While the U.S. political scene is in a time of transition, the automotive industry remains challenged to meet future fuel economy standards.  The 2016 CAR study “An Assessment of Powertrain Technology Costs Associated with Meeting CAFE and GHG Standards” investigated expected powertrain technology costs and effectiveness through the year 2025.  With unprecedented participation from global vehicle manufacturers, the report aggregates powertrain technology cost and efficiency data from nine global vehicle manufacturers.  Members from the Alliance of Automobile Manufacturers and the Global Automakers contributed responses to both quantitative surveys and qualitative interviews.

Not surprisingly, manufacturers expect costs to be higher and efficiencies to be lower than regulators estimate—but not always.  Manufacturers reported somewhat higher costs for most technologies than were estimated by the regulators.  However, there were some technology costs the industry felt were trending close to regulators expectations.  For example, advanced battery costs appear to be rapidly decreasing, and according to many manufacturers, in-line with regulators estimates. While there were clear differences in cost, manufacturers estimates for efficiencies were strikingly lower than regulators expectation.

A common theme is that consumer expectations often limit the opportunities for efficiency gains in powertrain implementation.  For example, manufacturers reported their engine programs often started out close to the optimal modeling targets, but the real world implementation into a vehicle inevitably reduced the end efficiency—every time.

“This difference in expectations for efficiency gains leads to an uncertain “electrification tipping point.”

Cost differentials between manufacturers and regulators for ICEs may be a $150-300 range—certainly a noteworthy difference.  However, total cost to meet the standards become more daunting if the regulators forecasted efficiencies are not possible, thus requiring higher penetration levels of electrification.  Regulators predict meeting 2025 regulations will require 3 to 5 percent BEV/PHEV.  Given the industry’s expectations for efficiency, it was not uncommon to hear expectations of 5 times as much penetration for BEV/PHEVs to meet the standard.  Such a shift in the need for electrification greatly alters the cost equation—and is far beyond what the current market has shown willingness to accept. This electrification tipping point will be a critical guidepost in understanding the future market.

Further, it is not merely a cost and efficiency problem; it is also a pathways problem. Each manufacturer is pursuing many technology pathways.  No two manufacturers have the same product and technology portfolio; nor fuel economy strategy and technology costs.  Therefore, suggesting a lowest cost for a technology or implementation strategy may be misleading.  Depending on market position, customer expectations, and product mix, some manufacturers will bear a much greater burden than others.

In some ways, the industry’s ability to develop, refine and deliver technology can be its biggest burden and its biggest opportunity.  The industry has historically met the technology and cost challenges laid in front of it, and has often done so sooner and at a lower cost than initially expected.  Why not again?  The internal combustion engine has been refined for over a century.  The discussion of theoretical efficiencies limits has also been going on for nearly as long.  Clearly the industry will continue to make ICEs more efficient—probably more than even they think.  Yet, these innovations most certainly will add cost.  The challenge now for industry and regulators is in working together to find ways to be sure the modeled world can match up to the real world.