Boy, was I wrong about KiOR as a biofuels success story

KiOR plant in ColumbusKiOR Inc., which operates a commercial-scale cellulosic biofuel plant, may be closing its shutters very soon. Backed by venture capitalist Vinod Khosla, there’s been a lot of hope in KiOR as a symbol for possibility in advanced biofuels as a clean transportation fuel. Its catalytic process converts woody biomass and non-food crops into gasoline and diesel and can be fueled through the existing US infrastructure. Khosla just made a commitment for near-term financing, but the company needs more additional capital by April 1 to stay in operation. The company needs to meet certain milestones to bring in at least $25 million by the end of this month; part of that milestone performance is bringing its Columbus, Miss., biofuel plant through an upgrade. If additional funding doesn’t come through, it’s likely to default on its debts and may file for bankruptcy. All of this was announced not long after the company reported a $347 million loss for 2013.

In October, this advanced biofuels producer received $100 million from Khosla Ventures LLC and Gates Ventures LLC to expand production at the Columbus plant. As I wrote about back at that time, it looked very promising for KiOR, being the first US company to build its own commercial scale cellulosic biofuel plant – creating jobs, economic growth, and clean transportation fuel. If KiOR goes belly up, it will provide more ammunition for biofuels critics (and there are quite a few out there). The biofuels industry has only produced a small fraction of the level envisioned in 2007 by the renewable fuel standard. Even with the US Environmental Protection Agency’s cutbacks on ethanol blend and advanced biofuels proposed in November, that’s not the real problem. It’s a startup industry that needs more success stories, so this one would hurt. For several months, I had KiOR on the green transportation stock market index that I show monthly in Green Auto Market Extended Edition. The company’s stock has not been performing well lately. The company may need to be removed from the chart.

How the troubles at KiOR will affect the advanced biofuels industry is still unknown. There are a few biofuels companies that are performing very well financially, and are giving hope to investors. One of them, Aemetis, another publicly traded company, also produces advanced biofuels for the US market – and deployed commercial-scale production in the past two years. Aemetis recently announced record quarterly and annual gross profit. It’s used a different business model than KiOR, and there are several other highly profitable domestic biofuels producers, according to Biofuels Digest’s Jim Lane.

    Big Picture: Northern California AltCar Expo starts up, Intertek working with DOE on AFV data collection for petroleum use reduction

    AltCar Expo logoAltCar Expo is continuing to expand beyond Santa Monica, Calif., with the first Northern California AltCar Expo held at Richmond’s Craneway Pavilion on Friday and Saturday. Plug-in vehicle readiness and deployment of alternative fuel infrastructure tools for local government agencies were explored in speaker panels, and electric vehicles, hybrids, and vehicles powered by hydrogen, natural gas, and propane were available for test drives. AltCar Expo Texas will host its fifth annual meeting March 28-29 at the Irving Convention Center; it’s taking place in coordination with the Propane Engine Fuel Summit on March 27.

    The free two-day event in Richmond, Calif., kicked off Friday morning with remarks from Mayor Gayle McLaughlin, Contra Costa County Supervisor John Gioia, and Randall Winston, special assistant to the executive secretary office of Gov. Jerry Brown. Scheduled speakers on Friday included Jon Coleman of Ford, Steve Ellis of Honda, Jeannie Lam of Nissan, and Christine Kehoe of the California Plug-In Electric Vehicle Collaborative. “Plug-In Electric Vehicle Readiness Plan for Local Governments & Industry,” was hosted by the Association of Bay Area Governments, the Bay Area Air Quality Management District, and the Metropolitan Transportation Commission. The session focused on suggested actions elected officials can take in their communities to support electric vehicle deployment. “Best Practices for Deployment of Alternative Fuels Infrastructure-Tools for Local Government Agencies” was hosted by the Bay Area Air Quality Management District, and the San Francisco, East Bay, and Silicon Valley Clean Cities Coalitions. It focused on best practices for the sighting and permitting of natural gas and hydrogen infrastructure.

