Finally, the big automakers are betting on hybrid models and electrics, thanks to big advances in lithium-ion batteries. 2010 will be the tipping point in an industry marked by inertia.

What is happening in the worldwide automobile industry, particularly, in America?

• GM lost 15.5 billion dollars in the second quarter of 2008. This is the third worst quarter for GM in the hundred year history of the company.
• Ford lost 8.7 billion dollars in the second quarter of 2008.
• It’s assumed that the results for Chrysler will be equally unsatisfactory, if not catastrophic.

Ford’s president Bill Ford explains, in an interview with Maria Bartiromo in BusinessWeek, that change happened very, very suddenly.

“We had a good first quarter, we made money, and we thought we were on our way. Even though fuel prices were rising in the first quarter, we didn’t see a big change in customer behavior.”

Ford continues: “But when gas crossed about $3.50 a gallon, that was the tipping point. And, of course, we had no idea where that tipping point was going to be. Literally overnight people stopped buying trucks and big SUVs and came into the dealerships demanding the smallest and most fuel-efficient vehicles they could find, and the fall-off [in sales], therefore, was very dramatic.”

This cultural shift has one big loser- the SUV- and according to Bill Ford, the change is permanent.

The downgraded “cathedral of modern times”

The car, until just a few years ago the “cathedral of modern times”, a symbol of independence and progress, has lost its social favor. The current perception: the car is a threat.

Blake Morrison explains in The Guardian the drastic change in social perception of the car, which has gone from the standard of western individualism to contaminating machine, symbol of climate change provoked by humans.

The car is no longer related to a romantic figure in a house in the country with the tagline “Do you like to drive?” popularized by the advertisements of BMW, but is now seen as capable of influencing patterns of urban development (e.g. sprawl) and contributing to negative ways of life- stress, obesity-.

The car: from celestial music to degrading invention

The great-grandson of Henry Ford, Edsel II, upon being asked this year about the Ford Model T (the first car mass produced for the middle classes) during the celebration of the centennial of the legendary car, pronounced: “It was a product that offered freedom”.

A satisfied client of the Model T wrote to Henry Ford: “You know, Henry. Your car lifted us out of the mud. It brought joy into our lives. We loved every rattle in its bones.” It would be difficult for the current executives of Ford to find letters -or e-mails- with a vaguely similar tone.

Roland Barthes situated the car as “the Gothic cathedral of the modern times”. But now this achievement that arose from the Industrial Revolution is perceived as a threat.

Seats of hemp, white wine as fuel, Tesla…

Today no automaker, not even luxury car-makers, want to appear polluting. Blake Morrison explains how the British luxury sportcar firm Lotus, has launched the model Lotus Echo Elise.

It’s a model with “ethical” finishes: solar panels and hemp seats.

The California ultra-sportscar Tesla, the first commercial electric vehicle with high specs, poses a challenge for the remaining firms in this sector.

Even Prince Charles of England utilizes British white wine (from local vineyards’ surplus wine) as fuel for for his Aston Martin convertible.

In the meantime, every social circle is discussing batteries, electric cars, hybrids, plug-in hybrids, etc. It’s no longer just history covered by the media, but a conversation that has moved to the street.

The high price of the gasoline has accelerated the process: manufacturers have entered in a race to satisfy the user.

Toyota is several steps ahead, but other automakers, both traditional and new firms (in the startup style and with Silicon Valley funding) are struggling to offer cars that are efficient and not reliant on fossil fuels.

The world prepares for the electric car: from petroleum to lithium?

Several similarities exist between the best-selling Toyota Prius, a hybrid vehicle (combustion motor and electric-assist motor) and a totally electric vehicle like the Tesla Roadster sportscar:

• Both vehicles reduce the pollution emitted during its use: a considerable reduction in the case of the Prius and the Tesla could stop emitting CO2 altogether and would not contaminate beyond the embodied energy in its production, if electricity derived from renewable sources were used to charge its battery.
• Both cars use an electric battery capable of being recharged: by being plugged in to a power supply, in the case of the Tesla; automatically, in the case of the Prius.

The vast majority of electric vehicles already on the market or to be marketed in the next five years use lithium-ion (Li-Ion) batteries.

Nonetheless, the car that has become a symbol of low consumption, the Prius, still uses one composed of nickel-metal hydride. Toyota recognizes the greater convenience of Li-Ion, and by 2010 all of the brands’ hybrids will use this option.

