MEXICONOW Staff Interview
“Now what?” may be the default -- repetitively default – question concerning challenges and opportunities that face North America’s auto manufacturing giants.
Beyond Corporate Average Fuel Economy (CAFE) requirements colliding with the nuances and abrupt shifts of consumer demand, technology issues – especially with the powertrain systems could have vehicle buyers thinking about the relationship between “green” and “greenbacks.”
Bruce Belzowski, University of Michigan’s Transportation Research Institute
Assistant research scientist reoriented the compass toward a time when spark-ignition may no longer be the rule and “up-contenting” vehicles might be the modus operandi.
In recent years you presented the subject of “greening” of the auto industry. To what extent is that progressing as we prepare to move beyond 2014?
When you look at what’s going on at the manufacturer level, they’re really moving into different segments that they never really spent a lot of time in the past, meaning the A/B segments. They are bringing out vehicles that are lighter and more fuel efficient and have fewer emissions than ever before.
An “A” segment car would be a Fiat 500 type vehicle, Chevy Spark. The “B” segment puts you into a step above that. The Focus would be “C” and then the Accord; Malibu would be the “D” segment.
You have been doing research on China as well as Mexico when it comes to the automotive industry. To what extent do you find any linkages between the two; what picture does your research portray?
Obviously, the Chinese market is dominating the story and has been for the last few years, and it’s not really letting up. That’s where it differs from Mexico. What we see is the movement of more suppliers away from China when they are really looking for what they used to call “the China price.” I think that’s something that actually has lost a lot of steam.
The suppliers are still in China because they’re supplying manufacturers there, there’s no reason for them to leave there. But in terms of shipping things and shipping things back to North America and other countries, I think what the manufacturers have decided is that it’s much easier and less expensive and less hassle for them to be regionally located. That’s to the advantage of Mexico; also for Eastern Europe.
What relationship exists between global power-train strategies and reducing dependency on foreign oil – especially from the U.S. motorists’ point of view?
Powertrain strategies are based on the regulatory demands that the government has placed on them, both in terms of fuel economy and emissions. The fuel economy is aimed at reducing dependence on foreign oil. So this is the government making its stand and saying it’s not an open market and anything goes. It’s not that, it’s something that we see, the government sees as a threat, a threat to the country itself if it remains. It could be held hostage to foreign countries that have oil and may not see us as friends.
Why do foreign producers have a Corporate Average Fuel Economy (CAFE) that’s better than that of the U.S.-based OEMs?
I think that the results from our survey are based on what the experts thought was going to happen. This is the way they view the world and I can only guess at what their reasoning is. I think that what was originally said was that the foreign manufacturers have been working on fuel economy for much longer than the U.S. companies have, especially because of the area of light trucks.
That’s a real challenge for the U.S. manufacturers because these trucks tend to be quite heavy even in the -- I’m not talking medium duty -- I’m talking F150, Silverado, Ram type trucks. These are quite heavy trucks and they represent almost half of the fleet of sales. The U.S. manufacturers are always going to be challenged to try to reduce the fuel consumption in those vehicles compared to the foreign companies who really don’t have as many of those vehicles.
The U.S. average fuel price is at about $3.27 a gallon. To what extent is that a sweet spot? At what point could a price increase actually affect the market dynamics concerning powertrain?
You are looking at how consumers view gasoline prices and how they respond in terms of the types of vehicles they buy based on the price of fuel. We had a market test of that back in 2008 and when we reached $4 a gallon, consumers really did start, I don’t want to say “panicking,” but some did. I don’t know if they were very rational in doing that but they really started looking at different types of vehicles, smaller vehicles that got better fuel economy once they realized that you were paying $4 a gallon.
Higher fuel prices helps sell more of the more fuel efficient vehicles, a lower fuel price makes it more of a challenge. What the manufacturers know is that they have these targets they have to meet in 2016, 2025.
They have developed more -- I would say, I don’t want to call them luxurious small cars -- but they are “up- contenting” vehicles that in the past they treated as “Econo-boxes.” You would never see a Ford Focus with leather for example in the old days and now you can get most of these smaller cars that will come with accoutrements that you would never have seen before, making them more attractive to buyers in a way that they weren’t before.
You mentioned that in about 10 or 12 years fewer than 50 percent of engines in cars will be spark ignited. In other words, “spark plug days” maybe something past maturity in the product cycle. What does this do to the auto marketplace?
Some of the issues that are related to that in terms of the reduction in spark ignited engines are kind of qualified. One is that hybrids have spark- ignited engines. Every hybrid you see on the road has a spark-ignited engine. In our analysis we had what we called “pure spark-ignited engines.”
They were not hybrids; they don’t go away from that perspective. The other growth area will be in diesels and diesels are something that we are used to having on the road, not into the large amounts that we have predicted but it’s not something that’s completely foreign to us compared to something like a fuel-cell vehicle or a pure electric vehicle.
These engines are still going to be around but according to the experts who were telling us what they thought was going to happen, they see a fleet that is going to have multiple types of fuels: one with unleaded gasoline, another set and that would be for the spark ignited engines, also for hybrids. There will be a fleet of vehicles that will be run on diesel and also more than ever on natural gas as well as a smattering of pure electric vehicles. It’s an interesting time because we’ll have a wide variety of choices in front of us.