    The daylong Propane Engine Fuel Summit in Texas will feature Texas schools and businesses using propane autogas. Presentations from the City of Fort Worth, CleanFUEL USA, Dallas County Schools, Dallas-Fort Worth Clean Cities, and Northwest Propane Gas Co., will cover topics such as refueling infrastructure, economic and environmental factors, and propane industry equipment. Santa Monica’s flagship AltCar Expo, the ninth annual, will be held September 19-20 at the Santa Monica Civic Center in Santa Monica, Calif.

    And in other clean transportation news……..

    Intertek is working with US Department of Energy (DOE) and several national laboratories to collect data on alternative fuel vehicle street performance and reduction of petroleum consumption. Testing includes vehicle performance, durability, and operational costs. Intertek has a lot of experience in this space, being a leading provider of global testing, quality, and safety solutions. Most battery electric and plug-in hybrid models have been included in the study, along with hybrids, the Honda Civic Natural Gas, and the Volkswagen Jetta TDI. Vehicle performance data is being collected through Intertek’s data logging systems at a closed course test track. Fleets are also involved in the data collection – as the test models are driven daily for nearly 200,000 miles over three years. Each car is equipped with Intertek’s data loggers, which use Wi-Fi to automatically upload the operational data.

    Coda Automotive has gone away, but its new identity – Coda Energy – is up and running. Coda Energy has installed about 20 of its “CODA Core” Tower systems at commercial and industrial sites across California. Fortress Investment Group, which picked up Coda’s assets last year in June for $25 million during Coda Automotive’s bankruptcy, will be providing financial backing for a total of 100 systems over the next few months. Fortress is investing about $64,000 for each 30-kilowatt, 40-kilowatt hour lithium-ion battery based unit. Coda’s new combined system received Underwriters Laboratories (UL) 1973 safety standard certification last month. Coda’s customers for this grid battery system will pay only 50% of whatever savings the systems provide to annual utility bills. Reducing demand charges is the primary economic driver for these battery systems – and these types of battery storage systems are expected to become more important going forward as a way to retain renewable energy for electricity.

    Hyundai Motor Co. is entering the battery-powered vehicle market in 2016 through its Kia Motors subsidiary. An electric version of the Soul compact will start being built in Korea next month, eventually ending up at destinations in the US and Europe. The battery electric Soul is expected to run 92 miles per charge; the global sales target for this year is 5,000 Soul EVs. In other news, Hyundai has another MPG problem – the automaker is restating the mileage rating on another one of its vehicles – the 2014 Sonata sees its rating drop from 29.6 mpg to 28.4 mpg. In 2012, Hyundai and Kia had an investigation by the US Environmental Protection Agency and acknowledged that its original stated mileage on cars like the Hyundai Elantra and Kia Soul had been inflated somewhere between one and six miles per gallon.

    Biofuels will continue to see growth, but at a much slower pace than originally expected, according to a Lux Research study. The industry is expected to grow to 60.4 billion gallons a year between 2013 and 2017, a 3.2% annual growth rate – but far less than the 19.6% annual growth rate experienced between 2005 and 2013. The “food vs. fuel” debate and imminent blend limits for biodiesel and ethanol by the US Environmental Protection Agency have created impediments. Next-generation feedstocks like waste oils and cellulosic biomass are not tied up in the food supply and could unlock significant economic advantages; and next-gen biofuels – such as renewable diesel and butanol – can offer higher blends, but are not quite mature, according to the report.

    Volkswagen is testing out lithium-air battery technology that could triple storage capacity. The new battery could hold much more power than its size would indicate – a 24.2 kWh battery perhaps holding 80 kWh of energy; its range could skyrocket up to 300 miles per charge. VW is keeping it under wraps for now – including when it might be installed in one of its cars.

    Walmart is testing out a “WAVE” vehicle in its fleet – Walmart Advanced Vehicle Experience – which will be 20% more aerodynamic than counterparts because it’s being made out of carbon fiber; its micro-turbine hybrid powertrain can run on a variety of fuels. There’s also an electric motor and battery storage system being tested out. The carbon fiber body would cut out 4,000 pounds from the truck; it’s 53 feet long – the first time sheets that large have been manufactured. The goal here for Walmart is to double its fleet fuel efficiency by 2015, which the company says it’s 80% on the way to meeting.

