Green Vehicles in Catalonia Challenges 2010

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The industrial challengesof green

vehicles in Catalonia

DamiMartn

TomsMega


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The industrial challenges of green



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Martn, Dami

The Industrial challenges of green vehicles in CataloniaBibliografia

I. Mega, Toms II. Catalunya. Departament d'Innovaci, Universitats iEmpresa III. Observatori de Prospectiva Industrial IV. Ttol1. Vehicles elctrics Catalunya 2. Autombils Indstria i comer Catalunya621.33(467.1)

Government of Catalonia

Ministry of Innovation, Universities and Enterprise

Secretariat for Industry and Enterprise

Observatory for Industrial Foresight

Editing council:

Elena Ribas and Joan Miquel Hernndez

First edition: Barcelona, September 2010

Print run: 1,000 copies

http://www.gencat.cat/diue/ambits/empresa/opi

Design, layout, translation and printing:www.cege.es

Legal Deposit: B-42510-2010

The Department of Innovation, Universities and Business does not necessarily share the opinions

stated in the documents from the Diagnoses of the Observatory collection and the authors are

exclusively responsible for these opinions.

The content of this work is subject toa licence of Acknowledgement-Non-

commercial-Without derived works

3.0of Creative Commons.Its

reproduction, distribution and public dissemination is permitted

provided theauthor is cited andno commercial useis made thereof.

The complete licence can be consulted at: http://creativecommons.

org/licenses/by-nc-nd/3.0/es/legalcode.ca


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The industrial challenges of green


Dami Martn

Toms Mega


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5ACKNOWLEDGEMENTS

Acknowledgements

First of all, we would like to acknowledge the work carried out by the consultancy rmBax&Willems and their collaboration on the project that has led to this publication. Theirknowledge of the sector and their creativity in providing advice have laid part of thefoundations for the ndings of this work.

We would also like to acknowledge the magnicent sources of knowledge we have beenabletomakeuseof,resultingfromtheworkbydierentinternationalagencies,universitiesand private consultancy rms, particularly the characterisation of the automotiveindustrys value chain as provided by INTERBEN, as well as the prospective studies carriedout by the consultancy rm ROLAND BERGER.

Special thanks go to Ezequiel Navarro (PREMO) for his enthusiasm, the experience he hasshared with us and especially for making us believe we were up to the challenge.

In general, we would like to thank the rms and professionals from the industry for thetime they have dedicated to us, the knowledge they have placed at our disposal and theirspirit of collaboration, so vital for a good understanding between the public and private

spheres:

Carme Saez and Inka Guix from LaFarga Group Juan A. Aixendri, Enric Pons and Jaume Cots from Ausa Inocencio Gonzlez from Catmoto Pablo Gay and Gabriel Alarcn from Sener Julio Elvira from Mazel Jos Mara Piqu, David Huguet and Ramon Busquet from Siemens

Jordi Mestre from Lear Carlos Juan from J.Juan Jaume Prat from Ficosa Joan Montoliu from Derbi Javier Piris and Luis Bravo from Nissan Vctor Puig from Dilixi Santi Castell from Seat Francesc Perarnau from Gestamp Automocin Isidor Terradas, Llus Rodrguez and Toni Castella from Facomsa


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6 THE INDUSTRIAL CHALLENGES OF GREENVEHICLES IN CATALONIA

ngel Hermosilla from UPM Xavier Amores from the Economics Oce Assumpte Farran from Icaen Joan Pallis from Circutor David Mir from Sony Rosa Palacn from ICMAB Agustn Aragn and Donia Razazi from Fitsa-Foreve Julio de Juan and Vicente Gonzlez from MITyC Xavier Fernndez and Carlos Ibarlucea from Suzuka Zero Ramon Arribas and Xavier Cazorla from CADS Jos Manuel Barrios, Josep Maria Farran and Ignasi Ferrer from Idiada Igor Cantero from Cegasa

scar Miguel from Cidetec Ezequiel Puig from the UPC Maite Garcia and Rafel Boronat from STA

And all those who do not appear on the list but who have provided us with a useful pointof view.

Finally, we would also like to thank Elena Ribas for her collaboration, Joan Miquel

Hernndez for his wise direction, all our colleagues at the Observatory for IndustrialForesight and Secretariat for Industry and Enterprise, who have always been ready tomake their owncontribution, no matter howsmall,as well as our colleagues at ACCI withthe indefatigable Glria Prats at their head, and particular thanks go to Csar Lpez forhaving encouraged and shared a good part of this project in its initial stages.


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7PROLOGUE

Prologue

When Toms Mega and his team at the Observatory for Industrial Foresight (OPI) visited us at PREMO to ask for ourhelp on this project, we had just won the inductive components contract for the new General Motors electricvehicle through Delphi in Detroit, we had set up an alliance for its joint development globally with Lear in theUnited States, we were developing Renault network connection lters in Paris and we were working with our smallteam in Tokyo to gain a foothold in Japan. All this designed and conceived in Barcelona by a highly qualied teamwhose average age was under 35.

This sector, which moves the world, industry, infrastructures and energy, started to transform a few years ago withthe decision by the Japanese government to adopt a clear industrial policy designed to base its automobileindustry on this new paradigm, with a rst step at that time: the hybrid vehicle. Afterwards, more ecient internalcombustion vehicles have followed, as well as mixed hybrids, extended range electric vehicles, pure electricvehicles, etc.

The work were describing here is a clear example of the opportunities and future directions of green vehicles. Themost conservative estimates predict a market, only in power electronics, totalling 5 billion dollars by 2020. A wide-open blue sky where everything is yet to be achieved and where, in Catalonia, were competitive and havecompanies with technology, a history of trade dating back a thousand years and a young, well-qualied generation

that was born polyglot and is used to working in teams and at a global level.

A competitive economy is one that gets more quickly to the same places the rest also reach, sooner or later. Aneconomy thats capable of nding the fastest route, as the Catalan economy has always managed to do.

Never before has such a great convergence of technology occurred in a sector that is just one step away fromrevolutionising cities, the generation of electricity, the integration of electronic technology, programming,communications, chemistry (batteries) and the environment. The report entitledIndstria XXIshows that the real

weight of the industry and services for production in Catalonia is 59% in terms of GAV and 53% in terms ofemployment. Too important not to sign up for this challenge that, born in Japan, is spreading to the United Statesand Europe, led by France, and that has forced the large German manufacturers to thoroughly review the greensolutions they oer. Now no-one can do without ecological solutions; not even industrialists like us, can ignore thefact that were all set to do it, both technically and in an economically viable way.

This industry is modular, lighter and more open to integration, less tied to the physical requirements of proximity,and requires Catalan rms to overcome our reluctance to working in a network, following models of open


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innovation, sharing resources and capabilities to overcome the problems of scale that are stopping us fromaccessing the larger markets.

A few of us pioneers are already providing this new sector with added value and what we see outside Catalonia is

neither better nor more competitive than what can be done by Catalan industries.With determination and a clearlydened Catalan industrial policy with vision, a new scenario will open up before us where our strengths can bemaximised. Opportunities, when we take advantage of them together, are multiplied.

A task, then, worthy of being considered by all stakeholders. Congratulations to the OPI.

Ezequiel Navarro

CEOPremo Group


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9INDEX

Index

Presentation 11

Introduction 15

Executive Summary 21

1. Brief notes on the Catalan automotive industry 27

1.1 Sector composition 28

1.2 Brief competitive analysis 29

1.3 Expected trends 33

2. Green vehicles 352.1 Vehicles within the green trend 36

2.2 The multifaceted challenge of green vehicles 38

2.3 Alignment of interests 40

2.4 Future perspective for electric vehicles in Catalonia 43

2.5 Speed of penetration 44

3. Industrial opportunities 47

3.1 Decisive trends 48

3.2 Opportunities for the automotive industry 51

3.3 The battery paradigm 52

4. Capacities of the Catalan industry 57

4.1 Eects caused by green vehicles on Catalan industry 58

4.2 Analysis of capacities to industrialise green vehicles 59

4.3 Analysis of new industrial capacities required for green vehicles 64

4.4 Strategic positioning 64

5. Conclusions 67

5.1 Lines of action 71

References 75

Analytical les for green vehicle systems and components 79


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Presentation


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13PRESENTATION

The manufacture of automobiles and other vehicles is one of the most important industrial segments in Catalonia.The automotive sector in particular accounts for almost 10% of the aggregate turnover of Catalan industry and, at atime when exports are so vital to oset the extreme frailty of domestic consumption, this sector is one of the leadersin Catalonia in this respect, illustrating its high degree of competitiveness.

