Where Firm-Level Innovation and Industrial Policy Meet:Consensus Roadmaps for Low-Carbon PowertrainTechnologies*Matthias Holweg

Environmental mandates, energy security concerns, and societal demands place considerable pressure on automotivemanufacturers to develop novel powertrain technologies that reduce energy consumption, and in turn, carbon emis-sions. The economic case for these novel technologies is far from clear, however, and firms often turn to the respectivenational governments for R&D aid and demand-side subsidies. Government on the other hand often feels unable toback any single technology for competition regulatory reasons, while at the same time being presented with conflictingmessages from industry where to focus its support. This paper reports on an initiative by the U.K. Government that ledto the establishment of a permanent forum for government-industry exchange, the Automotive Council U.K., in whichthe author has participated from the outset. In the course of the Council’s work, two “consensus roadmaps” have beendeveloped jointly by industry and the U.K. Government to guide national efforts in the transition for both passenger carand commercial vehicle powertrain technologies toward low-carbon alternatives. This paper discusses the key tech-nological development stages and projections outlined in these technology roadmaps and comments on the generaldeterminants of an effective interaction between government and industry in the light of a technological discontinuity.

Toward a New DominantPowertrain Design

T echnological evolution forces firms to adapt overtime (Damanpour, 1991; Henderson and Clark,1990). Arguably, the automotive industry faces a

major technological inflection point at this very point intime, adding to a range of existing challenges related todepressed demand, increasing regulatory demands tomeet ever more stringent emission targets, rising energycosts, and societal pressures to reduce tailpipe emissions,vehicle noise, and traffic-related fatalities. In many waysone could argue that it is the “worst possible time” to askthe automotive industry to abandon one of its core capa-bilities, the design and manufacture of internal combus-tion engines (ICE). Sluggish demand and narrow marginsprovide little financial room to invest in developing thesenew powertrain technologies. Moreover, as electricvehicle (EV) and fuel cell (FCV) powertrains that are thelikely successors still lack a clear economic case, it

remains unclear as to which technology, or technologies,will become the next dominant powertrain design.

Regardless, the debate about what powertrain tech-nology will eventually replace the internal combustionengine that powers virtually all of the estimated 1.1billion passenger cars and commercial vehicles currentlyin operation globally (Ward’s Automotive, 2012) isalready well underway, and has long preceded the currenttimes of recession and recent oil price volatility (see DTI,2000; EUCAR, CONCAWE, and Joint Research Centre,2004). The main policy objective is clear: a reduction ofthe carbon dioxide (CO2) emissions of the transportsector, which contributes approximately 26% of globalCO2 emissions, and 71% of which are caused by roadtransportation (Wiesenthal, Leduc, Köhler, Schade, andSchade, 2010). Less clear are the means by which thesereductions will be achieved. The electrification of theautomotive powertrain, continued weight, roll resistanceand drag reductions, engine downsizing, and the intro-duction of lightweight materials are all facets of theongoing transition away from a carbon-based fuel thatpowers an internal combustion engine, toward a new typeof automotive powertrain technology or technologies,that will augment and eventually replace it in the long run(Committee on the Assessment of Technologies forImproving Light-Duty Vehicle Fuel Economy, 2011).

For incumbent automotive firms this transition raisesexistential questions about their ability to retain, and

Address correspondence to: Matthias Holweg, Kühne Logistics Univer-sity, Grosser Grasbrook 17, 20457 Hamburg, Germany. E-mail:matthias.holweg@gmail.com. Tel: +49 40 328 707-201.

* I would like to thank the Automotive Council members and secretariatfor their support. All opinions expressed in this paper are mine, and do notreflect those of the HM Government, the Automotive Council UK, or itsmember organizations.

J PROD INNOV MANAG 2014;31(1):33–42© 2013 Product Development & Management AssociationDOI: 10.1111/jpim.12078

