Strategic Management of Innovation: the Case of Clean Automobile Professor J.J. CHANARON 17...

Strategic Management of Strategic Management of Innovation: the Case of Clean Innovation: the Case of Clean

AutomobileAutomobile

Professor J.J. CHANARONProfessor J.J. CHANARON17 September 200917 September 2009

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ASSESSING THE VARIOUS TECHNOLOGICAL OPTIONS

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Conditions for Innovation• Innovations are successful when they are

simultaneously:1. Scientifically and technically possible, i.e. when

they have the technical performances expected by customers and users

2. Commercially vendible, i.e. when their price meets the demand as well as the after sale and maintenance costs

3. Industrially feasible, i.e. when their manufacturing costs and quality are satisfactory to all stakeholders

4. Politically, socially and culturally acceptable, i.e. when they get political support and full customer acceptance

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Required Success Factors

INNOVATIONINNOVATION

CUSTOMSCUSTOMS

Socially and CulturallySocially and CulturallyAcceptableAcceptable

IDEOLOGIESIDEOLOGIES

SOCIALSOCIALPRACTICESPRACTICES

MARKETINGMARKETING

SALESSALES

SERVICESSERVICES

EconomicallyEconomicallyVendableVendable

ENGINEERINGENGINEERING

MANUFACTURINGMANUFACTURING

METHODSMETHODS

Industrially FeasibleIndustrially Feasible

RESEARCH &RESEARCH &DEVELOPMENTDEVELOPMENT

ScientificallyScientifically& Technically & Technically

PossiblePossible

DESIGNDESIGN COSTSCOSTS

PRICEPRICE

BusinessBusinessModelModel

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Available Options

ICEV Internal Combustion Engine Vehicle Vehicle powered by a gasoline or diesel engine

AICEV Advanced Internal Combustion Engine Vehicle

Vehicle powered by ICE using bio-fuels, natural gas or hydrogen

HEV Hybrid Electric Vehicle Vehicle powered by both ICE and electric power trains

PHEV “Plug-in” Hybrid Electric Vehicle HEV with “plug-in” rechargeable batteries

ERHEV Extended-Range Hybrid Electric Vehicle

Vehicle powered by electric power train and batteries recharged by a small ICE

FPBEV Full Performance Battery Electric Vehicle

Full electric vehicle powered solely by batteries

FCEV Fuel Cell Electric Vehicle Full electric vehicle powered solely by fuel cell

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NGVFactor Degree of

achievementCurrent Status

Long Term Perspective

Political, social and cultural acceptability

CO² performances

Very good Excellent Excellent

Fossil fuel dependence

Total Total Reserve for 100 years but geographically distributed

Infrastructure Excellent Different according to countries

Relatively easy and cheap to develop

Technological Possibility

Overall Total Total Excellent

Safety Good

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NGV

Factor Degree of achievement

Current Status


Commercial vendibility

Customer acceptance

Relatively good

Still some resistance over safety

Resistance will disappear

Pricing Correlated to oil pricing trend

Subsidized by governments

Industrial feasibility

Cost Good Small premium Will vanish with economies of scale

Engineering Good Good Will improve

Component supply

CNG kit available

Fully available

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Bio-fuel VehicleFactor Degree of

achievementCurrent Status



CO² performances

Very good Excellent Excellent


None None

Competition food/transportation

Bad Bad Progress in output/ha and efficiency

Infrastructure Good Good Relatively easy and cheap to develop

Ecology Require genetically modified seeds

Poor

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Bio-fuel VehicleFactor Degree of

achievementCurrent Status Long Term

Perspective

Technological Possibility

Overall Total Total Excellent

Safety Not an issue

Raw materials Limitations Limitations Opening to new sources: straw, exotic plants, garbage


Customer acceptance

Relatively good Good

Pricing Good Subsidized by governments

Will improve with economies of scale


Cost Relatively cheap Will decrease with economies of scale

Manufacturing New infrastructure to be built up

Under construction in Brazil, USA and Europe

Will expand rapidly in some countries

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HEV


Current Status



Environmental friendship

Slightly better

Might be improved with new generations downsized gasoline engine & better batteries