The recent economic crisis, which has reduced sales in the natural markets for vehicles made in Catalonia, is severelyaecting this industrial activity, in addition to the stagnation that has been occurring in the sector for some years nowand which is expected to continue in the future. Specically, in Catalonia and Spain, 120,657 and 615,742 fewervehicles were produced in 2009 than in 2004 (ANFAC data) respectively, but even more crucial is the expectedstagnation in European production while the world market continues to expand over the next ve years, which couldlead to a rise of more than 40% in sales for 2015 compared with those in 2009, according to OECD estimates.This trend

is determined by other, more structural causes in the global economy, such as production and demand shiftingtowards countries like China and India, as the most signicant locations, in detriment to other traditional productionsites.

But this isnt only aecting the automotive sector: Catalonia has one of the highest concentrations in Europe ofmanufacturers of other vehicles, such as mopeds and motorcycles, urban and regional transport vehicles and a wholeassortment of tier two suppliers that, to a greater or lesser extent, are going through a period of sweeping changesonce again determined by global trends.

The recent strong emergence of electric vehicles and the quieter green evolution of internal combustion enginesencouraged by government policies from various countries and specically European Union directives are leading toa paradigmatic change for the sectors involved and, in the Catalan case, are becoming an opportunity to defend andduly position its industry in the world.

Most advanced economies in the world are working to overcome this challenge and particularly the emergingeconomies. Secretariat for Industry and Enterprise spotted these industrial and business opportunities and is activelyworking to keep ahead, as far as possible, of the trends in this world, to determine the challenges and position Catalanindustry at the forefront of green vehicles.

As a result of this pro-active approach, it commissioned the Observatory of Industrial Foresight to analysethe capabilities of Catalan industry required by green vehicles. This study has broken down each of the systemsand components required now and in the future by green vehicles, analysing the impact of the new systems andtechnologies being incorporated and identifying the capabilities of Catalan industry in each case. It is therefore anexhaustive study that should provide us, in the rst instance, with a complete picture of what the vehicle of the futurewill mean and, secondly, dene the measures required by industrial policy to take on this challenge in the most


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satisfactory way possible, both in industrial and technological terms. I would like to take this opportunity to expressCatalonias resolute desire to continue being a leading region in vehicle manufacture at a European level, and also toconrm that we have both the capabilities and potential required to play a key role in the future of green vehicles.

I encourage you to share this study, and I hope and wish that its content and considerations will be useful for businesspeople in their strategic decision-making, becoming an incentive to embark upon the road to green vehicles.

Antoni Soy i CasalsSecretary for Industry and Enterprise


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Introduction


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At this stage of the game, everyone realises that electric vehicles have become part of the strategies of governments,councils, manufacturers and energy suppliers, among others. After many months of extensive debate on electricvehicles and their considerable media coverage, it seems that all interests are now nally converging on electric

vehicles as a solution for private mobility in the medium and long term.

But unlike other recent examples of revolutionary technologies that have managed to denitively replace theincumbent technology within a short period of time, the case of electric vehicles involves many factors that suggestthey will take quite a long time to penetrate the market. Firstly, were not talking of a product that will replace theinternal combustion vehicle but rather complementary products and technologies that, over time and as theirattributes and infrastructures develop, will gradually gain market share.

Green technologies applied to mobility go beyond the phenomenon of the electric vehicle. From engines that usealternative fuels to the longed-awaited hydrogen technology, including the lower consumption of fossil fuels, vehiclesare continually improving their environmental features. The common strategic driving force for all these kinds oftechnologies is the sustainability of mobility and, along similar lines, the conceptof green vehicles. Of course theres talkof less dependence on energy, of reducing contaminating emissions and noise, but also of eciency and takingadvantageof alternative energy sources and particularly at a lower cost, taking into account the vehicles whole life.Withthe permission of hydrogen, the longest running technology for the coming decades is represented by the electricsolution, especially because of its potential to improve vehicle features. However, from an industrial point of view all the

other technologies and systems also arouse a lot of interest, as they result in a more sustainable andgreener productand they will most certainly be optimally complemented by electric technology, providing the best product on themarket.

The electric drive vehicle is actually a very old invention (the rst car was driven by electricity) for which severalattempts have been made throughout itshistoryand, to a large degree, it hasmanaged to penetratecertain segmentsof the mobility market where its intrinsic features are beyond the scope of internal combustion. Conversely, the greentrend is a more modern phenomenon, arising from the worlds interest in reducing pollution and the greenhouseeect, this becoming the vital trend of the future in the world of mobility and generating a large number of business

opportunities. If we add to these arguments the concern of governments in developed countries regarding theirdependence on fossil fuels, then the virtuous circle is completed and we can state that were seeing a denitivecampaign for the consolidation of green vehicles, with electric vehicles taking pride of place.

Still farfromthe mass introduction of electric vehicles onourroads butwith greentechnology clearly makingprogress,in April this year the Spanish government announced its Comprehensive Plan for Electric Vehicles, led by the Ministryof Industry, Tourism and Trade. Also signicant is the European Unions policy on promoting green vehicles viadierent directives and, most particularly, via the Green Cars Initiative as part of the 7th Framework Programme (FP7).


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17INTRODUCTION

At a more local level, we should also note Barcelona Councils rm commitment to its LIVE programme and itsparticipation in the MOVELE programme by IDAE (Institute for Energy Diversication and Savings), as well as otherinitiatives along the same lines, carried out by other Catalan councils. In the rest of the world, of note is the strongcommitment shown by the governments of the United States and China, the drive of the French government, the

Danish and Israeli initiatives, etc. There are also many dierent agreements between energy operators and central,regional and local government.

Given this scenario, the question is as follows: what will be the repercussions for Catalan industry of the massintroduction of green vehicles in the future?

Windows

Coachwork

Exterior door modules

Roof modules

Front and rear modules

Auxiliary elements

Fuel and feed

Block and power

Ignition, management and

electric components

Refrigeration

Transmission

Exhaust

Auxiliary elements

Seats

Cockpit and instrumentsDoor modules

Interior furnishings

Overhead systems

Auxiliary elementsBatteriesand

ultracapacitors

Range

extenders

Electric

machines

Power

electronics

Lowfrictionwheels

Integrated

solar panels

Lightweight

composites

Thermoelectric

materials

Efficient lightingsystems

Othersensors

and electronics

Exterior

Engine and

powertrain

Interior

Structural elements

Steering

Axles

Wheels

Brakes

Suspension

Auxiliary elements

Chassis

Driver support

Windscreen cleaning

Lights

Comfort

Safety

Safety andcomfort

systems

Ready To be adapted Newentrant Future industry+ + =THE GREENVEHICLE INDUSTRY

The vehicle manufacturing industry currently accounts for around 10% of the aggregate turnover of all Catalanindustry (IDESCAT). This is a sector with high levels of productivity, directly employing more than 40,000 people and

accounting for over 15% of Catalan exports (2009). This demonstrates its high degree of competitiveness andimportance, especially when there is a crisis in domestic consumption. But what will the green vehicle industrybe like? What are the gaps and areas of opportunity for new industries coming into the automotive sector? What arethe capabilities of Catalan industry to take on this challenge and what role might it play in this future? What is theroute map it must follow in order to make the change over to green vehicles? Where are decisions taken concerningthe new models, systems and components of green vehicles?


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Given all these questions and also given the uncertainty hovering over many of the factors that will determine howfast green vehicles penetrate the sector, especially electric vehicles, the Secretariat for Industry and Enterprisedecided to nd the answers by commissioning the Observatory of Industrial Foresight to carry out an analysis, thendings of which are presented in this report. This study initially formed part of the Green Vehicle Working Group

promoted by the Social Council of the Polytechnic University of Catalonia (UPC), with the participation of moststakeholders and serving as a basis to outline the administrations lines of action in the industrial and technologicalsphere regarding green vehicles.

