While fuel-cell technology is progressing in places like California and Japan, the rest of the world shrugged it off after the initial hype subsided. Since then, practically every automaker in existence has invested in battery technology and electrification. However, according to a recent survey, most auto executives secretly do not believe batteries will be the real breakthrough in electric mobility. Dealers feel the same way, but they’ve been less cagey on the matter.
Uh, what? Then why is everyone and their mother talking up plug-in cars and sweeping the fuel cell under the carpet?
Well, in addition to hydrogen having an abysmal fueling infrastructure almost everywhere, governments simply aren’t pushing it like battery power. Incentivizing plug-in cars has gone a long way to bolster the segment’s popularity and, with China mandating that a growing portion of all auto sales be battery-related, companies have to lean into what they already have. That said, many executives still seem to feel that hydrogen-powered cars have more to give the industry.
Let’s not get ahead of ourselves. Its time to talk about why auto dealers are so unhappy about the electric revolution.
In a recent interview with Automotive News, Sonic Automotive CEO Scott Smith said dealerships were getting mighty worried over automakers claiming they’ll soon electrify a large portion of their fleet. In addition to EVs not yet gaining widespread market approval, there is also a cost factor nobody seems to be addressing.
“I don’t know if anybody’s paid any attention to what’s happened to the price of lithium over the past two years. It’s about tripled,” Smith said. “So nobody is going to be able to afford these cars because the batteries will be too doggone expensive, unless our tax dollars are subsidizing every electric vehicle that’s sold instead of going to schools, first responders and people who really need the money.”
Personal politics aide, many wonder if plug-in cars will continue to sell after the federal tax credits run out. But even if the government grants another round, a sudden uptick in MSRP stemming from skyrocketing lithium and cobalt costs would have to be offset. “We’re paying wealthy people, giving them a tax break, to drive expensive cars,” Smith elaborated. “It makes no sense to me.”
Current chair of the National Automobile Dealers Association Wes Lutz also said dealers aren’t so hot on autonomy right now. Lutz admits that customers like the idea of safety features and assisted highway cruising, but most aren’t interested in a car that can drive itself all of the time. “I just think we’re jumping the gun on this thing,” he said. “Why don’t we ask the consumer if that’s what they want to do?”
“We just want to make sure we don’t price autonomous vehicles out of the range of consumers because all these things are going to cost something. If the government makes them mandatory and the price of the car goes up, all people are going to do is hold onto their older car longer,” Lutz continued, estimating that Level-4 self-driving hardware would increase the price of an average car by around $5,000.
Yet automakers continue to push both plug-in vehicles and autonomous tech harder than just about anything else right now. There are a myriad of reasons for this. In addition to governments championing both as away to improve safety and minimize pollution, running with these concepts makes a company more appealing to investors. These days, a company’s share price is about as important as its profitability and Wall Street does not reward the status quo.
However, automotive executives aren’t entirely sold on battery technology themselves. A 2017 survey from KPMG (shared by Bloomberg) showed motoring executives overwhelmingly thought hydrogen fuel cell tech would be the breakthrough hero for electric mobility — not batteries. But estimates of its success places it on a much longer timeline and not without significant financial investment. A lot of this has to do with inefficiencies in production and transport. Electrolysis (used to extract hydrogen from water) is great if the energy used is comes from renewable sources, but natural gas reforming is currently the most efficient and popular means of production. It still isn’t ideal, though: supply logistics have to be worked out and new means of production are currently being developed. Meanwhile, electricity is already pretty easy to produce via conventional means and even easier to move around on the grid — at least until it becomes overwhelmed by millions of people plugging in their car every evening.
“It almost feels like a Betamax versus VHS moment,” said Justin Benson, KPMG’s U.K. head of automotive, referring to the format wars of the 1970s. “It’s not beyond the wits of man to move to hydrogen relatively quickly, if organizations wanted to do it.”
It’s an apt analogy. Despite producing inferior quality video, VHS beat Betamax because the hardware was cheaper and it ended up being adopted by the rental market and porno industry. VHS also provided for longer running times out of the gate. Betamax certainly could have adapted to solve these problems while continuing to offer superior fidelity. But nobody wanted to make the investment and the format never regained relevance. So why would it be any different for hydrogen?
It might not be. But plenty of auto companies are placing the technology on the back burner in case the change comes. “We’ll keep the fuel-cell technology in development so that we have this technology option should there be a shift in the market,” said Ola Kaellenius, head of development at Daimler AG. Toyota and Honda are also actively interested in hydrogen and intend to improve Japan’s storage network for it. Hyundai’s in the game, too.
However, let’s not forget that, while this survey makes it seem like automakers are holding out hope for a fuel-cell resurgence, there are plenty of executives who have spoken out against the technology. Elon Musk has has raked hydrogen over the coals repeatedly and Jaguar’s technical design director called it a disaster in practical efficiency. This is largely true; efficiencies are nowhere near where they need to be to make hydrogen a sustainable energy source right now. But the same case could theoretically be made against BEVs, depending on how you parse out the data.
We suppose the lesson here is that, while everyone talks endlessly about the future, no one has a firm grasp on what it looks like.
[Image: Volkswagen Group]
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