Volume 11 Issue 1 Article 5 12-31-2009 How to cope with distance in the future? Guy Fournier Follow this and additional works at: https://www.ebrjournal.net/home Recommended Citation Fournier, G. (2009). How to cope with distance in the future?. Economic and Business Review, 11(1). https://doi.org/10.15458/2335-4216.1261 This Original Article is brought to you for free and open access by Economic and Business Review. It has been accepted for inclusion in Economic and Business Review by an authorized editor of Economic and Business Review. 75 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 2009 | 75–100 HOW TO COPE WITH DISTANCE IN THE FUTURE? THE IMPACT OF GLOBALISATION AND ECOLOGICAL REQUIREMENTS THE DESTINY OF THE AUTOMOTIVE INDUSTRY AND ITS SUPPLIERS+ GUY FOURNIER* ABSTRACT: Mobility is essential to life, human needs, and economic development. Di- minishing oil reserves, a growing dependency on oil and global warming will all strongly impact on mobility. However, innovative solutions exist. To keep mobility aff ordable it is likely that fossil-oil-based mobility will not be substituted by just one technology. Second- and third-generation biofuels and electric vehicles are some of the best ways to be energy and CO2 effi cient in a well-to-wheel view. In contrast, fuel cells do not seem to be an alter- native. Original equipment manufacturers (OEM) and suppliers will be fi rmly impacted by this evolution. Th e fastest and most innovative of them can take advantage of these challenges and fi nd new interesting business opportunities. Keywords: Sustainable Mobility; Global Warming; Peak Oil; Biofuel; Alternative Propulsions; Electric Vehicle; Vehicle to Grid (V2G); Car-Sharing; Automotive Industry UDC: 629.33:005.44:502/504 JEL classification: L90, Q57 1. INTRODUCTION Mobility is a fundamental need of all societies and is an important part of our social cohesion. Further, it is also a prerequisite for the economic development of a company, town, country or region. With the growing scarcity of resources and rise of environmen- tal issues, the recent path of development cannot continue for future generations. Th is raises the problem of whether mobility can remain aff ordable for individuals or other economic actors? + Acknowledgments: I would like to thank Philippa Hood, Eda Osman, Michael Rau, Hans-Jörg Schoenfelder, René Seign and Matthew Stinson for their dedicated support in preparing this manuscript and my colleagues and students of the School of Engineering and the Business School for our fruitful discussions. * Pforzheim University, Tiefenbronner Straße 65, 75175 Pforzheim, Germany, Email: guy.fournier@hs- pforzheim.de ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200976 To fi nd new paths towards future developments an interdisciplinary approach combin- ing economics, technology and business strategies will be adopted in this paper. First, the phenomenon of globalisation and its impact on wealth and the automotive fl eet will be defi ned and explained. In the second stage the consequences of globalisa- tion, with regard to the scarcity of oil and how regulation is aff ecting the automotive sector, will be analysed and evaluated. Aft erwards the culmination of these factors will challenge the traditional techno-economic mobility paradigm in place. Finally, we will explore how the market will be impacted in relation to the customer, producer, infra- structure and projected estimations for the future. 2. GLOBALISATION AND THE AUTOMOTIVE INDUSTRY Globalisation is a result of the international division of labour. Th is division is likely regarded as one of humanity’s greatest innovations. Th e division of labour1 enables both countries and companies to specialise in what they do best. Within this frame- work, it enhances productivity and thus economic growth. It encourages wealth at all levels of the economy, including companies, towns, regions, countries and conti- nents. Th e transport of goods, energy and new information technologies as well as the eco- nomic framework are fuelling this development by facilitating the division of labour. Th e mobility of goods and services can therefore be seen as a determinant creator of wealth and prosperity. Prosperity fi rst came with the industrial revolution in Western countries. Th e integra- tion of more states of the world into the international division of work has acceler- ated globalisation and today brings wealth into developing countries. Th e fi rst need of a developing nation is to fulfi l individual mobility. Today, the United States has about 800 vehicles per 1,000 people. Other mature markets such as Japan, the United Kingdom, Germany and France have about 600 vehicles per 1,000 people. In the BRIC countries, Russia has 230 vehicles per 1,000, Brazil has 130, while two of the most populated countries in the world – India and China – have fewer than 50 vehicles per 1,000 people.2 Th e fi gures quoted above indicate there is vast potential for growth and opportunities for a vehicle manufacturer and an original equipment manufacturer (OEM). At the same time, new competitors are emerging from these countries and are augmenting the com- petitive environment, forcing the OEMs to specialise in what they do best. Th is reduces the vertical range of manufacturing and gives the supplier the opportunity to enlarge its 1 Cf. Smith, A.: An Inquiry into the Nature and Causes of the Wealth of Nations, London 1776, p.13 2 Cf. Japan Automobile Manufacturers Association: ”World Motor Vehicle Statistics Vol.7 2008”, p. 95C GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 77 part of value added. Th e ‘Fast Study’3 expects that the automotive market will grow from USD 645 billion in 2002 to USD 903 billion in 2015. Th e suppliers’ share of value added will at the same time rise from 65% to 77%. Th e vertical range of OEMs will therefore continue to decline in the future.4 New growth opportunities for suppliers are connected with greater pressure from OEMs.5 Th is is because OEMs are receiving an increasing amount of pressure from end- users. Th e main factors driving the pressures from end-users are caused by: stagnation in demand from the triad markets; increasing price sensitivity; growing awareness of environmental issues; and a decrease in brand loyalty. Also, suppliers are facing industry pressures that include continuous price rises of raw materials and the growing bargain- ing power of suppliers as a result of the consolidation of suppliers. An example of this is seen in the cases of Arcelor in the steel industry, and Rusal and Sual in the aluminium industry. Th e supplier is therefore increasingly fi nding himself in a ‘sandwich position’ and will have to react swift ly to ensure that it limits any loss of market share or decline in profi tability. As mentioned, the fi rst need of any developing country is to ensure that its fulfi ls its indi- vidual mobility needs with its new wealth. Developing countries have more groundwork to cover in this regard compared to developed nations, which have reached saturation point. Th at is the main reason why an increasing dichotomy exists between established mature markets and emerging ones, which are forcing the industry to adopt diametri- cally opposing strategies. Th is dichotomy is further borne out when reviewing the global light vehicle fi gures between 2000 and 2007. Th ey show that emerging markets (in light blue) are growing at a rate of 12.40%, while mature markets (in dark blue) are declining by -0.56%.6 Th is trend will continue in the future (see Figure 1): the mature markets will stagnate with an annual growth rate of -0.10%. In contrast, emerging countries will grow by 6.74% each year. 3 Also see the following: Mercer Management Consulting; Fraunhofer-Instituten for Production Technology: ‘Future Automotive Industry Structure (FAST) 2015’, 2004 4 It is expected that the automotive region of Eastern Europe will be the winner of this evolution, its market share is expected to grow from 3.5% to 7.5% in 2015. For more details, see Sihn, W.: Automotive Region East- ern Europe – AREE Opportunities and Risks of the ”Detroit of the East” for Automotive Vienna 2006. 