The question of which clean technology will prevail in the car of the future continues to permeate the auto industry. Plug-in electrified vehicle sales led the way in recent months, breaking the 1% mark of total sales in the U.S. for the first time in November; and seeing ambitious PEV product launch announcements from Volkswagen, Daimler, BMW, and Toyota in the fall. That was triggered by Tesla receiving more than 400,000 down payments soon after showing its Model 3 reveal during the spring; and post-VW “dieselgate” scandal government crackdowns increased in Europe, the U.S., and South Korea.
Hydrogen fuel cell vehicles are starting to see new vehicle launches and more stations being built, but it still has a very slight presence in the global market. But long-term, global auto executives think fuel cell vehicles will win out over PEVs in volume sales. One of the issues involved is that California’s zero emission vehicles mandate counts battery electric vehicles and fuel cell vehicles, but is phasing out plug-in hybrids; and nine other states are also following California’s ZEV guidelines.
A new study from KPMG took a deep look at this issue, and several other technology innovations and pressures shaping the next phase of the industry’s future. Here are a few key findings:
- KPMG’s Global Automotive Executive Survey 2017 interviewed almost 1,000 senior executives from auto industry companies, including automakers, suppliers, dealers, financial services providers, rental companies, mobility services providers, and companies from the information and communication technology (ICT) sector. Additionally, more than 2,400 consumers from around the world were surveyed to share their perspectives and have them compared against the opinions of leading auto executives.
- As for top issues auto executives see shaping the industry in the near future:
No. 1: battery electric vehicles (BEVs) with regulatory pressure pushing awareness for electrification
No. 2: connectivity and digitalization
No. 3: fuel cell electric vehicles
No. 4: hybrid electric vehicles
No. 8: mobility as a service/carsharing
No. 9: autonomous and self-driving cars
- Battery electric mobility shot up from No. 9 in 2015 to No. 1 in 2017.
- KPMG consulting analysts see the success of BEVs depending on infrastructure and application. “Success of BEVs depends on infrastructure and application. Coordinated actions for infrastructure set-up, and a clear distinction of reasonable application areas (e.g. urban, long-distance) needs to be established,” said Moritz Pawelke, global executive for automotive at KPMG.
- The report sees a few market trends clashing together, lost in translation, between evolutionary, revolutionary, and disruptive key trends that all need to be managed at the same times. Industry executive are “torn in between” as traditional combustion engines have become even more technologically relevant, but socially unacceptable. It’s also a new phase in the industry history where connectivity, mobility services, and automated vehicles are approaching faster than expected.
- Executives are tipping toward fuel cell vehicles may be that they have a strong attachment to the existing infrastructure and traditional vehicle applications. That comes from fast fueling and liquid gas pumps at fueling stations, and an existing fueling infrastructure carrying hydrogen in pipelines and tanker trucks.
- Setting up a user-friendly charging infrastructure is the problem leading 62% of the surveyed auto industry executives to believe that BEVs will fail.
- In contrast, 78% of executives believe fuel cell electric vehicles will be the “golden bullet of electric mobility.”
- “The faith in FCEVs can be explained by the hope that FCEVs will solve the recharging and infrastructure issue BEVs face today. The refueling process can be done quickly at a traditional gas station, making recharging times of 25-45 minutes for BEVs seem unreasonable. However, this technology is far from market maturity and will bring new unsolved challenges like the cooling of hydrogen or the safe storage in a car,” the study said.
I would also list a few other major challenges fuel cell electric vehicles face competing against PEVs and petroleum-powered vehicles:
- Less experience with the technology by consumers and fleet operators. There’s concern over safety, reliability, cost, and refueling infrastructure outside of California.
- Sales volume has been soft and will take years to grow. For example, HybridCars’ Dashboard reports that there were 1,034 Toyota Mirais, the top-selling fuel cell vehicle by far, in the U.S. during 2016. That compares with 29,156 Tesla Model S units and 24,739 of Chevy Volt units, the two top selling plug-in models in the U.S. last year.
- Europe is beating the U.S. in hydrogen stations, but the sales are still behind the limited numbers seen so far in the U.S. The European Alternative Fuels Observatory reported in December that there are over 75 hydrogen fueling stations in operation in Europe, more than double the U.S. with its current level being 33 as of early December, according to U.S. Department of Energy’s Alternative Fuels Data Center. EAFO also reported that there are about 500 passenger fuel cell electric vehicles on European roads, with only about 200 of these units sold during 2016.
- Fast chargers are breaking through in the U.S., and will see more activity in Europe and Asia. That’s being led by Tesla’s Supercharger network and the EVgo and ChargePoint networks in the U.S.; and German automakers in Europe.
- Hydrogen stations are being established as singular, hydrogen-only stations and not as part of existing retail gas stations. The KPMG study indicates that those surveyed and writing the report assume that hydrogen pumps will be added to gas stations, but that hasn’t been the case so far.
- Hydrogen stations cost about $1 to $2 million per station to build, and need to have their hydrogen supply trucked in or coming through a hydrogen pipeline. While the Shell hydrogen station in Torrance, Calif., sponsored by Honda and Toyota, has fuel coming in from a pipeline, the other stations usually have the fuel delivered by tanker trucks like the ones used at gas stations. Government backing is helping a lot of these hydrogen stations to be developed in California, Europe, and Japan, but long-term, the fueling question will need to be resolved. That would likely include the home hydrogen station concept being explored by Honda.
Here are a few more points to consider on the future of cars:
- Automakers are still resisting spending enough on marketing PEVs to help get car buyers to take them more seriously. The Northeast States for Coordinated Air Use Management, a nonprofit group made up of air-quality regulators from eight states, just issued a report on this topic. Car companies are targeting them at a few select state like California and not going national like they are with gasoline-powered vehicles. Automakers are spending their finite ad budgets on vehicles known to sell well and generate profits, like pickups, SUVs, and luxury cars. PEVs haven’t become profitable for them yet.
- Hybrids aren’t going away even if ZEV regulations are heading in that direction. Over the next 5 years, 53% of automotive executives in the KPMG study are planning to highly invest in plug-in hybrids and 52% in ICEs and full hybrids. Hybrids make up nearly 3% of new vehicle sales compared to plug-ins, and plug-in hybrids are doing very well including the Chevy Volt in the U.S. and the Mitsubishi Outlander PHEV in Europe.
- Carsharing, ride-hailing, and ridesharing aren’t just a momentary fad. According to the KPMG study, by 2025, more than half of all car owners today will no longer want to own a car. That comes from 59% of auto execs and 35% of consumers surveyed. Auto execs think that disruption will led to more support for mobility as a service, and shared vehicles and trips. I would agree with other analysts who also believe vehicle electrification will play a big part in the shared economy. Young consumers tend to be more interested in electric vehicles and supportive of the technology, especially if it’s powered by renewable energy. They’re more likely to use Uber, Lyft, Zipcar, and other mobility services and have been losing interest in owning cars.
- China is the leading auto market in the world, and sales of “new energy vehicles” are expected to grow. India will soon be the largest nation in the world, surpassing China’s population in the near future based on current birth rates. About two thirds of the auto executives interviewed think that the global share of new vehicle sales will reach 40% sold in China by 2030. Two-thirds of those interviewed think that India won’t come anywhere near China in new vehicle sales in 2030. PEV sales in India have been slight compared to China, Japan, South Korea, the U.S., and Europe.