New era unfolding for the automobile industry

Transcription

% !
April 1, 2009
What
makes this recession exceptional is that every major global car market is currently
seeing either a sharp decline in demand or much slower growth.
Following more than 100 years of dominance by the
traditional internal combustion engine the degree of electrification in the sector is
now beginning to increase. Alternative fuels are also gaining prominence.
!
The EU
regulation stipulating that the CO2 emissions of new cars must be reduced to 120
grams per kilometre by 2015 at the latest is an important instrument for promoting
lower-carbon individual mobility. In addition, the expectation of rising oil prices will
prompt automakers to produce more energy-efficient cars.
!
They push up new car prices significantly. This implies that
CO2 abatement costs are high. Government incentives can accelerate market
penetration, but a subsidies battle between the leading automaking nations needs
to be averted. In the long term all new propulsion technologies and fuels need to
be able to survive without subsidies.
"
Authors
Eric Heymann
+49 69 910-31730
eric.heymann@db.com
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Admittedly, no
rapid structural change can be expected in new car registrations and most
definitely not in the stock of vehicles on the road. Such a change is precluded by
the long development lead times required for the new technologies and the long
operating lives of cars. Currently, petrol and diesel cars still enjoy many
advantages over alternatively fuelled vehicles. Thus cars equipped with internal
combustion engines will probably make up around 90% or even more of new
registrations in the EU on average during the next decade.
Meta Zähres
Editor
Tobias Just
Technical Assistant
Angelika Greiner
&
!
CO2 emissions of new cars in the EU-15, g/km
190
Deutsche Bank Research
Frankfurt am Main
Germany
Internet:www.dbresearch.com
E-mail marketing.dbr@db.com
Fax: +49 69 910-31877
180
170
160
Managing Director
Norbert Walter
150
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Sources: European Commission, European Federation for Transport and Environment
EU Monitor 62
1. New era unfolding against the backdrop of the
crisis
The global recession in the automobile industry is currently hogging
the headlines – and quite rightly: the current crisis in the sector is
exceptional because in the coming months, too, the demand for new
vehicles in all major car markets around the globe will decline
sharply or at least grow much more slowly. The countries being hit
the hardest are those where the real estate and financial crises are
particularly severe; namely the US, Spain and the UK. For the first
time since 2001 there were declines in global unit automobile
production (down 4%) and global new car registrations (down 5%) in
2008. 2009 will be the most difficult year for the automobile industry
in decades.
Significant cutbacks in output likely
Carmakers and autoparts suppliers are reacting to the sales crisis.
They are cutting back production, shortening the working week or
extending holiday shutdowns. In the US, first and foremost, carmaking plants are bound to be closed. Many companies – especially
autoparts suppliers and car dealers – will not survive the current
recession. Across the entire sector we will see not only more
bankruptcies but also an increase in mergers and acquisitions. The
automotive industry can thus be said to be heading for far-reaching
consolidation.
At the same time as experiencing this cyclical turmoil the auto
industry is also set to undergo a technological revolution. For the
first time in over a century of the automobile’s existence there is a
realistic chance that motor vehicles will no longer be powered by
fossil fuels alone. There are two main drivers for this development:
firstly, environmental and climate policy demands a reduction in CO 2
emissions by cars – on account of the climate change threat. And
secondly, the stratospheric rise in the oil price until mid-2008 and the
expectation that its current decline will prove a temporary phenomenon have led the auto industry to redouble its research efforts
into alternative propulsion systems.
Below we shall assess the EU regulation limiting the CO2 emissions
of new cars. In the second part of this report we shall summarise the
advantages and drawbacks of alternative means of propulsion and
their future prospects compared with conventional internal
combustion engines.
2. Auto industry in the spotlight of environmental
policy
!
Greenhouse gas emissions in the EU
by mode of transport in %, 2005
Sea
14.4
Other
1.6
Road
72.2
Air
11.8
Source: Eurostat
2
'
The automotive industry has been the subject of environmental
regulation for decades, with governments employing a wide variety
of instruments. Petroleum taxes and motor vehicle taxes in the EU,
for example, are also ecologically motivated. The obligatory fitting of
catalysts, introduced in several EU countries at the end of the
1980s, and the gradual tightening of exhaust emission standards
(Euro 1 to Euro 6) are aimed at reducing harmful vehicle emissions
(e.g. oxides of nitrogen and hydrocarbons). Another example is the
tax incentive for the retrofitting of diesel cars with particulate filters in
Germany or the bonus/penalty (or “feebate”) system for new cars in
France in which tax rebates are granted on vehicles with low CO2
emissions whereas cars with high emissions are saddled with
punitive tax fees. At the initiative of the EU measures to combat the
potential risks of particulate matter emissions must be implemented
by member states. In Germany, for example, a system of
environmental badges (Feinstaubplaketten) has been introduced
April 1, 2009
(
)*+
Diesel share of new car registrations
in Western Europe* in %
60
50
40
30
20
10
0
90 92 94 96 98 00 02 04 06 08
* EU-15 + EFTA
Source: ACEA
that signifies the level of a vehicle’s particulate matter emissions,
and in many cities “green zones” have been designated in which
cars without the corresponding badge may not be driven. The
objective of the EU end-of-life vehicle directive issued in 2000 is
ultimately to ban the use of hazardous substances (e.g. heavy
metals) in automaking, to boost the rate of recycling for old vehicles
to 95% by 2015 and install a disposal system that is free to consumers for cars that have come to the end of their service lives.
Given the growing threat from climate change motor vehicle CO2
emissions are of course central to environmental policy. After all,
transport is the only sector in the EU in which greenhouse gas
emissions have risen constantly since 1990 (by a good 30%) –
despite the significant reduction in specific vehicle emissions. The
transport sector currently generates nearly one-quarter of all
emissions in the EU. Over 70% of the sector’s emissions come from
the road traffic segment, with passenger cars in turn responsible for
around two-thirds of road traffic emissions; this is the equivalent of
some 12% of all CO2 emissions in the EU.
Automobile industry failing to satisfy its own self-commitment
,
-.