5 For more details, see Roland Berger: Automotive suppliers procurement study – Main success levers to mas- ter the procurement challenges are not exhausted, February 2008 6 Cf. PWC (2008) ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200978 FIGURE 1: Global Light Vehicle Assembly 2007–2015 Th e continuous growth in light vehicle assembly has of course also had an impact on the number of vehicles on the road; in the 1950s the world had about 50 million vehicles on the road and currently there are 600 million. Th e World Business Council for Sustain- able Development (WBCSD) 2004 expects about two billion cars by 2050.7 However, the IMF estimates a fi gure closer to three billion by 2050.8 FIGURE 2: Projected Total Stock of Light Duty Vehicles by Region Source: World Business Council for Sustainable Development (WBCSD) 2004 7 World Business Council for Sustainable Development (WBCSD) (ed.): Mobility 2030: Meeting the chal- lenges to sustainability, Geneva 2004 8 www.imf.org/external/index.htm GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 79 For fuel growth in general, and for the fl eet of vehicles in particular, more energy is needed. International Energy Outlook 2008 projected that world market’s energy con- sumption will rise by 50% between 2005 and 2030. Looking particularly at liquid fuels, the world is expected to increase more rapidly in the transportation sector than in any other end-use sector.9 Th e demand for fuels is thus growing very fast. Now, the objective is to examine how the market off er will appear in the future. 3. GLOBALISATION AND SUSTAINABLE DEVELOPMENT: THE NEED TO CHANGE THE ECONOMIC FRAMEWORK Th e off er of oil grew steadily between 1935–2005 facilitating economic growth and pro- viding a valuable source of energy for the ever-expanding car fl eet. However, more re- cently oil stocks have been showing signs of depletion.10 FIGURE 3: Oil Production Source: www.energywatchgroup.org A report from Energy Watch (see Figure 3) declares that ‘peak oil’ production has been reached in the world. ASPO11 is more optimistic and predicts that ‘peak oil’ production will happen within the next decade. Th e IEA has forecast that ‘peak oil’ production will occur around 2030. Beside these geological facts, a lack of investment in explo- ration and production could slow future oil production down. Consequently, costs would increase until the point is reached where the industry is unable to bring a suf- fi cient number of new fi elds into production quickly enough. Investment is critical to compensate for the depletion of oil. Th e current fi nancial crisis could aggravate the situation further in the long run. Finally, the production policies of the key regions (politics) could reduce the off er. An argument in support of this point is that those regions with vast oil stocks want to protect their future generations’ revenues. Th e 9 Energy Information Administration (EIA): International Energy Outlook 2008, Washington 2008 10 http://www.eia.doe.gov/oiaf/ieo/highlights.html 11 http://www.aspo-usa.com/ ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200980 conclusion from the above sources strongly indicates there is a high risk of a supply crunch.12 Th e diff erences between supply and demand are refl ected in price levels that rose con- sistently from 1999 to August 2008. As an example, the price of oil in summer 2008 in France was so high that demand dropped 10.6% in June and by 12.3% (gasoline and diesel) in August. In the USA a similar occurrence was observed.13Interestingly enough, the US Energy Information Administration actually predicted the recent downturn (see Figure 4). It still expects diff erent scenarios for the future, but forecasts that a higher pro- jection will be more likely. In this case, the price of oil would reach USD 186 a barrel in 2030. Th e International Energy Agency has projected that supply could fall by 4% while demand could increase by 3% by 2015. Th at is why M. Birol, the Chief Economist of the IEA, declared ‘We should abandon oil before oil abandons us.’14 FIGURE 4: World Oil Price in Two Cases, 1980–2030 Source: EIA (Energy information Administration): Energy Projection 2008 3.1 Global Warming Th e scarcity of oil is not the only problem that individual mobility will have to face in the future. Since energy fuels the division of labour and globalisation, most of that energy has a fossil provenance. A number of growing human activities emit carbon dioxide, methane and other fossil compounds back into the atmosphere. Cars alone emitted ap- proximately 2.6 billion tonnes of carbon dioxide (CO2) in 2000, which is equivalent to 12 Compare Schneider, A.: ”Th e Shrill Sirens’, Interview with Fatih Birol, in: International Politics on April 2008, S. 34 – 45, p. 36 13 For more details, see Le Figaro 16.9.08, challenges 16.9.08 14 Compare Schneider, A.: ”Th e Shrill Sirens’, Interview with Fatih Birol, in: International Politics on April 2008, S. p. 37 GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 81 6.1% of overall global CO2 emissions. Th is fi gure could reach 6.8 billion tonnes or 8.1% of overall emissions by 2050 15. FIGURE 5: Changes in Greenhouse Gases from Ice-Core and Modern Data Sources: IPCC 2007; Stern 2006, 2008 Th e emission of carbon compounds back into the atmosphere is considered to be one cause of global warming. Th ere has been a sharp increase in these emissions since the industrial revolution. Th is marked increase takes the shape of a hockey stick16 (see Fig- ure 5). Since the publication of the IPCC17 report and the Stern Review 2006,18 it is now more apparent that emissions from economic activity, in particular the burning of fossil fuels for energy, are causing the earth’s climate to change. According to the Stern Review 2006, the overall fi nancial costs of climate change will be equivalent to losing 5% of glo- bal Gross Domestic Product (GDP) each year. Th e costs of stabilising climate change are also signifi cant, but is currently estimated at less than 2% of global GDP. 19 One aim of the aforementioned studies is to furnish politicians and economic actors with the arguments needed to change attitudes and to reduce greenhouse gases. However, since 2000 anthropogenic CO2 growth has been four times faster and no decoupling of growth 15 PWC (2008) 16 Mann/Bradley/Hughes 1998 17 INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE: Climate Change 2007: Th e Physical Science Basis, Paris, February 2007, p. 3 18 Stern, N.: Th e Stern Review: Th e Economics of Climate Change, Cambridge 2006. 19 Stern, N.: Emission Rights Are a Bad Idea, FAZ Nr. 229 vom 30. September 2008, p. 14 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200982 from greenhouse gas emissions (2008) can be observed.20 Th at means that the carbon intensity, meaning carbon emitted per unit of GDP of the global economy, rose especially in the 2003-2005 period. Th is change was largely attributed to China’s rapidly growing share in economic output and carbon emissions. In order to reverse this evolution, more and more politicians are trying to defi ne new rules for globalisation and human activities. On the international level there are discussions on the Kyoto Protocol. Th e aim of these discussions is to stabilise greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Th e European Union is currently investigating a realistic target for its member countries to reduce their CO2 emissions by 20% by 2020,21 or 30% if a broader international agree- ment is reached. Th e objective for cars in 1997 was that by 2012 CO2 emissions should be reduced to 120 g/km. However, aft er a long dispute between the European Commission, governments and the automotive industry a fi nal decision was reached in parliament at the end of 2008.22 Th e European Parliament took a strong stance on this regulation de- spite vigorous lobbying from the automotive industry. Beyond the abovementioned costs and regulation ambitions, the European Commission is also working on a proposal to internalise the external costs of transportation. Cur- rently, these are estimated at 1.1% of GDP (€100 billion) for global warming, noise and air pollution and another 1.1% GDP (€100 billion) for traffi c congestion.23 