possibly increase, their share of value-added in the auto-motive supply chain. Vehicle manufacturers are unani-mous in their assessment that it is not possible for anyone firm to support all possible powertrain technologies.Overall research and development (R&D) intensity isbetween 3–6% for vehicle manufacturers, who at presentspend an estimated one third of their R&D on alternativepowertrains and greenhouse gas (GHG) emissions(Wiesenthal et al., 2010). The general feeling in theindustry is one of being “stuck” in a setting with strongcommercial pressures on the one side, and considerableuncertainty with regard to the viability and marketreception of novel powertrain technologies on the other.This uncertainty is amplified by inhomogeneous nationalpolicies within Europe with regard to subsidies for alter-native powertrain vehicles, or the taxation of alternativefuels, such as compressed natural gas (CNG), liquefiednatural gas (LPG), and liquefied petroleum gas (LPG).Considering the magnitude of the R&D investmentneeded, it is not surprising that vehicle manufacturersoften turn to their respective national governments fordevelopment cost and demand-side subsidies in supportof this transition. While governments are keen to supportenvironmentally friendly technologies, as well as retainthe economic contribution their automotive industry pro-vides, due to constraints set by European competitionregulations they often finds themselves unable to backany specific technology as this in turn would disadvan-tage other firms backing a different one. As a result, theautomotive industry is frequently complaining aboutgovernments’ indecision, while government in turn feelsunable to respond effectively due to the conflicting mes-sages from industry where to focus its support. In theUnited Kingdom, a forum that permits dialogue betweenall industry players and government has long been calledfor (Central Policy Review Staff, 1975; Gibson, 2002)but came to existence only in 2009 in the form of the“Automotive Council UK.”

In this paper, I will report on my personal involvementin this development, which started with the “New Auto-

motive Innovation and Growth Team”1 (NAIGT) in 2008that brought together senior managers of the main domes-tic vehicle manufacturers (generally the chief executiveofficers or managing directors for the U.K. operation),senior representatives from the component supply indus-try, R&D providers, and the U.K. Government. I joinedthe NAIGT as the academic member in order to provideanalytical support, conducting a series of surveys andbenchmarking studies (reported in Holweg, Podpolny,and Davies, 2009). The NAIGT developed a 20-yearvision for the automotive industry and its recommenda-tions to the U.K. Government and industry to achieve this(Parry-Jones, 2009). Key among these recommendationswere proposals to establish a joint industry-governmentAutomotive Council to ensure that a strategic, continuousconversation between government and the automotiveindustry in the United Kingdom takes place. The Auto-motive Council is cochaired by the Secretary of State forBusiness, The Rt. Hon. Dr. Vince Cable MP, to ensurethat the communication takes place at the highest levelwithin government. Two additional workgroups havebeen established within the Council: the Supply ChainSubgroup, which aims to retain and build capabilities inthe U.K. component supply chain, and the TechnologySubgroup, which aims to develop “technology roadmapsfor low carbon vehicles and fuels, and exploit opportuni-ties to promote the UK as a strong candidate to developthese and other technologies.”2 This paper summarizesthe key developments outlined in these technologyroadmaps, specifically commenting on the barriers andsteps needed to progress toward the emission reductionpolicy objectives set out by the U.K. government and theEuropean Commission.

The paper is structured as follows: the next sectionbriefly reviews the regulatory framework within whichthe Automotive Council operates, then proceeds tooutline the technology pathways and common compari-son methods. The following section presents the technol-ogy roadmaps for both passenger cars and commercialvehicles, and then proceeds to outline the key learningpoints from establishing an effective mechanism forindustry-government exchange. The concluding sectionoffers comments on the likely temporal progression fromthe ICE, to electrification of the powertrain, toward thekey barriers for EV and fuel cell vehicle FCV powertrainsas possible next dominant designs.

1 For more details on the NAIGT, see: http://www.bis.gov.uk/policies/business-sectors/automotive/new-automotive-innovation-and-growth-team.The final report of NAIGT is available at: http://www.bis.gov.uk/files/file51139.pdf

2 For more detail on the Automotive Council UK, see: http://www.automotivecouncil.co.uk/

BIOGRAPHICAL SKETCH

Dr. Matthias Holweg holds a joint appointment at Kühne LogisticsUniversity, Germany, and at Judge Business School, University ofCambridge, UK. Prior to joining Cambridge Judge Business School,Dr. Holweg was a Sloan Industry Center Fellow at the Center forTechnology, Policy, and Industrial Development at the MassachusettsInstitute of Technology (MIT), and a Senior Research Associate at theLean Enterprise Research Centre at Cardiff Business School.

34 J PROD INNOV MANAG M. HOLWEG2014;31(1):33–42

Context

Regulatory Framework

For any national government, a fundamental challenge ininteracting with its domestic automotive industry is tobalance employment needs and economic growth withclimate change targets. As is the case for many othercountries, the automotive industry is a significant con-tributor to the national economy: the sector represents6.7% of U.K. turnover and 2.6% of gross value added(Holweg et al., 2009), and by the standard U.K. Govern-ment definition employs 194,000 people in 3300 busi-nesses. It accounts for around 12% of UK manufacturedexports, and 13% of manufactured imports; in 2011, 77%of the cars and 61% of the commercial vehicles producedin the United Kingdom were exported. National industrialpolicy is set by the Department for Business, Innovationand Skills, yet an added complication to industry–government relations are stringent European competitionregulations that prevent semi-open to hidden incentives,subsidies, and tax breaks that are commonly used else-where in the world to attract and retain large manufactur-ing operations.