CO2 emissions in the EU-27 by sector,
1990=100
140
120
100
80
60
90 92 94 96 98 00 02 04
Energy
Industry
Transport
Households
Source: European Commission
-
/
!
Average performance and engine capacity of cars in the EU-15, 1995=100
140
130
120
110
100
90
94
96
98
00
Engine capacity
02
04
06
Performance
Source: ACEA
0
The above-mentioned growth in emissions makes political action
necessary. In the 1990s the European Commission initially relied on
the instrument of voluntary self-regulation: in 1998 the European
automobile industry made pledges to the European Commission
that, among other things, it would cut average CO2 emissions of new
cars to 140 g/km by 2008/09; in 1995 the average CO2 emission
level was still 186 g/km. In the early days of self-regulation the auto
industry made relatively major strides, although the average power
and capacity of engines in newly registered cars increased. This
development was enhanced by the trend towards more fuel-efficient
diesel cars. In recent years, however, the progress has slowed, so
the sector will miss its target; in 2008 the average CO2 emissions by
new cars in the EU was 157 g/km.
The main culprit for this failure is the automobile industry itself,
since it has the greatest influence on the development and
deployment of more efficient engines, new propulsion technologies
or lighter materials when designing vehicles. All the same, a number
of developments in the regulatory arena and on the demand side
are also partially to blame. Tougher regulatory requirements with
regard to harmful emissions and consumer desires for increased
safety and comfort have driven up the average weight of cars
considerably. This has cancelled out the savings achieved via
technological improvements. In addition, over the last ten years it is
precisely luxury cars and larger-engined niche vehicles such as
sports-utility vehicles and sports cars that have become very
popular with customers. The preferential tax treatment of company
cars has been a contributory factor. In Germany in 2008, for
example, 86% of new luxury car purchases were recorded as
commercial registrations, while for off-road vehicles and sports cars
the corresponding figure was no less than 60%. In a competitive
market it thus comes as no surprise that most manufacturers gear
themselves towards such products. For example, all leading
carmakers have at least one off-road vehicle in their range. By
contrast, very economical models have largely proved to be sales
flops. Such “green” cars have sold sluggishly due to sizeable
markups and often mediocre design, among other things.
A lesson can be learned from the failure of voluntary self-regulation
by the European auto industry. Although flexibility and the reduction
April 1, 2009
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EU Monitor 62
in red tape are convincing arguments in its favour, voluntary selfregulation does have one major failing, which is that the achievement of environmental policy objectives cannot be guaranteed
because of the lack of binding regulations and the inability to
implement sanction mechanisms. Furthermore, it encourages freeriding behaviour.
New regulation on CO2 emissions by cars…
When it became apparent that the European auto industry would fail
to achieve its reduction target, the European Commission decided to
rely on binding targets for reducing CO2 emissions by new cars.
Initially the limit was to be set at 120 g/km as the average for new
cars registered in 2012. Manufacturers of heavy cars whose
emissions are usually higher would have to achieve larger percentage reductions than companies already producing relatively
economical (and small) vehicles. In turn, however, the CO2 ceiling
1
would be higher for heavier vehicles.
Following months of discussions and consultations with associations
and interest groups at the end of 2008 the EU agreed on a regulation to reduce the CO2 emissions of new cars. It contains the
following key elements:
— The automobile industry will be granted a longer phasing-in
period for reaching the reduction targets. This arrangement is
designed to factor in the length of the typical product life cycle in
the sector. Initially, that is by 2012, only 65% of new cars will
have to comply with the average CO2 limit of 120 g/km. The
figure must then rise to 75% by 2013, 80% by 2014 and not until
2015 does it have to reach 100%.
,
— There are exceptions for makers of niche vehicles, which will
have to make only minimal reductions in their average CO2
emissions or none at all; this can be interpreted as a de minimis
rule. As previously proposed, the makers of heavier cars, whose
fuel consumption thus tends to be higher, will have to reduce
their emissions more significantly.
CO2 emissions of newly registered cars
by country (g/km), 2007
SE
FI
DE
UK
— On top of the originally planned possibility to use savings of
10 g/km derived from eco-innovations and biofuels to be counted
towards the reduction target, an additional 7 g/km is to be
allowed.
NL
GR
DK
EU
BE
ES
FR
IT
PT
0
50
100
150
200
Source: European Federation for Transport
and Environment
)
— Fines will be imposed on manufacturers that exceed their limit:
between 2015 and 2018 a fine of EUR 5 per vehicle will have to
be paid for the first gram over the limit, for the second gram EUR
15, for the third EUR 25 and from the fourth gram EUR 95 per
vehicle. From 2019 onwards the standard fine will be EUR 95 per
gram in excess of the limit per car. For a car whose CO2
emissions in 2019 are 10 grams higher than the target figure this
would mean a fine of EUR 950 being levied.
— A long-term CO2 target was set at an average of 95 g/km in 2020.
The figure is to be reviewed in 2013.
1
4
The objective was to be achieved by means of an “integrated approach“: in
addition to improvements in vehicle engine technology other measures should be
able to be used to a limited degree (10 g/km) to count towards attaining the
objective. These so-called eco-innovations would include reduced rolling
resistance of tyres, display of the ideal time to change gear, minimum standards
for the energy efficiency of air conditioning systems or increased use of biofuels.
This package was to be accompanied by tax measures such as changing the
basis for vehicle tax to CO2 emissions and improved information for consumers.
April 1, 2009
3
… has advantages and drawbacks
$
The EU regulation contains the typical elements of a (political)
compromise. It therefore comes as no surprise that both the
automobile industry and the environmental associations are critical
of particular provisions in the agreement. It does indeed contain
both positive and negative aspects: the extension of the phasing-in
period can be criticised from an ecological point of view. It is a major
concession particularly if the sector is judged according to the
targets it has set itself. All the same, setting the CO2 limit for new
cars in the EU a few grams higher or lower will have only a modest
impact on global climate change. We therefore consider it more
important that the adopted regulation constitutes a legally binding
instrument to bring about a long-term reduction in new car CO2
emissions. In this case what counts in the truest sense is the end
product. The advance notification of ambitious limits for 2020
provides the sector with a reliable basis for its planning. It also
makes sense to reassess the target in the light of technological
progress that takes place. However, the long-term targets should not
be watered down on the basis of flimsy arguments. All in all, the
regulation contains the world’s most stringent new car CO2 reduction
targets currently in force. Of course the longer phasing-in periods
granted are also related to the current recession in the automotive
sector.
