“Downsizing might be a

trend for engines but it isdefinitely not one for safetyfeatures,” says Ralf Cramer,head of the chassis andsafety division at Continen-tal, the German car partssupplier.

The trend has beenspurred by customerdemand, tighter regulationand carmakers’ realisationof its relevance to image.

“Today, a carmakerspends 15 to 20 per cent ofthe development costs for anew model on safety fea-tures,” says Hermann Stef-fan, head of the institute forvehicle safety at the Techni-cal University of Graz inAustria. “Twenty years ago,it was almost zero.”

The issue is more press-ing than ever. The numberof fatal car accidents hasbeen falling in Europe inthe past two decades (from70,000 to about 39,000 thisyear). But worldwide thefigure is still on the rise,driven by the rapid trendtowards individual mobilityin emerging markets.

The UN estimates that1.3m people die each year inroad accidents. It has calledthe period to 2019 the “dec-ade of action for roadsafety”, aimed at halvingthe number of road deaths.

One way to get there willbe to make sure that everycar sold has ABS and ESP.

Carmakers in the US willbe forced by law from 2011to install ESP on every car

they sell. Similar laws willtake effect in Europe, Aus-tralia and South Korea inthe next few years, andsome emerging markets areexpected to follow.

Werner Struth, head ofthe chassis systems controlbusiness unit at Bosch, theworld’s largest car partssupplier, says: “It will onlytake another one or twoyears and this will be stand-ard everywhere.”

Even low-price cars suchas the Dacia Logan willsoon be equipped with ESP.

Carmakers are also roll-ing out a number of fea-tures that will take somedecisions out of drivers’hands.

Emergency braking sys-tems are one. They monitorthe area in front of a carwith radar and/or video sen-sors. If they compute thatthere is a danger of a colli-sion, they give an acousticwarning. And if the driverfails to react they brakeautomatically.

Mr Struth at Bosch,which has sold the firstsuch predictive emergencybraking systems for Audi’spremium A8 car, says thatthis feature will soon besold in the middle ranks ofcars as well.

“We expect a doubling oreven tripling of driverassistance sales within thenext two to three years,” hesays. “This will lead to arapid cost reduction.”

Mr Cramer at Continentalsays: “It will take five to 10years until driver assist-ance systems will be ascommon as ABS and ESPare today.”

Other systems, such as alane departure warning,and a hold control thatprevents the car from roll-ing backwards at trafficlights, will spread to themass market in this decade.

But there is a limit tohow much control driversare prepared to give away,says Mr Steffan. “Auto-matic cruise control, whichadapts the driving speed totraffic and speed limits, hasnot been widely acceptedyet, as customers feelrestricted in their drivingfreedom,” he says.

This is why most carmak-ers’ forecasts about thefuture of vehicle safety lookdifferent from the auto-matic, driverless visionscommonplace in the past.

Manufacturers now see afuture in which cars bristlewith sensors and communi-cate with each other – towarn and help the drivers,but not to take over controlfrom them.

But the obstacles forintroducing such a systemare many. Unlike with ESPor driver assistance sys-tems, the customer whopays for such features willnot reap any benefit untilmost cars are equipped withthe relevant sensors andcommunication devices.

“What we will need is abusiness model that willhelp to entice customers tobuy such a system,” saysMr Struth. “This does noexist yet.”

SafetyDrivers limit theeffectiveness ofelectronics, saysDaniel Schaefer

Mass reduction techniquescross into the mainstream

When BMW recentlyfielded a fleet ofabout 600 electriccars to study their

viability in real-life driving con-ditions, it packed a 260kg bat-tery pack into the back of itssmall Mini.

Test drivers liked the car, butcomplained about the bulky bat-teries, which took up most ofthe boot space and all of theback seat. The Mini E is a testmule, BMW says, and as suchnot destined for series produc-tion; nor is the Active E, a forth-coming battery-powered testversion of its 1 Series small car.

But the Munich carmaker’s“Megacity” mass-produced elec-tric vehicle, when it goes on salein 2013, will mark a radical

departure from its currentline-up of cars. Indeed, the carwill be built using a differentmanufacturing process – andusing different materials – frommost other cars on the road.

The car will have a flat bat-tery pack smaller than the MiniE’s inside a lightweight alumin-ium chassis called a “Drive”module. Atop it will sit a “Life”module – a passenger cabinmade mostly out of carbon-fibre-reinforced plastic.