      New Jersey’s Tesla decision a watershed for dealer franchise vs. OEM corporate stores

      Tesla store“This [the ban on Tesla] is a disturbing trend and deals a big blow to the future of automotive retailing. It also pushes the US behind the rest of the world. So far the resistance to Tesla and any kind of progressive thinking in auto sales had been relegated to the southern states. New Jersey’s decision could now influence states such as New York and Massachusetts, which have so far been more supportive of Tesla.” – Kumar Saha, senior industry analyst with Frost & Sullivan’s Automotive and Transportation research group.

      On March 11, New Jersey Gov. Chris Christie’s cabinet members and appointees voted to block Tesla from direct sales. The administration ruled in favor of a state requirement that new cars must be sold through licensed franchises from a rule proposed last October by the New Jersey Motor Vehicle Commission; that happened around the same time Tesla opened two of its own stores in the state. Tesla CEO Elon Musk took a shot at Gov. Christie, accusing the expected 2016 Republican presidential candidate of making a “backroom deal” to keep Tesla out of the state. Musk put more pressure on Christie, whose administration has been taking heat for alleged bullying of opponents – the most notable event occurring last year when former high-ranking officials faced potential criminal charges after ordering lanes approaching the George Washington Bridge be closed, creating a traffic nightmare.

      This dramatic decision by New Jersey follows several state-by-state battles in the direct OEM sales versus state franchise law battle. Auto dealers in Ohio, New York, Minnesota, and Georgia have fought Tesla. Texas dealers successfully backed a law setting the nation’s toughest restrictions on Tesla. Arizona, Colorado and Virginia also imposed limits.

      In New Jersey, the New Jersey Coalition of Auto Retailers spent more than $155,000 on lobbying last year. Gov. Christie received about $65,000 in campaign contributions from people associated with the auto industry during last year’s primary and general election campaigns.

      There’s a lot at stake in how these lawsuits and lobbying ventures play out. The legal history of state franchise laws protecting dealers are not too clear – that varies by industry with many retail sales transactions being conducted in corporate stores without any franchised operators in these branded networks. The state franchise laws are about a century old now, and other automakers have taken on the fight of breaking them long before Tesla Motors. Dealer networks have been very successful at lobbying in state legislatures and winning court battles.

      Ford Motor Co. and General Motors Co. attempted to operate a few company-owned stores in the late 1990s and early 2000s as internet sales became more economically viable. Dealers won that battle – today you can shop for, and spec out, cars on OEM websites, but you have to buy or lease them through a dealership. Truecar.com experienced a similar experience after its 2011 Superbowl commercial promising the best local market price from dealer in their area. Dealers in several states attacked Truecar for allegedly violating laws regulating auto brokering, price advertising, and other legal issues. The onslaught hurt Truecar’s finances, as about 2,600 dealers bailed out of Truecar; it forced the company to spend much of the year overhauling its relations with dealers.

      As Frost & Sullivan analyst Kumar Saha said, automotive retailing is changing fast. Dealers may be winning some of the state legal battles with Tesla, but may be losing a lot more business in the future as the business model changes.

        Consultant’s notebook: Forget Facebook, best deal on alternative fuels

        ConsultingIt’s been about two months since I launched LeSage Consulting – thanks very much for the support and feedback. Here are some of my notes on the experience so far……

        Social Media Hits and Misses:  As internet marketing guru Bob Bly wrote about last week, social media has limited value for B2B marketing – especially Facebook (which somehow produced $7 billion in ad revenue last year). Facebook is great for photo galleries, “friending,” and reading about the fun one of your old high school chums is having standing in line at Starbucks. Everyone has an account on Facebook and, I would suspect, that in the next five years, there will be 10,000 more Facebook-type sites customized to a plethora of groups – special interests, hobbies, geography, politics, spirituality, environmental, business networking, etc. I’m seeing a lot more value in LinkedIn and Twitter. LinkedIn is very good for networking with like-minded professionals (check out my Clean Transportation interest group) and getting people to subscribe to your e-newsletter and take your survey. I’ve been surprised to see how important Twitter has become for business networking and special interest groups. Some companies are announcing new product and service offerings on webinars coordinated with tweets.