While the economic mandate is clear, the UK govern-ment also balances national economy interest withmeeting its climate targets at the same time. The UK hascommitted to reducing carbon emissions by the year 2050to 80% of a 1990 baseline in the Climate Change Act2008. This has to be seen within the wider Europeancontext for reducing transport emissions: under the newvehicle regulation, the fleet average to be achieved by allnew cars is 130 grams of CO2 per kilometer by 2015(equivalent to 5.6 liters per 100 km of petrol or 4.9 l/100 km of diesel), which is being phased as of 2012, andwhich will reduce to 95 g/km by 2020 (4.1 l/100 km ofpetrol or 3.6 l/100 km of diesel). According to the EU, the2015 and 2020 targets represent reductions of 18% and40%, respectively, compared with the 2007 fleet averageof 158.7 g/km (European Commission, 2009).

Powertrain Pathways

In order to outline the different options, it is important tounderstand that automotive powertrains are embedded inthe architecture of the vehicle, the transportation systemthese vehicles are used in, and the fuel sources and infra-structures that provide the energy for these vehicles. Tounderstand the issues associated with a major technologi-cal change in automotive powertrains, all three aspectsneed to be considered. Two methods are commonly used

to provide this environmental impact assessment: LifeCycle Analysis (LCA) and Well-to-Wheel (WTW)assessments.

Life Cycle Analysis methods consider the entireenergy consumption, emissions, and cost of extractingthe raw materials, manufacturing the components, assem-bling the vehicle, using it, and finally, disposing of it atthe point of “end of life of vehicle” (ELV). Proponentswill claim that this method is more comprehensive thanWTW; however, there are considerable uncertainties inthe estimates (Contestabile, Offer, Slade, Jaeger, andThoennes, 2011). Nonetheless, a range of LCA studies ofalternative powertrains have been published (MacLeanand Lave, 2003; MacLean, Lave, Lankey, and Joshi,2000; Wagner, Eckl, and Tzscheutschler, 2006).

Well-to-Wheel analyses consider two main cycles inorder to determine a vehicle’s energy consumption andemissions: first, the “fuel cycle,” which describes theprocess of extracting, refining, and distributing the fuel(the so-called “Well-to-Tank” [WTT] process), andsecond the “driving cycle” of the vehicle using the fuelfor propulsion (the so called “Tank-to-Wheel” [TTW]process). Combining both WTT and TTW cycles pro-vides a holistic understanding of the energy consumptionand emissions generated by using a vehicle in standardconditions, but this does not allow us to make a statementbeyond its usage. With regard to alternative powertrains,two key studies comparing alternative powertrains on aWTW basis have been conducted by GM and theNational Argonne Laboratory in the United States(Brinkman, Wang, Weber, and Darlington, 2005), and byCONCAWE, EUCAR, and JRC in Europe (CONCAWE,Joint Research Centre, and EUCAR, 2007; EUCAR,et al., 2004).

Figure 1 shows the main possible alternative pathwaysto the dominant ICE architecture in the passenger car andcommercial vehicle setting (crude oil as energy source,diesel, and gasoline as energy carriers, delivered througha liquid fuel distribution infrastructure, for use within aninternal combustion engine powertrain).

As can be seen, a wide range of potential options isavailable for existing and renewable energy sources to becoupled with existing and new fuels and infrastructures.In fact, it is conceptually possible to connect any energysource with any energy carrier, infrastructure, andpowertrain design. Despite this rich “offering” however,the fundamental problem identified by most studies isthat none of these alternative pathways combine the manyadvantages of liquid fossil fuels (petrol and diesel) interms of (1) availability, (2) affordability, (3) energydensity by weight, (4) energy density by volume,

ROADMAPS FOR LOW-CARBON POWERTRAIN TECHNOLOGIES J PROD INNOV MANAG 352014;31(1):33–42

(5) handling safety, (6) storage ability, and (7) operatingtemperature range. Petrol and diesel both offer a verycompelling package across these fundamental criteriaagainst which any new fuel/powertrain pathway will haveto be judged. Neither hydrogen nor electricity—the com-monly proposed main competitors—have properties thatare even close to the performance of petrol in terms ofenergy density, as shown in Table 1.