Suggested incentives for people to adopt less costly behaviours include tax reductions, charges and emission trading schemes. Parallel to this, countries are setting up their own individual regulations to combat cli- mate change and the external costs. Many European countries have started to introduce a one-off tax or a yearly tax based on CO2 emissions. Similar to the domestic appliance energy effi ciency rating, France has e.g. devised the ‘Bonus Malus’ scheme which evalu- ates carbon dioxide emissions from cars. A carbon dioxide exhaust of less than 130 g/km gives a bonus (tax break) from €200 to €5,000. Th e tax on new cars with a carbon dioxide exhaust emission of more than 161 g/km is between €200 and €2,600. It is expected that the revenue from these taxes will fi nance the tax breaks. In reality, this has profoundly changed demand: sales of cars with less than 131 g/km jumped from January 29.6% in 20 See Canadell JG, Corinne Le Quéré, Michael R. Raupach, Christopher B. Field, Erik T. Buitehuis, Philippe Ciais, Th omas J. Conway, RA. Houghton, Gregg Marland (2007): Contributions to accelerating atmospheric CO2 growth from economic activity, carbon intensity, and effi ciency of natural sinks, Proceedings of the National Academy of Science 21 http://ec.europa.eu/energy/energy_policy/ 22 For more details, see the European Parliament legislative resolution of 17 December 2008 on the proposal for a regulation of the European Parliament and of the Council setting emission performance standards for new passenger cars as part of the Community’s integrated approach to reduce CO2 emissions from light- duty vehicles (COM(2007)0856 – C6-0022/2008 – 2007/0297(COD)), http://www.europarl.europa.eu, Texts adopted 23 See Nash 2003 p. 36. For further detailed information about external costs in the transport sector, please refer to European Commission 2008. A study by INFRAS, IWW, Universität Karlsruhe estimates the external costs of transport without traffi c congestion to be 650 billion €. See Infras 2004 p. 6 et seqq GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 83 December 2007 to 46% in August 2008. Th e average sales CO2 exhaust dropped from 149g/km (2007) to 140g/km in only 10 months. 24 FIGURE 6: Th e Bonus Malus System in France Source: http://www.developpement-durable.gouv.fr Previously we have looked at the world level, Kyoto, followed by the European and coun- try level, but even on the city level transportation regulation can and is being imple- mented. In 2003 London became the world’s fi rst major city to introduce a congestion charge25 to reduce the fl ow of traffi c into and around the centre from Monday to Friday. Currently this charge is GBP 8. Th is was followed by some other cities like Stockholm26 where a daily congestion charge of €7 was introduced. Traffi c passing into the conges- tion zone decreased by nearly a quarter (22%); traffi c accidents involving injuries fell by 5-10%; CO2 emissions have been reduced by 14% in London, and by 2-3% overall in Stockholm just as a result of this one policy. Public transport use increased by about 6%, although around 1.5% of that is credited to the higher fuel prices in this period. In Germany green zones have been implemented, meaning that traffi c is regulated by pollution from vehicles. In Paris a self-service car (‘Autolib’) will be launched to reduce the number of cars in the city.27 4. CHALLENGING THE TRADITIONAL TECHNO-ECONOMIC MOBILITY PARADIGM Mobility is essential to life and human needs. As we have seen it is also fundamental to economic development. Th e diminishing oil reserves combined with the growing dependence on them, along with global warming, will highly impact on mobility. Th e question is whether mobility will remain aff ordable, or whether these changes trigger creativity and innovation which could result in a new techno economic paradigm.28 24 Katchagourian, R.: Bonus-Malus. A measure that starts on the ground wheel, in France Soir, 10 Oct. 2008 25 www.tfl .gov.uk/roadusers/congestioncharging/6717.aspx 26 http://www.sweden.se/templates/cs/Article____14227.aspx 27 For more information, see www.paris.fr 28 For more about the techno-economic paradigm, see Perez, C.: Structural change and the assimilation of new technologies in the economic and social system, in: Future Nr. 4 from October 1983, Bd. 15, S. 357 – 375; Freeman, C.: Die Verbreitung neuer Technologien in Unternehmen, Wirtschaft sbereichen und Ländern, in: Heertje, A. (Hrsg.): Innovation, Technik und Finanzwesen, Oxford 1988, S. 34 – 63; Freeman, C., Perez, C.: Structural crises of adjustment, business cycles and investment behaviour, in: Dosi, G., Freeman, C., Nel- son, R., Silverberg, R., Soete, L. (Hrsg.): Technological Change an Economic Th eory, London / New York 1988, pp. 39 – 66 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200984 Most ideas about the new mobility concepts discussed today are in fact not new. Th e Otto motor was developed in 1860 and uses ethanol. Th e diesel motor was run on nut oil at the World Exhibition in 1900. At the same exposition, the Lohman Porsche, the fi rst hybrid car, was demonstrated in Paris. At the end of the 19th century there was fi erce competition to make the fastest car and history shows that electric vehicles were the most successful. Th e 1899 jamais contente car then achieved more than 100 km/h. Twenty years later, Ford designed his Model T to run on Ethanol, yet gasoline was to be imposed by Rockefeller with the help of prohibition in the USA.29 Th is paradigm remains to the present day. In order to gain a better understanding from the technical point of view and to better evaluate the diff erent possibilities regarding fuel mobility, it is best to analyse the energy path from primary energy to the wheel (see Figure 7). First, one has to distinguish pri- mary energy that can be classifi ed as fossil fuels (crude oil, natural gas, coal), renewable (sun, wind, biomass) or nuclear (uranium). Primary energy is then transformed into fi nal energy (gasoline, natural gas, ethanol, biodiesel, biomass to liquid, electricity, hy- drogen, compressed air etc.). Th is fi nal energy is then transformed by a powertrain into movement (useful energy). Powertrains propel a vehicle using: a spark ignition (gasoline, compressed natural gas, ethanol or hydrogen), a compressed ignition (diesel, dimethyl ether (DME), fatty acid methyl esters (FAME or biodiesel), a fuel cell (an electrochemical device that continuously changes the chemical energy of a fuel (hydrogen) and oxidant (oxygen) directly into electrical energy and heat without combustion or by a hybrid (us- ing multiple propulsion devices) or the pervious options. FIGURE 7: Energy Technology Perspectives Model Source: own, based on Concawe, Eucar, JCR – Well-to-Wheels Report, Version 2c, March 2007; Daimler Optiresource tool 29 www.rockarch.org/publications/resrep/dighe.pdf GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 85 Usually, when a carmaker speaks of a zero-emission vehicle they tend to focus on a tank- to-wheel view. In reality, the manner in which electricity is produced should also be tak- en into account. When taking this ‘well-to-tank’ view into consideration, zero-emission vehicles can still be produced if the primary energy is wind. In contrast, the use of coal instead of wind as the original energy source would give a worse CO2 balance than the internal combustion engine. Th e well-to-wheel approach is thus a systematic approach assessing energy consumption and greenhouse gas emissions. It considers not only the CO2 produced when the fuel is used in the vehicle but also the CO2 emitted in the fuel’s production and distribution, whether from crude oil, biomass or other primary energy sources. In the next step, primary energy (1) especially of liquids like biofuels will be analysed. Some years ago this source of energy was seen as a solution to substitute oil in the long run. Th is will be followed by an analysis of fi nal energy (2), focusing on Li-ion batteries which could launch the mass production of the electric vehicle. Accordingly, the fi nal step will be to break down the diff erent powertrains to conclude with an evaluation of useful energy (3) according to a well-to-wheel view. Primary energy, and especially the effi ciency of biomass, can be evaluated in com- parison with how far an average car can drive with one hectare of cultivated area. Th e most effi cient biomasses today are the biomass to liquid (BtL) and biomethan (see Figure 8), the second-generation biofuel. Th e 1st generation biofuel competes with the food chain and thus has a high negative impact on the price of food. By contrast, second-generation biofuels are not in competition with the food chain. Th ey off er greater effi ciency because, beside the fruits, the energy of the leaves and the stem can be used. Th at is the main reason why the distance to drive with one ha of cultivated area is much higher with BtL and biomethan than with the fi rst generation of biofuel. However, biomethan and BtL may be constrained in scale as the surface of land is limited. Th ere has recently been the development of third-generation primary energy namely in the form of microalgae. Currently there are about 200,000 diff erent types of microalgae. Th e annual productivity and oil content of algae is far greater than with seed crops. Algae can yield more than 100 times more oil than a hectare of soybean.30 Another advantage is that cultivated areas are not required. Algae can grow in places away from farmlands and forests, thus minimising damage caused to eco and food chain systems. In addi- tion, purifi ed water is not needed. Finally, this is an improvement in the yield of oil due to working on a vertical rather than horizontal plane. Th at is why the yields of oil from algae are higher than those for traditional oilseeds. Th e only problem is that it will not be commercially available before 2020.31 30 For more details, see Campbell, M.N.: Biodiesel: Algae as a Renewable Source for Liquid Fuel, Guelph 2008, p. 4 and also US Department of Energy: Algal Bio fuels, Washington 2008 31 See e.g. the algal project in UK: Jha, A.: UK announces world’s largest algal bio fuel project, in: Th e Guard- ian: 23 October 2008. ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200986 FIGURE 8: Distance to Drive with 1 Hectare of Cultivated Area Source: FNR 2008 Looking at fi nal energy, traditional gasoline, diesel or biodiesel, hydrogen or electricity can be used. Electricity has gained in importance over the last years as lithium-ion bat- teries have opened up new opportunities for electric vehicles and hybrid vehicles. Th e reason why lithium-ion batteries have gained in importance is simple: they off er the best weight-to-energy ratio (important for the range), the best specifi c power (important for acceleration) of any battery and a slow loss of charge when idle.32 Th e weight-to-energy ratio is especially promising. Limitations are present; however, especially in comparison with gasoline or diesel, the energy density of gasoline is 12,000 Wh/kg, about 100 times better than batteries. One reason for this gap is that internal combustion engines (ICE) burn fuel and oxygen, but the weight of oxygen does not have to be transported. Th is is also why the exhaust of CO2 is higher than the weight of gasoline (burning one litre of diesel produces 2.65 kg CO2, while one litre of burned gasoline emits 2.32 kg CO2).33 Another limitation of batteries is the price. According to Avicenne34 these prices will de- cline quickly with mass production, but will still be high. Today the costs are about USD 1800-2000 / kWh, in 2010 they are expected to decline to USD 700-800 / kWh and to USD 500 / kWh in 2015. Th e availability of lithium or cobalt could also be a problem, but statements on this topic vary. As primary energy and fi nal energy have been discussed, the next step is to analyse which powertrains can transform the best fi nal energy into useful energy to aid mobility. 32 Kromer, M.A.; Heywood, J.B.: Electric Power trains: Opportunities and Challenges in the U.S. Light-Duty Vehicle Fleet, Publication No. LFEE 2007-03 RP, Cambridge, Ma., p. 19 33 Baden-Württemberg (ed.): Energy-saving Drive, Stuttgart 2006, p. 20 34 AVICENNE, Th e Rechargeable Battery Market 2005-2015, March 06 GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 87 Historically, consumers have been motivated by performance, comfort and safety and been willing to pay a price premium for it.35 Accordingly, producers have reacted to these demands and off ered these features at higher prices. Th at was the success and the reason for the high margins of carmakers in Europe and the USA. With growing en- ergy prices and environmental constraints, these business models are not viable today. To solve this problem, car producers can choose between keeping and improving the traditional technology or choosing a new energy path like hybrid power, electricity or fuel cells. Keeping the conventional powertrain strategy can bring huge benefi ts. An easy way to adapt it could be to reduce the vehicle’s weight and thereby reverse the tendencies of the last 20 years whereby the car became about 70% heavier. Another possibility would be to downsize cars or develop new combustion engines like the DiesOtto (a combina- tion of Otto and Diesel technology). Even conventional combustion technologies and engines could decrease fuel consumption to just 15-20% of the fuel energy that is used for movement (see Figure 9).36 Th e fi rst energy fl ows of the 1920s show similar eff ectiveness compared to today! Th ese improvements are of course possible only if the enhancement in vehicle technology is used to improve fuel consumption rather than to power larger, more powerful cars. FIGURE 9: Energy Flow Source: Bosch 2008 Analysing the energy fl ow of a car can be very helpful in developing energy saving strate- gies: Th e Start-Stop-System can save 10% of energy and avoid low idle losses (see Figure 35 Kromer, M.A.; Heywood, J.B.: Electric Powertrains: Opportunities and Challenges in the U.S. Light-Duty Vehicle Fleet, Publication No. LFEE 2007-03 RP, Cambridge, Ma., pp. 19, 135 36 Kallenbach, R., Bosch: Trends in Automotive Electronics, Steinbeis Symposium, Stuttgart 8.4.2008 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200988 9). Energy used for braking can be regenerated as occurs with hybrid cars (see Figure 9). Th e rolling resistance and aerodynamic losses can be reduced through improved wheel design and aerodynamics. To evaluate the diff erent improvements in fuel economy and CO2 emission reduction strategies the CO2 savings must be divided by the costs. In this way the most cost ef- fi cient savings can be seen. Investing in reduced mechanical friction will cost USD 50 and improve the CO2 effi ciency by 4%. Investing in a dual clutch transmission will cost USD 2,000 but will improve the CO2 balance by only 7%.37 Even though signifi cant im- provements can be achieved, the considerable increases in fuel economy required by the consumer and regulator will be diffi cult to achieve using conventional internal combus- tion engines alone, which further enhances the need for hybrid vehicles, electric vehicles and/or fuel cell vehicles. A hybrid vehicle is a vehicle with more than one power source such as a small internal combustion engine and an electric motor. Th ere are diff erent types of hybrid vehicles: micro hybrid, mild hybrid, full hybrid and serial hybrid. Micro-hybrids have the capabil- ity of turning off the ICE when it is not needed. Mild hybrids not only turn off the en- gine but also provide supportive power when starting up and accelerating at low speeds. Full hybrid systems have a much more powerful electric drive system in addition to an internal combustion engine. Th e electric drive remains active in the upper speed range, making it possible to cruise without the combustion engine for a limited period of time. Th e range of the full hybrid vehicle on electricity is still limited to a few kilometres. Serial hybrid vehicles are only driven by an electric engine and run purely on electricity from on-board batteries. Th e conventional gasoline engine is used to drive a generator and to extend the vehicle range from 60 km with batteries alone to about 600 km. Th e battery pack can be recharged by the onboard engine and can also be recharged