CO2 emissions of new registered
cars in Germany by vehicle segment
(g/km), 2007
Luxury
Sports
Off-road
Executive
Midsize
Vans
Compact
Supermini
Mini
0
100
200
300
Source: Kraftfahrt-Bundesamt
In addition to being critical of the phasing-in periods, a number of
environmental organisations have also condemned the credits for
eco-innovations as too generous and the potential fines as too low.
We basically welcome that there will be recognition for all the technological measures that help to reduce vehicle CO2 emissions. This
increases the flexibility and room for manoeuvre of companies. And
ultimately in this case achieving the ends is more important than the
means employed to get there. The risk of misuse must of course be
precluded by implementing appropriate measures. That is why there
is also a provision that the efficacy of eco-innovations must be verified.
Fines too high or too low?
1
#
Commercial share of new car registrations in Germany (%), 2008
Luxury
Executive
Midsize
Vans
Off-road
Sports
Compact
Mini
Supermini
0
25
50
75
100
April 1, 2009
2
Our assessment of the potential fines is inconclusive. On the
one hand, for expensive cars in particular the markup resulting from
an excessive level of emissions will probably be too low to dissuade
the majority of customers from purchasing such a vehicle. If, for
example, a vehicle costing EUR 50,000 exceeds the permitted CO2
emissions limit by 10 grams, the fine would push the price up by a
mere 1.4% in 2015. An appreciable impact on potential buyers’
eventual choice of vehicle is thus unlikely to be achieved, even
though this impact is likely to be significant in cases where the limit
is exceeded by a much larger margin. On the other hand, a fine of
EUR 95 per gram of CO2 over the limit would result in expense of
no less than EUR 475 per extra tonne of CO2 emitted by the vehicle
if it is driven a total of 200,000 km during its life. This price per tonne
of CO2 is many times higher than that charged under the EU
Emissions Trading Scheme. If one exceeds the limit, one could thus
use the fines to purchase emissions certificates and thereby reduce
supply. Afterwards there would still be sufficient resources to fund
environmental projects, for example. The mathematical exercise
above illustrates firstly that differing environmental policy
instruments almost inexorably result in differing CO2 prices. This
should not actually be the case with a homogeneous, tradable good
and indicates ecological and economic inefficiency. In the end,
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EU Monitor 62
however, this fact reflects the political realities. On the other hand,
the exercise indicates that many measures to reduce automotive
CO2 emissions entail very high costs for achieving these reductions.
2
This is true in particular compared to the building sector.
Further political intervention appears necessary
Automotive industry will launch more
energy-efficient vehicles
When all is said and done, the EU regulation will force the auto
industry to redouble its efforts to develop and manufacture more
energy-efficient vehicles. The fears expressed by some critics of the
regulation that the extended phasing-in periods and the generous
credits available for eco-innovations will prompt the industry to sit
back and do nothing for now will prove to be incorrect. The industry
has recognised that it is time to take action. The energy efficiency of
cars is an increasingly important criterion in the decision-making of
commercial and private customers – not just because of the high
variable costs, but also because a vehicle’s resale value drops
significantly if its fuel consumption is high. This is why more and
more economical vehicles will come onto the market over the next
few years.
Changeover to CO2 as basis for car
tax sends an important signal
This trend could be given extra impetus by additional government
measures aimed primarily at kickstarting the hitherto tentative
demand for economical cars. For example, in Germany the changeover to a car’s CO2 emissions as one basis for assessing vehicle tax
will not take place until mid-2009, although there has actually been
political agreement on this for years. This measure sends a clear
signal to consumers that they should pay attention to low fuel
consumption. By contrast, the stalemate of the past months and
years has unsettled consumers and made them reluctant to buy
cars. Also the preferential tax arrangements contained in the
company car rules could in future be geared more closely to ecological criteria: the more economical the vehicle, the greater the tax
deductibility could be, for example. Since such measures would be
likely to encounter short-term political opposition, their early
announcement and phasing-in periods appear to make sense.
4
The expansion of electronic traffic management systems and the
rapid removal of bottlenecks from the road transport infrastructure
would also help to cut road traffic emissions. And finally, campaigns
that provide information about the economic and ecological benefits
of economical driving habits would probably be beneficial. The
public sector and the auto industry have equally important roles to
play in this regard.
Average CO2 emissions of new cars in
the EU by marque (g/km)
Daimler
Mazda
BMW
Nissan
Volkswagen
Suzuki
Ford
Hyundai
GM
Honda
Toyota
Renault
Fiat
PSA
Supplementary costs to remain manageable for the time being
0
2005
100
2006 2007
200
Source: European Federation for Transport and
Environment
5
The measures to reduce motor vehicle CO2 emissions do of course
entail additional costs for the automotive industry, which will then be
reflected in the selling prices of vehicles. According to calculations
by Germany’s Federal Environment Agency published in 2008 the
costs of a 20% reduction in emissions both for petrol and dieselengined cars would be less than EUR 1,000 per vehicle. The
resulting markup would already be recouped after three to four
years based on today’s fuel prices and average distance driven and
would therefore not be prohibitively high. In its report “Costs and
Potential of Greenhouse Gas Abatement in Germany” published in
2007 McKinsey also identified a series of economically viable
abatement measures for the automotive sector. A report conducted
2
6
See Auer, Josef et al. (2008). Building to save the planet. The construction industry
will benefit from climate change. Deutsche Bank Research. Current Issues.
Frankfurt am Main.