The main obstacles for electricity and hydrogen asenergy carriers are obvious from this table, namely theinability to store enough energy by weight and volume toprovide sufficient range for the vehicle, leading to thecommonly cited “range anxiety” for electric vehicles andsafety concerns over liquid or gaseous hydrogen storagein the vehicle. Although novel battery technologiespossess the theoretical energy density to rival traditional

Coal

Crude Oil

Natural Gas

Energy Source Energy Carriers Infrastructure Powertrains

CoalCrude Oil

Natural Gas

Biomass

Natural Gas

Nuclear

Gasoline

FT Gasoline

Diesel

FT Diesel

Biodiesel

Ethanol

Methanol

DME

CNG

LPG

Hydrogen

Electricity

ICE

Electric

Fuel Cell Hybrid

Fuel Cell (FC)

ICE Hybrid

Liquid FuelInfrastructure

Gaseous FuelInfrastructure

ElectricInfrastructure

‘Plug-in’ FC or ICE Hybrid

Butanol

(e.g. Carbazole)

Figure 1. Automotive Powertrain Pathways. Adopted from WBCSD

Table 1. Energy Density by Weight and Volume for Different Fuel and Storage Types

Energy Carrier Form of StorageEnergy Density byWeight [kWh/kg]

Energy Density byVolume [kWh/l]

Gasoline Liquid 12.7 8.76Diesel Liquid 11.6 9.7Natural gas Gas (20 MPa) 13.9 2.58

Gas (24,8 MPa) 13.9 3.01Gas (30 MPa) 13.9 3.38Liquid (-162°C) 13.9 5.8

LPG (Propane) Liquid 12.9 7.5Methanol Liquid 5.6 4.42Hydrogen Gas (20 MPa) 33.3 .53

Gas (24,8 MPa) 33.3 .64Gas (30 MPa) 33.3 .75Liquid (−253°C) 33.3 2.36Metal hydride .58 3.18

Electricity Pb (lead acid) battery .04 .09NiMh battery .08 .30Li-Ion battery (current) .19 .60Li-Ion battery (projected) .40 1.45Li-Air battery (projected) 2.00 2.00

Values shown are indicative, individual battery packs will deviate from these values. Sources: Royal Academy of Engineering (2010); Christensen et al.(2012); Whittingham (2012).

36 J PROD INNOV MANAG M. HOLWEG2014;31(1):33–42

ICE powertrains on a WTW basis, field trials consistentlyshow that batteries fall far short of their theoreticalcapabilities in practice (Christensen et al., 2012;Whittingham, 2012). So-called “metal air” batteriespromise a step change in terms of energy density, but sofar lack the level of maturity needed for any serial pro-duction in the medium term.

On a WTW basis, current electric and fuel cell vehiclesconsistently produce between 90 g CO2/km and 140 gCO2/km in field trials, which is on par with the mostefficient internal combustion engines and hybrid vehiclesavailable at present (Contestabile et al., 2011; RoyalAcademy of Engineering, 2010). The most importantvariable in this respect is the grid energy mix, as both EVand FCV technologies rely on increases in alternativeenergy sources, or nuclear power, to drastically reducethe WTW carbon emissions they produce (Holdway,Williams, Inderwildi, and King, 2010). To illustrate thesensitivity of EV carbon emissions on the carbon inten-sity of the energy mix, let us consider the Tesla roadster:on the United Kingdom’s energy mix (which has a carbonintensity of c.545 g CO2/kWh), it produces 130 g CO2/km. Using the same car in France, however (where thehigh content of nuclear energy reduces carbon intensity toc.117 g CO2/kWh), it would only incur 26 g/km. Equally,if electricity were entirely produced from lignite, theTesla’s CO2 emissions would even rise above 220 g/km(Medawar and Holweg, 2011).

As a result of this dependency, currently available“alternative powertrain” hybrid electric vehicle (HEV)and EV vehicles perform on par with the best-performingICE vehicle. Comparing four compact vehicles under theU.K. energy mix, the Toyota Prius, Nissan Leaf, GMVolt, and the Golf Bluemotion, the Toyota performed bestat 107 g CO2/km, followed by the Nissan Leaf (111 g/km), the Golf Bluemotion (121 g/km), and the GM Volt(petrol mode: 131 g/km; U.K. electric mode 126 g/km)(Medawar and Holweg, 2011). A sensitivity analysisshows very clearly that the grid carbon intensity is thecrucial determinant for overall HEV and EV emissions.