With regard to the content, we have rst analysed the path towards green vehicle use and, specically, the factors thatwill determine the dierent stages of this industrial business.This chronological exercise is at the very least extremelyusefuland perhaps even vital in orderto draw up realistic, viableplans forthe corresponding actions to be undertaken.To produce this transitory scenario we have employed the dierent predictions and hypotheses available and haveadapted them to the Catalan situation.

Then we analysed the trends in automobiles: which are added because of thegreentrend and how the pre-existingtrends are intensied.

From this point, we identied how the green trend impacts each of the systems and components that make up anautomobile, subsequently uniting the activities of rms in the automotive sector with these dierent impactcategories. In this way, weve been able to quantify and classify the eect of green vehicles on each of the activities ofthe automotive industry in Catalonia. This document contains a seriesof les that summarise this information for each

system and component in an automobile, indicating which industries already have a product that is ready to take onthe challenges, which still have more or less a long way to go to adapt their product and which may see their currentbusiness decline and possibly even disappear from the value chain.

Finally, we have identied those industries joining the value chain, especially those related to the whole area ofelectricsystems and components, as well as the availability and/or potential of Catalan industry to provide solutionsand products for these new areas and thereby reinforce the value chain.

However, some reservations should be made. The rst regarding time: above all, a methodology has been used thatis current within such a fast evolving area as the one we are concerned with here. Secondly, the heterogeneous,multi-product andmulti-locationnature of thesector andits rms haslimited thedepth of the quantitative analysis.Consequently, the diagnosis carried out is not exact but it is the best approximation within a reasonable timescale.In any case, the methodology employed will make it easier to revise and update this study in the future. Thirdly,most of the analysis has focused on the automobile and the systems and components that travel on boardthe vehicle. We have left the peripheral systems to the vehicle for another, later publication, as well as otherautomotive segments, such as manufacturers of industrial and service vehicles, coachwork suppliers, the mopedand motorcycle sector, sailing, etc. Nevertheless, based on this initial study of the automobile, together with the

extensive knowledge of these other segments possessed by the OPI thanks to previous studies, weve been able toextrapolate many of the conclusions reached for these segments.


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19INTRODUCTION

Product

Process

Railway

manufacturers

Motorcyclemanufacturers

Coachworksuppliers

Motorcyclecomponentsand systems

Auto componentsand systems

OEMAuto

Metal transf.

Plastic and other transf.

NICHE

Specialty

INTERMEDIATE LARGE-SCALE

Productioncapacity

As has already been mentioned, this study forms part of the GreenVehicle Working Group which, under the auspicesof the Social Council of the UPC and based on an all-inclusive view of this challenge, has determined the industrial,technological and scientific capabilities of Catalonia regarding the challenge of green vehicles.

An industrial strategy forgreen vehicles hastherefore been definedthat forms partof theCatalan AutomotiveStrategy(2009-2020), approved by the Catalan government in March 2009 and establishing three areas of work: a plan ofimmediate rescue measures, a structural impact plan of transition and competitiveness in the medium and long term.In the coming decade, the aim of this strategy is to help achieve the following objectives (in line with the IndustrialPolicyPlanand theResearchand InnovationPlan): maintain themarket shareof manufacturerswith plantsin Cataloniain the Spanish and European market; increase therelative weightof productionin Catalan plants; maintain the relativeweight of transport-related activities with regard to overall GDP; maintain the market share of Catalan componentmanufacturers in world trade; and increase the level of private investment in R&D and technological development.

Similarly, the studys findings have also helped the corresponding area of the Strategy to Promote Electric Vehicles inCatalonia, IVECAT, a joint initiative of the departments of the Catalan government involved in this challenge.

While this study was being carried out, the Secretariat for Industry and Enterprise also took part on the board ofGeneral director of the autonomous communities in drawing up the Comprehensive Electric Vehicle Plan, producedby the Ministry of Industry, Trade and Tourism.

Lastly, this study and its conclusions have formed the strategic basis to promote the actions of the Green VehicleWorking Group, set up jointly by ACCI and the Secretariat for Industry and Enterprise in order to coordinate theimplementation of the industry and technology action plans of the Department of Innovation, Universities and

Business, to be the point of connection with the strategy of the Catalan governments IVECAT and especially to helpfirms embark upon this path and profit from it as much as possible.


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We hope that this study is a good complement for the rest of the work being carried out in the eld of green andelectric vehicles, and that it contributes some strategy to the industrial perspective regarding this multifacetedchallenge. We also hope that the content and knowledge generated throughout this project, including what we havebeen able to reect in this publication, may be of use to the companies involved.

To end, we would like to note that the opinions, reections and conclusions contained in this publication are the soleresponsibility of its authors.


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Executive Summary


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The automotive industry is crucial to Catalonia: the size of both exports and R&D investment, the high employment,both direct and indirect, and the large volume of related business make this sector one of the most important forCatalonia. Nevertheless, at the beginning of the 21st century the sector started to suer the consequences of a shift

in the automotive worlds centre of gravity (as is happening in so many other business areas) towards the emergingeconomies. And this is happening both in terms of production capacity and demand.

The consolidation of green vehicles, and specically the recent emergence of the concept of the electric vehicle,illustrates both sides of the same coin: on the one hand, it might intensify this global shift in business and, on theother, it might be a unique opportunity for Catalan industry.

Below we present the ndings from an analysis of the dierent points covered throughout the study: what we mean

by green vehicles and the role played by the electric option as such, the expected speed of penetration for thisphenomenon and the repercussions for industry, the technologies that will determine the future, the impact on eachof the areas of production, the gaps and weaknesses in the value chain, the challenge and the ability of Catalanindustry to overcome it and, nally, the proposed lines of action to tackle this challenge from a strategic perspective.

Throughout this study, when we talk about green vehicles we mean any vehicle that evolves in line with the concept ofsustainable mobility; i.e. less dependent on fossil fuels, reducing emissions and noise, energy ecient, making useof alternative energy sources and the recyclability of the materials used, primarily.

Its success is thereforestronglyaected by government regulations and legislation andsubsidies forvehicle purchasesand for developing recharging infrastructures, the latter in the case of electric vehicles. Other decisive factors are howwell these vehicles are accepted by end consumers, the availability of infrastructures and the competitiveness oftechnologies. In this respect, for several years now diesel and petrol combustion technologies have been working toreduce their emissions and continue to lead the array of green solutions. Other alternatives based on gas havesecured a limited foothold in certain markets. More recently, alternative bio fuels have emerged, and combustiontechnologies are evolving to process them as eciently as possible. The penultimate wave comprised of rstgeneration hybrid solutions, which have made a very interesting contribution to internal combustion technologies in

terms of managing consumption at low speeds and when stopping and starting, and in providing extra power.

Within these green solutions, electric vehicles have the longest future ahead of them over the coming decades.Nonetheless, the speed at which they penetrate the market will be determined by many factors: the price dierencebetween petrol and electricity, presumably on the up; taxation on pollution, as governments will continue toincrease taxes on those technologies that pollute the most and emit most greenhouse gases; the euro/dollarexchange rate, truly unknown in the future; subsidies for buying these vehicles, as it is expected that the pricedierential will continue to be oset to a certain extent, as the technology advances; technological developments,


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23EXECUTIVE SUMMARY

with an expected progression in the dierent systems involved, especially batteries, where spectacular progress isexpected; and the purchasing power of consumers, both public and private, to be able to aord the dierence inprice in buying these vehicles compared with those based on heat and internal combustion engines.

From an industrial point of view, the large-scale implementation of electric vehicles is a process that has just begunand it will pass through three very dierent phases:

An initial Industrial Positioning phase, with a still residual penetration in niche markets and eets of pure electricvehicles, a signicant number of rst generation hybrids and a growing number of plug-in hybrids. Throughout thisphase, the dierent industrial players will take strategic decisions and invest in technology and production in order toget a foothold in this business, although the returns will still be very small. In this phase, it is also expected thatindustries will start to join the market that, to date, had not formed part of the vehicle business.

A second Maximum Industrial Complexity phase, in which plug-in hybrids will quickly take over a signicant share ofthe passenger car market, where internal combustion vehicles will increasingly lose signicant market share andelectric vehicles will be seen more and more frequently, especially for use in towns and cities. In this second stage,electric vehicles will no longer be a niche option and their turnover will become highly signicant, thereby justifyingthe investment and commitment of rms during the rst phase. In this phase, with such a wide range of possibilities,industry will combine long andshort production runs, extending their range of products and technologies, which willmake it extremely complicated to manage manufacturers demand for systems and components.