April 1, 2009
for the European Commission and published in 2006 calculated the
costs of achieving the “120 g/km by 2012” target at around EUR
1,700 per car. Every analysis comes to the same conclusion that
much more extensive abatement measures result in a sharp rise in
marginal abatement costs. In the above-mentioned Federal Environment Agency report the costs of achieving a 40%+ reduction were
estimated at up to EUR 5,000 per vehicle. The resulting markups
would admittedly dampen demand as it takes much longer to recoup
the additional outlay depending on an individual’s driving style. It
also becomes clear that the CO2 abatement costs of many initiatives
are very high.
3. Initial market reactions materialising
France’s bonus/malus “feebate”
system for new car purchases
Since early 2008 France has had in place a
feebate system for new car purchases.
Depending on a new car’s CO2 emissions the
buyer receives either a tax rebate or is
obliged to pay a fee.
The lower the CO2 emissions per car, the
higher the environmental rebate:
— EUR 200 for emissions between 121 and
130 g/km;
120 g/km;
— EUR 1,000 for emissions between 61 and
100 g/km;
— EUR 5,000 for emissions of up to 60
g/km.
Conversely, the higher the CO2 emissions, the
larger the penalty fee:
165 g/km;
200 g/km;
— EUR 1,600 for emissions between 201
and 250 g/km;
— EUR 2,600 for emissions above 250
g/km.
Source: French Embassy
(
The recent months have seen particularly feverish activity: while the
European market as a whole underwent severe contraction in 2008
there were successes for several marques with a reputation for
building small cars with low fuel consumption (such as Smart, Fiat).
The German market also serves as an example: in 2008 the
average CO2 emissions of new registrations fell by about 3%. In
2007 this figure fell by nearly 2%, whereas in 2006 it was still flat. In
addition, the mini vehicle segment in Germany has fared very much
better than the market as a whole for years. In 2008 new
registrations rose by nearly one-fifth in this segment, which contains
for example the Smart Fortwo, the Renault Twingo, the Fiat 500 and
the VW Fox. The examples of France and Spain also illustrate the
effectiveness of environmental regulation: on January 1, 2008, both
countries introduced a “feebate” system of bonuses and fines for
new cars. This has led to a sharp reduction in the average CO2
emissions of cars sold (a drop of around 8 g/km in France). In the
Netherlands, too, the tightening up of a roughly two-year-old system
at the start of 2008 led to a sharp fall in average emissions during
the course of 2008.
Auto industry is better than its reputation
Newly registered cars in Germany by
vehicle segment (% yoy), 2008
Overall, it is thus becoming clear that higher fuel prices and environmental regulation do have an impact. In any event the performance
of the European automotive industry is better than portrayed by the
frequently negative media reports and the many statements issued
by environmental organisations, even though the industry will miss
its CO2 target. The German automotive business in particular has
long been criticised for its alleged ecological backwardness. At
first glance the criticism appears to be justified, as a number of
examples show:
Mini
Midsize
Off-road
Compact
Supermini
Luxury
— On the introduction of the catalytic converter and the particulate
filter for diesel cars, for example, German automakers were
among those who dragged their feet, although in both cases they
eventually turned out to be technological trendsetters.
Vans
Sports
Executive
-20
-10
0
10
April 1, 2009
The stratospheric rise in oil prices until mid-2008, the continuing
debate about ways to reduce vehicle fuel consumption, and the first
political measures in individual EU member states have already
triggered significant reactions on both the supply and demand sides.
Currently around one-third of newly registered cars in the EU have
CO2 emissions of less than 140 g/km. In the mid-1990s just 3% of
new cars managed this. Average new car CO2 emissions in the EU
have fallen by some 16% since then.
20
6
— On average, German carmakers build bigger and more luxurious
vehicles whose fuel consumption is thus higher than that of most
of their European and Japanese competitors. Several niche
7
EU Monitor 62
7
vehicles also have extremely high fuel consumption and are
antiquated from an ecological point of view. By contrast, the
segment containing cars with a list price of around EUR 10,000
had been ignored until recently.
!
The most environmentally friendly
cars*, 2008/2009
1 Toyota Prius
6.7
2 Honda Civic Hybrid
6.7
3 Smart Fortw o Coupé cdi
6.4
4 Citroën C1 1.0 Advance
6.3
4 Daihatsu Cuore 1.0
6.3
4 Peugeot 107 Petit Filou 70
6.3
4 Toyota Aygo 1.0
8 Smart Fortw o Coupé mhd/
Cabrio
6.3
9 Daihatsu Trevis 1.0
6.0
6.2
10 Citroën C2 1.1 Advance
5.8
10 Daihatsu Sirion 1.0
10 Fiat Panda 1.2 8V Bi-Pow er
Gasbetrieb
5.8
5.8
* Based on the VCD environment al list;
Scale f rom 0 t o 10
Source: VCD
'*
— In developing specific new forms of propulsion like hybrid
technology German companies lag a considerable way behind
Japanese automakers (namely Toyota and to a lesser extent
Honda).
Despite the reasons cited, the blanket criticism of the German auto
industry does not stand up to closer inspection. For example, German luxury cars enjoy great international popularity. This segment
will also continue to experience global growth going forward, as
small cars are not a reasonable alternative for all consumers.
German carmakers can therefore hardly be blamed for satisfying
this demand. There is no question that further improvements in fuel
consumption must be made. At the same time it should be noted
that especially in countries with subsidised fuel prices fuel consumption is only one of many selection criteria for the car buyer. In
addition, the German Association of the Automotive Industry (VDA)
reports that German manufacturers now offer around 80 models
whose fuel consumption is lower than 5 litres per 100 kilometres;
this means that such models probably make up a good double-digit
percentage of all German cars. In addition, German companies
have recently made greater progress than their competitors in
reducing average CO2 emissions. In any case German automakers
produce cars that boast the lowest CO2 emissions per unit of weight
and power. This is one important reason for their ongoing market
share gains in the US, the most important market for big cars.