It is against this background that any new powertraintechnology needs to be assessed. In the following section,the technology roadmaps will be presented, outlining thekey stages and barriers, as perceived by industry.

Consensus Roadmaps

Roadmap Development

The technology roadmaps were developed through itera-tive focus groups of vehicle manufacturer R&D staff,

component supplier representatives, as well as Govern-ment representatives. The objective was to detail a com-monly agreed technology roadmap to the UnitedKingdom in prioritizing its R&D investments in meetingthe nationally set CO2 reduction challenge. Vehiclemanufacturers pursue different technologies individually.The roadmaps were thus developed as “lowest commondenominator” in order to share common views on thedifferent powertrain technologies, and to recognize thatthe same technical and commercial barriers apply to allvehicle manufacturers alike. The roadmaps are neitherbinding, nor are they expressions of intent. Their mainpurpose is to provide a joint statement that helps govern-ment to guide its policy efforts in defining researchfunding priorities for the national research councils,R&D subsidies, skill development, and taxation in orderto support national policy.

Technology Roadmap for Passenger Cars

The technology roadmap for passenger cars, shown inFigure 2, shows the progression from a traditional inter-nal combustion engine toward mild and full hybrids, andsubsequently toward electrical vehicles and fuel cellvehicles. The roadmap deliberately features both electricvehicles and fuel cell vehicles, as these are not seen ascompeting technologies at national level (although theyare of course at the firm level). These progression pathshave been linked to the relative CO2 targets and theirrespective timings.

As the famous “sailing ship effect” (Rosenberg, 1976;Utterback, 1996) predicts, the initial step is based onevolutionary developments of the existing combustionengine in terms of weight and drag productions, as wellas continued innovations of the internal combustionengine itself, such as heat gas recovery. This step will alsoinclude the introduction of structural composites, activeaerodynamics, and a new generation of small lightweightvehicles for urban use, as well as larger low drag vehiclesfor larger distances. It should be noted that the sharedview is that the current ICE will remain in full productionuntil 2040, and possibly beyond.

The next interim step will be the continued expansionof micro- or mild hybrids (HEV), which includes belt-mounted and crank-mounted starter generators, as well assmall lead acid, NiMh and Li-Ion batteries to store theenergy. These micro- and mild hybrids will be replacedby full hybrids as and when battery costs are reducedsignificantly from the current levels of €600/kWh.On-board electric voltage is then likely to increase to40–150 V and the battery technology based on lithium

ROADMAPS FOR LOW-CARBON POWERTRAIN TECHNOLOGIES J PROD INNOV MANAG 372014;31(1):33–42

ion technologies. It is unlikely that Li-Air batteries willbe available for the mass market by 2020. A further stepchange in battery cost and weight reduction is required toexpand to a mass market, while alternative energy storagesolutions such as flywheels, capacitors are thought to befurther enabling technologies.

The third step in this transition toward plug-in hybrids(PHEV) and EVs will take place if accompanyingchanges in electric energy storage have also occurred, andthe battery cost and battery life are acceptable to theprivate consumer. Furthermore, it is noted that gridsupply needs to be both available, and “green” enough toprovide sufficient fuel at an acceptable carbon emissionlevel. The high cost for initial PHEV and EV vehicles arelikely to require fiscal intervention for a mass marketadoption. Interestingly, the shared view is that ICE com-ponents will remain compatible with increasing bio- andsynthetic fuel content.

The fourth step toward the introduction of mass-market EVs, as well as FCVs, will first and foremostrequire charging infrastructures for electricity and hydro-gen, respectively. For either electric or hydrogen technol-ogy to take a major share of the transportation fuel sector,a substantial use of renewable energy is needed to provide

a favorable CO2 balance for the energy generation.Longer term CO2 reduction is seen as fully dependent ongreening of the electricity supply.

While several manufacturers that contributed to thetechnology roadmap are pursuing different powertraintechnologies, there was a common view as to which con-dition will favor electricity over hydrogen in the long run:the key metric is the relative performance of battery costand energy density versus the cost per kilowatt for thefuel cell. Similar to batteries, the cost and range forhydrogen storage will determine its relative performance,and will only become feasible for the mass market if thecost per kilowatt of fuel cell power reduces significantlyover current values. The one advantage that hydrogenpossibly carries is the reduced refueling time, in par-ticular if a liquid organic carrier can be developed (suchas, for example, an improved version of Carbazole/9-azafluorene, which due to its toxicity is no longer beingconsidered as a viable candidate by industry).