In the last phase ofMass Industrialisation, electric vehicles will take over a large part of the market share in detrimentto internal combustion vehicles and also electric hybrids and they will be mass produced. There will be ercecompetition between related industries, where customers, markets, technologies, products, features and uses willhave radically changed from the rst phase.

Stages in the emergenceof electric vehicles

STAGE1

Industrial positioning

2010 2020 2030 2040

STAGE2

Maximum industrial complexity

ICV > Hybrids > EV

Mixed eets-Bikes-Private

Batteries approx. 300/kWh

Transitory models

Hybrid mass industrialisation

Aux. industries pulled along

STAGE3

Mass industrialisation

ICV = EV = Hybrids

Widespread private demand


EV models from scratch

EV mass industrialisation

Fierce competition aux. ind.

ICV

HEV

PHEV

EV

ICV >> Hybrids >> EV

Niche demand

Batteries 450/kWh

Reconverted models

Short production runs

Early pioneers

Source: Produced by authors.

Returning to green vehicles, according to an analysis of the main technologiestaken on board, the most decisive willbe those related to the reduction of emissions, improved eciency and the recyclability of materials. The electricoption contributes directly through technologies related to batteries and super condensers, power electronics,electrical machines, lighting and small electric motors. Indirectly, technological developments are speeding up in


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specic areas such as reducing weight and friction and also in heat engines, which have found a new rival in electricsolutions. Along these lines, remote control technologies, communication devices, control and safety software andeven design and architecture technologies are inherent to green vehicles that are being boosted by the emergenceof electric vehicles.

Automotive product trends

CI engines

+ ecient

Low

friction

Batteries

BIO-LGP fuel

Electronics

Communications

V2V-V2EDesign

Architecture

Safety Comfort

Light

materials

Lighting

small

electric

systems

Batteries

Electric

powertrain

Power

electronics

C02

Noise

Other

fuels

Connectivity

Features

Safety

Cost

Consumption


On the other hand, technologies related to manufacturing processes will evolve towards the processing of new

materials and new combinations of these materials, incorporating new processes, technology and machinery.

With regard to the product, there are few systems or components that are not involved in green vehicles. Fromcomponents related to internal combustion, which will improve their features in terms of eciency and emissions, tobatteries, power electronics and the electric engines used in electric vehicles, including blocks of components of thechassis, exterior, interior and safety and comfort, which will be adapted in terms of eciency, weight reduction andelectronication. In the case of electric vehicles, complementary energy supply systems, such as photovoltaic andenergy recovery, are also particularly important.

With the nature of vehicle components being aected by such a range of factors, its reasonable to suppose that theprogression of green vehicles will transform the value chain, which will have to adapt to the new manufacturingrequirements. Catalonia has a complete industrial sector in which most companies will have to modify their productsby incorporating other technologies and materials, another signicant portion is looking at a reduction in marketshare in the medium and long term and will have to diversify their product when the time comes and, nally, theresa very small group that will not be signicantly aected by this phenomenon. Specically, the following have beenidentied:


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25EXECUTIVE SUMMARY

33 companies with a product that will not be signicantly aected by the appearance of green vehicles. These arebasically seats, furnishings and bumpers. In these cases, material recyclability and weight reduction are the mainchallenges.

79 companies that will have to redesign their product, changing certain technologies and/or materials. Thesecompanies are mostly concerned with the blocks of interior, exterior, chassis and safety and comfort. Theirchallenges involve intensively applying technological innovation and R&D.

22 companies will have to reconceptualise their product from scratch, these working principally in the area ofheating, air conditioning and brakes. These rms will have to intensify their R&D, as green vehicles will require thesame functions but provided in a radically dierent way to the present.

40 companies will lose market share in the medium and long term but still have some work to do in terms oftechnological improvement. These are from the engine and power block and their challenge lies in innovation but,above all, in diversication in the medium term.

66 process companies, principally in the segment of transforming metal, plastic and other materials, will have to

innovate in processes, incorporating technologies to process new materials and including new equipment tohandle their raw materials.

Measures of actions by group

Extra investment Product /process innovation R&D Diversication reconvers ion

Productcompan

ies

A

Not very aected33 companies (10 local)

B

Redesign required, changingtechnologies and/or materials

79 companies (34 local)

C

Change in concept22 companies (8 local)

D

Loss of market share in

medium/long term

40 companies (18 local)

Process companies 66 companies (54 local)


With regard to new industries entering the green vehicle sector, Catalonias industrial weak points lie in componentsthat are highly critical for electric vehicles, such as batteries and super condensers, and theres little critical mass ofrms in terms of power electronics and electric engines. In these last two cases, however, of note are the Catalanelectric and electronic companies and sectors, which help to plug a large partof these specic gaps regarding electricvehicles and these rms have a great opportunity to diversify based on their current business.

However, in Catalonia the rst incursions of green vehicles appear in segments other than passenger cars, such as

motorbikes, industrial, service and transport vehicles, where various initiatives have emerged. A business opportunitytherefore already exists regarding green vehicles in all these niches, and Catalonia has leading companies that aremoving towards electric mobility.

As a last point in our analysis, the challenge of green vehicles for Catalan industry is therefore formidable. Catalanindustry is in a favourable position, with a large amount of business know-how accumulated over many years and isa relatively complete sector where there are more opportunities than threats. In fact, if we compare it with othertraditionally leading regions, the gaps are common and are concentrated in systems inherent to electric engines and


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storage; i.e.in the extremely new aspect of the technology. However, othermore emergingregionshave a considerable

advantage in these product areas and an extra effort must be made, as well as a highly strategic view taken, in order

to make up for this weakness.

The growing number of new technologies and solutions brought about now and in the future by green vehicles will

require an escalation in innovation to develop products but without losing sight of productivity, which is what

guarantees their business. This balance will not be easy for Catalan companies, which are generally not large in size

and will have to decipher this change and strengthen their capabilities in terms of technology, investment, trade, etc.,

either using the companys own resources or through alliances or other types of collaboration with other firms and

agents.

On the other hand, the strategy to be followed must also include a refocusing beyond the traditional limits of this

business in order to access and collaborate with the decision-making centres for green vehicles, bearing in mind that,

in these initial phases, these centres are concentrated at head offices.We must also take into account the effect of theshift in demand and production towards emerging economies.

In the shortand medium term, the great opportunities will lie in the niche and service fleet segments, both public and

private. In this respect, Catalan industry has a notably wide range of industry in mopeds and motorcycles, industrial

and service vehicles, coachwork for transport and commercial vehicles that have the large metropolitan core of

Barcelona as their big source of demand and a unique place for trials and experimentation.

So green vehicles are becoming a new paradigm that will bring about a veritable industrial shake-up. Catalan industryis ready and can aspire to taking advantage of these opportunities, although its a difficult path to take. The following

public lines of action are therefore suggested to push this industry towards green vehicles with the idea of providing

support for companies that must take this path and position the sector at the forefront of the automotive world of the

future: reinforce the value chain, with actions aimed at providing players at all stages of the green vehicle value

chain; stimulate industrial demand, working to locate in Catalonia the design, development and production of new

greenvehiclemodels;supportprojects,helpingtogreenlightthoseproductsrelatedtogreenvehiclesandparticularly

collaborative projects that combine capabilities and know-how; strengthen the competitiveness of the industry

supplying systems and components as well as the auxiliary industry to adapt it to the new challenge and the

conception of an aggregate strategy, supporting the creation and promotion of an industrial platform for green

vehicles in Catalonia.

1


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Brief notes on the Catalan

automotive industry

1


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1.1 Sector composition

The Catalan automotive industry is one of the most important in Spain. The volume of exports, extent of investment

in R&D, level of employment generated both directly and indirectly and many other indicators place it at the forefrontof industrial sectors in Catalonia. The sector is headed by two large manufacturers, Seat and Nissan, and a group ofsystemand component companieswith topclass representatives in the world, in alla large critical mass.Thereare alsooutstanding companies in niche sectors, such as industrial vehicles and motorcycles, without forgetting coachworksuppliers. The automotive value chain is made up of more than 300 companies, those with foreign capital being thestrongest in the product specialty, especially in terms of parts assembly (the so-called Tier 1). However, as we reducethe degree of functional product integration we nd more companies with local capital. A very dierent map appearsfor specialists in processes, where Catalan companies are the majority, especially in metalworking, while there is more

equality with companies with foreign capital in the transformation of plastics and chemical materials. Most of thecompanies in the sector are in these two groups that make up the main chain for the sector.