High Reserve for 40-50 years but could be extended with downsizing

Infrastructure Excellent Total availability

Not an issue

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HEV


Current Status


Technological possibility

Overall performances

Good Similar to current ICE

Should not change substantially

Range/autonomy

Limited <20km on electric drive

Lithium-Ion battery will improve

CO² Performances

Limited ≤10-15% improvement

Fuel consumption performance

Limited 5-10% in Europe15-30% in the US

Should improve slowly

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HEVFactor Degree of

achievementCurrent Status Long Term

Perspective


Customer acceptance

Relatively weak

Customer preference for mono-energy power train

Might benefit from change in behavior

Pricing Relatively weak

Premium of US$2,500

Price will decrease with volumes


Cost Higher >10-15% Will decrease with economies of scale and scope

Engineering More complex Under control of very few OEMs

Will improve rapidly

Manufacturing Easy Electronic module is the key component

Quality Equivalent Equivalent

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FPBEV


Current Status




Excellent Excellent


None Excellent

Infrastructure Weak Weak Recharging stations, national grids to be adapted

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FPBEVFactor Degree of

achievementCurrent Status Long Term Perspective

Technological possibility Overall performances Very poor, far from expected levels

Limited mileage autonomy

Must improve substantially

Range/autonomy Limited <100-150km Lithium-Ion battery will probably improve but alternatives should be investigated

Durability/Number of recharging cycles

Relatively good Still in question for real use conditions

Must improved

Recharging time Long Too long : Consumers want the ability to be able to do a quick recharge

Must improve radically

Recharging infrastructure

Not available To be extendedGrid to be up-graded

Must be improved and expanded

CO² Performances Limited when electricity is produced from fossil fuels (oil and coal)

Poor in North America and Japan, Better in nuclear energy oriented countries

Energy consumption performance

Good Good Should improve slowly

Technological options Prototypes Very few Basic research and applied development are required

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FPBEVFactor Degree of



Customer acceptance

Relatively weak

Customer preference for petrol

Might benefit from change in behavior thanks to hybrid technology

Pricing Relatively weak

Very high premium


Maintenance/Repair

Good Costly if change of battery stack required

Should be improved

Industrial feasibility Cost Much higher No reliable data so far7,000€ for 120 km range

Will indeed decrease with economies of scale and scope

Engineering Simpler than ICE

Under control of some OEMs and battery manufacturers

Will improve rapidly

Manufacturing Relatively easy Still limited for high volume and high performance batteries

Battery manufacturing is the key element


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Issues

• Impact on recharging grid is significantImpact on recharging grid is significant: most countries will not be able to cope with the production and distribution of electricity

• Theoretical performances of lithium-based batteries probably not sufficient

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FCEV


Current Status




Excellent Excellent Very likely after 2020


None Excellent Perfect

Safety Weak Weak due to H2 leaks and refueling risk

To be improved

Infrastructure Weak Weak Huge need with high cost of producing and distributing H2

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FCEVFactor Degree of


Technological possibility

Overall performances Still weak, far from expected levels

Limited mileage, high temperature, problem in cold weather, life cycle unknown

Must improve substantially

Range/autonomy Acceptable <500-600km for the latest generation

Range will probably increase

Durability/Number of refueling cycles

Relatively good Still in question for real use conditions

Must improved

Anode and membranes Poor Platinum anodes are very expensiveCurrent membrane are not resistant enough to high temperature

Basic research and applied development are required

CO² Performances Perfect if H2 is not produced by electrolyze from fossil fuel power generators

Good

Energy consumption performance

Good 30 to 50% electrical efficiency

Should improve slightly

Technological options On-board H2 refining, Liquid H2

Basic research

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FCEVFactor Degree of



Customer acceptance Relatively weak Customer preference for petrol

Might benefit from change in behavior thanks to hybrid technology and other electric vehicles

Pricing Relatively weak Extremely high premium


Maintenance/Repair Good Costly if change of cell and battery is required

Should be improved


Cost Much higher No reliable data available so farPlatinum on anode is very expensive

Will indeed decrease with economies of scale and scope

Engineering Simpler than ICE Under control of some OEMs and fuel cell manufacturers

Will improve relatively rapidly

Manufacturing Relatively easy Still limited for high volume and high performance cells

Cells manufacturing is the key element


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Comparing Energy Storage

Unit Gasoline Diesel ElectricityNatural

gasLiquified

gasCompressed

H2 Liquid H2

State Liquid Liquid Chemical Gas Liquid Gas Liquid

Temperature Centigrade Actual Actual Actual-300° Actual Actual Actual -253°

Pressure Bars 1 1 1 >200 5-25 350-700 5

Energy Wh/kg 11900 11800 30-200 2200 7080 1200 500-1000

Energy Wh/l 8900 9900 70-300 2500 4300 450 1800

Refueling time Minutes 5 5 30-360 5 5 5 5

Battery Exchange Time Minutes 5

Tank-to-Wheel efficiency % 30-35 40-42 80-85 20-38 30-35 ~50 ~30-35

Weight for 60 litres Kg 45 50 90-150 70 36 90-100 100-200

Range Km ~900 ~1000 30-120 160 430 200-300 ~180

Sources: Syrota, 2008 and press cuttings.