GM has chosen Li-Ion technology for batteries for it’s electric model, the Volt, that will be on the market in 2010.

Lithium-ion batteries weigh less, last longer and store more energy than other similar technologies.

Nevertheless, automakers have to surmount several inconveniences so that this technology will become a viable long term alternative, among those they highlight:

• Li-Ion batteries work at low temperatures: their commercial life cycle shrinks quickly if they are used at high temperatures; therefore, Toyota and other manufacturers years ago opted for alternatives that are more stable at high temperatures.
• As Danny Bradbury explains in The Guardian, there is no unanimous scientific consensus about the amount of lithium in the world’s reserves. Since it is a finite resource, lithium could serve as a short term alternative that would allow manufacturers to make electric and hybrid vehicles while looking for other inexhaustible and non-polluting resources to make batteries.

Beyond lithium-ion: batteries for the future

The electric carmaker Zenn has invested 2.5 million dollars, according to The Guardian, in eeStor, a Texas firm specialized in ultra capacitors.

These devices, used to administer large electric impulses in diverse situations, are small and lightweight. They are being adapted to store electricity for electric, and hybrid, vehicles.

Companies like eeStor are developing ways to increase their storage capacity which is very inferior to conventional batteries. If this handicap can be successfully overcome, ultra capacitors could replace lithium-ion batteries as the preferred technology for electric cars.

BMW has developed an experimental version of its X3 model driven by an ultra capacitor.

Besides the ultra capacitors, another technology that is getting special attention is the use of compressed air, a principle of propulsion used since the Middle Ages that several brands are trying to improve.

The India firm Tata Motors has invested 20 million euros (31 million dollars) in the firm MDI, whose department of engineering was created in the world of Formula 1, for the right to be able to market cars with compressed air technology that comes out of this partnership.

Compressed air vehicles can sound like science fiction or could be categorized as eccentric. The technology, however, has big advantages and will receive increasing aid, from both the traditional auto industry and startups.

Besides MDI, Energine and Air Car are investigating the possibilities of this technology. Various prototypes are being developed. There is still no commercial vehicle that uses compressed air as its exclusive method of propulsion.

Why the big automakers are (re)discovering the electric car

In April of 2005, two years after having buried the first electric car produced by a large manufacturer, the EV1, offered to American clients for lease, General Motors held a strategy meeting attended by various high level executives and the then CEO of the company in crisis: Rick Wagoner.

The meeting, according to BusinessWeek, was a interesting as it was unproductive.

The company’s vice president, Robert A. Lutz, famous for his disruptive ideas, put on the table once again a taboo: why produce another electric car, capable of working with a giant and improved version of the lithium-ion batteries used in cellphones and laptops.

A provocative suggestion, as the GM executive knew all to well. The idea lacked any support in the meeting, despite Lutz’s argument that Toyota had quickly become an example company for its growing number of drivers concerned about the environment and gasoline consumption.

In the footprints of the symbol (the Prius)

The Toyota Prius was already, in 2005, a phenomenon of the masses.

Surprisingly, Toyota, a brand with as many SUV models as the Big Three (GM, Ford and Chrysler), now held all the environmental credit and sales in a car that combined a combustion motor with a battery capable of being automatically recharged with the inertia generated by the use of the conventional motor.

A concept hardly revolutionary, but efficient included in a vehicle with a peculiar and non-aggressive, though spacious, functional and recognizable design.

In 2005, the Prius was a symbol indeed, despite its extravagant line far from the refinement of the European models and the aggressiveness of the large American vehicles.

It worked for Toyota. Meanwhile, GM continued with its peculiar identity crisis and with executives that fought to increase production of many cylinder vehicles and high fuel consumption: the off-road vehicle (SUV) and the luxury line Hummer.

GM: resurrect the electric car or die

Paradoxically, the efforts of Toyota to manufacture its range of hybrid motors arose out of fear and respect for General Motors, when the latter was developing it’s electric car, the EV1.

20 months after GM’s strategy meeting, the brand was forced to rework their strategy. In January of 2007, Rick Wagoner presented in the Detroit showroom the Chevrolet Volt, a prototype of an electric car with an aggressive design, good aerodynamics and compact frame.

Wagoner announced that they would begin to produce the car in 2010.

Still then, the incredulous believed that small and efficient vehicles were not GM’s answer to the crisis.

GM’s commercial and economic situation has only gotten worse. The increased cost of fuel has caused users to unceremoniously change their commercial preferences.

Now, GM is closing production plants for SUVs or converting them to produce compact models.