BMW’s decision to build thecar out of expensive aluminiumand plastic composites turnedheads in the industry – as didthe Megacity’s departure fromthe classic “unibody” method ofdesigning and building cars.

But BMW says the weight sav-ings will allow it to spend lesson the Megacity’s battery pack.“Battery cells are quite expen-sive, so we said, Let’s reduce theweight of the vehicle – we canachieve the same mileage withless battery,” says Ulrich Kranz,the head of BMW’s “Project i”electric-car unit.

Carbon fibre has long beenprized in the industry. BMW

says it is as strong as steel, butabout 50 per cent lighter,whereas aluminium, is “only” 30per cent lighter than steel.

BMW says that the car willseat four and have a range of160km to 180km betweencharges. The carmaker willsource the carbon fibre througha 49-51 per cent joint ventureannounced last year with SGL

Group, a leading German-head-quartered carbon producer.

Because of carbon fibre’s highprice, it has until now mostlybeen used in aircraft and racingcars – or in small quantities onluxury vehicles, such as some ofthe bumper reinforcements androofs in BMW’s own “M” high-performance models.

While curing carbon compo-nents for a Formula One racingcar “takes hours” in an oven,says Mr Kranz, “our manufac-turing process is different”.BMW is keeping close wraps onthe details.

Automakers have long beenworking with new materials andmanufacturing processes in abid to take weight out of cars.The pressures to do so havechanged over the years.

In past decades, a leading fac-tor pushing for weight reductionwas the growing number ofsafety and comfort featuresautomakers were building intocars, which made them heavier– for example electric seats andstronger steel bodies.

Over the past decade, regula-tors’ demands for lower-emission, more fuel-efficientcars have become the factorspushing carmakers to findlighter materials.

The industry’s new push intoelectric cars has intensified thequest.

Tesla Motors, the recentlyfloated US electric carmaker,chose Lotus, a British niche pro-

ducer, to make the bodies for itspioneering roadster based on itsElise, largely because of theirlight weight.

Among BMW’s luxury compet-itors, Audi has also been aleader in lightweight design,most notably the aluminiumbodies based on its trademark“Space Frame”. The carmakerhas made more than half a mil-lion cars with aluminium bodiessince 1994.

While high-tech materialsused to be solely the province ofluxury automakers, their use isfiltering down to volume pro-ducers as the value of weight

Weight savingExotic, lightermaterials easethe load on motorsand batteries,writes John Reed

Light touch: the Megacity’s construction allows for cheaper batteries – and better handling, BMW saysBecause of carbonfibre’s high price, ithas until now mostlybeen used in aircraftand racing cars, oron luxury vehicles

savings in their cars goes up.PSA Peugeot Citroën, in part-nership with its supplierRhodia, is studying ways ofusing high-tech materialsincluding composites in its cars.

“For a lot of parts, it is diffi-cult to be cost-competitive ver-sus steel,” says Marc Duval-Destin, the company’s head ofresearch and development. “Butthe value of lightweight solu-tions is really increasing now.”

Automakers are also usingnew alloys, metal foams, andenhanced manufacturing meth-ods to save on weight. By usingmore integrated electronics in

their cars, automakers are alsosaving on weight and costs byreducing their use of chips andthe cable needed to connectthem – about 35kg in the typicalcar, according to EngelbertWimmer of PA Consulting.

While traditional safety fea-tures added weight to cars, new“active safety” features thatreduce the speed of any crash,or avoid collisions entirely, willallow the industry to take evenmore weight out of its cars.

“We have just begun toexploit the potential of light-weight construction,” says MrWimmer.

‘It will take five to10 years until driverassistance systemswill be as commonas ABS and ESP’

4 ★ FINANCIAL TIMES MONDAY OCTOBER 4 2010

The Future of the Car

Two­wheelers show four­wheelers the way in innovation

My dining room in Londoncontains a couple of bikesthat should have changedmotorcycling for ever.

One is the only produc-tion two-wheel-drive motor-cycle from a big manufac-turer, Yamaha. The sameJapanese company was alsoresponsible for the otherbike, an attempt to improveon the failings of conven-tional front forks.

Neither achieved big salessuccess. But in spite of suchsetbacks a number of thetrends only now emergingamong car manufacturers

have long been seen amongtwo-wheelers.

One that is also reflectedin aviation is the pursuit oflight weight, with alumin-ium and more recently car-bon-fibre construction beingemployed to make the mostof power outputs and fuelloads.