Current significance of hybrid technology is overestimated
4
cars*, 2008/2009
1 Honda Civic Hybrid
6.7
2 Audi A3 1.4 TFSI S tronic
5.1
3 Ford Focus 1.6 TDCi ECOnetic
5.0
4 Volksw agen Golf 1.4 TSI DSG
5 Mercedes A 160 CDI
Blue Efficiency
6 Audi A3 1.4 TFSI
Sportback S Tronic
5.0
5.0
4.9
7 Ford Focus 1.6 TDCi
7 Volksw agen Golf 1.6 TDI
BlueMotion United
4.8
4.8
9 Audi A3 1.9 TDI e/Sportback
4.6
9 Hyundai i30 1.6 CRDi
9 Volksw agen Golf 1.9 TDI
BlueMotion
4.6
4.6
* Based on t he VCD environment al list ;
Scale from 0 t o 10
Source: VCD
''
The above-mentioned backwardness in hybrid technology is also
put into perspective by looking at the significance of this type of
propulsion: the segment continues to lead a lonely niche existence.
In Europe in particular its share of new registrations remains stuck
well below 1%. In Germany in 2008 just 0.2% of all newly registered
cars were full hybrids; their market share thus actually fell compared
to 2007, after rising nearly 50% in 2006. In 2008, by contrast, four
times as many natural gas-powered cars as hybrids were registered
in Germany. In the US, too, hybrid car sales make up just 2-3% of
the market. Most hybrid vehicles primarily display their superior
efficiency in urban traffic and are less energy efficient than modern
petrol and diesel cars for motorway driving. After all, the markup for
hybrid vehicles is not inconsiderable and is probably one reason for
their currently still low market penetration.
However, we emphasise categorically that these statements are not
intended to denigrate hybrid technology, which has already proven
itself on the road. In future hybrid vehicles will undoubtedly play a
more prominent role than they do at present. Given the abovementioned statistics, it is nevertheless surprising how much hype is
generated about hybrid technology by the German media and many
environmental associations. What is also frequently ignored is that
German companies are among the global pioneers in researching
into other alternative forms of propulsion.
In the meantime the advances made by German carmakers in the
environmental field have definitely been recognised. For example,
the Verkehrsclub Deutschland (VCD), an association for sustainable
mobility that tends to be critical of the German auto industry, ranks
many vehicles made by German carmakers or their subsidiaries as
8
April 1, 2009
among the best in its current “Environmental Car List 2008/2009“. In
the compact class these cars make up no less than nine out of
eleven of the most environmentally friendly vehicles, seven out of
ten family cars and all five of the best 7-seater models; these also
include vehicles from German and European subsidiaries of US
automakers which, however, have largely been developed in
Germany.
The bottom line is that although the automotive industry has not met
its own CO2 targets, the blanket criticism of the German automotive
industry is overdone. The role of the car buyer in particular has been
ignored.
4. Propulsion technologies of the future
&
Over the next few years alternative propulsion technologies will
gradually become more important. At the same time, it is illusory to
believe that the conventional internal combustion engine will cede its
dominant position in the short term. There are three main arguments
that back up our assessment:
family cars*, 2008/2009
1 Toyota Prius
2 Ford Focus 1.6 TDCi
ECOnetic Turnier
3 Renault Clio Grandtour 1.2
16V TCE eco
4 Ford Focus 1.6
TDCi Turnier
6.7
5 Honda Civic 5dr
4.8
6 BMW 318d
7 Mercedes B 170 Blue
Efficiency NGT Gasbetrieb
4.6
— Firstly, most of the vehicles due to be launched over the next two
to three years will be fitted with petrol or diesel engines because
they are already being developed today. With a service life of 15
years or more, current-generation cars will still be seen on the
road in the mid-2020s. A structural change in the cars on the
road can therefore only occur over many years in any case.
5.0
4.9
4.8
— Secondly, there is still a great deal of potential for reducing the
fuel consumption of petrol and diesel engines despite all the
efficiency gains that have been made over recent years. Over the
next few years smaller engines with compressor chargers (downsizing, for short), direct injection petrol engines and many other
refinements will help to reduce the fuel consumption of conventional engines by another 20-25% across all vehicle classes.
Furthermore, the lower fuel consumption of diesel cars could see
them bid farewell to their current niche position in the US for
example.
4.6
8 Skoda Fabia 1.2 Combi
9 Skoda Fabia 1.4 TDI
GreenLine Combi
4.5
9 BMW 318d Touring
4.5
4.5
* Based on the VCD environmental list ;
Scale from 0 t o 10
Source: VCD
'
— Thirdly, despite a growing body of research, there is currently no
prospect of quantum leaps in alternative fuel technologies that
could offset their many drawbacks compared to conventional
engines in the short term. This applies primarily to the currently
still considerably higher production costs and the resulting markups. In these respects the levels of vehicles with conventionally
fuelled cars are only gradually being approached. Economies of
scale and technical advances are needed to close the gap. There
are also shortcomings with regard to their range and other
aspects of performance.
Rising degree of electrification – costs must be reduced
Electric vehicles emit low levels of
pollutants and noise
April 1, 2009
As things currently stand, there is no disputing that the number of
cars powered by electrical energy will increase going forward. There
is a large range of application areas for electrical energy in road
traffic: at the bottom end of the scale there are micro and mild hybrid
vehicles. They are fitted with an automatic stop/start device or an
electric motor that helps the car to accelerate and converts the
mechanical energy into electrical energy and stores this in a battery.
Autos with a full hybrid system have more powerful electrical
engines that remain engaged right into the upper rev range and
even allows the vehicle to be driven for short periods without the
internal combustion engine; here, too, braking energy is recovered
and reused. These are the kind of vehicles that people usually mean
9
EU Monitor 62
when they talk about hybrid cars; the best-known example is the
Toyota Prius. One advantage of these cars is that they do not
require any special infrastructure, and can be refuelled at filling
stations like every other vehicle. At the upper end of the scale there
are plug-in hybrid cars whose onboard batteries can also be recharged by plugging them into an electrical socket; plug-in hybrid
cars are currently not yet in series production.
