Australia
Q3 2016: Partnerships and Technology Signal the Beginning of a New Era
While some of the issues from earlier this year continue to hold the attention of the industry, partnerships and technology took on a large role this quarter following numerous developments.
Manufacturing
The biggest talking point still concerns Volkswagen, which has plunged into legal disarray around the world. Numerous governments have now taken action against the auto-maker for its Dieselgate saga, while locally a class action was instigated and the ACCC took the company to court.
Volkswagen have argued the local government is delaying them from implementing fixes to Australian-delivered vehicles, while the Federal Court cited frustration with the way the manufacturer is cooperating with proceedings. In August, Volkswagen’s operations were further impacted after contractual disputes with its suppliers in Germany and Brazil.
Brexit has resulted in several manufacturers weighing their ongoing operations within the UK, illustrated most by the Japanese government issuing strong advice concerning its contribution to the UK economy.
July 29 marked the final local production run of Ford Falcons, which was recently followed by engine production ceasing on September 26. For now, Holden will shut its engine plant in December this year, a year ahead of the scheduled conclusion of the Commodore range.
Numerous partnerships were also forged during the quarter. Ford signed an agreement with ridesharing business Carhood, which offers motorists free airport parking in exchange for renting out their vehicle. Apple was rumoured to be in discussion with McLaren regarding an acquisition, however this was later denied. Autonomous vehicle partnerships included Volvo and Uber, as well as Hyundai and Google, while Volkswagen will partner with Chinese company Anhui Jianghuai Automobile to develop electric vehicles in China.
Source: Fortune.com
Safety and Environment
Driverless vehicles encountered their first major hurdle during June, with one of Tesla’s vehicles involved in a fatal accident after it was unable to distinguish between a white truck and brightly lit sky.
The AAA announced that it would begin to conduct real-world testing for vehicle tailpipe emissions, coinciding with research from Beyond Zero Emissions, which illustrated the potential for a 6% reduction in greenhouse emissions if all Australians converted to 100% renewable electric vehicles. Supporting the momentum were reports that state governments may soon offer motorists’ incentives to take up renewable electric vehicles, with the federal government also mulling whether to scrap the Luxury Car Tax for such cars.
Technology
Despite Tesla’s autonomous vehicle incident, manufacturers still continue to make preparations for self-driving vehicles. Just one example, BMW, in partnership with Intel and Mobileye, are aiming for a 2021 release. Framework preparations are also under way around the world – Australia’s current road network is being mapped for machine-reading; black boxes will be required for such vehicles in Germany; and the US released driverless vehicle safety guidelines.
Meanwhile, other technology developments during the quarter included:
- Honda developing a car that can detect a driver’s emotions
- Hyundai and Toyota pushing for hydrogen technology within Australia by 2018
- Airbus assessing the viability a flying vehicle
- Audi are currently looking into: in-car Wi-Fi; electric vehicle sales being 25% by 2025; vehicles that communicate with traffic lights; and energy recuperating shock absorbers
- Infiniti unveiled the world’s first market-ready, variable compression ratio engine
- The first driverless bus was unveiled in Perth in late August
Audi led the way with innovative technology this quarter
Regulatory Issues
Locally, the NSW government made the controversial decision to boost its support of E10 petrol, which has thus far failed to gain any material traction within the market.
At a broader level, the government’s plan to tackle emissions through stricter standards have led motoring groups to caution drivers about the prospect of cost increases associated with new cars.
Lastly, legal and motoring bodies made renewed calls for the introduction of “lemon laws” to protect new car buyers.
What's Driving the Push for Ethanol Fuel?
Despite years failing to gain traction at the bowser, the NSW government recently paved the way for changes that will renew its efforts to increase the availability and uptake of E10 petrol across the state. For those unfamiliar, in 2007 the NSW government set a mandate for 6% of all fuel sold across the state to be E10.
To date however, uptake has been limited to well below 3%, as motorists shun the product in favour of premium fuels. Through laws, which are expected to come into effect from September, businesses which were previously exempt from selling ethanol-blended fuel will now be required to sell the product. It has also been announced that in 2017, $4.5m will be spent on advertising to clarify the “myths” surrounding E10.