        Compressed natural gas (CNG) is doing the best in transportation fuel prices; charging and alternative fuel stations are seeing growth and propane is still number two after charging stations (with E85 close behind propane). For those interested in receiving monthly reports on fuel prices, sales figures on hybrids and electric vehicles, and stock market performance of AeroVironment, Clean Energy, Tesla Motors, and others, you can opt for a paid subscription to Green Auto Market Extended Edition. You can also find a free sample copy of it there, too, on this site.

        The Value of Time:  Consultants need to have specialized expertise in their fields from work experience, education, accomplishments, and professional networking relationships – not to mention thousands of hours out in the trenches finding out what’s really going on out there. As a former consulting colleague (and current significant other) says to me all the time – What’s your time worth? Sending a proposal to a current or prospective client with fees based on project cost, or hourly estimate, or some variation, is one thing. But what about writing a freelance article? You could put in a lot of hours, and do a couple of rewrites, for $500 (or less – thank you, Elance). Perhaps that article goes out to a well-respected mass market publication, or to a very specialized niche publication read by managers in your field. Then, yes that’s worth the time and energy – it’s effective marketing and it doesn’t really cost you anything. But then there are other situations that come up that remind me that some of that time spent is not worth it. For example, I’ve had people contact me recently on LinkedIn for networking and promotion. They got something out of it, but I didn’t seem to – beyond the annoying learning experience of not doing that again.

          Big Picture: Cadillac ELR “Poolside” TV ad generates backlash; Fisker launches new website under new owner

          Cadillac ELR commercial 2Cadillac’s “Poolside” TV ad for its ELR extended range electric luxury car, which has been airing recently during the Winter Olympics and Oscars, has generated a lot of unintended backlash. It’s been enough for Ad Age to interview Cadillac advertising director Craig Bierley about it. He says that the TV commercial has been misconstrued – it’s not targeted to the wealthiest, but to self-made customers who’ve used “hard work and hustle” and are now making $200,000 a year more. It’s created a maelstrom of debate with right-wing commentators seeing it as affirmation of what’s made the US great; left-wing commentators see it as ugly American chest-thumping. Green Car Reports readers have felt strongly about it – a recent article generated heated debated and more than 300  comments. Uwe Ellinghaus, Cadillac’s global chief marketing officer, doesn’t have any problems with it. The TV ad is delivering what they’d intended. The early research Cadillac had done on the ad suggested “we would break through the clutter and generate a hell of a lot of buzz. Mission accomplished.” There’s always the question of what TV ads like this do to America’s (and Cadillac’s) image in important global markets.

          And in other clean transportation news……

          • The new website for Fisker Automotive speaks to its rebirth as an automaker now owned by Wanxiang America, the US arm of the largest auto parts company in China. “Fisker Automotive is poised & ready for a new beginning,” it states on the revamped website. It looks like the extended range Fisker Karma will return as it was before.
          • EcoMotors, the Michigan-based OPOC engine maker backed by Bill Gates and Vinod Kholsa, has created a joint venture in China with a subsidiary of First Auto Works (FAW), which is a Chinese state-owned auto manufacturing company. The FAW subsidiary, First Auto Works Jingye Engine Company, is investing more than $200 million into the venture that has been named BEM Shanxi Co. That venture will build an advanced engine designed by EcoMotors in 2015. EcoMotors previously established a similar deal with another Chinese company, Zhongding Power, nearly a year ago. Both Chinese companies are utilizing EcoMotor’s OPOC engine, which is said to be cheaper and more compact than conventional gasoline and diesel engines, and will deliver higher fuel economy and fewer emissions.
          • Linear City Development said it’s now offering the nation’s first apartment building to provide free electric vehicle charging for tenants. Linear City has installed 20 Level 2 EV charge stations at The Elysian, a 96-unit conversion of Los Angeles’ historic Metropolitan Water District (MWD) headquarters. It will cover the cost of electricity for the life of every original EV-driving tenant’s lease.
          • BMW is getting strong initial orders for its i3 electric car, Norbert Reithofer, BMW’s CEO, said at the Geneva Motor Show. It’s already available in Europe and will soon roll out in the US and Asia. Orders might be more than the automaker has production capacity for right now, he said. The model with the range extender (which can go 160 miles versus 80 for the battery electric model) is getting more purchase activity from early buyers, he said.
          • Toyota Chairman Takeshi Uchiyamada, father of the original Toyota Prius, foresees hybrid models making up 20% of global auto sales; they’re at the 13% to 14% mark now. Honda may add to those numbers; the company issued a press release stating its renewed commitment to hybrid technology. That may have been damage control after news broke last month about one of its original hybrid models, the Insight, being pulled off production lines by the end of this year.