4
CO2 emissions of cars per 100 kW
engine output, g/km
French
Korean
Italian
Japanese
German
0
50
100 150 200 250
Source: German Association of the Automotive
Industry
'/
Hybrid is a bridge technology
Hybrid technology can reduce fuel consumption by up to 25%
compared with similar petrol-driven models. This virtue comes to the
fore in urban driving. By contrast, on longer journeys at steady high
speeds the extra weight of the electrical power unit proves to be a
handicap; fuel consumption then tends to be higher than for cars
with conventional engines. The technology has huge potential for
use in urban buses or taxis where the higher purchasing costs can
be recouped relatively quickly. But also where there is mixed use
(primarily journeys in urban and rural areas) hybrid vehicles can
prove an ideal solution because their range – unlike that of fully
electric vehicles – is almost a match for diesel or petrol vehicles.
Hybrid vehicles are thus a key bridge technology on the road
towards electromobility. Their market share of new registrations will
rise in the EU, simply because competition will drive more and more
manufacturers to offer such cars. However, these cars will have
captured no more than a low single-digit percentage of the market
by 2015 because, among other things, the markups on them will
remain substantial.
As with all alternative fuel technologies the high markups for hybrid
vehicles still frighten off many buyers even though the extra outlay
can actually be recouped quickly. Economies of scale, technical
progress and a steep learning curve are, however, likely to
significantly reduce the extra costs and the markups for such
vehicles in future. In climate policy terms, however, hybrid vehicles
are among the most inefficient ways to reduce CO2 emissions: the
abatement costs according to McKinsey amount to more than EUR
3,000 per tonne of CO2, which makes them many times more
expensive than the prices currently being charged under the EU
emissions trading scheme. This drawback is also often ignored in
assessments of the technology.
Electric vehicles – the battery is the sticking point
Low emissions of pollutants, CO2 and
noise
10
The logical next step in the development of hybrid technology is the
discarding of a conventional engine and its replacement with an
electric motor only. The odds are very good that this technology can
play a significant and sustained role in road transport over the next
few years. The main advantage of electric vehicles is their high level
of efficiency: the bulk of the electrical energy is used to propel the
car; by contrast, vehicles with petrol or diesel engines lose a large
amount of energy as heat. Further winning attributes of electric
vehicles are that their emissions of local pollutants, CO2 and noise
are only very low or nonexistent. CO2 emissions per kilometre
travelled of course depend on the energy mix of electricity generation. The emissions of Germany’s current power grid system would
already fall below the EU target of 120 g/km according to Germany’s
federal environment ministry. A higher share of renewable energies
would of course enhance the carbon footprint of electric vehicles.
One major benefit for consumers is the low variable costs: the
electricity cost per 100 kilometres driven is (under the current tax
regime) in the low single-digit euros and is thus – depending on the
April 1, 2009
pump price – only around one-third of the fuel cost for an average
diesel or petrol car.
Batteries currently still very expensive
Given these advantages it is surprising at first glance that electric
cars have hitherto failed so miserably. The main reasons for this can
be found by taking a look at the battery technology. Battery costs are
extremely high at around EUR 1,000 per kWh at present. In order to
enable the range of electric vehicles to be increased well beyond
100 kilometres would require an additional outlay of EUR 10,000 or
more. Another problem is the low energy density of the batteries,
which means they are heavy and take up a lot of space. The life
(number of charging cycles), the safety and the overall eco-profile of
the battery over the life cycle are further areas that require attention.
For the time being, the range of pure electric vehicles (without
replacing the batteries) will in most cases remain at (well) under 200
kilometres. At present it still takes several hours to recharge a
battery; this considerably limits the usability of electric vehicles.
“Big business” is investing in electromobility
Investments in infrastructure
necessary
Some of the problems cited can be mitigated with lithium-ion
batteries that are widely used in laptops and mobile phones. One
important lever in the ongoing development in the whole field of
electromobility is increased collaboration between automakers and
autoparts suppliers, power utilities and technology groups. This
ought to speed up the pace of technological progress greatly. The
most important objective will probably be to cut the production costs
of batteries by 70-80% and at the same time to increase their performance while reducing their size. In addition, investment in the
power supply infrastructure will need to be made over the next few
years. Charging stations for electric vehicles will need to be installed
in multi-storey car parks and lay-bys or at special electric replenishment stations so as not to limit the pool of potential users too
severely. Long-term, strategic investors are thus required, since
these investments will not have paid for themselves after just a few
years.
Replaceable battery blocks could
mitigate problem of short range
Of course a system of replaceable battery blocks is conceivable; this
would mitigate the problem of short ranges and also make electric
vehicles attractive to frequent drivers. Also conceivable is a system
in which the car buyer is not the owner of the battery, but is merely
the lessee and/or pays a variable usage fee to the battery’s owner.
The beauty of this would be that the customer would not a priori be
frightened off purchasing an electric car by the high battery costs.
The leasing rate and/or the variable usage fee for the battery as well
as the electricity costs would have to be lower than the fuel costs for
cars with internal combustion engines in order to make these
models economically attractive. The first pilot projects conducted in
the electromobility field – in Israel and Denmark among other places
– contain such elements.
Major opportunities, but only gradual structural change
Average car journey covers short
distance
April 1, 2009
The potential market for electric vehicles is fundamentally huge,
regardless of the concrete technological concept. Even the still short
range is not a fundamental problem for most car drivers because the
average car journey in Europe is just 30-40 kilometres, and on 80%
of all days the distance driven amounts to less than 40 kilometres.
This would make an electric car an interesting alternative for many
customers if intelligent solutions can be found to the remaining
mobility issues (e.g. car sharing, rental cars, quick charging systems
for batteries). The German government expects around 1 million
11
EU Monitor 62
electric vehicles to be on German roads by 2020; applying the same
formula to the EU the total number of electric cars in member states
would thus come to around 5 million. At first glance this appears
to be a modest objective as it would correspond to just 2% or so of
all cars on the road then. However, even this share can only be
attained if the costs of electric cars fall dramatically over the next
few years. Using today’s technology the CO2 abatement costs of
electric vehicles are exorbitantly high.
The question of where the electricity for the electric cars will come
from is of little relevance for now, because the additional power
required by the above-mentioned 1 million electric cars could largely
be supplied by the power stations currently in service. In the longer
term of course it must be ensured that more and more low-carbon
energy sources are included in the power generation mix in order
not to worsen the eco-profile of electric vehicles.