Mapof theautomotivesector

General basic supplier

Suppliers of technical services and technological centres

Primary

sectors

Transformationchain,supply

and serviceraw materials

Auxiliary chain

Sector of goods, machinery and industrial maintenance

Main chain

Process

specialists

Product

specialists

OEMs

Source: Inter-Ben Consulting, Mapa General del Sector de lAutomoci de Catalunya.

The rest of the value chain is well covered by a notable number of suppliers of equipment, machinery, industrialmaintenance and auxiliary services, such as manufacturers of moulds, templates and tools.

In general, companies with local capital are not very international in scope and have little presence abroad inproduction terms. They are also the smallest companies in this sector. This characteristic leaves many companies withlocal capital in a very delicate position, as they do not have the right size to compete in the tough automotive sectorand their customer diversication is limited to Spain.


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29BRIEF NOTES ON THE CATALAN AUTOMOTIVE INDUSTRY

1.2Brief competitive analysis

The automotive sector is known for its tough competition and the low margins companies have to work with, asituation that is exacerbated by surplus capacity globally. This situation shifts production towards those sites with the

best competitive conditions and greater growth in their domestic markets. Consequently, a few decades ago Spainreceived a large amount of investment from automotive companies that are now experimenting with other countriesenjoying a similar situation to Spains at that time.

Productioncapacity of the automotive sectorin global termsThousands of vehicles

120,000

100,000

80,000

60,000

40,000

20,000

02008 2009 2010 2011 2012 2013

Surplus capacity

Production capacity worldwide

Annual production worldwide

Source: Bipe.

This situation has been aecting manufacturers established in Catalonia, even though there has been an extremelystrong demand for vehicles in Spain over the last decade and the European market (the natural market for Catalanexports) has seen recordnew vehicle registrations with more than 17 million automobiles per year from 2004 to 2007.The industry that has gained the most from this large number of registrations has been that located in Eastern Europe1,

which in 2009 produced 19.7% of all vehicles produced in the European Union, while in 2004 its share was muchlower, only totalling 7.25%. On the other hand, there has been a slight downturn in industry located in Spain.

1 Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia.


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Trends in vehicle productionout of thetotal forthe EU-27Percentages

25

20

15

10

5

0

2004 2005 2006 2007 2008 2009

Spain

Eastern European countries

Source: Produced by authors with data from the ACEA.

In such a competitive situation, Catalan companies in the automotive sector have seen quite dierent trends in themost notable variables. The sector has suered an apparent fall in the number of establishments and employees. Theformer is entirely in the systems and components industry, while the fall in employment has been equal both incomponent manufacturers and motor vehicle manufacturers.

Employees (thousands) 2000 2001 2002 2003 2004 2005 2006 2007 2008(*)

Motor vehicles, coachwork, trailers 24.2 24.0 22.1 21.3 21.4 21.3 20.9 20.7 18.9

Parts and accessories for motor vehicles 25.2 24.9 24.9 24.3 23.9 23.2 22.8 22.1 26.7

Number of establishments

Motor vehicles, coachwork, trailers 149 169 163 162 153 165 169 167 142

Parts and accessories for motor vehicles 405 329 348 289 313 298 282 283 280

(*) The change in sample characteristics for the industrial survey of firms and the new Economic Activity Code classification make it difficult to compare the years 2000-2007 with2008, when these changes came into force.This is particularly evident in the motor vehicle parts and accessoriesgroup and especially with the employment data, which showthe opposite trend to what would be logical given the crisis in the Catalan automotive sector.Source: Idescat. Estadstica, producci i comptes de la indstria.

Turnover and prots, on the other hand, have remained stable with just small uctuations. Manufacturers of motorvehicles, coachwork and trailers have obtained more than 80% of the sectors prots with 66% of the turnover for theperiod mentioned. This shows that vehicle manufacturers work with greater margins than those enjoyed by theirsuppliers. In the case of component manufacturers we can see that the rise in turnover is not passed on equally to therise in their prots, with turnover growing continually while prots are quite volatile, although a long-term downturncan be observed.


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Revenue (thousand euros) 2000 2001 2002 2003 2004 2005 2006 2007 2008(*)

Motor vehicles, coachwork, trailers 9,573,020 9,170, 060 8, 550,306 8,588,566 9,563, 255 8, 908,036 9,754,852 10,258,624 8,824,130

Parts and accessories for motor vehicles 4, 111,220 4,379,180 4,679, 103 4,643,802 5,088,879 4,872, 067 4,937,497 5, 142,233 5,872,900

Prot (thousand euros)

Motor vehicles, coachwork, trailers 136,955 311,489 222,294 178,305 217,455 9,373 21,480 225,336 199,343

Parts and accessories for motor vehicles 131,282 95,168 11,849 67,717 88,921 44,182 14,524 52,995 157,162

(*)The change in sample characteristics forthe industrialsurvey offirms and the new Economic Activity Code classification makeit difficult to compare theyears 2000-2007 with2008, when these changes came into force.Source: Idescat. Estadstica, producci i comptes de l a indstria.

The variable with the best trend is apparent worker productivity as this has improved most signicantly, especiallyamong component manufacturers, with a rise of 50% in the period 2000-2007. This trend is the result, on the one

hand, of a more than 15% reduction in the hours worked among component manufacturers and almost 20% amongvehicle manufacturers and, on the other hand, a 25% rise in revenue for the former and more than 7% for the latter.

Trends in workfactor productivity

325

275

225

175

125

752004 2005 2006 200720022000 2001 2003

Revenue per hour worked - vehicles

Revenue per hour worked - parts and accessories

Source: Produced by authors with data from Idescat.

With regard to trends in the foreign sector, exports and imports have grown continuously. The much greater growthin imports than exports has meant that the sectors traditionally positive balance of trade has become negative overthe last few years. Also evident is a reduction in the share of Catalan industry within the trade balance of the Spanishautomotive industry.

T d i h f i f h i i d


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Trends in theforeignsector of theautomotiveindustry

2,800,000

2,300,000

1,800,000

1,300,000

800,000

300,000

700,000

200,000

1,200,000

210

190

170

150

130

110

70

90

50

2004 2005 2006 2007 2008 200920022000199919981997 2001 2003

Balance of trade

Coverage rate

Source: Produced by authors with data from Idescat. Data TARIC 87: Motor vehicles, tractors, cycles and other land vehicles, parts and accessories thereof.

Lastly, the percentage of purchases made by manufacturers from national suppliers and international suppliers hasremained stable. Purchases from system and component rms established in Spain out of the total turnover ofmanufacturers have remained between 21.87% in 2004 and 21.92% in 2008. In this respect, and in terms of imports,in 2004 these accounted for 21% of the turnover and in 2008 they reached 22%. Both items have fallen absoluteterms, however, down 17% in the case of the domestic purchases and 14% in the case of imports.

Consequently, over the last decade the Catalan automotive sector has been gradually weakening, with this declineincreasing in the last two years andthe closure of some system andcomponent factories andnumerous redundanciesthroughout the automotive sector. Nevertheless, the two large vehicle assemblers, Seat and Nissan, still have theirfactories in Catalonia, as well as most of the system and component industry.

The most immediate future, with the serious macroeconomic problems faced by the European Union and especiallySpain with its very high unemployment, does not suggest high levels of demand for vehicles. To this negativemacroeconomic situation we must also add the end of subsidies for buying vehicles that had been implemented

throughout Europe in 2008 and 2009, which cushioned a large part of the impact of the crisis on car manufacturersand came to an end in summer 2010. Consequently, in the short-term, production levels are unlikely to be as high asthey were in the period 2004-2007. However, the production of most vehicles in Spanish factories, small vehicles, isthe segment that is making the most of the current circumstances due to its vehicles low emissions, lower fuelconsumption and lower prices. For example, throughout 2009, when production in Europe dropped to 1996 levels,3,233,549 vehicles were sold with emissions under 120 g CO/km. This gure represents a 59% improvement on 2008and 130% on 2007. A clear example of how green vehicles are the product segment that is best overcoming the crisisand that not only has not fallen in sales but is growing spectacularly.