by plugging the car in. Pure electric vehicles (EVs) have one or more electric motors for propulsion. Full hybrid cars are complex as they have two engines to be managed simultaneously (parallel hybrids). Th e advantages of these vehicles are that they are energy effi cient but as yet still not as effi cient as the electric car. Th ey do, however, have low CO2 emissions. Serial hybrid vehicles are complex vehicles because two engines must be installed, but not as complex as the parallel hybrid vehicle. Th ey have a lower level of effi ciency when the range extender is needed. Another disadvantage is the high cost of the batteries. Th e advantages are that there is a high range of operation through the range extender, and also when in battery mode the vehicle is effi cient and environmentally friendly. Battery powered electric vehicles also provide solutions in terms of alternative vehicle concepts. Th e negative aspects of the electric vehicle are that even with lithium-ion bat- teries they still have a limited range of operation, and require lengthy charging periods. Th e cost of batteries is also an issue, as well as the performance and durability since they are temperature-related. However, the vehicles have lower operating and maintenance 37 Compare FITT Research: Electric Cars: Plugged In - Batteries must be included, New York 9th June 2008, p. 7 GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 89 costs. Th ey have an effi ciency factor of up to 90% on a tank-to-wheel basis. Further, they are durable and utilise resources effi ciency as no gearbox or clutch is necessary. Finally, electric vehicles produce no noise or emissions on a tank-to-wheel view. A problem could be the availability of lithium carbonate and cobalt for the batteries (see above) and of copper and rare-earth38 for the power trains. On a macroeconomic level, electric vehicles have the best fl exibility for being fuelled as all primary energies can be transformed into electricity. Another alternative concept is the fuel cell. Th e market is due to see the launch of a new fuel cell vehicle in 2010, but at an extremely low level. Currently, the fuel cell vehicle is less effi cient than the electric vehicle39 (see below). Th e range of operation is lower than with an internal combustion engine (ICE) and the price of the car is high due to the use of expensive materials. As there is currently no supporting infrastructure, the price of setting up and fuelling this development would be extremely high and is unlikely to be carried out. Further research should be conducted regarding the amount of water vapour the car emits as it is suspected that these emissions could be as damaging to the envi- ronment as CO2. On a positive note, there is no tank-to-wheel pollution and the driving range is greater than that of the electric vehicle. It has low maintenance costs and the technical fascination is arousing the interests of many parties. FIGURE 10: Km travelled on 100 MJ on a Well-to-Wheel view Source: own, based on data from Concawe, Eucar, JCR – Well-to-Wheels Report, Version 2c, March 2007; Daimler Optiresource tool 38 For more details, see Kruse, J.: Chinese Key-controlled raw materials, in: Automobileweek, 6 October 2008, p. 23 39 See below, the effi ciency of a fuel cell vehicle operated on compressed gaseous hydrogen will be in the vicinity of 22%. Using liquefi ed hydrogen will worsen the effi ciency in the vicinity of 17%. For more details, see Bossel, U.: Effi ciency of Hydrogen Fuel Cell, Diesel-SOFC-Hybrid and Battery Electric Vehicles, Ober- rohrdorf 2003 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200990 We have previously seen diff erent powertrain alternatives and evaluated them individu- ally. Now we will compare these diff erent solutions on a well-to-wheel view from the energy effi ciency and the CO2 emissions point of view (see Figures 10 and 11). Th e sum- mary shown above highlights various fuel/powertrain combinations as estimated by the European Well-to-Wheel project.40 Competition between the diff erent energy paths is quite enthralling. Technology will provide diff erent solutions for diff erent requirements in the future. Which powertrain concept will be imposed? Nobody knows, but the elec- tric vehicle seems promising. With 100 MJ of wind energy an electric vehicle can drive at 142 km. A fuel cell car, in contrast, can drive just 23 km, which is on the macroeconomic view is very energy ineffi cient. Th e Hybrid Electric Vehicle (HEV, Diesel) is very effi cient too, with a range of 61 km. A normal ICE Gasoline car can drive 47 km. FIGURE 11: Gramme CO2 equivalent per km on a Well-to-Wheel view Source: own, based on data from Concawe, Eucar, JCR – Well-to-Wheels Report, Version 2c, March 2007; Daimler Optiresource tool Turning our attention to CO2 emissions41, the BEV with wind is clearly the best solution with nearly 0 g/km. Using the EU Energy mix is still very interesting as the emissions are estimated at 87 g/km. By contrast, the electric vehicle with coal as an energy source is the second worst in this league with a high 181 g/km. However, coal power stations with this level of CO2 emissions are unlikely to be constructed in Europe today. Th e hybrid electric vehicles have relatively low CO2 emissions. Th e fuel cell here has the highest amount of CO2 at 196g/km on a well-to-wheel view. 40 Concawe, Eucar, JCR – Well-to-Wheels Report, Version 2c, March 2007; Daimler Optiresource tool 41 Ibid. GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 91 5. SHAKING THE MARKET We have previously seen the potential growth in world markets. Th is potential growth means more cars on more roadways in more countries (3 billion in 2050) (Chapter 1) whilst everyone is watching the impact of oil availability and future pricing together with the impact of CO2 emissions (Chapter 2). Th ere is a perceived confl ict between the demand for more cars with better performance and a cleaner planet. Recognising the diff erent technical solutions and their evaluation stressed in Chapter 3, the question now is how will the individual mobility market develop. Will the needs of the customer be met? What about the infrastructure required to create new markets? Will there be a shift towards other mobility modes? From the customer perspective it should be noted that, since 2007, 50% of the world population has been living in urban areas. In Europe and the USA the urban population is much higher at 72% and 81%, respectively.42 In developing countries the megacities will continue to grow steadily.43 Further, 75% of future travelling will be done in urban areas. In France 15-20% of the cars never leave towns and 30% of the vehicles are second cars. Looking at the daily travel needs of the customer, 75% of European drivers use their cars for less than 40 km in one day. In Germany the average driver travels 38.5 km a day, in France the fi gure is 35.3 km and in the UK it is 29.9 km.44 Th erefore, the range of the car does not need to be high. On the other hand, single parent households are increas- ing45 which has an impact on the vehicle size needed. Th e second question to answer is how accepting are customers of new technologies. Th e EV in the 1980s and 1990s did not arouse emotion or passion. Th e off er was based on light utility ICE (internal combustion engine) vehicles. Today’s design is being success- fully used to enhance acceptance by consumers. Further, new concepts are being de- signed to attract greater interest by addressing the (non-existing) sound, the extraordi- nary acceleration, cutting-edge technology and the new lifestyle of the electric vehicle. Besides these new arguments, ‘a little good sense and public-spiritedness can be just as eff ective as a large amount of technical development’.46 Presently, diff erent surveys confi rm the newfound interest of customers in electric and hybrid vehicles. An international survey conducted by Continental came to the conclu- sion that 45.8% of participants would take the purchase of an electric vehicle seriously into consideration and, on average, 36% of the customers are prepared to buy a hybrid vehicle. Comparing the attitudes of diff erent countries, China is the country