What’s+next+for+the+car+industry

Apr 21, 2008
 * What’s next for the car industry? **

Every automobile on the roads of the world reflects a long and complex chain of industrial production and energy usage. Yet we live in a world where many of the highest quality resources and energy supplies have already been exploited and lower quality resources are more expensive to extract and exploit, if they are even available. So the world’s automobile industry is in the midst of a revolution in both resource availability and energy consumption.

Today the automobile business is vast. It is a global industry that has evolved by leaps and bounds in the 100 years since Henry Ford made his famous remark in 1908 about building “a car for the great multitude.” The worldwide customer base includes at least a billion people — spread over six continents — who have income sufficient to buy a car or small truck.
 * What it takes to build a car**

According to figures assembled at the MIT Sloan Automotive Laboratory, there are about 700 million automobiles and light trucks in the world. About 30 percent of those vehicles are in North America.

Every car requires steel, aluminum, copper and lead. Each car requires rubber, plastic, and myriad of other petroleum and natural gas by-products. And there is much else in the long industrial ladder of automobile production. Just think in terms of the energy that goes into processing materials, fabricating parts, building components, assembling a finished product, and all the transportation along the way.

In addition to the basic energy and material resources that go into manufacturing an automobile, the sheer number of vehicles reflects a lot of fuel tanks to fill with gasoline and diesel. And this does not even touch on the energy and resources that go into building road systems.

The oil shocks of the 1970s — in both price and availability — spurred improvements in auto energy efficiency within the US as well as worldwide. In the US, the increase in fuel efficiency was related to rising costs for gasoline, as well as government mandates for higher fuel efficiency dating from the late 1970s.
 * The last 25 years**

On average over the past 25 years, the typical power train of gasoline-fueled automobiles in the US has improved in efficiency by about one percent per year according to data gathered by MIT. One percent improvements may not appear to be much, but the compound improvement in the typical US automotive engine over 25 years has been about 30 percent.

There has been even more progress in the fuel efficiency of diesel engines over the past 25 years. Diesel power trains are no longer the sooty, “knock-knock” devices that they were back in the days of disco. Most cars sold today in the European Union (EU), for example, are powered with clean-burning, fuel efficient, smoothly running diesel engines. In fact, the demand for diesel fuel in Europe is such that EU refineries routinely ship surplus gasoline to sell into the North American market. And in North America the relatively low prices for gasoline throughout the 1980s and 1990s discouraged the use of diesel engines.

So there have been significant improvements in automobile power train efficiencies over the past couple of decades. But have these improvements translated into any overall reduction in demand for fuel? No.

In 2007 motor fuel consumption in the US was as high as it has ever been. (Although according to the American Petroleum Institute, demand for motor fuel may be at a plateau due to price increases at the pump in 2006 and 2007.) In the past 25 years we’ve seen more people driving more cars for more miles. But compounding the fuel issue, the cars that people are buying and driving tend to weigh more and offer higher performance.

As I’ve said over and over again, we live in a world of peaking oil output, and of energy and resource scarcity.
 * Is a car-dependent culture sustainable?**

It helps to view the age of the automobile - and its future - as a systemic whole. And some social critics are out in front of the broad discussion, with a sharp focus on the automobile and what it has brought us as a society. James Kunstler, for example, author of highly regarded books such as The Geography of Nowhere and The Long Emergency, believes that the car-dependent suburban build-out of the US may be “the greatest misallocation of resources in all of human history.” That is, in an era of expensive energy and scarce resources, a car-dependent culture has no real future and is in fact a hindrance to progress in other directions. That is quite a viewpoint, well-presented by Kunstler in his writing. It’s depressing, but it sure gets your attention.

Criticism of the automobile culture is not confined just to social commentators like Kunstler. Another remarkable indictment comes from no less an automotive insider than Prof. John Heywood, the director of the MIT Sloan Automotive Laboratory. He has stated that “cars may prove to be the worst commodity of all.” According to Prof. Heywood, cars are “responsible for a steady degradation of the ecosystem, from greenhouse emissions to biodiversity loss. What’s worse, even if we improve vehicle efficiency, turn to fuel hybrids or make rapid advances in hydrogen-based fuel technologies, the scale for slowing down the degradation may run to the decades. Turning the curve won’t be easy.”

You can agree or disagree with the broad themes of Jim Kunstler or John Heywood. But there’s no argument with one of Prof. Heywood’s points. Wherever we are going, it will not be easy to “turn the curve.” Looking forward, some people believe the oil just is not there to fuel cars in the future in the way that we did it in the past. So a lot of people are going to have to do things differently. . ..
 * People are going to have to do things differently**

In addition, auto designers are coming up with new ways to eliminate weight and drag. (At higher speeds, up to 70 percent of the energy used to turn the wheels on a car goes just to push the air out of the way of the chassis.) The auto industry is looking towards different sorts of fuels, and moving towards what is called fuel-flexibility.

Hopefully this will lead us to a great new investment in the car of the future.

Adapted from Byron W. King for Whiskey and Gunpowder as reprinted in MoneyWeek. 2 April 2009 .