1 3Expected trends


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1.3 Expected trends

In 1980, 39 million vehicles were produced on thewhole planet. This gure reached 69 million in 2008.Vehicledemandis expected to continue in the future with this spectacular growth: from 55 million vehicles sold in 2008, the forecastis of 70 million in 2018. Where this demand comes from will also vary substantially. The BRIC countries consumed 21%of the worlds vehicle demand in 2008. For 2018 this gure will have risen to 28%. On the other hand, the EuropeanUnion, the natural market for the Catalan automotive sector, will reduce its 26% share in 2008 to a possible 21% in2018. This means that the European Union will maintain its current demand for vehicles while other locations on theplanet with see huge growth. Production is expected to shift, to a certain extent, towards those locations wheredemand will also be greater in the future.

Metropolitan areasof the world

Los Angeles(13 million)

Mexico City(22 million)

NewYork(20 milions)

Rio de Janeiro(13 million)

Sao Paolo(21 million)

Buenos Aires(15 million)

Lagos(21 million)

Istambul(14 milions)

El Cairo(14 milions)

Hyderebad(12 million)

Karachi(19 milions)

Mumbai(25 milions)

Delhi(25 milions)

Calcutta(18 million)

Dhaka(22 million)

Jakarta(20 million)

Bangkok

(12 million)Manila

(14 million)

Beijin(11 million)

Shanghai(13 milions)

Tokyo(37 million)

Osaka(12 million)

Tianjin(11 milions)

Madrid(5 million)

Barcelona(4 million)

Milan(4 million)

Rome(3.5 million)

Naples(3.5 million)

Athens(3.7 million)

Katowice(2.5 million)

Berlin-Brandenburg(4 million)

Paris Ille de France(11 million)

London(11.5 million)

Randstad(*)(6.5 million)

Ruhr Area(11 million)

(*) Amsterdam, Rotterdam,The Hague and Utrecht.Source: Seat.

Another trend that will alter the product in the world of automobiles is the gradual urbanisation of the planet. Citiesaregainingin inhabitantsanddemanda specic mobilityproductdue tothe problemscaused bythe mass inhabitationof urban zones: pollution, congestion, space... Manufacturers will have to adapt in order to play their part in this

growing market share of the city-car concept.

Consequently, the growth in sales for automotive manufacturers will change as developing countries, especially theBRICs, gradually incorporate a rich middle class into their population structure. Moreover, these vehicles will meet aspecic demand generated by the needs of these large metropolises that are growing by the day, most particularly inthose countries with large growth forecasts.


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2


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Green vehicles


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2.1Vehicles within the green trend

The colour greenis gradually imposing itself on the world of automobiles. Even models of vehicles that traditionally

consume large amounts of fuel (4X4, sports cars...) have their hybrid and/or electric versions.

Forsometimenowtheautomotiveindustryhasbeenworkingtoreduceautomobilesemissionsandfuelconsumptionand, as has already been mentioned, the vehicle segment with the best performing sales is that of small vehicles withlow CO

2emissions and low fuel consumption. Although its true that the purchase of these vehicles has particularly

been subsidised by various European governments over the last two years, and that increasingly more vehicles havelow emission levels, their spectacular rise suggests that green vehicles are enjoying and will enjoy signicant growthin the market. As can be seen in the graph below, in only four years the market share of the most polluting vehicles

has fallen dramatically, while the situation for green vehicles has been completely the opposite.

CO2

emissionsof newvehicles in theEU-15Grams of CO

2/km. Percentages

100

80

60

40

20

0

1995 2006 2007 2008 2009

120

121-140

141-160

+ 161

Source: ACEA.

This green trend is aecting all kinds of motorisation and fuels: improvements in petrol and diesel engineconsumption, the combination of these fuels with biofuels, vehicles that run on natural gas and nally hybrids andpure electric vehicles. Electric vehicles are the culmination of this trend in reducing emissions, to the extent that acountrys energy mix has technologies with lower C0

2emissions than coal, such as natural gas or without emissions,

such as nuclear and hydraulic energy and renewable energy sources. All technologies have incorporated the greentrend that is dominating the market but naturally some provide a much more eective response than others. Internal

combustion engines have a technological limitation to reducing their contaminating emissions and will therefore


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37GREENVEHICLES

always generate them. Moreover, their development will be slower because its a much more mature technology. Ontheother hand, technologiesassociated with electromobility have much further to go. Theparadigm of greenvehiclescan only be achieved by electric vehicles that run on electricity from 100% renewable sources.

Types of electric vehicles

Non plug-in hybrid vehicles

This vehiclecombines a conventionalinternalcombustion enginewithan enginedriven byelectricalenergy from a lowpower battery.Thetraditional engine is generally petrol as its lighter and simpler, although diesel versions are being developed. On starting and at slowspeeds, the vehicle is driven by the electricity stored in its batteries and the conventional engine comes into play when it needs morepower. Oneof the bigadvantages of hybrids is that they can take advantageof 30% of theenergy they generate, especiallyin city driving,while a conventional petrol vehicle only used around 20%. Many hybrid systems can also accumulate and reuse energy, for example withregenerative brake systems.

There are two congurations within this hybrid category: the parallel system and the combined system.

Parallel systems are particularly simple: the heat engine is the main source of energy and the electric engine provides the systems withextra power when the vehicle is started and also when accelerating, to optimise consumption, as this is the time when the heat enginebecomes more inecient.This is the case of the Honda Insight.

The more complex combined system has an electric engine that works alone at low speeds, while at high speeds the heat and electricengines worktogether, controlled by a computer for the best drive combination.Both engines are coupled to a mechanical device that addstogether the power from both engines andtransfers it to thewheels. The heat engine drives the vehicleand also feeds the generator, whichprovidesenergy to the electric engine,making thesystem less ecient. This is the case of the ToyotaPrius.

Another widely used classication is according to the capacity of the electric mobility, Micro Hybrids being the models that only act instop/start functions, Mild Hybrids when the electric engine assists the fuel engine and Full Hybrids that can go for some distance on justelectric power.

Plug-in Hybrids

Plug-in hybrid electric vehicles (PHEV) share the characteristics of a traditional hybrid and an electric vehicle, as they have an internalcombustion engineand an electric engineaccompanied by a batterypack with enoughpowerto go considerable distancesexclusivelyinelectric mode, recharged by plugging the vehicle into the electricity supply.This is the most ecient option for intermediate models thatcombine urban and interurban mobility.

Electric vehicles

Pure electric vehicles or BEV (Battery Electric Vehicles) are those that only have an electric engine fed by a battery pack with enoughpower to serve all their driving needs. The fuel engine and petrol tank no longer exist in these models. They are currently highly suitablefor short distances.

The so-called Range Extender, for some comparable to serial hybrids, is driven exclusively by its electric engine, which is capable ofsupply all the power the vehicle needs. It also has a small petrol engine specically to generate electricity to recharge the batterieswhenever necessary. In fact, its an electric vehiclein all sensesof theterm with a load of fuel anda generatorto be more self-sucient andavoid so-called range anxiety. This is the case of the ChevyVolt and, very soon, the Opel Ampera.

This greentrend is notonly aecting vehicle emissionsbut also energyconsumptionassociated with their production,the materials used and to what extent vehicles can be recycled. Automakers are also making progress in this respect,independently of the kinds of powertrain used in the vehicle.

Potential reductionsin emissions by technology


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Petrol

Diesel

1st generationBiofuels

2nd generationBiofuels

Micro hybrid

Mild hybrid

1stgeneration BEV

PHEV

Rangeextender

BEV

FCV

2010 2015 2020 t

Reductioninemissions(CO2+contamin

ants)

Source: Produced by authors based on data from Renault.

2.2Themultifaceted challenge of green vehicles

The electrication of vehicles is providing a response to numerous challenges facing society and the economy.Two ofthe aspects of this multidimensional or multifaceted challenge are related to the reduction of negative externalitiesoered by electric vehicles replacing internal combustion vehicles, while another two are related to the benetentailed by introducing electric vehicles integrated within the electricity system from renewable energy sourcesand intelligent electricity supplies, known as smart grids, and a further two respond to challenges of a political andindustrial nature.