with the 42 United Nations: Urban Population, Development and the Environment 2007, New York 2008, p. 90,92. For a better overview for the growing urbanisation see Weyman, O.: 2015 Car innovation, Innovationsmanage- ment in der Automobilindustrie, Düsseldorf 2007 43 See Weyman 2007 44 Europäische Gemeinschaft en, Eurostat: Kurzstreckenmobilität in Europa, Brussel 2005 45 Statistisches Bundesamt: Datenreport 2006, Zahlen und Fakten über die Bundesrepublik Deutschland, Bonn 2006 46 CCFA: CO2 Emissions – Mobilising road transport, Paris 2008, p. 21 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200992 highest disposition to buy hybrid cars. Also, it has been proven that tax incentives in- crease the disposition to buy as the consumer can overcome the initial cost disadvantage of an electric vehicle or hybrid vehicle. Looking at the price, 50.8% are not prepared to pay more for a hybrid car. Th e other half is disposed to pay a €2,781 more for an environ- ment friendly vehicle.47 Th is shows that a substantial proportion of the population has a sense of public spiritedness. A German study comes to a similar result with 37% of the participants saying they would buy an electric vehicle, 15% would choose a hybrid vehi- cle and 48% would opt for a vehicle with a conventional engine.48 When comparing vehicle costs, as mentioned before, an electric vehicle is currently more expensive than an ICE car. Th is is especially true concerning the purchase price mainly because of the cost of batteries. As the operating and maintenance costs of an electric vehicle are low, it is interesting to see if the life cycle costs are still higher. Considering usage over 12 years, and taking into account the evolution of battery costs, gasoline and electricity price, as well as improvements in ICE consumption, an ICE vehicle will have lifecycle costs of €38,604 in 2010. Th e electric vehicle is 6% more expensive at €40,887. In 2020 the situation will probably be diff erent. Progress in battery technology and mass production will make electric as aff ordable as ICE cars – the lifecycle costs of an electric vehicle will be 20% cheaper than an ICE car.49 We have discussed the customer requirement and now our attention will turn towards the off ers available. Western car manufacturers have until recently failed in their mar- keting communication and brand positioning to address the trend toward more sustain- able behaviour by the customer. Th ey have previously focused on performance, comfort and safety to achieve a higher price. With the changing paradigm, American OEMs and European premium market OEMs have had to bear drops in sales in the segments of trucks, SUVs and also the premium market. In contrast, sales in the segment of small and medium cars have risen substantially. In the mid-range market segment, high performance cars of the traditional paradigm will appear. Th e Golf 6 blue motion, for instance, will achieve 99g/km of CO2 emissions. Th is is better than the second generation of the Prius from Toyota (104g/km). Toyota, the precursor of the hybrid system, will launch the next generation of the Prius in mid- 2009. It will have a very low CO2 emission of 89 g/km. GM has announced the launch of plug-in hybrid electric vehicle with a range extender. Th is project has top priority and will come on to the market in 2010. Th is serial hybrid car will be able to drive more than 60 km on batteries.50 47 Compare Krogh, H.: Alternative Drives on the Rise, Automobilweek, 27 June 2008 48 Compare WP Consulting: Electric vehicles retail-marketing study, Bremerhafen 2008 49 See Valentine-Urbschat, M.; Bernhart, W.: Powertrain 2020: Th e future drives electric, in: Automotive Insights n° 02.2008, Munich 2008, pp.6-13 50 Th ese data of course change oft en and depend on the advancement of diff erent projects. For more details, see the following e.g. Automobilwoche, Automobive News, Japan Automobile Manufacturers Association or Comité des Constructeurs Français d’Automobiles. GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 93 Th e growing small car segment has many newcomers penetrating the market. Th ere is latent demand, but no substantial off ers for the new concepts51. Th e Norwegian Th !nk company currently off ers the ‘City’. A bigger ‘Ox’ will follow. Heuliez is the biggest elec- tric vehicle producer in the world and was recently bought by the Indian company Ar- gentum. It has planned to provide the ‘Will’ in 2010: Th e drivetrain, electric suspension system, brake and tyres are integrated into an active wheel. Also, Pininfarina will launch the new B-0 in 2009. Th e group Bolloré developed the car. In addition to being equipped with lithium-ion batteries this car will integrate super-capacitors, which are known for their sophisticated energy storage components. Th ey allow for greater acceleration, in- creased range and a longer battery lifespan. In order to make mobility more aff ordable for developing countries and for some segments in developed countries, the low-cost concept is constantly evolving. Th e very successful Lo- gan has sold more than 1 million vehicles since mid-2004. Volkswagen will launch the ‘Up’ in 2011 and Fiat will perhaps use the Serbian Zastava brand to launch its own range of low- cost cars. Th is low-cost concept has not only been copied, but also developed further in order to save weight and fuel. Th e new and improved idea is to renounce superfl uous features. Th e aim of the C-Cactus from Citroen is to come back to the rapport of dimension and weight of vehicles seen in the 1970s. A new Logan will be launched in 2010 and will emit 97g/km of CO2. Th is shows that mobility can be environmentally clean and also aff ordable. Beside these developments, new OEMs in developing countries are developing their own low-cost solutions to accommodate the demand for aff ordable mobility. Th ey extend the low-cost idea and have designed ultra-low-cost cars like the Nano from Tata, which is priced in the realm of USD 2,000. Recognising the demand for sustainable mobility, some OEMs will compete in other higher segments. Th is will mean they will come into direct competition with Western OEMs and use this opportunity to close the gap faster in powertrain engineering. An interesting producer could be BYD – Build Your Dreams. BYD is the second biggest Li-Ion battery producer in the world. BYD is currently devel- oping new electric and hybrid vehicles, which will be soon available in the US. Th e BYD Strategic Plan received an excellent reception from Warren Buff et, who subsequently invested USD 0.25 billion in 2008 in the company.52 Tata, an Indian company, has a stake in Pininfarina and also bought Miljøbil Grenland (Norway) in order to further develop an EV on the basis of the Indica. At the moment, Tata is the only company that has also invested in air-compressed cars from MDI, a French company. Th e suppliers of OEMs have diff erent possibilities for adapting: they can follow the OEM, help the OEM (innovator), become a competitor to the OEM or diversify and change branches. To summarise, the slow OEM reactions to the new paradigm seen in recent years have brought a number of new players to the market such as Th !nk for city cars, Tesla, Fisker and Mindset for sports cars, Pininfarina (Bolloré) and Heuliez (Argentum) 51 So e.g. Carlos Ghosn the CEO of Nissan and Renault in: Nissan (ed.): Nissan GT 2012 and Fiscal Year 2007 Results, Tokyo May 13, 2008 52 See e.g.: Zeller, J.: Buff ett Buys BYD’s Battery Brain Trust, in: Th e New York Times from September 30, 2008 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200994 for small cars. New Chinese and Indian car manufacturers, notably BYD (China) and Tata (India), regard electric and hybrid vehicles as a major opportunity to close the gap in propulsion technologies vis-à-vis their global competitors and are preparing to penetrate the US and European markets. A prerequisite for launching the new vehicle concepts is the development of a support- ing infrastructure. Substituting oil for biofuel would not necessitate large investments in new distribution channels. Clean solutions can be implemented within the existing fuel infrastructure. In contrast, the