But two-wheelers havealso led on powertrains.Piaggio, the Italian manu-facturer, beat the carmak-ers into series production ofa plug-in hybrid with thelaunch last year of the firsthybrid scooter, based on itsinnovative MP3 tiltingthree-wheel scooter.

An electric-only moderunning on its lithium-ionbatteries, with a range ofabout 20km, gave it a bigadvantage over the four-wheel competition. And theextra wheel at the front

gave nearer car-levels ofstability on greasy roads.

However, low sales wereattributed to a high price ofabout €9,000 ($12,250) andthe small petrol enginebeing inadequate to copewith its extra weight. SoPiaggio’s answer this yearis a bigger engine – of 300cc– and a price cut of €1,000.

Even conventionallyengined scooters havemany advantages for urbantransport, by minimisingtraffic congestion and thespace needed for parking.

However, safety-paranoidplanners in the west tend tofight shy of promotingmachines that some groupsare vocal in insistingexpose users to more riskthan in cars.

BMW of Germany, withits history of making bothfour-wheelers and two-

wheelers, has addressedthis in a number of ways.

One was with its C1 safe-ty-cell scooter of early thisdecade. However that failedto achieve hoped-for salesvolumes. In the UK, wherebuyers should have warmedto its weather protection,sales also suffered becauseof the obduracy of officials,who refused an exemptionfrom the requirement towear a helmet despite thetwin seat belts.

The Munich manufac-turer has revisited the con-cept, though, with a similarall-electric version, the C1-Eunveiled last year.

And it has taken anotherapproach with the newlyunveiled Mini Scooter E all-electric two-wheeler, whichaims to complement itsMini car brand. Featuresaimed at the mobile genera-

tion include a docking sta-tion to integrate a smartphone into the electronics.

Smart, part of Daimler-Benz, is also unveiling anelectric scooter in Paristhat it claims will have a60-plus mile range.

Safety fears, however,may be better addressed bythe cabin motorcycle designthat last month won one ofthe two subsidiaryclasses in the$10m

X Prizes for fuel efficiency(see also separate story onPowertrains).

The E-Tracer from Swisscompany Peraves uses a150kW electric drive systemmade by AC Propulsion,based in San Dimas, Califor-nia, and a 19.4 kWh lithiumpolymer battery systemfrom NeuEnergy of SanDiego. With a claimed top

speed of “well over120mph” and the

equivalent ofmore than

200 mpg– much

b e t t e rthan the

other twoX Prize win-

ners – it

shows that performanceand economy can co-exist.

The E-Tracer is a develop-ment of the Monotracer andits predecessor the Ecomo-bile – cabin motorcyclespowered by BMW bikeengines that have been insmall-scale production formore than 25 years.

With the safety andweather protection of atough composite shell, andrider-controlled retractingoutrigger wheels to keepupright when standing still,they answer many of thecriticisms of conventionaltwo-wheelers – at a price.

The Monotracer, which isavailable now, costs about€53,000. The E-Tracer, oncePeraves and fellow Swisscompany Designwerk havemade it ready for produc-tion next year, will sell for€60-80,000, It promises

0-60mph in less than 4.5 sec-onds and a real-life range of220 miles. And, from myown experience of drivingthe Ecomobile, unique fun.

The Yamaha off-road bikein my dining room is lower-tech, but was revolutionaryin using hydraulics to drivethe front wheel.

Later 2WD designs – fromAustrian manufacturerKTM – use a simpler elec-tric motor in the front hubinstead. With no need forcumbersome and heavyhydraulic hoses.

Car designers say theyare just starting to exploitthe freedom that new tech-nologies give them to relo-cate components and pro-vide better aerodynamics ormore space for occupants.

This is a direction that islikely to provide excitingresults for some time.

Old tech stillhas plenty ofmileage left

When Oliver Kuttner, aVirginia real-estate devel-oper, brought together agroup of investors to entera $10m competition for ahighly fuel efficient butcommercially viable vehi-cle, he expected theywould produce an electricor hybrid car. He was soconfident that electricpower held the key to suc-cess that the venture wasnamed Edison 2.

Yet Mr Kuttner and hiscolleagues realised early onthat the weight of batteriescurrently on the marketmade them unsuitable forthe project. Instead, theychose an internal combus-tion engine powered by eth-anol, complemented bylightweight materials andan aerodynamic design. Thefinal product weighs just826lbs.