Alternative fuels: Very important, many issues to be resolved
Conflict between use of crops for fuel
or food
8
The aforementioned McKinsey report refers to the fundamentally
great potential of biofuels to reduce CO2 emissions and to their
comparatively low abatement costs. The specific eco-profile and
carbon footprint of biofuels are, however, highly dependent on what
plants are cultivated under which climatic conditions and whether
the emissions which result from the change in land use are also
taken into account. There have been a number of analyses of this
which – depending on the assumptions – arrive at highly contrasting
outcomes. The competitiveness of biofuels compared with fossil
fuels will also be heavily determined by the regulatory environment
(e.g. tax burden, blend levels) and by the oil price.
9&
Share of fuel consumed on German
roads in %, 2007
Diesel
39.1
The rising demand for biofuels was also blamed for some of the
increase in prices of agricultural commodities until early 2008. With
a limited area of land for cultivation there is indeed a usage conflict
between crops for food production and others intended for power
generation, but equally, the causal link between the demand for
bioenergies and the prices of agricultural commodities is less strong:
the latter have fallen dramatically of late without any serious
changes in demand for bioenergies occurring.
Petrol
53.2
Biodiesel Other*
5.6
2.2
* Vegetable oil and ethanol;
Percentages do not add up to exactly 100% due to
rounding errors
Source: IW Köln
Biofuels (ethanol or biodiesel) already play a major role around the
world and their use is constantly rising – either in the form of pure
fuels or for blending with petrol or diesel. Particularly in Brazil bioethanol made from sugar cane already has a long tradition, and
most vehicles in Brazil are fitted with flex-fuel engines that are
suitable for use with pure biofuels and blended fuels.
'0
The bottom line is that bioenergies are associated with “unwanted
side-effects”, but this ultimately applies to all energy sources.
Despite all the justified concerns regarding biofuels the baby should
definitely not be thrown out with the bath water, however. Advances
in technology will also help bioenergies to solve or mitigate some of
the above-mentioned problems. Second-generation bioenergies, in
which whole plants and above all crop waste can be converted into
energy and/or fuel and into which research is just beginning, should
have a smaller carbon footprint than today’s biofuels and reduce the
conflict over usage. One advantage of biofuels is that the existing
infrastructure (e.g. the network of filling stations) can be used
without the need for comprehensive retooling and expansion
investments.
The EU basically continues to set great store by biofuels, which can
also be seen in the option to use biofuels for achieving part of the
12
April 1, 2009
“120 gram target”. There are, however, no plans for a concrete
target quota for biofuels at present. In future, biofuels will probably
have to meet sustainability criteria in order to be licensed in the EU.
Gas-fuelled vehicles are gaining importance internationally
Autogas versus CNG
There are basically two different types of
natural gas that are used as fuel for road
vehicles: Autogas and Compressed Natural
Gas (CNG).
Autogas (which is also known as Liquefied
Petroleum Gas or LPG) is a compound
containing propane and butane. Liquefication
means that the gas tank occupies a relatively
small amount of space. Petrol cars are usually
converted to Autogas. In Germany the fuel will
receive preferential tax treatment up to and
including 2018 at the earliest.
Unlike Autogas, CNG is in a gaseous state (as
methane) when refuelling takes place. CNG
requires special fuel tanks that take up quite a
lot a space, which means that conversion can
result in the loss of most of the vehicle‘s boot
space. Gas-powered vehicles supplied straight
from the factory are usually CNG fuelled. CNG
will be taxed preferentially in Germany until at
least 2020.
Both LPG and CNG are burnt in conventional
internal combustion engines.
Reliable tax provisions important for
consumers
Natural gas is also increasingly being used as a fuel for road
vehicles. According to figures from the Deutsches Institut für
Wirtschaftsforschung (DIW) the number of gas-powered vehicles
worldwide climbed from a good 1 million in 2000 to more than 9
million by 2008; this is more than all the cars registered in the
Netherlands, for example. Argentina, Pakistan, Brazil, Iran and India
are leading users of such vehicles. The leading EU member state by
a long way is Italy, followed by Germany. New registrations in
Germany were roughly three times as high as in 2005. In nearly all
countries the sale or use of natural gas is promoted via government
incentives (e.g. a lower petroleum tax rate). The reasons for this are
among other things that gas emits lower levels of CO2 and other
pollutants than diesel and petrol.
Car drivers find the lower price of gas at the filling station appealing
– despite their higher fuel consumption compared with petrol and
diesel cars. More and more carmakers are offering gas-powered
cars straight from their factories as a higher-priced option. In
addition, for those who cover long distances it can make financial
sense to convert a car from a petrol engine to gas power (Autogas
or LPG as a rule, see box). Often the petrol engine is retained so
that the driver can choose between two types of fuel. One disadvantage for owners of gas-powered vehicles is the still very
patchy network of refuelling stations. Nevertheless, the number of
gas refuelling stations is expanding, above all in Italy, Austria,
Switzerland and Germany.
One basic flaw of gas-powered vehicles from an ecological point of
view is that, after all, they also use an equally finite fossil fuel; this
problem could be eased by an increasing share of biogas. On the
one hand, the advantage of the lower price is dependent on the tax
regime. Long-term, reliable conditions are therefore helpful for
consumers. On the other hand, the gas price can rise faster than the
oil price if global gas demand increases by an exceptionally large
amount; this would also reduce its price competitiveness relative to
diesel and petrol. The range of gas-powered vehicles is also shorter.
Over the next few years gas-powered cars are likely to prove more
popular than full hybrid alternatives in the EU.
Hydrogen-fuelled vehicles are still a long way off
There are still no practical examples of hydrogen-fuelled road
vehicles, although many carmakers have successfully conducted
test runs using prototypes for years. Hydrogen can be directly used
in an internal combustion engine or a fuel cell to generate electricity
– in both cases with zero CO2 emissions. Many unsolved problems
currently still exist, such as in producing the hydrogen, storing and
transporting the fuel in a loss-free and safe manner; substantial
investments in the corresponding infrastructure would also be
necessary. A market breakthrough cannot therefore be expected
before 2020. The fuel does, however, possess enormous potential –
not only in the transport sector – should it prove possible to generate large quantities of hydrogen at low cost from renewable sources
3
and install the necessary infrastructure.