…And the compact car arrives in the United States

What has changed, so that consumers are buying increasingly more compact and efficient cars in the United States?

• The price of fuel is at a historic high, at more than 4 dollars per gallon. As opposed to Europe, where consumers are accustomed to paying high prices since the petroleum crisis of 1973 -one of the reasons that manufacturers opted decades ago to produce more efficient and compact cars-, expensive fuel is a new phenomenon in North America.
• The economic crisis, with a fall in home prices and a real estate puncture, has obligated banks to lend less money. Consumers are opting for the first time for compact vehicles, with a similar fuel consumption to that of the most efficient European models. For the first time since 1992, the best-selling car in the United States is a compact, (Honda Civic) instead of a truck. The best-selling car in the United States would surely be a European compact vehicle, preferably German, if it weren’t for the strength of the euro against the dollar in recent years, that has made even a Volkswagon Golf into a high end vehicle.
• Environmental awareness: the Prius has not only become a symbol of the “environmentally aware driver”, but, of not being able to supply the demand for the vehicle with current production, Toyota has generated a surprising second-hand market: the Toyota Prius not only maintains its value if in good condition, but -as only occurs with classical vehicles-, its value appreciates with time, as Stuart Schwartzapfel explains in Wired: “A Prius purchased earlier this year will command a resale price higher than the original sticker price.”
• Public Promotion of a new culture of frugality: many city councils and federal, state, and local departments, as well as police forces, compete in the United States for a clear position in a new culture of energy saving. Public officials arrive to work and move about the city in compact cars and, if they can, hybrids, with the Prius the preferred symbol.
• The search for the socially popular: “green” is fashionable everywhere. To show openly a certain environmental awareness is attractive for a new generation of professionals, interested in favoring a change in the world toward a new sustainable culture through daily decisions, including the car they drive.

In the article GM: Live Green or Die, David Welch explains why even GM is betting unreservedly on the development of a fleet of more efficient cars, led by a model that the company hopes will become its own Prius: the Chevy Volt.

The American rivals of General Motors aren’t in a better commercial situation.

Ford: Why not copy the best of its European subsidiaries?

Ford, the company that has successfully sold compact vehicles in Europe for the past few decades under its own brand, winning the favor of the youth with the Fiesta and the Focus (successor of the best-selling Escort), is found in a similar critical situation.

The price of gasoline is keeping the average American consumer away from the dealers and especially reluctant to buy models with many cylinders.

The best-selling trucks in the United States in recent years were Fords. Now, the abrupt fall in sales is also reflected in the fallen stock prices of the company.

As opposed to GM, that has bet on an electric motor for the Volt, Ford has not defined itself by a technology. If in 2005, the company announced that it would produce at least 250,000 hybrids per year, in the middle of 2006 they contradicted themselves.

In the middle of 2007, finally convinced by the popularity of its hybrid off-road vehicle Ford Escape, the brand made a serious bet on combustion motors with electric help, following in the wake of Toyota and Honda.

The F series truck has been the best selling vehicle in the United States for years. Now, it is the biggest loser on the market; in May, the Honda Civic beat for the first time this many cylinder vehicle as the best selling vehicle.

Andrew Clark explains in The Guardian that the demise of the SUV has forced Ford to concentrate on European models.

Some say the brand has the time to adapt its American factories to create improved versions of the current compacts that the company manufactures in Europe.

While it tries to convince its American clients that the Fiesta, the Focus or the van Transit are the solution to the current price of gasoline, the firm faces historic losses: 8.7 billion dollars in just the second quarter of 2008.

On the contrary, the brand’s European subsidiary earned 582 million dollars in profits during the same period.

Chrysler, without Daimler: to produce an electric car in 3-5 years

The third great American manufacturer, Chrysler, untied from Daimler since May of 2007, when the German firm sold it to the venture capital fund Cerberus Capital, worries over its loss of market share with regard to BMW and Audi-Volkswagen.

Chrysler is planning a radical change that will bring it in line with the new strategic path of GM and Ford: more efficient and compact vehicles, as well as bets on new technologies, beyond the combustion motor.

As an initiation for this radical change in style, the brand announced in July that it plans to develop electric vehicles within three years.

The company has created a new production unit, Envi, that is developing electric vehicles capable of surpassing the 40 miles (65 kilometers) range on one battery charge.

Bill Vlasic explains in The New York Times that what at first was a slow migration of Americans toward more efficient cars, has become a stampede, once the price of the gallon of gasoline surpassed, now months ago, 3 dollars.