Edison 2’s experience isevidence that for all theheadlines garnered by elec-tric cars, many of the mostmeaningful advances inlow-emission, fuel-efficientpowertrains will comefrom improvements in tra-ditional petrol and dieseltechnology.

“We were surprised athow clear it was thatwe were better off concen-trating on an internalcombustion engine”, saysRon Mathis, Edison 2’s chiefdesigner.

Ian Penny, global enginesdirector at Ricardo, a con-sultancy, told the FinancialTimes earlier this year:“There is more scope toimprove the internal com-bustion engine now thanthere has ever been.”

Mike Omotoso, a power-train specialist at JD Power,another consultancy, addsthat improvements in gaso-line technology can beaccomplished at relativelylow cost, both for carmak-ers and their customers.

JD Power estimates thatglobal sales of pure electricand hybrid vehicles willreach about 2.8m units in2015, or less than 5 per centof total light-vehicle sales.Even after that – probablyfor at least another 20 or 30years – the vast majority ofvehicles on the roads, espe-cially in emerging econo-mies, will continue to bepowered by petrol, dieseland, to a lesser extent, bio-fuels such as ethanol.

“There are an awful lot ofthings we can do thatweren’t possible or eco-nomic in the past,” says MrPenny, citing advancessuch as more aerodynamicturbochargers, engine cov-ers that retain more heat,and lighter materials.

He notes that the typicalsedan now achieves a ther-mal efficiency – the ratio ofheat energy in its fuel con-verted into power – of onlyabout 25 per cent. Turbo-charging can raise the per-centage to the mid-30s.

Mr Penny estimates thattechnological advancescould raise diesel engines’thermal efficiency from thecurrent 40 per cent to morethan 50 per cent. Ironically,much of the improvementis likely to come from

advanced electrical sys-tems.

Improved technology hasenabled carmakers toreplace eight- and six-cylin-der engines with smallermodels that offer greaterfuel efficiency but little orno drop in performance.

According to Ward’sAutomotive Reports, four-cylinder cars made up61.9 per cent of US produc-tion last year, up from46.6 per cent in 2000. Theproportion of four-cylinderlight trucks – pick-upsand sport-utility vehicles– almost doubled to14.8 per cent.

Direct petrol injectionand turbochargers enableFord Motor’s new EcoBoostengine to achieve as muchpower in a six-cylinder con-figuration as a traditionalV8. The number-two Detroitcarmaker aims to turn out1.5m EcoBoost engines ayear by 2013, fitting them in80 per cent of its modelsworldwide.

Others are working onengines that, they claim,will go even further thanthe EcoBoost in combiningfuel efficiency, low emis-sions, compact size and per-formance.

Ricardo has developed atechnology – known as eth-anol boost direct injection –which it expects to demon-strate by early next year.

Another potentiallyground-breaking technologybeing developed by GeneralMotors and Volkswagen,among others, combines the

efficiency of diesel with thelow emissions of the mostadvanced petrol engines.

Known as homogenous-charged compression igni-tion (HCCI), the processcould improve fuel economyby 25-30 per cent. Mr Omo-toso predicts that HCCIengines will be commer-cially available within thenext few years.

On another front, Micro-soft founder Bill Gatesteamed up earlier this yearwith Khosla Ventures, aCalifornia venture capitalfund, to invest $23.5m inEcoMotors, a two-year-oldcompany in suburbanDetroit staking its future ona opposed-piston opposed-cylinder (Opoc) internalcombustion engine.

If all goes to plan, com-mercial production of thetwo-stroke engine will startin two to three years.

EcoMotors claims itsengine will be half theweight, half the size andhave half the number ofcomponents of existingpowertrains, giving it50 per cent more fuelefficiency. Its other backersinclude Zhongding Holding,a Chinese car partssupplier.

Meanwhile, Mr Kuttner’sdecision to opt for a conven-tional engine turned out tobe wise one.

The results of the contest,organised by the California-based X Prize Foundation,were announced on Septem-ber 16. The Edison 2 teamwalked away with the firstprize of $5m.

Mobile phone generation cools on cars

Marketing and strategyexecutives at automakerswho poll young peopleabout cars are meeting achilly indifference towardthe notion of owning one atall.

While buying an automo-bile remains a leading aspi-ration for consumers inemerging markets, a grow-ing proportion of youngerpeople in Europe – and, to asmaller extent, the US – saythe one device they cannotlive without is a mobilephone, not a car.

A cooling of younger peo-ple’s enthusiasm towardcars has been noted for sev-eral years in Japan.

