50 Shades of Green

Green Vehicles come in all shapes, sizes and colors, and the push for their development is consistently growing and fueled by our desire to better the environment, high oil prices and government incentives. Every one of us knows about this trend, and some of us may even drive one ourselves. But what about the differences between the types of green vehicles, as well as the future expectations and market trends?

The main contributors of this movement are the so called “Big 3”:

HEV’s (Hybrids), PHEV’s (Plug-in Hybrids) and BEV’s (Battery Electric).

HEV
’s make up the biggest portion of the green market, and the famous Toyota “Prius” was the pioneer for this trend. These vehicles utilize batteries at slow speeds, but diesel for speeds that the battery cannot handle, and thus emit less greenhouse gases as their conventional counterparts, with the 2015 “Prius” emitting 49 g/km of CO2.

The PHEV’s takes this trend a step further, particularly with the introduction of REEV’s (Range Extended Electric Vehicles), like the Chevrolet “Volt”, which extends the battery life. PHEV’s utilizes the battery as the main option, even at higher speeds. However, due to battery life being relatively short, the vehicle switches to diesel when necessary. Because the battery is the first-option, the emissions of CO2 for the newest “Volt” is at roughly 27g/km.

Finally, the BEV’s have been making a big splash in the playing field, with the famous BMW i3 being released in 2014. These vehicles run solely on electric batteries and therefore are ZEV’s (Zero Emission Vehicles) and emit no pollutants. However, opponents against this development have argued that the electricity used to fuel these vehicles still stems from coal/gas factories and therefore are not pure ZEV’s. When we calculate the average CO2 used to generate electricity for the BMW i3 it comes out to roughly 12.5 g/km, which is still significantly lower than any alternatives. But the average i3 emissions does not represent the majority of the electric market. In fact, when we take coal dominant markets like China or India as examples, we find that the emissions for electric vehicles can exceed 200 g/km when compared to green nations like Scandinavia where the emissions are close to zero. Thus the success of the BEV’s is highly dependent on the future energy sector.


Source: incadea 2015

So as we can see, the innovation of Green Vehicles has been relatively successful,

and has become, in many cases, a cost-effective alternative when compared to the traditional vehicle.

Northern European countries including Sweden, Norway and the Netherlands, are the biggest success stories, in which electric or hybrid vehicles are not only affordable but models like the Prius, and Tesla, or other makes are constantly leading in sales volume. This was made possible through government regulations and incentives, in which the purchasers of Green Vehicles not only receive tax breaks, but also free use of battery charging, highways, bus lanes and parking. In fact, these incentives have become so popular, that in the Netherlands, this policy is being changed to only incorporate battery electric vehicles by the end of 2015. This was done to push and promote fully electric vehicles but at the same time regain some tax income, because the policy got too popular.

However, there is plenty of room for improvement within this sector of the industry.

In fact, executives from the automobile industry aren’t as optimistic about green technologies in terms of investment. The blunt of the investment is still towards ICE downsizing, or simply reducing the size of the current engines to improve their efficiency and mileage (KPMG, 2014). Environmentally-friendly vehicles require high research and development costs, and the products are often too expensive for everyday consumers; or when affordably priced, offer only low profit margins. Due to this, most managers or directors at OEM’s simply prefer the most cost-effective and profitable strategy.


Source: KMPG Executive Survey 2015, Page 17-18, KMPG, 2015

Another concerning fact is that Green Vehicles, although gaining popularity, still make up only a small percentage of both the vehicles on the road and production numbers. In fact, the dim forecasts have it that the production number sits at roughly 3% in 2014 and is only expected to rise to 4.6% in 2020 (KPMG, 2014). It is also concerning that this low percentage is dominated by hybrids, and that some of the very innovative solutions such as a BEV’s or Fuel Cell are barely scratching the surface. However, as the research and development costs fall, we can expect a faster rise in all segments, and the future continues to look brighter each day for the different shades of green.


Source: KMPG Executive Survey 2015, Page 17-18, KMPG, 2015
Rafal Jacaszek | Director Business Consulting

Director Business Consulting, main tasks cover focusing on the strategic positioning of the professional services team to optimally drive the short and long term objectives of incadea customers. Rafal has over 15 years of automotive experience and has gained a significant reputation on market trends. Prior to incadea, Rafal held leading positions at General Motors Europe, being responsible for the GME Dealer Management System Project, assuring processes between GME, DMS vendors and GM Retail network in Europe. Rafal started his career with the automotive business units of EDS.

Dennis Melzer | Business Consulting

As a Business Consultant, Dennis focuses on supporting our clients all over the world in international projects in regards to making their business processes more efficient. While analyzing the processes and workflows within different OEMs, Dennis helps them to choose the best solution and proposes the possible improvements within the DMS used. One of the main interests that Dennis has - is to analyze the newest automotive business trends and ensure that all the companies and customers are up to date of the ongoing changes in the automotive market.