The shape and functionality of the car has been, and will continue to be, determined by a combination of technological advances, regulations on safety and energy efficiency, and consumer demand. Companies which support winning technologies delivering safety, style, comfort and economy should prosper from the next phase of the car’s evolution.
Hollywood’s predictions of flying cars being a standard mode of transport in the current decade, in films such as Blade Runner (1982) and Back to the Future Part II (1989), have proven to be premature. Still, a much earlier vision of widespread electric cars or ‘phaetons’ in the year 2000, by subsequent Titanic casualty John Jacob Astor IV in his novel A Journey in Other Worlds (1894), appears to be finally becoming reality – 130 years after the first electric car was developed c.1884.
Progress in battery technology and interest in lower emissions have led to a very recent jump in sales, with more than 600,000 plug-in hybrid and electric cars sold since 2008 worldwide, and with IHS Automotive forecasting production to rise 67% from 242,000 in 2013 to 403,000 in 2014. However, this remains a drop in the ocean relative to the 63m cars sold worldwide in 2013 alone.
The key to realising future investment opportunities in the car industry lies in the confluence of disparate factors relating to technology, regulations and consumer lifestyle and demand coming together to drive a product from a niche to the mass market. This could be about to happen for the electric car.
Elon Musk’s Tesla Motors pioneered the new generation of electric cars, with its Roadster sports car; utilising a Lotus Elise chassis, it launched in 2008 with a base price of $109,000, and was followed by the Model S Sedan at $70,000. A Model X utility vehicle is expected next year priced similarly to the Model S, while the mass market is due to be targeted in 2017 with a Model III priced at just $35,000. Major automobile companies have followed suit, with the Nissan Leaf and the BMW i3 among the most popular electric cars and Toyota having previously achieved success with its Prius petrol-electric hybrid.
The limiting factors to electric cars becoming a truly mass market proposition have been price, due to the cost of batteries, and the distance that can be travelled on a single charge. Tesla uses small cell lithium-ion batteries (made by Panasonic), which are currently around 75% cheaper than rivals’ large cell batteries, and it sees scope for scale production to reduce costs further, arguing that when Model III reaches full capacity, it will use more lithium batteries than the entire current global electronics market. Advances in energy density in batteries (the amount of energy that can be stored) means that the newest version of the Roadster’s battery will enable it to travel 400 miles between charges, compared to the original 244 miles. Further advances in the future should permit longer distances, speedier charging, and smaller, lighter weight batteries.
Regulations and incentives around energy efficiency and CO2 emissions in transport are at the forefront of the global political agenda given concerns about climate change, energy security and fuel costs. Although transport uses less energy than buildings or industry, it has been growing fastest, rising from 24% of total energy used in 1970 to 30% today, and it is likely to continue to rise rapidly given emerging market urbanisation. Road travel represents 77% of transport’s energy consumption, and its share of the greenhouse gases emitted by transport has risen from 54% in 1970 to 71% today, so it is an obvious target for efficiency measures.
Public policy seeks to encourage a consumer lifestyle ‘modal shift’ away from cars (towards cycling, walking and public transport) particularly in urban areas, through congestion charging on petrol cars and better cycling infrastructure. Over the last ten years the number of cities offering bicycle sharing schemes has risen from 13 to 600. There is evidence of declining ownership of cars in cities, with the number of under 30 year olds with driving licences falling in many countries, and car sharing schemes such as Zipcar gaining popularity.
However, car ownership and motoring will continue to be a priority for a large segment of the population, particularly as emerging markets become more prosperous, and so technology must be used to make cars more energy efficient. Electric cars, with their zero exhaust emissions, cheaper energy costs and minimal maintenance costs are an obvious solution, hence the appeal to governments (particularly China) as a solution to problems of pollution and dependence on oil imports. Alternatives could include bioethanol as fuel, though this might contribute towards food price inflation (through competition for increasingly scarce agricultural land), and hydrogen fuel cell cars, though these would require huge investment in fuelling infrastructure, and the production and compression of hydrogen.