A new frugality after thecredit crunch has fed thetrend, as has the rise ofsocial networking sites.

“Physical mobility is notas necessary as it was inthe past,” says BeatriceFourcher, Renault’s head ofproduction. “It’s not neces-sary to get in a car to getconnected.”

Ms Fourcher says thenumber of customers aged35 or less in France whowant to buy a car has fallenfrom 30 per cent 10 yearsago to only 20 per cent now.

“It’s too expensive,” shesays. “They want to putmoney into other things.”

Carmakers, ever resource-ful, are searching for newways to give these scepticalyounger consumers prod-ucts that fall short of fullcar ownership, but attachthem to their brands.

Many leading manufac-turers, including Renault,have appointed executivesor working groups responsi-ble for “mobility” – one ofthe biggest buzzwords inthe industry these days.

Some are now studyingcar-sharing or rentalschemes, including onesthat meld cars with publicor other forms of transport.

PSA Peugeot Citroën

recently launched an inter-net-based scheme offeringsubscribers the ability torent a “mobility solution”.

Users of Mu by Peugeotpay a fixed fee for “mobilityunits” – not unlike a mobilephone subscription package– which they can redeem torent a large car or cabrioletfor the weekend, a scooterfor an urban jaunt, or evena bicycle.

The buzz around “mobil-ity” has coincided with thegrowing popularity of car-sharing schemes such asZipcar. Frost & Sullivan,the consultancy, says mem-bership of such schemes inEurope will rise from about500,000 today to 5m by 2016.

It also dovetails with thelaunch of the first of severalelectric cars. Renault andBMW are among carmakersthat think plug-in cars willappeal to a generation scep-tical of automobiles – notjust because of theirsmaller carbon footprint,but because of the connec-tivity possibilities they willoffer via recharging infra-structure.

“The electric vehicle is a

solution: it’s new, it’s fresh,it’s different from whatyour parents had,” says MsFourcher. “Also, it’s a con-nected car.”

Daimler’s Smart carbrand is piloting a car club-like scheme in Ulm, Ger-many and Austin, Texas,under which users can pickup a car on the street anddrive or drop it off as

needed, and pay for theservice with a smart card.Paris plans on expandingits Vélib’ public bicycle hirescheme to include cars.

“You can imagine afuture where most vehiclesthat provide battery electricpropulsion for urban usagecan be owned by a car-sharing company, a leasingcompany, a city, or a utility

company,” says FrankWeber, head of corporateand product planning forGeneral Motors’ EuropeanOpel unit. “They might takethe car away from the per-sonal ownership we havetoday.”

GM is studying possibleshared mobility solutionsinvolving electric cars andrecharging stations able toidentify drivers. However,adds Mr Weber: “There’stoo much uncertainty – weneed products first tounderstand people’s electricmobility needs”.

BMW says it is looking atnew sales models or rentalschemes based on the needsof customers who live in bigcities and do not haveenough space for more thanone car.

An urban driver who useshis electric car 350 days ayear to get to work, forexample, might need alarger car once a year totake on holiday. “We arestudying this, and lookingat whether there are waysof making money on this,”says Ulrich Kranz, head ofthe carmaker’s “Project i“

team devising its Megacityline of electric cars.

Rival luxury brand Audiis also, according to a sen-ior marketing executive,studying a pool leasingscheme akin to a car club,where participants pay amonthly fee for a vehiclebased on their needs for aweek, a weekend, or a day.

“Are young people stillinterested in cars?” asksPeter Schwarzenbauer,Audi’s head of marketingand sales. “If you have theright product, the answer is‘yes’.”

The “iPhone generation”is, he says, used to gettinghardware free with theright mobile-phone con-tract. So Audi, he says, isstudying the possibility ofallowing customers to payfor usage – say, 10,000km ofdriving a year – rather thanthe actual car.

“We have to add to – notreplace – the normal way ofselling cars,” says MrSchwarzenbauer. “We aretrying to figure out whichformat would attract whichfocus group. We think thepossibilities are unlimited.”

AlternativesSharing or rentalcould replaceownership formany drivers,says John Reed

Everything but the kitchen sync

Even as car buyers – espe-cially Americans – seekout smaller, more fuel-efficient vehicles, they

are demanding more space withmore amenities inside the cabin.

The growing emphasis on inter-iors reflects the evolution of carsinto much more than a means oftransportation. They increasinglydouble as offices, entertainmentvenues and communication hubs.People eat and drink while driv-ing. Who has not used a car forsleeping or sex?