In conclusion, all vehicle manufacturers could agreeon a common high-level powertrain technology roadmapthat recognizes a set of common technical and commer-cial barriers. Also, it was very clear that in the near tomedium term, there is no alternative available to replace

Figure 2. Technology Roadmap for Passenger Cars. Source: Automotive Council UK

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the internal combustion engine. Efforts will be confinedto weight, drag, and displacement reduction, as well as acontinued innovation of the existing technology. Theintroduction of increasing levels of hybridization andelectrification is highly dependent on the availability ofbatteries, hub motors, and power electronics technologythat offer a higher energy density and lower cost.

Technology Roadmap for Commercial Vehicles

The technology roadmap for commercial vehicles is char-acterized, first and foremost, by the diversity of dutycycles that commercial vehicles operate. It was seen asmost useful to categorize commercial vehicles into fourcategories: light-duty vehicles up to 3.5 metric tons,medium-duty vehicles up to 26 metric tons, buses andcoaches, and heavy-duty vehicles up to 44 metric tons.Second, it was made clear that the duty cycles foron-highway and off-highway are a key distinctionbetween these commercial vehicles that is of utmostimportance when it comes to the definition of low-carbonpowertrain options.

Figure 3 shows the joint technology roadmap forlight-, medium-, and heavy-duty cycle vehicles. Coretechnologies that apply to all duty cycles includeadvanced aerodynamics, selective light-weighting, and

intelligent vehicle logistics that increase operational effi-ciency on- and off-highway. In terms of technologicaladvancements, IC engine improvements, the introductionof biofuels, and ancillary electrification are seen as ben-eficial for all commercial vehicles. Further technologicaladvances include friction reduction, downsizing,advanced boost combustion, and emission controlsystems, as well as a focus on total powertrain efficiencyincluding transmission drivetrain and actuator systems tooptimize the use of energy. For heavy-duty vehicles thatare used on-highway there, at present, does not seem tobe any alternative but to use carbon-based fuels. Theenergy density and range requirements simply cannot bemet by any other current technology. One potentialchange may be a reduction in carbon intensity for the fuelused for long-haul duty cycles.

In terms of medium-duty vehicles, such as trucks of upto 26 metric tons or backhoe loaders and other construc-tion equipment, there was a perceived possibility to intro-duce micro- and mild-hybrid vehicles for medium-dutyapplications, where “stop-start”/“accelerate-decelerate”dominates in the duty cycle. The adoption is dependent onboth the charging infrastructure and advances in batterytechnology, as well as the duty cycle to be performed.Particular opportunities for hybrid technologies are seenfor mixed-duty cycles, as well as urban deliveries.

Niche EVs

20202000 2010 2030

Full Hybrid

Micro/Mild Hybrid

130 100EU Fleet Average CO2 Targets (g/km)

2040

Plug-In Hybrid

Mass Market EV Technology

IC Engine and Transmission innovations (gasoline/diesel/ hydrogen /renewables)

Demonstrators Fuel Cell Vehicle

Demonstrators

Charging Infrastructure

H2 Infrastructure

Energy Storage Breakthrough

Energy Storage Breakthrough

Fuel Cell Stack & H2 storage Breakthrough

Vehicle Weight and Drag Reduction

??

2050

Figure 3. Technology Roadmap for Commercial Vehicles. Source: Automotive Council UK

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For light-duty vehicles and inner-city applications,the progression toward low-carbon powertrains is verysimilar to that of passenger car technology but generallylagging in timing. Also, it was noted that a comparativelylower energy storage requirement was needed, whichenables a more rapid rate of electrification of light dutycommercial vehicles. Compared to passenger cars, themore predictable duty cycles and the ability to rechargethe vehicle overnight at a fixed location are key enablersfor the introduction of electric and hybrid vehicles with alower energy storage capability.

In conclusion, the key distinction between passengercars and commercial vehicles is the duty cycle for therespective application, and the resulting power require-ments that will determine the applicability of alternativepowertrains. Second, refueling and range requirements—particularly for higher power and heavy duty cycles—arelikely to stand against current technical restrictions inenergy storage and range associated with electric andhydrogen vehicles. Third, the total cost of ownership willbe the determining factor for the introduction of newpowertrain technologies, as institutional buyers applystringent commercial criteria for their vehicle fleets.

