Transforming the auto industry - Incentives, Regulation, Technology and Events

May 5, 2010 - PRLog -- For a number of years, commentators have been discussing how to move the auto industry away from oil dependency. Back in 2004, in his book 'The End of Oil' Paul Roberts discussed how the US government could bailout the Detroit auto-makers such that it could retool and provide improvements in fuel economy (p.318).

And this process now really seems to be gaining significant momentum. It is now realistic to expect the cars people drive to change significantly over the next 5 to 10 years. As ever, there is great uncertainty amongst the auto industry as to whether people will actually buy the new green / low-carbon models.

At Haddock Research, through our Environmental Choices monitor, we are tracking data about the exact car models people have in their households, and to understand how this links with consumer segments and household composition - available in oursection report on transport and cars. As part of the questionnaire, we collected information on the make, model, engine size, model year and fuel type of each car within a household - and to ask about who was mainly responsible for each car within the household, what it was used for and annual mileage. This information could then be matched against US EPA data (for Canada and the US), and Department of Transport data (England) to see how the cars rated in terms of Greenhouse Gas scores, and the 'A to G scale' calibrated by CO2g/km, respectively. This information can also be used to categorize cars according to the general types (in North America - Large Cars, Midsize Cars, Minivans, Pickups, Small Cars, Station Wagons, SUVs, Vans).

We collected a huge amount of other information about each respondent - including demographics, other transports methods used, attitudes towards climate change, and the associations and emotions (aka the affect heuristic) towards a SUV, a Prius and a suburban train.

This analysis provides solid evidence that concern about climate change is making a difference in the cars that people are buying. As we summarize in the Interim Highlights of the first wave of our Environmental Choices survey:

The EPA database provides a Greenhouse Gas score (0 to 10; with higher scores being more 'low carbon') for each specific car - and, for Canada and the US combined, the averages correlated to concern about climate change. For the respondent's own car, the average Greenhouse Gas score for Climate Citizens is 5.85, for Mild Greens is 5.51, and for Sceptics & Uninvolved is 5.28. At a very general level, car companies should draw encouragement thatClimate Citizens will likely be interested in the low carbon (hybrid, hydrogen fuel cell, electric) models in development.

Here is a summary of some key factors transforming the auto industry in North America and the UK:

A number of incentives programs have been launched to encourage people to switch away from older, less fuel-efficient models - such as the 2009 'cash-for-clunkers' deal in the US, the 2009 'vehicle-scrappage-scheme' and forthcoming electric-car grant in the UK, and the Retire Your Ride scheme in Canada. In Canada, a number of auto manufacturers have devised their own schemes in collaboration with the Retire Your Ride scheme - most recently an expansion of the scheme by Ford.

Regulation is being used to improve the fuel-efficiency standards of cars. The state of California, and province of Quebec, had been active in drafting their own standards, but it would be tough for auto manufacturers to adapt their cars to these sub-national regions. On April 1 2010, there was an announcement to implement stringent fuel-efficiency standards throughout North America - which will improve efficiency by 40% by 2016.   The EPA predicted it "would boost the average cost of a vehicle of less than $1,100 (U.S.) by 2016. However, the EPA estimated consumers would save several thousand dollars in fuel costs over the life of a car built in 2016."

The technology used in creating fuel-efficient cars is now moving quickly, and electric cars are now getting a great deal of attention. GM's Volt is due to be launched in November 2010. China's BYD has announced the plans to launch their e6 later this year, locating its new sales offices in California. Toyota currently has field trials of their plug-in Prius in Canada, with commercialization due in 2012 - the same year that the Nissan Leaf is due to be available (with a factory to be built in the UK). In Canada, ZENN Motor Company is active in this area, and Hydro-Quebec and Mitsubishi are undertaking field trials of their all-electric i-MiEVs. The Better Place company provides networks and services to the electric car industry ... and the list goes on.

And events can be a tremendous factor for change (as Chernobyl was for the nuclear industry). The last couple of years has seen the auto sector being massively influenced by oil price volatility, the financial crisis and government bail-out money. Will there be a significant impact from the current oil price spill in the Gulf of Mexico, which threatens a potential environmental catastrophe? There are 2 significant stakeholders here - consumers/public opinion and government/cleantech investment. With public opinion, will it make people think more about the consequences of using oil in their cars, and encourage greater demand for more fuel-efficient cars (and electric cars, in due course)? With governments, will they push more money towards clean tech investment (and away from oil). Private investment in these sectors is significantly impacted by government policy (see, for example, the Blackrock New Energy Investment Trusts' April 30 2009 report, p.9 - pdf). Let's see how this plays out!

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Haddock Research and Branding, Inc. is an innovative full-service market research agency focusing on climate change and the low carbon economy. Providing vital information to those creating a low carbon world.