            AeroVironment and KnowWhatYouDrive educate EV car shoppers

            AVEV101Education and accessible, clear information is needed out there to get past the stumbling block that holds consumers back from owning an electric vehicle. If you take a look at a new educational website for electric vehicle (EV) shoppers, you’ll find answers to frequently asked questions:

            • What’s the difference between EVs, plug-in hybrids, and hybrids?
            • Why lithium ion batteries?
            • What do you get out of it? Why make the investment?
            • What’s the latest on charging technologies?
            • How long does it take to charge and how far do you travel?

            AeroVironment is working with Saginaw, Mich.-based KnowWhatYouDrive on an educational initiative to help consumers take the plunge and purchase an EV and a home charging port. The free online course at AVEV101.com walks through all of the questions that typically come up for car shoppers – or those with some interest in owning an EV. Details are presented on the types of available charging stations, charging time, and how the installation process works. You can test your electric vehicle IQ and instantly earn $25, $50, or $100 coupon codes for an electric vehicle charging station and installation.

            “Education is one of the key factors that will help speed EV adoption,” said Wahid Nawabi, senior vice president and general manager of AeroVironment’s Efficient Energy Systems business segment. Doug Taylor, founder of KnowWhatYouDrive, says that it can be a daunting task with all of the EVs on the market now through Ford, Nissan, Fiat, and other OEMs. KnowWhatYouDrive works with charging station supplier Eaton on its website, and offers a discount program for EV charging stations.

            AeroVironment has been committed to making the EV ownership and charging experience more accessible to consumers. It launched a dealer program last year offering a turnkey residential charging package. Consumers can purchase the EV and the charger in combination at the time of sale and build it into the financing. The home installation process is built into the transaction so that it can take place in a faster, more seamless way than it typically happens.

              PERC’s Roy Willis on propane’s major milestone with UPS

              UPS propane fleet vehicleUPS, along with Frito-Lay, have become testing grounds for alternative fuel vehicles in delivery fleets. You may have noticed that UPS was given a lot of attention last week for adding 1,000 propane-powered delivery trucks to its US fleet – joining up with electric, hybrid, CNG, LNG, biomethane, and nearly 900 propane-powered trucks in its Canadian fleet, in the corporation’s sustainability initiative. UPS will also initially install 50 propane fueling stations at UPS locations mainly in rural areas in Louisiana and Oklahoma with other states pending. That $70 million vehicle and fueling investment will allow UPS to displace about 3.5 million gallons of conventional gasoline and diesel per year. Propane Education & Research Council (PERC), a non-profit propane technology incubator, is playing a key role in integrating propane autogas and refueling with the UPS fleet. UPS and PERC were able to secure certifications with the US Environmental Protection Agency (EPA) and the California Air Resources Board, in alliance with equipment manufacturers. UPS did a test run this past winter in Gainesville, Ga., with 20 propane-powered delivery trucks, and expanded its order with Freightliner Custom Chassis Corp.