While long-haul vehicles and high-power productswill continue to depend on innovations of the existingpowertrains and transmissions, the shift toward alterna-tive powertrains will first and foremost start with light-duty vehicles on short range (e.g., urban delivery) cyclesthat benefit most from technologies developed in the pas-senger car market. Centrally refueled vehicles and urbanusage cycles offer tremendous opportunities for the intro-duction of low-carbon powertrains, as here the reducedrange requirement will significantly reduce the overallcost of the powertrain system. This is seen as a distinctadvantage over the passenger car market, where thevariety of duty cycles (from daily commute to holidaytrip) requires a range comparable to that of an ICEpowertrain.

Effective Government–Industry Collaboration

In addition to the actual outcome, the process of devel-oping the technology roadmaps discussed above also pro-vides insights into the nature of government–industryrelationships. The U.K. Government has a checkeredhistory with its linkages to the automotive industry: arecurring issue of complaint has been the apparent lack ofsupport of the U.K. Government for manufacturing as awhole, while the perception has been that services ingeneral, and financial services in particular, were muchmore supported (Central Policy Review Staff, 1975;

Gibson, 2002). Recent surveys confirm that this percep-tion persists to the present day (Holweg et al., 2009).Thus, from an academic standpoint, the establishment ofthe “Automotive Council” as a formal body to enable thisstrategic dialogue offers a first-hand opportunity to studythe interaction of firm-level innovation strategy withnational industrial policy.

Most interesting in this respect has been to observe thesimultaneous complementarity and conflict between thegovernment’s position and that of the different industryplayers. From the government’s point of view, the funda-mental requirements for any interaction with industry aretwofold: first, that it meets the political objectives (asrelated to economy issues such as employment, but alsoenvironmental regulation such as climate change), andsecond, that this interaction is auditable and fair, in as faras it abides by national and European competition regu-lation. This latter point is important, as individual firmsoften will argue for subsidies on the basis of their indi-vidual contribution to the national economy. While thegovernment does not dispute this contribution, interactingon a “one-to-one” basis behind “closed doors” is prob-lematic as this could be construed as favoritism. In thepast, recurring UK governments have erred on the side ofcaution, which led to the perceived lack of interest andsupport. In this regard, the key lesson for the U.K. Gov-ernment has been that “nonfinancial” initiatives are asimportant as financial initiatives related to tax policy orsubsidies of various kinds. Germany and France are com-monly mentioned by industry as good examples of hownational governments maintain a continuous strategicdialogue with industry. As France and Germany arebound by the same European competition regulation asthe United Kingdom, the key difference is indeed nonfi-nancial support, whereby a constant dialogue betweenindustry and ministers at state and federal level are thenorm. This dialogue is not need or project driven, butongoing, and extends into the national research council toalign national research spend with industry priorities.

The main lesson for industry has been that the Auto-motive Council has required firms to shift their attentionaway from individual company needs and toward thecollective needs faced by all industry players. The tech-nology roadmaps are a good example of this “lowestcommon denominator” of views shared by all firms whatphases and barriers there are in the transition towardlow-carbon powertrains while still reflecting areas of theR&D activities of individual firms. Rather than asking forspecific firm-level subsidies, the focus has shifted towardprecompetitive strengthening of the U.K. automotiveindustry as a whole, which in turn reinforces govern-

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ment’s ability and willingness to contribute to the Auto-motive Council. By taking the Council’s activities intothe mutually agreed precompetitive stages of supportingthe automotive industry through the national researchcouncils, the local development agencies, and the R&Dsupport scheme, the government has provided the coher-ent approach to industry support it was so frequentlycriticized of lacking in the past.

Outlook

Contrary to commonly held public perceptions, the tran-sition toward a low-carbon transportation system will bea long and gradual one. The internal combustion enginewill remain the main source of propulsion for motorvehicles for the first part of this century, both in its currentform as well as additional range extender in HEVs/PHEVs, and it is likely that it will not be displaced at allfor certain commercial applications that require high-energy density and long range. The reason is simply thatwe still lack a clear alternative for carbon-based transpor-tation fuels and powertrains: both EVs and FCVs arelikely contenders without any clear favorite at this pointin time. Both technologies suffer from structuraldisadvantages—in terms of energy density, weight andcost of the battery pack for EVs, and in terms of storageand distribution infrastructure for hydrogen in case ofFCVs. While EV and FCV reduce TTW emissions tozero, on a WTW basis they are about even in terms of CO2

emissions on the United Kingdom’s current energy mix.It is clear that the adoption of a new dominant

powertrain design is intrinsically linked to the way inwhich energy is provided. Unless large-scale alternativepower generation will provide a significant reduction incarbon intensity per kilowatt hour, on a WTW basis, noneof the presently proposed alternative powertrain tech-nologies can deliver the significant reduction in carbonemissions they promise. Within the European context,biofuels are not a sustainable alternative either, unlike incountries like Brazil (Gallagher, 2008). Thus, one has toconclude that the move away from the ICE as the mainsource of propulsion in our transportation systems isinversely proportional to our ability to generate afford-able, alternative low-carbon energy. In this respect, theperceived risks by industry seem indeed justified, as theeconomic case for investing in these new technologies isanything but clear. Several studies foresee the turningpoints of alternative powertrains outselling traditionalICE vehicles as early as 2020, however in 2011, themarket penetration of electric vehicles in the largest auto-motive markets ranged from .4% (in Japan) to as little as