However bright the future for the electric car, the internal combustion engine is far from dead and will probably remain the dominant form of car propulsion for decades to come. Significant improvements can be made to its energy efficiency, at relatively low cost, such as gasoline direct injection (high pressure fuel injection directly into the engine cylinder), turbochargers (using exhaust heat to drive a compressor, increasing engine power) and variable valve timing (enabling engine intake and exhaust to be tailored to engine conditions, improving combustion efficiency). Stop-start systems (automatically turning off idle engines) and electric power steering (reducing engine load) will also provide improvements.
Reducing vehicle weight is a key driver of fuel efficiency, with 10% weight reduction leading to an estimated 6-7% lower fuel usage and lower CO2 emissions. Standard steel is increasingly being substituted by materials such as aluminium and high strength steel in both the chassis and the engine block, and as costs fall due to increased scale, materials such as composites (carbon fibre reinforced polymers, magnesium alloys and Corning’s Gorilla Glass) could be used in various applications.
Electronics are of ever increasing importance in cars, with an average car today needing more than 100 microprocessors and five miles of electrical wiring. Technology will play a growing role in improving safety, comfort and driveability. Touchscreens and more sophisticated human-machine interfaces will enable information to be delivered to drivers, and drivers to control the car, more quickly and clearly. Safety is one of the main aspects that car owners are willing to pay extra for, with road fatalities claiming more than 1m lives globally every year (a top ten global cause of death), and with human error accounting for 95% of accidents. It is estimated that 60% of accidents could be mitigated or averted if drivers were given an extra half second to respond to the situation.
Passive safety, in the form of airbags and side impact bars, is increasingly being supplemented by electronics-enabled active safety or Advanced Driver Assistance Systems (ADAS), which proactively assist in crash avoidance.
ADAS products range from parking assistance and driver drowsiness detection, to displaying speed information on the windscreen (to keep the driver’s eyes on the road), to radars, cameras and laser sensors which alert drivers to objects in their proximity. Certain products are semi-autonomous, taking control of the car in extreme situations to avoid (monitoring cars in front and braking if the driver is distracted), electronic stability control (detecting loss of steering control and then braking individual wheels to reduce skidding) and lane keeping systems (which monitor the lanes and override the car drifting across).
The logical conclusion of the development of active safety technologies is the prospect of fully autonomous or automated driving, in other words self-driving vehicles, in which the former ‘driver’ could spend their time working or at leisure. While sensors and software content would be significantly higher, with vast amounts of data to be collected and processed, the cost of this could be offset by reduced complexity in the powertrain, fewer passive safety features, lighter weight (less need for steel chassis on safe roads) and potentially lower motor insurance premia.
A world of fully autonomous cars could use telematics and the Internet of Things to enable collaborative collision avoidance, and advanced traffic management whereby traffic jams are averted before they ever occur, ultimately leading to journeys becoming optimally quick and energy efficient. The internal configuration of a car could end up being dramatically different, with no distinction between driver and passengers, and displays focused on entertainment as much as driving statistics.
With Google having logged 700,000 miles travelled by its driverless test vehicles by April 2014, and four US states permitting autonomous car testing, the prospect of a fully automated driving network seems tantalisingly close. Most automobile companies aim to have driverless car offerings within 10 years.
However, in reality, we are still decades away from a fully driverless world, not least because of the prohibitive cost of autonomous technology ($80,000 per vehicle at present, though this would fall as the scale of the market grows), concerns about its reliability, and the time it would take to replace all existing non-autonomous cars. It may well be the case that most of the benefits of autonomous driving will only accrue if non-autonomous driving is no longer permitted, so human agency is totally eliminated, and it could be a long time (if ever) before this happens, not least because of the fact that many people derive great enjoyment from driving.
Whichever precise direction the car evolves in, it is clear that energy efficiency and electronics and software content will be ever more important. The implications for the existing automotive supply chain, and other sectors such as software, materials science, manufacturers of semiconductors and batteries, and insurance, will be profound, though it is as yet too early to discern clear winners and losers. Looking much further ahead, a sky teeming with flying cars may not be a pipedream – the world’s first production-ready flying car, Slovakia’s AeroMobil Flying Roadster 3.0, was finally unveiled in October 2014, with an American rival, the Terrafugia Transition, not far behind it.