introduction of the fuel cell would necessitate a cost-in- tensive hydrogen distribution infrastructure.53 Further, the current fuel cell technology is expensive and extremely energy and CO2 ineffi cient. Th e build-up of such an infra- structure is thus unlikely in developed countries. With regard to electricity, the extension of the existing power grids to allow for the de- velopment of electric vehicles might not be very expensive54 and would enable new syner- gies. Th ese synergies would come through valley fi lling and peak shaving (see Figure 12). Valley fi lling is charging at night when demand is low. Th e valley fi lling strategy is just one opportunity to raise synergies with power providers. Another possibility is to use the batteries of electric vehicles for ‘peak shaving’. Th is means that electric vehicles would send power back to the grid when demand is high. Th e advantage is that it could make wind energy systems more economically viable, more effi cient, more stable and reliable. Of course, further research in this fi eld is necessary. FIGURE 12: ‘Valley Filling’ and ‘Peak Shaving’ Source: Kempton / Dhanju 2006 53 A hydrogen infrastructure must be built from scratch. See for more details Zyga L.: Why a hydrogen econ- omy doesn’t make sense, Physorg.com 2006 54 Th e electric power grid only needs a modest extension in most parts of the world, ibid. GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 95 In France for instance, having 15% of electric vehicles in the entire car fl eet would in- crease energy use by just 3% and reduce CO2 emissions by 90%. Another German study expects that the entire German fl eet could be powered with just 10% more electricity.55 To develop such synergies an agreement between power providers, the state and automo- tive industries should be investigated. Such agreements have been signed in Israel, Den- mark, Australia, Hawaii (USA), San Francisco bay (USA), and in Canada with the ‘Better Place’ programme.56 Other similar agreements have been signed in Portugal, Kanagawa (Japan), Tennessee (USA), Switzerland, Monaco and France. ‘Better Place’ is an initiative to bring the public and private sectors together to create the conditions needed to make zero-emission vehicles on a tank-to-wheel view. Th e aim is to provide a viable and attractive solution for consumers and to create and operate a nationwide network of charging stations for electric vehicles and related infrastructure. Th e idea of the business model is to transpose the business model of the mobile phone to transportation: the customer buys a range extension through a battery exchange station (infrastructure) instead of minutes. Another evolution of the individual mobility market could be a shift to other travel modes. Th e fi rst solution could be ‘car sharing’. Th is model still uses vehicles and is pro- moted at the moment by several cities including Paris and Lyon, but also by private com- panies like Mercedes in Germany, which has launched ‘Car2Go’. In Paris the idea is to adapt the successful public bicycle rental model (‘velib,’ vélo libre) to cars. One-shared car should replace six cars. Th e cost amounts €15 to €20 per month and €4 to €5 for half an hour. Th is could provide an answer for growing town pollution and congestion (park- ing and driving). However, its eff ectiveness has yet to be proven.57 A second solution could be a change in travel habits and a shift to other travel modes. In France a survey on the impact of growing fuel prices observed that 41% of the participants drove less, 60% walked more, 36% used public transportation more, 31% rode a bicycle and 12% a moped.58 Japan is another example of shift ing travel modes. Most of the population lives in urban areas and most of their travel needs can be fulfi lled by walking or public trans- port. Th erefore, young people are becoming more and more indiff erent to vehicles and their consumer preference diversifi es. Th is can be observed with car sales which dropped from 7.7 million in 1990 to 5.4 million in 2007.59 In a shorter term view, the price of gaso- line was also an important argument in explaining the buying resistance.60 55 Th is is due to the high effi ciency of the EV and the raising of synergies with energy providers. Cf. Leuhold, J. : Antriebs- und Fahrzeugkonzepte für die Mobilitätsanforderungen der Zukunft , VDI Tagung Innovative Fahrzeugantriebe from 6th to 7th November, Dresden 2008 56 See the global progress at http://www.betterplace.com/ 57 See Les Echos from 7 October 2008, Th e launch of self-service cars in Paris postponed to the end of 2010 58 Compare Institute CSA (ed.): REPORT OF THE FRENCH AL’AUTOMOBILE A RESULT OF THE IN- CREASE IN THE PRICE OF FUEL - Survey Institute CSA THE PARISIEN / TODAY IN FRANCE /-TF1, Paris October 2008 59 Compare Nagashima, S.: A LOOK AROUND THE WORLD, Japanese OEMs’ desperate attempts to fi ght fl agging domestic demand, in: Automotive Insights n° 02/2008, p.3. 60 See Handelsblatt: Auto sales in Japan sink auf 35-Jahres-Tief, 07.01.2008 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200996 Previously, the evolution of the mobility market was looked at from the customer point of view: the off er and the infrastructure. Th e question now is at which speed will the recent mobility model be transformed. Th e speed will depend fi rst on the price of crude oil and environmental regulation (federal and local) and incentives. It will also depend on the availability of raw materials like lithium carbonate, cobalt, cupper, rare earth61 etc. as well as technological evolution. Last but not least, the customer perception and acceptance of the new lifestyle, new technology (with a growing range, growing potential customers), new business and fi nance models (‘Better Place’, leasing) and cost savings (cost of use, maintenance) will be the determinants. According to research by Roland Berger (2008), 25% of future vehicles will be electric or plug-in electric hybrid.62 Similarly, a study by the Centre of Automotive Research63 expects that by 2025 conventional cars will disappear and only hybrid (micro-, mild-, full and serial-hybrid cars) and electric vehicle will remain. Carlos Ghosn (CEO Renault Nissan) expects 10 million electric vehicles to be on the road in 2016, with two million of them in Europe.64 Th e fastest development will probably be in China. China has strong growth potential, high acceptance of the electric vehicle and is open to investments in new infrastructures because currently it has few gasoline stations to compete with the new electric car infrastructure.65 Even the future of the electric vehicle is very promising. It is also apparent that in the long run it will not be possible to replace oil with only one substitute like electricity or biofuel. Th e energy content in oil is unique. On the other side, lithium, cobalt, rare earth or copper, which are required for electric vehicles, are scarce and biofuels of the fi rst and second generations need cultivated areas that are also are limited. Nevertheless, the third generation of biofuel like microalgae could play a signifi cant role aft er 2020. In this case, the internal combustion engine could experience a revival. 6. CONCLUSION Th e issues surrounding global warming and the scarcity of oil and other valuable re- sources are very challenging for all economic actors (state, business, customer), each of which has a responsibility to recognise the other’s limits. No economic actor should live beyond its means, which has been done in the past as seen in the recent fi nancial crisis. Th e disturbance of our natural systems would cause an ecological crisis and be much more diffi cult to manage than the fi nancial crisis. 