              “The opportunity to road test new propane vehicles and fueling equipment with one of the most sophisticated fleets in the country is a major milestone for the propane industry,” said Roy Willis, president and CEO of PERC. The UPS deployment of propane vehicles and refueling infrastructure is a smart move and good investment, Willis says – making greater use of clean, efficient energy resource with growing domestic supplies. Willis says that other fleets, such as beverage companies and bakeries, are starting to show a lot more interest in propane – as what UPS does is carefully observed. Fleet managers need to see a business case made that propane-powered vehicles are worth the investment. They know UPS takes logistics very seriously and tests out the technologies and fuels long before adding them to their fleet – such as the test fleet in Georgia.

              PERC has been collaborating for several years with Freightliner, CleanFuel USA, and Powertrain Integration to build safe, clean, and efficient propane vehicles. UPS will be using CleanFuel USA’s Liquid Propane Injection (LPI) system in the planned purchase of the propane delivery trucks. CleanFuel USA will also provide several of the fueling stations out of 50 planned across the US. The UPS delivery truck is built on the Freightliner Custom Chassis MT-45 walk-in van with the LPI system, and a 6.0-liter engine by Powertrain Integration.

              The school bus market has been adding a lot of propane-powered buses, Willis said. Bluebird sold about 3,600 of these propane school buses last year, and Thomas Built will be introducing a new model soon. PERC is also working on dual-fuel research projects combining diesel and propane. Direct injection of propane is also being tested by PERC with the Southwest Research Institute. Direct injection can bring better horsepower and torque, plus fuel economy improvements. While most propane vehicles have been deployed in medium-duty fleet vehicles, direct injection could be a bridge to bringing propane to more light duty passenger cars like taxis and police cars. It could be an OEM product with warranty coverage at its dealerships and may be announced by the end of the year, Willis said.

              The technology is pretty well proven, according to Willis, with propane-powered vehicles widely used in fleets for several years. The fueling infrastructure is growing – such as school bus fleets adding them to maintenance yards and propane retailers bringing them to their local markets at public stations, which have been supported by state grants and incentives. The UPS announcement is probably a tipping point for more fleets to adopt propane in vehicle and fueling technologies.

                Big Picture: EPA releases finalized Tier 3 standards on emissions; Tesla Motors has another revolutionary goal: a Gigafactory

                EPA gasoline sulfurThe US Environmental Protection Agency (EPA) yesterday finalized what it calls “Tier 3 standards” requiring gasoline sulfur levels to be reduced by two thirds from 30 parts per million (ppm) to 10 ppm. EPA says that its new emission standards for cars and gasoline will significantly reduce harmful pollution and prevent thousands of premature deaths and illnesses, while also enabling efficiency improvements in the cars and trucks. Smog emissions, including nitrogen oxides and volatile organic compounds, are expected to drop 80% compared to today’s vehicles and particulate matter (soot) will drop by 70%. These standards will begin being implemented in model year 2017. The Tier 3 standards are being supported by automakers, labor, consumers, and public health advocates. Once fully in place, the standards will help avoid up to 2,000 premature deaths per year and 50,000 cases of respiratory ailments in children, according to the EPA.

