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You Might Think

John Eichberger |
September 25, 2019

There are so many story lines affecting the transportation energy sector, and so many diverse opinions about where the market may be heading, that it is truly a fascinating time to be a part of it. Yet, everyone relies on different resources to form their opinion – some rely on a trusted voice, a harmony of media headlines or raw data. Regardless how our opinions are developed, they actually might make us think a little more creatively – but we have to look deeper to truly understand what is going on and what is possible and separate reality from science fiction.

A perk of being part of the Transportation Energy Institute is that we don’t have a preference for how the market evolves, we simply want to provide a data-centric perspective to help inform those responsible for the evolution. And we want to ensure that emotion and reaction to headlines yield to more carefully considered evaluations.

Recently, we learned of the passing of a great musical front man and visionary Ric Ocasek of The Cars.  The music of this band, and the influence Ocasek had on so many bands whose music he helped produce, will carry on – including in this blog.  Our title comes from one of The Cars greatest hits – You Might Think.

You might think I’m crazy
To hang around with you
Maybe you think I’m lucky
To have something to do

So with the rhythm of The Cars echoing in the background, let’s take a look at some of these story lines that might make you think.

You Might Think…the internal combustion engine is dead.

We have written about this a lot, but it deserves another look.  Headlines and public statements continue to paint the picture of the automobile manufacturing companies abandoning the ICE in order to invest more heavily in electrified powertrains. While the investment in research and development is shifting, it is not all or nothing.  There is a still a lot the combustion engine has to give.

For example, Delphi Technologies has developed a gasoline direct injection compression engine (Gen3X) that delivers a break thermal efficiency of 43.5%. (For comparison, according to Green Car Reports, most gasoline engines operate at 20% efficiency.) This engine demonstrated 61 miles per gallon in highway cycle testing. Delphi further reported that the next generation of this engine is projected to deliver greater than 48% efficiency and is expected to deliver 68 mpg on the highway. (Source:  SAE “Automotive Engineering,” June 2019)

Uh oh, it’s magic
Just a little magic
You know it’s true
I got a hold on you

No, it’s not magic – it is a focus by engineers to deliver improved engines to consumers. And despite public announcements by major automotive manufacturers that they are “all in” on electrification, the reality is far for absolute.

The VP of global product integrity at GM told SAE “Automotive Engineering” magazine in July/August 2019, “The way things are being covered right now, you would think we had just stopped everything, and everything is electric, and that certainly is not the way things are going to develop…In the end you want to provide what the customers want:  fuel economy, performance, quality, reliability…We are doubling the number of resources that we have on BEVs, but we still have a tremendous amount of work to do on ICEs.”

So let’s not write that obituary just yet.

You Might Think…driverless cars will dominate the landscape in the near future.

If you believe this, you are not alone. In fact, former vice chairman of General Motors Bob Lutz in 2017 wrote an editorial in which he predicted that autonomous vehicles would deliver such improved levels of safety that within 20 years the government would make it illegal for humans to drive except on designated driving courses.

Futurist Tony Seba published an often quoted paper through his group RethinkX in which he predicts that within 10 years of approval, 95% of all vehicle miles traveled in the U.S. will be through autonomous, electric, on demand ride hailing service providers and that personally owned vehicles and the services that support them will disappear.

I cannot see this happening in the next 50 years, let alone 10 or 20, given the technological hurdles, regulatory barriers and patterns of consumer behavior we witness in the transportation market. And I am not alone either.

In March 2019, Reuters quoted Thomas Sedran, head of VW’s commercial vehicles and the one in charge of commercial autonomous strategy, who said “The complexity of solving this problem is like a manned mission to Mars…Level 5 will never happen globally…you still need near-perfect road markings…technology will only work in ideal weather conditions…requires quantum leaps in innovation in lidar technology.”

My personal background in government relations leads me to believe it will be decades before regulators can fully understand the implications of autonomous vehicles and even longer before they will be able to reach a conclusion about what to permit, regulate and prohibit.

And for the consumer perspective, I point to Deloitte’s Global Automotive Consumer Survey which shows that 50% of Americans still believe AVs will be unsafe, the number of consumers who use ride hailing services more than once per week has dropped 50% since 2017, and more Americans now expect to own a car in the future than thought so in 2017. The autonomous, electric, ride hailing revolution seems to have hit a few kinks in the road.

I value these discussions because they push us to think about what might be possible and only then can we unlock viable potential.  So, to those pushing the envelope, please:

Don’t cha stop don’t cha stop
Don’t cha stop don’t cha stop

You Might Think…electric vehicles don’t have much of a future.

I recognize that this opinion is most often in the minority, especially regarding media coverage. I also recognize that some may think this is my personal opinion (it’s not, btw). But the reality is that EVs are here, they are expanding their market share and they will represent a significant portion of the transportation fleet at some point. For those who think they are a passing fad, I refer you to the collective opinion when rock and roll and rap music entered the scene – “just cuz you don’t like it, don’t mean it ain’t no good.”

As has been demonstrated time and again in this column, EVs have not gained much market share to date. Within the U.S., they remain less than 2% of new vehicles sold and, according to 2019 midyear update, 56% of EVs sold in the U.S. are sold into California, ostensibly to comply with the state’s zero emissions vehicle program. Globally, earlier this year the market passed the 3 million sales mark for EVs – and while this is a significant milestone, it still only reflects less than 1% of the global fleet.

That said, to stick one’s head in the sand and imagine nothing is going on would be ill-advised. The 3 million global sales mark was achieved just two years after the 1 million mark was crossed, indicating an accelerated pace of acquisition. In the U.S., through June 2019 EV sales were outpacing 2018 sales by 96%.  But I think more impressive is the lineup of EVs that will be entering the market in the next couple of years.

Today there are 19 battery electric vehicles sold in the U.S. But through 2022, globally there are expected to be more than 40 BEV models available ranging from compacts to supercars to the most popular of all – the crossover utility vehicle. In what volumes these will be produced and delivered and how many will actually be purchased remains to be seen. But this is an indication that the market for EVs may be starting to mature and that is something to pay attention to.

She tricks me into thinking
I can’t believe my eyes
I wait for her forever
She never does arrive
It’s all mixed up

Just What I Needed

Sometimes it is worth taking the time to evaluate our own perspectives and to entertain the view from the other side. For me, this column today was just what I needed to remind myself that nobody knows how the future will unfold, so it is critical to stay open to the possibilities while remaining grounded in the facts and reality. Like Casey Kasem used to say, “Keep your feet on the ground and keep reaching for the stars.”  Oh, he also used to say “Zoinks” – he was a complex dude.

I don’t mind you coming here
And wasting all my time
Cause when you’re standing oh so near
I kinda lose my mind

I guess you’re just what I needed
(Just what I needed)
I needed someone to feed.

So the next time you hear a story that sounds a little out there, take the time and think it through.  While it may not mean much today, there could be something in there that will give you a little insight into where the future might be heading…and maybe, if we listen to each other, we can be “Moving in Stereo.”

Life’s the same, I’m moving in stereo
Life’s the same, except for my shoes
Life’s the same, you’re shaking like tremolo
Life’s the same, it’s all inside you

It’s so easy, to blow up your problems
It’s so easy, to play up your breakdown
It’s so easy, to fly through a window
It’s so easy, to fool with the sound

It’s so tough, to get up
It’s so tough
It’s so tough, to live up
It’s so tough, on you.

R.I.P. Ric Okasek – Thank you!

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