The multifaceted challenge of greenvehicles

Reducing emissions

Reducing noisePromotingrenewable

energysources

Energy security

Reinforcing industrySmart grids


Reducing noise emissions: electric vehicles are much more silent that combustion vehicles (although a considerablenumber of improvements hadalready been made in this area),as themotor hardlyemits any sound.This characteristicis particularly important in cities where noise caused by vehicles is one of their main drawbacks.

However, the noise in green vehicles has been reduced to such an extent that, in order to avoid accidents, automakersare now working onincorporatinga specic sound to warn pedestrians of the presence of this kind of vehicle


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39GREENVEHICLES

are now working on incorporating a specic sound to warn pedestrians of the presence of this kind of vehicle.

Mapof noise emission levelsin thecity of Barcelona

0-45 dB(A)

45-50 dB(A)

50-55 dB(A)

55-60 dB(A)

60-65 dB(A)

65-70 dB(A)

70-75 dB(A)

75-80 dB(A)

80-99 dB(A)

Note: Acoustic levels in dB.Source: Barcelona Council.

Reducing emissions of contaminants: like combustion vehicles, electric vehicles emit contaminants but thesehave a very dierent impact, as the quantity of emissions is much lower in the case of electric vehicles and thecontaminantsare emitted where the electricity is produced. If this comesfrom sources that emit C0

2, the production

centres are usually located outside urban centres. This aspect takes on particular importance for cities with verydense trac, wherea largepart oftheseemissions isconcentrated.As in thecaseof noise emissions,the introductionof electric vehicles would lead to signicant improvements in the public health of metropolises.

Energy security: in the case of Spain, the electricity that fuels electric vehicles is generated from a highly diversiedenergy mix. There are imported sources, as is the case in most of Europe for natural gas, uranium and partly coal, butthere is also a locally generated portion that comes from hydraulic and renewable energy sources. On the other hand,petrol and diesel come almost entirely from imports. The replacement of totally imported energy with energy partlyproduced locally improves a countrys energy security by reducing its need to look elsewhere for this raw material.This point becomes very important in a possible situation of tension in the demand for petrol, usually accompaniedby a sharp rise in oil prices.

Reinforcing industry: if, in the future, electric mobility becomes the norm, manufacturers will have to adapt to theparadigm supposed by electric vehicles in order to continue making vehicles The automotive industry is facing the


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paradigm supposed by electric vehicles in order to continue making vehicles. The automotive industry is facing thechallenge to start securing a foothold in this new niche but without underestimating the current option provided byinternal combustion vehicles. Not adopting this change could suppose the progressive reduction of the automotivesector, which is very important for Catalonia.

Smart grids: widespread generation is gaining ground, especially when motivated both by energy eciency(intelligent consumption) and renewable energy sources that spread the generation of electricity throughout thecountry. Electric vehicles will be another element of smarts grids, injecting or demanding electricity according to thespecic needs of the intelligent electricity network. But this is a long-term desire that electric vehicles and fastcharging will partly help to promote.

Promoting renewable energy sources: electric vehicles and renewable energy sources complement each other

perfectly. On the one hand, electric vehicles obtaina clean sourceof fuel that allows them to defend theirgreenlabelcompared with other automotive alternatives. On the other hand, electric vehicles provide predictability and makethe most of electricity production from renewable sources. For example, wind generators would not have to bestopped at times of low demand (principally at night) as they could supply eets of electric vehicles plugged into thegrid.

2.3Alignment of interests

In spite of the growing number of opportunities and positive externalities entailed by the incorporation of greenvehicles as a solution for future mobility, the number of challenges to overcome is also high, as is the number ofplayers that must align their interests for this multifaceted challenge to be a success.

Large cities have been the rst and most resolute in starting to promote the green option and, especially in recenttimes, the electric option. Cities such as Barcelona, London and Paris are competing directly in terms of appeal andpersonality. Electric mobility, with its typically low contamination (another issue is where the electricity used by thesevehicles is generated and how) in terms of air quality and noise mean that this solution cannot be ignored. Beyond

these direct externalities, cities see opportunities in the electric solution to implement improvements in urbanmobility, in all cases undertaking initiatives related to the more intelligent use of individual and collective transport.Cities are therefore starting to provide their service eets with electric solutions and are regulating their vehiclepurchases accordingly.

Governments are also acting along the same lines, motivated primarily by three factors: the need to becomeindependent, as far as possible, from the consumption of fossil fuels, the maximising of their renewable energysources and the reinforcing of their automotive and peripheral industries.

Utilities has the opportunity to extend their slice of the business pie by selling their own fuel, such as electricity.However, even in the best of cases this would only lead to an increase of no more than 4% by 2030 (according to themost favourable scenario published by the Joint Research Centre (JRC) of the European Commission). The greatinterest in electric vehicles may lie in the opportunities they represent for improving the grid network and making itmore ecient and more intelligent (smart grids), obtaining a return from this investment. We should note that themost interesting charging solution is the fast charge and this involves huge changes in the grid, unlike the slowcharge. However, we have yet to see clearly what the business will be like and how it will come about. By way of

example, at todays electricity rates it may take up to 70 years to amortise the new investment resulting from electricvehicles, according to the sector s own sources.


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41GREENVEHICLES

vehicles, according to the sector s own sources.

Automakers arending themselves involved ina race that wouldhave been slowerif electric vehicles hadnt appeared.In heat engines, where they still have some way to go, they are the undisputed leaders. In the electric world, on the

other hand, they have lost control over the main technology, shifting to batteries, electric engines and powerelectronics. Moreover, with regard to the vehicles environment, new mobility service agents will appear, bothintermediaries and full-service companies, that might displace automakers from the centre of the business.

Lastly, consumers demand a competitive price and are not willing to give up on product features. Autonomy, theavailability of charging points and the cost of acquisition are, from the consumers point of view, the big drawbacks tothe electric option compared with the internal combustion option. Developments in technology and governmentaction in implementing public charging points and normalising private charging points will be key in the immediate

future. Regarding the acquisition cost, new formulas will have to be found and customers educated so that they valuethe cost of the vehicle throughout its lifetime.

Alignmentof interests

Systemsand components

OEMsElectric

frms

Governments

Cities

FinanciersConsumers

+

Ex

pectationsforEVs


All this balance of interests might be disturbed by the economic diculties experienced in the private and publicsector. A possible cut in specic support policies could deter some of these powerful agents and the eects would bedevastating for the future prospects of the electric vehicle phenomenon.

Electric motorcycles


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Electric motorcycles are vehicles with two and even three wheels that use an electric engine. They increasingly form part of a new form oftransport that is accepted and for which new designs and models are appearing that are more attractive for consumers. Principally, indensely populated cities, electric two-wheeled vehicles (electric bicycles, mopeds and scooters) represent a good alternative to other

urban means of transport.The main Europeancities are promoting individual mobility projects basedon electric motorcycles, thereby extending the concept alreadyimplemented of bicing (rented bicycles) with the added improvements of autonomy and comfort. The fact that these bikes mayeventually be charged electrically at a stationconnected to thegrid will make these systems highlyfeasiblethat,with internal combustionand fuel recharging, were unfeasible.

Theworldof electric motorcycleshas a certain future, especiallyin countriesin South East Asia wheretheyare already a very commonplacesight in the streets. Below, by way of illustration, is a table showing the dierent models that already exist and the models that will bereleased in the near future:

Name Autonomy or kWhPrice (without

subsidies)Date available Removable battery

Mercedes Smart n.a. n.a. 2013 Yes

Brammo Enertia 80 km 9,500 Available No

Brammo Empulse 100-160 km 7,700-10,700 2011 No

Zero Motorcycles Zero S 4 kwh 7,000 n.a. n.a.

Piaggio MP3 Hybrid 65 km 8,500 Available No

Bereco Voltio 60-120 km 3,800 Available No

Bereco E-MO 35-45 km 2,146 Available Yes

VectrixVX1 105 km 7,405 Available No

Electric Motorsport Native Z1.5 65 km 2,000 Available in USA Yes

Oxygen Cargo Scooter 60 km 6,989 Available n.a.

ARNGREEN B4000 90 km 3,272 Available No

GoelixViva 90 km 3,210 Available No

Goelix Linx 80 km 3,145 Available No

Goelix e-Box 80-100 km 3,844 Available Yes

Goelix Elektron 100 km 5,435 (inc. subsidy) Available No

PGO iDep 40-60 km 3,310 Available No

Honda EV-neo 30 km n.a. End 2010 No

Yogo 35-70 km 2,740 2011 Yes

Hyosung GEM 4.0 120 km n.a. Available in Korea n.a.