According to the JD Power con-sultancy, Americans typicallyspend almost three hours a day intheir vehicle during the week, andmore than two hours over week-ends, making a total of 18.5 hoursa week.

Larry Erickson, head of thetransportation department atDetroit’s College for Creative

Studies, says: “The consumer isgoing to want [carmakers] todeliver everything they’ve got inthe rest of their lives, whether it’sa good idea or not.”

The list of “everything they’vegot” keeps growing. A JD Powersurvey found that 47 per cent ofdrivers owned cars with heatedseats last year, up from 35 percent in 2006.

The proportion of cars with con-trols on the steering wheel hasclimbed from 53 per cent to 73 percent, while more than two-thirdsnow offer compatibility with MP3devices, up from slightly morethan a quarter in 2006.

The evolution of car interiors isespecially noticeable in minivans,which are designed to appeal toboth adults and children, andto be used for a wide range ofactivities.

The 2011 Honda Odyssey has acool-box under the instrumentpanel that can store six soft-drinkcans. The second and third rowsof seats can be removed, provid-ing enough space for three moun-tain bikes or a 4ft x 8ft sheet ofplywood.

The Odyssey’s entertainmentsystem includes a 16-inch screenthat can be split in two to keep

quarrelling children out of eachother’s hair.

Chrysler’s minivans featureswivel seats and a small, remov-able table that turn the areabehind the driver into what theDetroit carmaker calls “a familyroom on wheels”. They boastno fewer than 13 cup and bottleholders.

J Mays, Ford Motor’s chiefdesigner, ticks off three priority

areas for car interiors in the yearsahead:●Improved “packaging” of com-ponents to create more space.Seats are becoming thinner.Mechanical transmissions andparking brakes are making wayfor “drive-by-wire” technology.Outdated technology is beingditched. “If you’re under 30, whoneeds a CD player?” Mr Maysobserves.

●Selection of materials. “Increas-ingly, [consumers] want naturalmaterials, as long as they areaffordable,” Mr Mays says. Plas-tics are giving way to naturalfibres. The seat fabric in someFord models is made fromrecycled yarn, and reclaimedwood is used for accents on somepremium models.●Most important are advances inthe interface between man andmachine. As Mr Mays puts it, thedemand for “seamless sociability”and “total connectivity” is help-ing blur the lines between home,office and car.

Improvements in voice andgraphical interface technology arepaving the way for the elimina-tion of the buttons, knobs andswitches that have been part ofinstrument panels and consolessince the car was invented.

The goal is to replace them withvoice recognition systems and theswiping movements used to oper-ate an iPhone or iPad.

Ford’s Sync system, developedwith Microsoft and introduced in2007, uses voice commands to con-trol mobile phones and musicplayers. A version with improvedvoice recognition capability madeits debut this year.

However, the need for a car towithstand extreme weather anddriving conditions has hamperedprogress towards sensitive iPad-type controls. Even so, Mr Mayspredicts, “it’s just around thecorner”.

Cultural differences presentanother challenge, even as car-makers move towards global plat-forms.

General Motors designed theinterior of its latest BuickLaCrosse sedan with an eyemainly on China, where theDetroit carmaker sells four timesas many Buicks as in NorthAmerica.

While a car’s rear passengercompartment is typically designedfor children in North America,the LaCrosse is marketed as achauffeur-driven vehicle in China.

As a result, the LaCrosse has anunusual amount of backseat leg-room for a North American car.The back window is equippedwith an anti-glare screen operatedat the touch of a button, makingit easier for Chinese businessmento use their laptops – and forAmerican children to watchDVDs.

“We both benefited,” a GMspokeswoman says.

InteriorsConstantly connectedconsumers are askingmore of their vehicles,writes Bernard Simon

Back­seat driving: the rear of the Buick LaCrosse was designed with chauffeur­driven Chinese buyers in mind

Voice and graphicalinterface technology ispaving the way for theelimination of buttons,knobs and switches

PowertrainsIt is too early tobury internalcombustion, saysBernard Simon

TechnologyRohit Jaggi looksat the latestdevelopments

‘Physical mobility isnot as necessaryas it was. It’s notnecessary to getin a car to getconnected’

Ford’s EcoBoostengine achieves asmuch power fromsix cylinders as atraditional V8

Winner: the E­Tracerhas speed, range and,in effect, 200mpg