New Powertrains and technology revolutions — Challenge for the automotive industry
For OEMs, trying to balance the various demands placed on global powertrain development has never been difficult. All major global automotive markets have increasingly stringent legislation focused on controlling carbon dioxide (CO2) emissions and exhaust gas emissions — such as particulates and nitric oxide (NOx) — and improving fuel economy. A key challenge for the industry is to make the right powertrain and technology choices in the context of rapidly changing preferences in society and within a changing regulatory environment.
As auto manufacturers navigate an increasingly complex landscape, they need to contend with three main drivers. First, changes in the development of ICE technology are occurring at breakneck speed. Second, societal adjustments in response to demographic and urbanization shifts are shaping the demand for mobility. Third, governments are providing a regulatory framework that will change and determine the required technology offerings and choices.
From a technological standpoint, announcements of the death of the ICE are premature. OEMs have been finding varied and creative solutions to reduce CO2 output and meet emissions legislation. The technology mix adopted varies by region and is typically a function of the test cycle specific to that region, but there are common trends worldwide in electrical and mechanical systems. The deployment of these ICE technologies is having a big impact on meeting regulations. One challenge for the industry will be passing on the additional compliance costs to a price-sensitive public, especially since the technologies deployed typically get more expensive as the industry works its way down the emissions curve.
Within electrical systems, all forms of hybrid technologies will be adopted in larger numbers. Mild, full, and plug-in hybrids will show significant growth in percentage terms. The current low oil-price environment has a dampening effect on the take-up rate of these technologies particularly in the US, as the economics of adoption are undermined. For example, the payoff period between a standard ICE and a full hybrid on the same midsize car in the US rises from 6 years with gasoline prices at $4 per gallon to over 12 years with prices at $2 per gallon. Start-stop technologies, in contrast, have a rapid payback period and will be widely deployed in the future.