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BUILDING UP A TENTATIVE VIABLE & ACCEPTABLE

SCENARIO

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t

PropulsionSystem

IC Engine andTransmissionImprovements

Hybrid and Plug-inHybrid Electric

Vehicles

Battery ElectricVehicles

Hydrogen Fuel CellBattery Electric

ElectricDrive

MechanicalDrive

ImprovedVehicle

Fuel Economyand

Emissions

DisplacePetroleum

2010 20302020

A Scenario of Consensus

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Characteristics for Scenario

1. Clean and efficient ICE will be substituted to conventional ICE during the next ten years culminating with a 75% market penetration in 2020 followed by a slow decline up to 2050

2. Hybrid solutions (conventional, plug-in or extended range electric vehicle) will progressively see their market penetration growing up to 25% around 2025

3. Full performance battery electric vehicles will start being commercialized in 2010 and see a growing but limited market penetration to 20% by 2030 and 30% in 2050

4. Fuel cell electric vehicles will not be seriously introduced before 2025 and then see their market penetration growing at a relatively high rate to reach more than 50% in 2050

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A Tentative Scenario

0

10

20

30

40

50

60

70

80

90

100

2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046

ICE Clean ICE HEV FPBEV FCEV

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Impact of the Current Crisis1. There is no obvious evidence that the

current crisis of the automotive industry would delay or accelerate technical change and innovation in powertrains

2. The Obama administration is associating financial support to a radical change of the « Big Three » model strategy towards downsizing and innovative powertrains

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Impact of the Current Crisis3. Financial resources of OEMs will limit

their R&D and innovation capabilities for years while priority is on market recovery and profit-loss optimization

4. Radical innovation on vehicle will need five years for market introduction and ten years minimum before being “visible” and even much more time before a real impact will be significant

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Impact of the Current Crisis5. European OEMs still do not invest so

much on hybrids and plug-in hybrids

6. Transfer of R&D and innovation expenditures and responsibilities for components on key suppliers will intensify

7. Downsizing and further move towards low cost and ultra-low cost models is an obstacle to radical change and innovation

Tata Nano

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Quasi-Standards

1. Lithium-ion for FPBEV and compressed hydrogen for FCEV are the worldwide quasi-standards

2. But basic R&D is still deeply needed on these two technologies

3. Basic R&D is still conducted by public laboratories and private corporations on alternatives to these quasi-standards

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Conclusions

1. No potentially dominant design such was and is probably still ICE

2. Diffusion curve of radical technologies will be slow

3. Real impact on pollution and energy will take years since 1 billion vehicles in use in 2010 with ICE

4. Still unclear industrial organization

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Pending Questions

1. Universal or local options?

2. Unique solution or concomitant trajectories?

3. Traditional automotive system or new industry?

4. Innovative leadership to developed or emerging countries?

5. Which role for Chinese OEMs or Chinese new entrants?

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Pending Questions

6. Which pricing level and tax incentive?

7. Recharging of replacing batteries for FPBEV?

8. Which supply system of energy or “fuel” hydrogen, electricity?

9. Total well-to-wheel figures to be calculated, up-dated and assessed: electricity generation sources such as coal might be worse than oil for global warming! Nuclear energy has strong opponents!

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Pending Questions

10.Which change(s) in customer behavior?

11.Which change(s) in customer preferences?

And probably the most important question:

12.12. Should the entire business model be Should the entire business model be changed? Vehicle sold with rented changed? Vehicle sold with rented batteries, for instance? Rented vehicles?batteries, for instance? Rented vehicles?

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And what if China?

• In China, a national research plan is involving all the best public laboratories - Tongji, Tsinghua, Jiao Tong, Dalian, CAS, etc.) on batteries and fuel cells

• Domestic OEMs leading the move forward: is it marketing bluff or real threat?

• Weaknesses in designing powertrains and in vehicle integration

• Bottlenecks to be resolved: costs, reliability, safety, and distribution infrastructure

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And what if China?• As at the end of August 2009, 91 models by 34

corporations with more than 15 millions of kilometers achieved so far

• A tough competition amongst Chinese stakeholders

• But a national consensus about the opportunity to leap-frog with Japanese and Western competitors

• A small level of motorization and a limited number of vehicles in use

• A strong political bargaining power capable to impose a solution and an acceleration

• High levels of urban traffic congestion and pollution

Thanks for your attentionThanks for your attention

Strategic Management of Innovation: the Case of Clean Automobile Professor J.J. CHANARON 17...

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