61 For more details, see Kruse, J.: China Key-controlled raw materials in: Automobileweek, 6 October 2008, p. 23 62 Compare Moch 2008 who in his model is expecting similar results. More scenarios are taken into account. Th erefore it is more precise. For more details, see Moch, P.: Fuel cell and battery vehicles – Short-term trend or hype? VDI Tagung Innovative vehicle propulsion from 6 to 7 November, Dresden 2008 63 Compare 2025 the car has run out of petrol, FAZ 26.6.2008 64 Compare Ghosn, C.: in Autojournal n° 761, from 9-16 October 2008, p. 37 65 world business council for sustainable development http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MzE4NTY GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 97 Innovative solutions exist to maintain aff ordable mobility. Competition between diff er- ent technical solutions (diff erent energy paths on the well-to-wheel view), as well as legal regulation, will determine the new techno economic paradigm. It is likely that fossil- fuel-based mobility will not be substituted by just one new technology like biofuel or the electric vehicle. Instead, there could be a mixture of gasoline/diesel, ethanol, rape oil, BtL, biomethan, microalgae in the future, hybrid or electric vehicle depending on the market segment or the distance. In the market it is highly likely we will see a further downsizing of cars even though a premium market will still exist. As a large majority of customers is prepared to buy alternatives vehicles, the mass production of hybrid cars for long distances and electric vehicles for short distances will emerge. In addition, low-cost and ultra-low-cost cars will gain importance in emerging and in developed markets. Th ese cars must not neces- sarily have poor energy or poor CO2 effi ciency. Th e OEM and supplier can both fi nd vast new business opportunities. However, if they are not fast enough they will lose market share to new competitors from outside their industrial segment or from China or India as customers are not willing to sacrifi ce their mobility. RECEIVED: DECEMBER 2008 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 200998 REFERENCES ASPO - USA (n.d.) Association for the study of peak oil & gas - USA (ASPO). Retrieved from http://www. aspo-usa.com/ AVICENNE (March 2006), Th e Rechargeable Battery Market 2005-2015 Bossel, U. (2003), Effi ciency of Hydrogen Fuel Cell, Diesel-SOFC-Hybrid and Battery Electric Vehicles, Ober- rohrdorf BMW (ed.), BMW group Zeitung 9/2008 Campbell, M. N. (2008), Biodiesel: Algae as a Renewable Source for Liquid Fuel. Guelph. Canadell, J., Quéré, C. L., Raupach, M. R., Field, C. B., Buitehuis, E. T., Ciais, P., et al. (2007), Contributions to accelerating atmospheric CO2 growth from economic activity, carbon intensity, and effi ciency of natural sinks. CCFA. (2008), CO2 Emissions – Mobilising road transport, Paris. CSA Institute (Oct. 2008), REPORT OF THE FRENCH AUTOMOBILES AS A RESULT OF THE INCREASE IN THE PRICE OF FUEL. Paris. Dighe, R. S. Business Support for Prohibition and Its Repeal, New York:. Oswego. Energy Information Administration (EIA) (2008), International Energy Outlook 2008, Washington. European Commission, Directorate General for Energy and Transport.(2007), Energy for a Changing World, Brussels. European Commission, DG TREN (2008), Handbook on estimation of external costs in the transport sector, pro- duced within the study Internalisation Measures and Policies for All External Costs of Transport (IMPACT), Delft Europäische Gemeinschaft en (2005), Eurostat: Short mobility in Europe, Brussels FITT Research. (June 2008), Electric Cars: Plugged In – Batteries must be included, New York. Frankfurter Allgemeine Zeitung (FAZ). (26.06.2008), 2025 the Car Has Run out of Petrol. Ghosn, C. (9-16th Oct. 2008), Autojournal No. 761, 37. Gourevitch, A., Lyon, L., & Paris), (C. (07.10.2008), Th e electric car, dream or reality. La Tribune . Handelsblatt (2008, 01 07), Auto Sales in Japan sink auf 35-Jahres-Tief. IMF. (n.d.) International Monetary Fund. Retrieved from www.imf.org/external/index.htm INFRAS; IWW; Universität Karlsruhe (2004), External costs of transport. Karlsruhe Innenministerium Baden-Württemberg (Aug. 2006), Energy-saving Drive. Stuttgart. Intergovermental Panel on Climate Change (2007), Climate Change 2007. Paris. Japan Automobile Manufacturers Association (2008), World Motor Vehicle Statistics Vol. 7 2008. Jha, A. (2008, October 23), UK announces world’s largest algal biofuel project. Retrieved from Guardian: http://www.guardian.co.uk/environment/2008/oct/23/biofuels-energy GUY FOURNIER | HOW TO COPE WITH DISTANCE IN THE FUTURE? ... 99 Kallenbach, R. R. (2008), Trends in Automotive Electronics - Networks, Systems, Hardware and Soft ware. Stuttgart. Katchagourian, R. (2008), Bonus - Malus - A measure that starts on the ground wheel. France Soir. Kempton, W., & Dhanju, A. (2006), Electric Vehicle with V2G - Storage for Large Scale Wind Power. Windtech International. Krogh, H. (27 June 2008), Alternative Fuel Vehicles on the Rise. Automobileweek. Kromer, M. A., & Heywood, J. B. (2007, May) Publication No. LFEE 2007-03 RP. Electric Powertrains: Op- portunities and Challenges in the U.S. Light-Duty Vehicle Fleet. Cambridge, Ma. Kruse, J. (2008), China kontrolliert Schlüssel-Rohstoff e,Iin: Automobilwoche 21, 6th October 2008. Maidach, M., van Essen, H., Doll, C., & Pawlowska, B. (2008), Handbook on estimation of external costs in the transport sector - Internalisation Measure and Policies for All External Costs of Transport (IMPACT). Delft : European Commission DG TREN. Mann, M. E., Bradley, R. S., & Hughes, M. K. (1998), Hockey stick. Mercer Management Consulting. (2004), Future Automotive Industry Structure – FAST 2015. Mock, P.(2008), Fuel cell and battery vehicles – Short-term trend or hype? VDI Tagung Innovative vehicle drives from 6 to 7 November, Dresden. Nagashima, S. (n.d.) (2008), “A look around the World, Japanese OEMs’ desperate attempts to fi ght fl agging domestic demand” Automotive InSights No 02, 3. Nash, C., with contributions from partner (2003), UNITE (UNIfi cation of accounts and marginal costs for Transport Effi ciency) Final Report for Publication, Funded by 5th Framework RTD Programme, Leeds. Nissan (2008) (ed)., Nissan GT 2012 and Fiscal Year 2007 Results, Tokyo May 13, 2008. Oeliger, D. (2008), NABU-federal offi ce: Position electric cars. Berlin. Price Waterhouse Coopers (PWC) (2008), Global Automotive Perspectives 2008. Roland Berger (2008), Automotive suppliers procurement study - Main success levers to master the procure- ment challenges are not exhausted. Schmidt-Walter, H. (2005), Hydrogen-powered fuel cells. Darmstadt. Schneider, A. (2008), Th e shrill sirens – Interview with Fatih Birol. Internationale Politik. Sihn, W. (2006), Automotive Region Eastern Europe – AREE opportunities and risks of the ”Detroit of the East” for the automotive industry. Wien. Smith, A. (1776), An Inquiry into the Nature and Causes of the Wealth of Nations. London. Statistisches Bundesamt. (2006), Data Report 2006, facts and fi gures on the Federal Republic of Germany. Bonn. Stern, N. (2008), Getting Rid of Emission Rights Away is a Very Bad Idea. Frankfurter Allgemeine Zeitung (FAZ) No. 229, 30 September 2008, 14. Stern, N. (2006), What is the Economics of Climate Change? Cambridge. ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 2009100 Th e offi cial gateway to Sweden. (n.d.). Retrieved from http://www.sweden.se/templates/cs/Article____14227. aspx Transport for London. (n.d.). Retrieved from http://www.tfl .gov.uk/roadusers/congestioncharging/6717.aspx Umwelt-Plakatte. (n.d.). Retrieved from www.umwelt-plakette.de United Nations (2008), Urban Population, Development and the Environment 2007, New York. US Department of Energy (2008), Algal Biofuels, Washington. Valentine-Urbschat, M., & Bemhart, W. (2008), Powertrain 2020: Th e future drives electric. Automotive In- Sights No. 02/2008 , 6–13. Weyman, O. (2007), 2015 Car innovation, Innovationsmanagement in der Automobilindustrie. Düsseldorf. World Business Council for Sustainable Development (WBCSD) (2004), Mobility 2030: Meeting the chal- lenges to sustainability. Geneva. World Business Council for Sustainable Development. (2008, Oct. 08), WBCSD - China seen as potential electric car hub. Retrieved from http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&Obje ctId=MzE4NTY WP Consulting. (2008), Electric vehicles retail-marketing study. Bremerhafen. Zeller, J. (2008), Buff ett Buys BYD’s Battery Brain Trust, in: Th e New York Times from September 30th, 2008. Zittel, W. (2007), Crude Oil – Th e Supply Outlook. Ottobrunn. Zyga, L (2006), Why a hydrogen economy doesn’t make sense, Physorg.com