                And in other clean transportation news……

                • Tesla Motors has yet another potential breakthrough concept in the works –its “Gigafactory” concept could bring more affordable electric vehicles to market through a large scale lithium battery factory. It would mean investing up to $5 billion with partners in a battery plant that can supply 500,000 electric vehicles a year by 2020, after opening up in 2017.  Panasonic may be considering joining in; Panasonic is currently Tesla’s largest supplier of lithium ion batteries. “In cooperation with strategic battery manufacturing partners, we’re planning to build a large scale factory that will allow us to achieve economies of scale and minimize costs through innovative manufacturing, reduction of logistics waste, optimization of co-located processes and reduced overhead,” Telsa posted last week on its blog. By the end of the first year of production, the per kilowatt cost of the battery pack could be reduced by more than 30%. Tesla is looking for plant locations in Nevada, Arizona, New Mexico, and Texas and said that site selection will be happening soon. When you view the charts Tesla compiled, the first one shows that its new battery factory will be producing more batteries by 2020 than all the other lithium battery makers combined are making today – that’s quite a claim.
                • Nissan did better in Leaf sales – at 1,425 cars sold it was a record for the month of February, more than double the amount from a year earlier. That makes for 12 straight months of year-over-year sales increases. Its top two markets last month were San Francisco and Atlanta; the rest of the top five was Los Angeles, Seattle, and Portland. The Chevrolet Volt’s sales have been seeing a decline – at 1,210 it was higher than January’s 918, but down a third from February 2013’s total of 1,626. Tesla continues to not report monthly sales, but the estimate was 1,000 to 1,200 units of the Model S sold.
                • Honda appears ready to pull its Insight hybrid off the market – one of the very first hybrids to come to market when it was introduced in 1999, before the Toyota Prius. The original two-seater hybrid got even better mileage than the Prius or the Honda Civic hybrid. It was redesigned in 2009 with a backseat, but it failed to grow in sales numbers even though it sold for less than $20,000.
                • President Obama is bringing to medium- and heavy-duty trucks and buses what was previously brought to passenger cars – a second level of fuel efficiency standards. The first round covered model years 2014 through 2018; the new standards will be in place in about tow years and will extend the rules into the next decade.
                • Even though ECOtality is out of business, its Blink electric vehicle charging stations are still around. IKEA added four stations at one of its Chicago-area stores as part of its partnership with Car Charging Group, Inc. IKEA started installing stations in 2011 in Arizona, California, Oregon, and Washington and wants to place them at 55 US locations.
                • Daimler will be launching a new battery electric vehicle in partnership with China’s BYD. It will go through the Denza brand and be shown as a concept hatchback car at the next Beijing Motor Show. It will be called the “NEV” – or New Energy Vehicle, which means it’s being built for China. One of the popular car trends in that market will be met – rear seating will have the feel of a lounge area, perfect for riding in when you have a chauffeur in the front seat doing all the driving.

                  Why the Cadillac ELR TV commercial is a very bad idea

                  Cadillac ELR commercial 2Rex Parker, professor of transportation design, at Istituto Europeo di Design (IED) in Sao Paulo, Brazil, called me last week and expressed distress and frustration with Cadillac’s “Poolside” ELR TV commercial prominently featured in the Winter Olympics (and in the photo to the left). Parker, a former designer with major automakers, had a lot to say about it being misunderstood overseas, fueling more tension and misunderstanding during a time when US TV commercials go global and viral through Youtube and social media. His comments speak to what I see as being the most significant trend shaping the near-term future of the auto industry – globalization. As I’ve covered and commented upon many times in Green Auto Market, automakers and suppliers are now truly multi-national conglomerates serving markets in North America, Europe, Asia, and Latin America. Chinese OEMs and suppliers are the most obvious example, as Fisker Automotive, Volvo, General Motors, BYD, Tesla Motors, and others would tell you. It’s not a good time to be bragging about the US being No. 1 in everything, nor is it accurate; and it rubs against ideals that a lot of people still have about this country – a land of equality in all things regardless of where you live.

                  The main issue Parker has with the Cadillac ad is that many people around the world won’t get the satirical, humorous angle – and will likely see it as an extreme symbol of stereotypical American arrogance and wealthy lifestyle perks. As you can see here, Parker doesn’t hold back on expressing his opinions on auto industry trends. Here are a few points he made on the phone last week……