Hyosung GEM 2.0 110 km n.a. Available in Korea No

Quantya Squter 70 km n.a. 2010 n.a.

Yamaha EC-03 42 km 2,180 2010 Yes

Peugeot E-Vivacity Rieju MIUS 100 km n.a. 2011 No

Rieju MIUS 4.0 60 km n.a. 2011 No

Rieju MIUS 2.0 30 km n.a. 2011 Yes

2.4 Future perspective for electric vehicles in Catalonia


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43GREENVEHICLES

Stages in the emergenceof electric vehicles

STAGE1Industrial positioning

2010 2020 2030 2040

STAGE 2Maximum industrial complexity

ICV > Hybrids > EV

Mixed eets-Bikes-Private


Transitory models

Hybrid mass industrialisation

Aux. industries pulled along

STAGE3Mass industrialisation

ICV = EV = Hybrids

Widespread private demand


EV models from scratch

EV mass industrialisation

Fierce competition aux. ind.

ICV

HEV

PHEV

EV

ICV >> Hybrids >> EV

Niche demand

Batteries 450/kWh

Reconverted models

Short production runs

Early pioneers


Electric vehicles on our streets wont become a reality straight away as their large-scale introduction is a process thatis just beginning. In the initial stage, which we are currently going through, the retail prices of electric vehicles will bemuch higher than those of internal combustion vehicles. Combustion vehicles will be in the majority (almost

omnipresent) even thoughwell start to see a signicant number of hybrids, an increasing presence of plug-in hybridsand a few battery electric vehicles. Demand will come mainly from certain niches, such as urban goods vehicles,mopeds and scooters (urban use), public passenger transport and those end consumers who are early adopters. Inshort, a vehicle with specic or limited autonomy and an already available charging point. Vehicles will be producedin short runs and in line with the already existing models of internal combustion vehicles. This means that theautomotive sectors usual economies of scale will not come into play, making the product more expensive. The priceof batteries will still be high, around 9,000 to 12,000 euros in the case of battery electric vehicles. In this initial stage,companies will start to position themselves: manufacturers will present their rst models, systems and componentsmanufacturerswill start to implementthe necessary changes in their products andthe newentrantsto theautomotivesector will establish initial collaborations with their new clients. The rst charging points will start to be installed,which will be slow charge. This will be a time of industrial positioning where turnover will be limited and heavyinvestment will be required in order to be competitive in the subsequent stages.

The second stage will be one of maximum industrial complexity. Hybrids will now have a signicant share of themarket, especially plug-ins. Internal combustion vehicles will start to lose market share signicantly and increasingly,while electric vehicles will become more common, especially for urban use. Batteries will have fallen considerably inprice and will have better features, andthere will be a mass industrialisation of hybrids that will boost the systems and

components industry specic for electried vehicles. This wide range of products will make it extremely complex tomanage manufacturers demand for systems and components. With regard to charging points, fast rechargetechnology will be available which will make it easier to use electric vehicles. Consequently, in this second stage,electric vehicles will no longer be a niche option and their turnover will become much higher, thereby justifying theinvestment and commitment of rms during the rst stage.

In the last stage, electric vehicles (and to a lesser degree plug-in hybrids) will take over most of the market share andwill be mass produced. Internal combustion vehicles will remain in certain niches, although there will still be a


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signicant number on the streets and roads due to the long amortisation period for automobiles. As is currently thecase with the internal combustion vehicle, the systems and components industry will encounter erce competition tosupply the necessary systems for electric vehicles. Batteries will have improved a lot in terms of price and features

compared with 2010 and a few models are likely to take over the market and become commodities. As technologyadvances, certain areas may choose induction charging. Electric vehicles will have a very dierent design andarchitecture to the current internal combustion vehicles. This last stage will be when electric vehicles will attain theirhighest turnover and when the features of these vehicles will meet all the needs of consumers.

This view of the future has not considered the solution based on hydrogen technology in the long-term. In fact,investment by research centres and manufacturers themselves in this area is being cut back due to the eect ofelectric vehicles. In any case, a lot of the technology and knowledge accumulated regarding electric vehicles will also

be useful for hydrogen vehicles.

2.5 Speed of penetration

Electric vehicles are a reality - a future reality, but a reality. They are not expected to ood the streets anytime soon asthe product still has limitations, especially regarding price and autonomy and access to charging infrastructures.However, the hybrid option will be quite strong in 2011 and 2012, with a considerable presence of electric mobility onour streets. The speed at which electric vehicles will penetrate the market, especially battery electric vehicles, willdepend on how various variables develop that will make EVs a competitive option compared with their rivals. Belowis a description of the expected trends in the variables analysed within the context of the European Union, which isthe main target market for Catalan manufacturers:

Oil prices: after peaking at close to 150 dollars in July 2008, the price of a barrel of oil slumped to 30 dollars,principally because of the nancial crisis and the subsequent global recession. Nevertheless, it has quickly goneback up to 70 euros, a barrier that it has not fallen below during the rst seven months of 2010. The end of cheappetrol(increasingly expensive to extract), the rise in the yuan andother currencies of South East Asia, the dramatic

growth of countries such as China, India and Brazil present a clearly upward scenario for oil prices. Petrol anddiesel prices, the latter totally correlated with the former, will continue this trend.These higher prices will increasethe cost of using internal combustion vehicles compared with electric vehicles.

Electricity prices: the price of electricity is expected to rise, especially due to the commitments acquired toimplement renewable energy sources.This is a reality throughout Europe, although they might rise more in Spainthan in the other countries due to the wide price dierential. However, the price rises in fossil fuels are expectedto be greater than those in electricity. This situation would make the electric vehicle option even more attractive

compared with the combustion, as the increase in the cost of using them (electricity) will be less than that forinternal combustion vehicles.

Pollution tax: environmentally-friendly policies arebeing drawn up throughout Europe with new taxes or hikes inexisting taxes. Higher taxes (e.g. those applied to fuels) make electric vehicles more competitive compared withinternal combustion vehicles. Within a context of high public decits, as is the case today in many Europeancountries, and with greater permissiveness for green taxation due to a greater awareness of problems such asclimate change, it will be easier to levy higher taxes (and therefore the price) for polluting activities.

Euro/dollar exchange rate: trends in the European currency compared with the American have crucialrepercussions regarding the speed of penetration of electric vehicles. As the dollar gains against the euro, fossilf l ill b i f h Thi i d di l h i f l d di l d i


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45GREENVEHICLES

fuels will be more expensive for the euro area. This is passed on directly to the price of petrol and diesel and itmakes the cost of using internal combustion vehicles more expensive. On the other hand, it also pushes up theprice of natural gas, used to generate electricity for electric vehicles, although the impact is less as the energy mix

includes several primary energy sources.

Indirectly, and regarding industrial reinforcement, a weaker euro against the dollar improves EU production costscompared with countries outside the euro area, stimulating domestic supply.

Subsidies: dierent governments in the euro area are very committed to electric vehicles. Germany, France, Italy,United Kingdom and Spain are some of the main European countries that have approved signicant aid for thepurchase of electric vehicles. Subsidies reduce the price dierential between internal combustion vehicles andelectric vehicles, making the latter a more attractive purchase. As electric vehicles see their prices fall, thesesubsidies will also decrease and eventually disappear.

Technological developments: the technological improvements expected in the case of electried vehicles aremuch greater due to this eld being so new. More specically, batteries, a key element in electric vehicles, areexpected to become much cheaper and to double their storage capacity over the coming years. Internalcombustion vehicles will also improve their energy eciency but less signicantly than electric vehicles. Thegreater prospects for technological development in the case of electric vehicles will therefore mean that theirfeatures and price will improve more perceptibly compared with the current standards.

Economic capacity: although, when taking into account the cost of the whole life of a vehicle, electric vehicles arestarting to become competitive in terms of price (especially with the aforementioned subsidies), the pricedierential may still make consumersopt forthe vehicle that involves less initial capital outlay. Currently nancingdiculties, falling purchasing power andhigh debt are notthebest circumstances forsuch an important purchaseas that of an automobile and even more so when, as in t

Green Vehicles in Catalonia Challenges 2010

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