Sales of some compact models have increased spectacularly, despite that a visit to any town in the American Midwest doesn’t demonstrate this still recent predilection for small vehicles.

Growth in sales in April of 2008, with regard to the same month of 2007:

• Honda Fit: + 54%
• Toyota Yaris: +46%
• Ford Focus: +32%

An explanatory graphic on the evolution in car sales in the United States, also from The New York Times, demonstrates how the model that most increased its market share in April of 2008 with regard to the same month of 2007 is the Toyota Prius (+53,8), while the models that lost most are SUVs: the F series Ford (-27%) and the Chevrolet Silverado (-30,7%).

Europe no longer learns from itself: looking toward Japan

In the meantime, European manufacturers face a different historic situation. Stricter legislation with polluting gasses in the European Union, as well as the historically high price of fuel, places the European vehicles closer to the Japanese than American models.

Despite this, the segment that has grown most in recent years in Europe is that of the luxury many cylinder off-road vehicle (Volkswagen, Volvo, BMW, Mercedes, Porsche and Audi, among others, have at least one high range, many cylinder off-road vehicle).

New legislation in Europe will limit CO2 emissions for automobiles to, on average, 120 grams per kilometer by 2010. Currently, the average is about 160 g/km.

Most of the European member states also have their own CO2, or eco-tax, on cars which use a combination of criteria including car price, engine capacity and CO2 emissions.

Despite the existence of a commercial offering of low consuming vehicles that is much more complete than that in America, European manufacturers perceive a similar challenge to that of Detroit.

The large European firms have waited longer than the Americans, but increasingly strict environmental laws in the EU and the escalation of the price of fuel has motivated several development programs of electric cars:

• BMW is preparing an electric version of a symbol of compact vehicles: the electric Mini, that would go on sale in the summer of 2009.
• Daimler is planning an electric version of the ultra-compact Smart for 2010. The firm is also working on electric motors for the Mercedes A and B classes.
• The French group PSA (Peugeot and Citröen) are jointly developing with Mitsubishi an electric model that will be ready in 2010.
• Renault has announced that it will sell electric models in Denmark and Portugal in 2011. The French company is working with its subsidiary Nissan and the Japanese battery-maker NEC on this new project.
• The German firm Bosch, the world’s largest component-maker, will produce lithium-ion batteries with the South Korean company Samsung. Bosch believes that they will be able to produce batteries capable of offering 200 miles (322 kilometers) of range between charges.
• Spain and Portugal are collaborating on a 150 million euro public-private project to develop an electric car from zerp, under the name Mobi-green.

Meanwhile…

Toyota is preparing the new Prius aiming toward a world launch in 2010 (it seems that 2010 is the chosen year: besides the new Prius, the Chevy Volt, the electric from Peugeot and Citröen, the Smart electric, the new Zenn, the Renault-Nissan electric, and the compressed car from MDI).

The beginning of the next decade will serve as a starting point for a new culture of the car. Perhaps.

The new Prius will not only substitute its current battery with a more efficient, lighter, longer lasting and higher capacity lithium-ion model. It is also the much anticipated “plug-in” that will allow users to decide when to recharge the battery by plugging in or when to allow the combustion motor to do so, as well as when to run only on electric.

A growing club of fans of Prius vehicles has been demanding this function for the past five years.

Google.org, the self-sufficient subsidiary of the Internet company, has invested in two Silicon Valley “startups”, dedicated to the development of a futuristic electric car and to the improvement of charging technologies for electric and hybrid cars (“plug-in”), Aptera Motors and ActaCell, respectively.

The RechargeIT program from Google modifies the Prius so that its system is more efficient, obtaining a fuel economy of up to 90 miles per gallon.

The next generation of the Prius will become the first mass produced car to include solar panels on the roof, capable of recharging the new lithium-ion battery. The panels are produced by Kyocera.

Toyota will expand its offering of hybrid vehicles with two new models, while Honda, the other Japanese manufacturer that has bet since years ago on the development of hybrids, is preparing its own response to the Prius.

Judging by the momentum of Toyota and Honda regarding their growing plans for new and much more efficient hybrid vehicles, the European manufacturers and, above all, the Americans, should offer solid low consumption and little polluting -or non-polluting – alternatives.

With growing environmental awareness and the current price of gas, automakers still haven’t produced a truly attractive line with a good marketing plan to sell an eco-vehicle en masse.