                  • Americans traveling abroad will usually tell you this type of TV commercial is a very bad idea. Parker was in France when this commercial hit the airwaves, and it inflamed French viewers. This type of message hurts Americans traveling abroad.
                  • Parker, who is half Brazilian and half American, was in Brazil last summer when a street riot in his US hometown of Huntington Beach, Calif., got a lot of media attention (which I can attest to, being stuck on Pacific Coast Highway while attempting to drive through Huntington Beach during this unexpected debacle). Brazilians were informed about it while it was going on – which is ironic given that it was a modest riot without casualties. But the internet gave them instantaneous information – and what happens in the US is taken very seriously in Brazil and around the world.
                  • The Cadillac commercial conveys “American arrogance and sets us back generations,” Parker said. The days of 1950’s US Secretary of State John Foster Dulles explaining US foreign policy are long gone, he said.
                  • I would also add, having been raised by a World War II vet with plenty of lively tales that I heard while growing up, that the days of post-WWII gratitude to the US are long gone. US traditions for individual rights, personal freedom and expression, holding elections, having open markets for developing industries, technology breakthroughs, and enjoying multi-media entertainment, will continue to influence what people around the world perceive and value; but toying with images and messages of what others resent, and sometimes hate, about the US, is not a good way to sell cars or improve international relations.
                  • You can certainly make the case that the US government is dominated by an autocracy of interest groups who’ve stuffed pockets with lots of campaign contributions; and that the US has serious social issues to deal with – such as the brutal impact crystal methamphetamine is having in a lot of communities. You can also talk to people who’ve lived in or visited other countries around the world that are quite unstable and struggling – they’ll explain why they live in the US and probably won’t be leaving. Those are better images to convey in a TV commercial, as you can typically see watching TV lately. If you were watching the Winter Olympics, you probably saw Chevrolet’s new campaign called “The New Us.” It shows a diverse range of families under the theme, “What it means to be a family hasn’t changed; what a family looks like, has. This is the new us.”
                  • Sell the car:  The best performing and most memorable car commercials show off the car – it might be driving up a hillside at peak performance, or featuring a young couple or family traveling together and feeling good. General Motors’ Cadillac division has done a great job for about 20 years now in selling the product in its ad campaigns; the ELR has what people are impressed about with GM’s Voltec drivetrain, and with what Cadillac designers have placed into platforms and dashboard panels. The Cadillac ELR “Poolside” commercial only shows the car being charged and its dashboard control panel for a few seconds. The commercial’s agenda looks like something else besides marketing the product.

                    Taking a deeper look at alternative fuel vehicle sales figures

                    Take a look at this chart, which WardsAuto published in late February showing something quite rare: detailed sales numbers on every type of alternative fuel vehicle sold in the US over the past five years in the light-duty passenger vehicle market. WardsAuto is getting these numbers from its own internal database of sales figures. I’m not sure what the “Unspecified Gas/Diesel” category means, and WardsAuto has not yet responded to my inquiry about it. However, looking at each of the vehicle categories offers a comprehensive view of market trends…….

                    • Hybrids continue to make up the largest share of US new vehicle sales for alt-fuel vehicles, but “clean diesel” isn’t far behind – 3.2% of total market share for hybrids in 2013 versus 2.85% for diesel. Some would argue that diesel shouldn’t be analyzed at all as an alternative fuel – it still comes entirely from oil; regardless, it is getting considered as an alternative by a few analysts as more Americans are starting to own them for passenger cars for the first time ever in place of gasoline engine vehicles. Strong performance and fuel efficiency are helping German automakers sell them in this market, and US automakers are starting to get into that space.
                    • Electric and plug-in hybrid vehicles made up .64% of new vehicle sales last year – only two thirds of a percent. However, the growth rate since starting plug-in sales in late 2010 is outstripping where hybrid sales, mainly from Toyota and Honda, were performing in their first years in the early 2000s. There are more EVs coming to market this year and beyond, which should help grow their sales numbers – along with pricing coming down and more charging stations being installed around the country.
                    • Hydrogen fuel cell vehicle sales are still very small; the Hyundai Tucson Fuel Cell vehicle is going to be on the market by early summer and has a production volume target of 1,000 units through 2015. There will be other models coming on the market through Toyota and Honda next year.
                    • Hybrid sales are nearing 500,000 units per year, jumping up significantly in 2012. Forecasters, including JD Power and Associates, see hybrids growing in sales percentages in the next 10 years. There’s a lot more hybrid vehicle options at dealerships now than about five years ago, and that will continue to grow.
                    • Compressed natural gas (CNG) vehicle numbers are very small with very little available on the retail market – the Honda Civic Natural Gas being about it. The Ford F-150 half-ton that can run on natural gas and propane came on the market last summer, and Chrysler and GM have heavier pickups more suited to commercial usage than passenger. Parent company Fiat Chrysler Automobiles has interest in more CNG-powered vehicles coming to the US, as natural gas has played an important role in Italian transportation since the 1950s.