3
April 1, 2009
See Auner, Norbert (2004). Silicium the link between renewable energies and
hydrogen. Deutsche Bank Research. Research Notes 11. Frankfurt am Main.
13
EU Monitor 62
Government incentives can speed up its success
Providing government incentives is a
balancing act
Government incentives can accelerate the market penetration of
alternative fuel technologies. There are no regulatory concerns with
regard to incentive programmes for basic research in the area of
electromobility, for example. Subsidies for setting up the infrastructure or tax breaks/direct rebates paid to buyers of energyefficient cars are a conceivable alternative. Providing government
subsidies is, however, always a balancing act. A subsidies battle
with other leading automaking nations needs to be prevented. In
addition, CO2 abatement costs should be monitored: financial
assistance for very expensive CO2 abatement technologies can
mean that no funds are then left for ecologically and economically
more sensible projects. Incentive policy is also difficult to conduct as
it cannot yet be predicted which will be the dominant fuel technology
of the future. As with every subsidy there are the serious problems
of rent-seeking and opposition to the scaling back of previously
granted state aid. In the long term all propulsion technologies and
fuels need to be able to survive without subsidies. For many
alternative fuel technologies, however, this is currently still a long
way off.
5. Conclusion and outlook
Great potential for alternative
propulsion technologies and fuels,
but structural change will not be rapid
By adopting the regulation to reduce the CO2 emissions of new cars
the EU has sent out an important signal focusing on the objective of
lower-carbon road transport. The expectation of a resurgence in oil
prices in the medium term and competition within the automotive
industry are also driving the expansion in the range of energyefficient cars available. If the markups on energy-efficient cars can
be recouped within a few years, demand will rise rapidly. However,
rapid structural change cannot be expected in either new registrations or the overall fleet of registered vehicles. This is due to the
long development lead times for new propulsion technologies and
the long and increasing operating life of new cars. In addition, petrol
and diesel cars currently still enjoy many advantages over alternatively fuelled vehicles. Conventionally fuelled vehicles are
therefore likely to make up more than 90% of new car registrations
in the EU on average during the next decade; in most developing
countries and emerging markets the share will actually be even
higher as petrol and diesel cars will remain cheaper to purchase
than electric cars, for instance, for the foreseeable future. Nevertheless the degree of electrification in the automotive industry will increase. Alternative fuels will also become more important.
The mobility concepts of the future will presumably be much more
flexible than at present. Why shouldn’t a commuter use an electric
car for the daily drive to work or other short journeys, but then swap
this for a bigger car (from the same supplier or dealer) with an
efficient diesel or petrol engine when going on holiday? The
development and implementation of such concepts are likely to
grow. All things considered, talk of a new era is not too overblown a
description of the process currently underway in the sector.
The current recession in the global automotive industry also offers
opportunities for innovative companies. Carmakers and autoparts
suppliers who, despite the poor economic circumstances, succeed
in bringing energy-efficient vehicles onto the market that also satisfy
customer requirements with regard to price, design, comfort, safety,
performance etc. will undoubtedly be among the winners in the
sector over the next few years. After all, global demand for cars will
14
April 1, 2009
continue to grow over the coming years. Many German and
Japanese automakers are well positioned to emerge stronger from
the crisis. The innovative ones are likely to be trendsetters and set
standards in developing and building energy-efficient vehicles.
% !
Schematic comparison* w ith conventional engine (petrol, diesel); scale goes from "very much better" (+ + +) to "very much w orse"
(- - -); o = neutral/same
Purchasing
costs
Variable
costs
CO2
reduction
CO2
abatement
costs
Infrastruct.
expansion
Performance***
Time until marketready
-
+
+
o
o
o
Available
Full hybrid
-
+
+
--
o
-
Available
Plug-in hybrid
Electric vehicles
(electricity
from renew able sources)
Autogas/CNG
Biofuels,
1st generation**
Biofuels,
2nd generation
--
+
+
--
-
-
From 2010/11
---
+++
+++
---
--
--
From 2010/11
-
+
+
+
-
-
Available
o
+
+
+
-
o
Available
o
-
++
-
-
o
Not before 2015
Hydrogen (from fossil
fuels)
---
-
--
--
---
o
Not before 2020
Hydrogen (from
renew able sources)
---
--
+++
--
---
o
Not before 2020
Micro-/mild hybrid
* Current assessment ; gap being closed t o pet rol and diesel cars due t o t echnological progress
** Variable cost s, CO2 reduct ion and abat ement cost s highly dependent on t ype of biof uels and regulation
*** E.g. range, accelerat ion, flexibilit y
Source: DB Research
')
Eric Heymann (+49 69 910-31730, eric.heymann@db.com)
Meta Zähres
April 1, 2009
15
EU Monitor 62
Selected literature
ACEA (2008). Reduzierung der CO2-Emissionen von Pkws – Auf
dem Weg zu einem integrierten Ansatz. Brussels.
European Commission (2008). CO2 from passenger cars.
Memo/08/799. Brussels.
European Commission (2007). Questions and answers on the
proposed regulation to reduce CO2 emissions from cars.
Memo/08/597. Brussels.
European Federation for Transport and Environment (2008).
Reducing CO2 Emissions from New Cars: A Study of Major Car
Manufacturers’ Progress in 2007. Brussels.
Herbener, Reinhard et al. (2008). Technikkostenschätzung für die
CO2-Emissionsminderung bei Pkw – Emissionsminderungspotenziale und ihre Kosten. Umweltbundesamt. Dessau.
VCD (2008). VCD Auto-Umweltliste 2008/2009. Berlin.
VDA (2008). Handeln für den Klimaschutz. CO2-Reduktion in der
Automobilindustrie. Frankfurt am Main.
© Copyright 2009. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank
Research”.
The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do
not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ
from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and
without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the
information given or the assessments made.
In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht.
In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by
the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong
Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved
and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS)
relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.
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New era unfolding for the automobile industry

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