While larger fuel businesses have long been stocking ethanol-blended fuel, small and mid-tier retailers are those who will be most affected. The Sydney Morning Herald was one of many to draw attention to the seeming inequality of the proposal, arguing smaller retailers “will be forced to spend an average of $140,000 a site to upgrade their storage tanks”, while the annual profits of such sites are only in the vicinity of $60,000.
With the product failing to make inroads within the market, why then is the government persisting and spending more to promote it? It’s hard to know the exact reasons, but reports have confirmed ethanol producer Manildra has made sizeable contributions to the Coalition party. At one stage, its representatives even met the NSW government 20 times in the space of just over a year.
Behind these dealings, the government claims the action will shore up employment within the biofuels industry. The problem however, is the lack of consideration for smaller businesses who may be required to close – up to 542 of them according to the Australian Convenience and Petroleum Marketers Association. And if that happens, you can bet the oil majors will be eyeing those sites, flush with the cashflow their smaller peers are ill afforded. The result? Job losses, less competition, and higher petrol prices for motorists.
Smaller businesses have made it clear, as they did the last time the government tried to phase out unleaded petrol, they won’t take the changes lying down. It has already been claimed, in the absence of any redress from the government, smaller retailers will be forced to increase petrol prices up to 8c per litre. Allowing bigger companies room to increase their own prices, consumers appear set to lose out. With this in mind, one has to question the legitimacy and true rationale behind this latest push.
Given the last effort to change these laws in NSW failed dismally, as well as the shift in consumer preferences since then towards premium grades of fuel, it’s hard to conceive how such measures will help increase sales for a fuel demonstrating minimal evidence of environmental gains, as well as no certainty it is the most fuel efficient option or guaranteed to be the cheapest once you refuel. Government initiatives should be about finding win-win solutions – this however, has the hallmarks of a lose-lose solution, save for a select few.
Manufacturers Face Increasing Scrutiny but are Intent on Innovating
‘Development’ was the key word during the second quarter of the year, with manufacturers and regulators making progress in a wide range of areas – not without controversy either!
Manufacturing
Auto manufacturers from Asia were the biggest talking point of the quarter, with several stories casting light on unscrupulous practices. Mitsubishi was the first of three auto makers exposed – the company confirming it had lied about the fuel economy performance of its minicars for the last 25 years.
Suzuki was next to acknowledge its own wrongdoings – illegal fuel economy testing for its Japanese vehicles. And earlier this month, Nissan faced criminal charges from the South Korean government after being caught in an emissions cheating incident. However, the Asian sector was supported by merger activity, with Nissan attaining “effective control” of Mitsubishi.
Volkswagen recently settled a $20b civil claim against it in the US, however, the manufacturer is still facing numerous other proceedings across the world for its infamous ‘Dieselgate’ scandal. Meanwhile, in Australia, Ford became the subject of its own legal battle after a class action was filed against the company for “unsafe” transmissions in over 60,000 of its vehicles.
Lastly, several manufacturers hedged their bets on the future of the industry. BMW, Toyota, Volkswagen and even Apple all signed partnerships with ridesharing companies, while Fiat Chrysler formed a self-driving partnership with tech giant Google.
Source: theguardian.com
Safety and Environment
While the Takata airbag recall surged towards 78 million vehicles worldwide, there were fewer major safety incidents throughout the quarter. One troubling report was the discovery of 33,000 fake Toyota safety parts in a Chinese factory, destined for Australia.
Toyota recalled 3.4 million cars over airbag and fuel tank concerns, while the Australian arm of Jeep Chrysler issued a recall for 50,000 auto vehicles which could roll away when left in park setting. This however, would pale in comparison with news at the end of June from Mitsubishi and Toyota, recalling nearly 500,000 and 324,000 cars respectively.
Google meanwhile, is considering an innovative approach to combat the increasing number of pedestrian fatalities, patenting a design for vehicles with sticky bonnets that would prevent secondary impacts after a pedestrian is struck by a car.
On the environmental front, Australia was left embarrassed by research showing it ranked equal 31st for global vehicle CO2 emissions. With an absence of legislation set to address this, while other countries make progress, things are unlikely to improve soon.
