Perspective by Oliver Hazimeh, Director of the North American Automotive Practice and the Global e-Mobility Practice, PRTM
[Management consultancy PRTM was a contributor to the “Electrification Roadmap” released in November 2009 by the Electrification Coalition. Earlier post.]
The recall of Toyota’s Prius is causing some observers to question whether the prospects for the entire hybrid electric vehicle (HEV) and electric vehicle (EV) markets are fundamentally hurt.
We don’t believe so. While a recall presents a short-term bump in the road regarding consumer perception of HEVs and EVs, there is no question that longer term, the fundamental drivers for increased powertrain electrification are alive and well.
This immediate problem affecting the 2010 Prius relates to software that manages the regenerative and conventional braking system. [Earlier post.] This technology has been successfully and robustly used for more than 10 years in other Prius models, as well as in non-Toyota models.
(Technical Note: The regenerative braking problem reflects a problem not with the mechanical brakes but with the system interface between hybrid regenerative software controls and the traditional ABS breaking system. Automotive electronics have been increasing significantly during the past years, and the advent of hybrid powertrains added new electronic control systems that need to be managed. Current lessons will not only help Toyota but the industry as a whole. As we continue the transition from a mechanical to more electronically controlled vehicles, the required engineering processes, skills and tools need to adapt accordingly. That is why many OEMs are beginning to rebuild their internal electronics and system engineering capabilities after many years of outsourcing. Customers should find assurance that other industries, such as the aerospace industry, have made a similar transition and today’s modern planes have replaced mechanical aircraft controls with full electronic controls).
Toyota has earned a stellar reputation for quality over decades. While the current recall issues are reflective of the company’s rapid growth, Toyota will likely address not only the specific vehicle problem, but will also ensure that it is systemically addressed at all levels of the organization.
The Electrification Tipping Point
PRTM believes that the worldwide tipping point in HEV, PHEV and EV acceptance, whereby these vehicles become a major part of the automotive powertrain portfolio, will likely occur in the next few years. The Prius recall, which is under more public scrutiny due to other recent Toyota quality issues, will not fundamentally alter the underlying drivers for electrification of powertrains. Just a few drivers for this shift include the following:
There is an urgent need to increase fuel efficiency and reduce C02—conventional ICE technology will not suffice, and all major OEMs have accepted the role that HEVs, PHEVs, and EVs need to play. They have already reshuffled their product portfolio for the coming years.
OEMs see the strategic need to develop and offer HEV, PHEV and EV vehicles—above and beyond simply complying with regulations. A major competitive threat comes from other regions, such as China, which view this technology as a means to leapfrog entrenched players.
Oil price and supply dependencies will continue the search for alternative fuel sources, and battery powered vehicles can have a significant impact on that equation. This issue is outlined in detail in the Electrification Roadmap, developed by the Electrification Coalition and PRTM.
Finally, the cost of the hybrid/electric vehicles will come down significantly during the next 10 years, primarily by reducing the lithium-ion battery cost. This will be achieved through a mix of scale, operational efficiencies and technology advances. This price reduction will create the economic incentive to appeal to a broader consumer base. We expect that HEV, PHEVs and BEVs will reach total cost of ownership parity by 2010, 2016 and 2018 respectively.
Certainly, any automotive recall is unfortunate for any auto maker and certainly for the consumer. However, we have every expectation that Toyota will effectively address the problem. We are also confident that the adoption tipping point gets closer every day, and that our estimates of 10% of PHEV/EV adoption and as much as 20% Mild/Full-HEV adoption by 2020 are still right on track.