Green technology: Makers hedge bets on alternative vehicles

  • 03/03/2008

  • Financial Times

As improved hybrid, clean-diesel, electric and other green powertrain technologies proliferate, manufacturers are investing in the next-generation cars we will drive in five, 10 or 15 years' time. Regulators, from Europe and the US to China, are prodding them along by tightening rules on greenhouse-gas emissions and fuel economy. Few big carmakers are putting all their eggs in one basket, and understandably so: petrol price trends, changing consumer preferences, and future breakthroughs in areas such as lithium-ion batteries or hydrogen fuel-cell technology will all help determine which green-car formats truly take off. Big manufacturers, from Toyota and General Motors to Renault/Nissan and Daimler, are hedging their bets by investing in a range of alternative-fuel vehicles, from diesel hybrids to plug-in electric vehicles. Industry experts point to a few clear near-term trends in cleaner cars. Americans are due to begin embracing diesel this year as a proliferation of models from German, domestic and other carmakers hits the US market. Europeans, who have reaped fuel-economy savings from diesel cars for years, are set to buy more hybrids. Alongside hybrids, electric cars and biofuel or biodiesel "flex-fuel' vehicles are set for dynamic growth around the world, albeit from a small base. And amid strides in technologies such as downsized engines and improved fuel injection, some leading manufacturers such as BMW are investing heavily in cleaner conventional petrol and diesel-engined cars. Until recently green cars had a whiff of science project or window-dressing. Over the past two years, tighter regulations and changing political sentiment on greenhouse gas emissions and energy security have turned the field into serious business. The regulatory push for greener vehicles is intensifying in the US, where Congress recently mandated a 40 per cent improvement in fuel economy by 2020. California is leading a push by several states to set their own greenhouse-gas regulations. Across the Atlantic, the European Union's draft proposal to cut cars' CO2 levels by about 25 per cent by 2012 is accompanied by new rules promoting lower-emission cars through rebates, higher taxes, congestion charging and other schemes. On the demand side, however, carmakers face a tough time producing green cars that consumers want. Despite changing political sentiment on the environment, industry players say most car buyers are indifferent. "Very few people will want to pay a premium to cut CO2,' says Andre Lacroix, chief executive of Inchcape, the car-retailing group. A recent survey by the vehicle management company LeasePlan found low emissions falling among buyers' priorities, cited by 26 per cent of drivers, behind reliability, safety, performance, styling, and space. In 2006, 29 per cent listed it as a top concern. Edmunds.com, the US car-shopping website, came up with another telling