Source: fitmycar.com
Technology
With Tesla releasing its highly sought after Model 3, electric vehicles were buoyed by notable publicity. In its footsteps, Volvo is aiming for 1,000,000 electric vehicles by 2025, while Mercedes-Benz announced plans for a 500km, five minute recharge EV – potentially as part of a dedicated EV brand. Nissan unveiled plans to develop the world’s first engine powered by a solid oxide fuel cell (SOFC) as well as bio-ethanol electric power. Toyota however, reaffirmed their long-term commitment to hydrogen power.
Mazda and Volvo adopted opposing views regarding any move to rely on self-driving technology. The former proposing that such technology should only be used as support, whereas Volvo foresee autonomous cars operational in Australia by 2021. Subaru are partnering with IBM to establish a data system that would replicate autonomous driving traits and eradicate vehicle accidents.
Source: cnet.com
Sales
As new sales continued to surge to record levels, Ford recorded a rebound in sales with a sixth consecutive month of sales growth – overtaking Holden for the first time since 1999. International auto makers remained the preferred brands of choice, while an increasing number of 4WDs and utes from Asia were being favoured ahead of local options.
Regulatory Issues
In response to emissions concerns, Norway proposed legislation that would ban the sale of new petrol and diesel cars from 2025, while India advocated for all cars to become electric by 2030. China looks set to allow the importation of parallel import vehicles, while in Australia, Nick Xenophon confirmed he would oppose local changes in this area. Finally, the SA government embraced self-driving vehicles by becoming the first state to permit controlled testing.
Are Alternative Fuel Technologies Well Positioned to Take Over?
There’s been no shortage of news coverage lately with regards to the next generation of technology that will power our cars. Between automotive companies, governments, community groups, and independent bodies, it appears the days of petrol and diesel powered cars could be numbered. But just how well equipped are the alternatives?
Among the manufacturers: Mercedes-Benz have recently announced plans to release a 500km, five minute recharge electric vehicle within the next five years; Volvo plan 1,000,000 electric vehicles before 2025; Volkswagen envisage 30 of their own electric vehicle variants on the roads across the next decade; and Toyota are targeting hydrogen power (consistent with the Australian government). Crucially however, manufacturers are not alone – as well as an increasing uptake among motorists, European countries like the Netherlands and Norway have led the way in committing to banish the future sale of petrol and diesel cars.
Source: Forbes.com
In theory, the premise of hydrogen cars sound fantastic – a combination of resources that are readily available, with less degradation to the environment; a fuel that lasts as long as current offerings; and delivered in a way (by pump) that is familiar to every motorist on the road. However, to produce such copious amounts of hydrogen, it would be remiss to think that the process (be it, electrolysis or steam methane reforming) does not also create a burden on the wider environment – for instance, heavy infrastructure and transport needs, or the creation of carbon dioxide (respectively). Even the portable solutions being touted are limited in their ability to generate sufficient fuel for required purposes.
Similarly, electric vehicles are also a simple permutation – charging a car’s battery by way of infrastructure that offers a renewable source of energy. To date, the technology has been inhibited by a shortage of public infrastructure (on a private level, it is accessible), as well as inherent limits with the batteries of such vehicles – which often restrict drivers to a lower driving distance, and only after a lengthy period of time charging. Also, it goes without saying that such batteries require inputs, namely lithium, which involves a refining and manufacturing process.
What you’ll note among the plans from Mercedes-Benz mentioned earlier, as well as the latest electric vehicles from Tesla, is that there is a solution in the works to address the major shortcoming regarding vehicle range. But as with any technological development, it’s likely this will take time to bed down, and even then, we’ll continue to see incremental developments as we have with current fuel technologies.
The US has been one market experiencing phenomenal growth in the sales, and infrastructure development, for electric vehicles – particularly as Tesla offers affordable vehicle prices and charging costs continue to decrease. Similarly, European markets are among those with the highest uptake of electric vehicles, alongside China and Japan. With this in mind, what becomes evident is that the countries with either the financial resources (e.g. Nordic countries), or those with sheer population (to leverage economies of scale), are the frontrunners in introducing such initiatives.
While the Australian government might have plans for alternative fuel technology to head in one direction with hydrogen, it would seem most of the world sees things a little differently. And in much the way we’ve become accustom to charging our phones daily, it might not be too long before we’re doing the same with our vehicles.
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