.03% (in China). Equally, the lack of a hydrogen infra-structure means that FCV vehicles so far are largely con-fined to inner-city commercial applications, with veryfew passenger car models on sale.

The decision of whether electrical or hydrogenvehicles will become the dominant powertrain design hasnot been made, as so far too many technical uncertaintiesprovide unclear economic cases on either side. This com-petition will eventually be decided by the relativeimprovement of battery capacity, weight, and cost perkilowatt hour in relation to the ability to store, distribute,and retrieve hydrogen within the vehicle at considerablyless loss than at present. Battery cost is commonly pre-dicted to drop from €600 per kWh to €250 per kWh by2015, while metal-air batteries promise another stepchange in energy density in the medium term. Yet, anybattery technology will always suffer from a relative dis-advantage in terms of refueling time, unless a widespreadnetwork of stations can be built to exchange modularbattery packs (also referred to as the “Better Place”model, based on the now defunct firm of the same namethat offered this service). In this regard, the potentialdevelopment of an organic liquid carrier for hydrogenmay well sway the balance in the long run, as this wouldmean that the existing petrol distribution infrastructurecould be harnessed for hydrogen distribution.

While the long-term decision of which powertraintechnology, or technologies, will become the next domi-nant design is yet to be determined, the “sailing shipeffect” is noticeable in as far as that the rate of improve-ment of the existing ICE technology has clearly acceler-ated in the light of the new powertrain technologies underdevelopment. The interim stage in this transition is in factalready well defined, as all manufacturers agree that agradual electrification of the ICE powertrain (from ancil-lary electrification toward mild hybrids, full hybrids, andeventually plug-in hybrids) are the likely interim stagetoward a new vehicle architecture. Electrification hasseveral advantages: first, any powertrain that uses electricenergy only (even if only for short distances) has zerotailpipe emissions, and can thus be used in areas that aresensitive to emissions (such as inner cities). Second,internal combustion engines are not well suited (that is,most inefficient) to operate in stop–start traffic patterns.Most importantly however, bringing in an electricpowertrain allows for the merger of vehicle systems:mechanical and electrical systems such as for braking andsteering can be combined within the traditional vehiclearchitecture. Hub motors, for example, could providepropulsion, braking, anti-lock braking (ABS), and elec-tronic stability program (ESP) functionality—all in one

ROADMAPS FOR LOW-CARBON POWERTRAIN TECHNOLOGIES J PROD INNOV MANAG 412014;31(1):33–42

system. This allows for further content and weight reduc-tion of the vehicle, which results in increases in fuelefficiency (Schäfer, Heywood, Jacoby, and Waitz, 2009).

As the “last gasp” of the ICE, the combination of apartly electrified powertrain working in conjunction witha small traditional ICE in a HEV or PHEV layout offersconsiderable potential for the passenger car market,where customers suffer from “range anxiety” and showan unwillingness to shoulder the financial risk inherent inbattery pack degradation. For light commercial vehicles,this transition will be even easier, as the regular andpredictable duty cycles of commercial vehicles willreduce the need for an energy storage that provideshighway-distance range, which will in turn greatly reducethe cost of the new powertrain configuration. On the otherhand, it is also clear that for on-highway commercial andheavy duty cycles, there is no alternative to liquid carbon-based fuels at present.

In conclusion, the adoption of new powertrain tech-nology in the automotive industry is, for the foreseeablefuture, likely to be an incremental change away from onetechnology, to many operating in parallel. This transitionis likely to be led by the incumbents leveraging theircomplementary assets (Teece, 1986), working with newpartners on the electrification within the boundaries of theexisting vehicle architecture. The decision as to whichpowertrain will replace the ICE in the long run however isnot an endogenous one to the automotive industry, butone that will be enabled only by a general shift towardlow-carbon alternative energy generation that can providethe basis for a new transportation fuel. Until then, it willbe more of the same, but better.

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