Business case study: green transport innovation and investment in a changing economic environment
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This document discusses the automotive industry in the UK and efforts to develop low carbon vehicles. It provides an introduction to Ford in Britain and the UK automotive industry, noting its large economic contribution. It then discusses factors influencing demand for low carbon cars, including regulations, fuel prices, and consumer focus on cost of ownership. The industry has made progress in reducing CO2 emissions, but more can be done through technologies like clean diesel, direct injection gasoline engines, hybrid powertrains, and electric vehicles. Ford is developing a portfolio of low carbon vehicles and consumer awareness is driving market growth, though infrastructure challenges remain. The summary focuses on key efforts to develop low carbon vehicles and reducing emissions through technology.
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Business case study: green transport innovation and investment in a changing economic environment
- 1. Business case study: green transport innovation and investment in the current economic environment CBI Climate Change Summit November 17th , 2010 Joe Greenwell, Chairman, Ford of Britain
- 2. Contents • Ford and the UK auto industry • What influences the market for low carbon cars? • Industry progress to date • What vehicle manufacturers are doing today • How Ford are approaching the low carbon marketplace • UK industry initiatives that are making a real difference
- 3. Ford in Britain - an introduction
- 4. UK automotive industry • £52bn in manufacturing turnover / £10bn value added to UK economy • Supports 800,000 jobs in total • Over one million cars produced each year / two million engines • UK is home to seven volume car manufacturers and eight commercial vehicle manufacturers • UK has more specialist car manufacturers than any other country in Europe • Eight Formula One teams are UK based • The automotive sector accounts for around 10 per cent of annual total manufacturing turnover value • Accounts for well over £20bn or around ten per cent of total export value • The automotive sector is Europe’s largest investor in R&D at €20bn
- 5. What influences the market for low carbon cars? • CO2 regulation • current and future fuel prices • Government measures – incentives, fiscal stimulus (BiK, VED, etc.) • industry initiatives • economic crisis - consumer is more focused than ever on cost of ownership • advertising and marketing • local measures - congestion charging (London and elsewhere) • consumer concerns / NGO pressures = increasing consumer demand for low carbon vehicles
- 6. Global pressure to reduce CO2 emissions
- 8. The Industry has made significant progress to date Continuous improvement, to new low of 149.5g/km 2009 average 5.4% lower than previous year and 21.2% better than 1997 UK average new car CO2 emissions (Source SMMT)
- 9. CO2 emissions reductions across segments All segments have seen substantial improvements Change in new car CO2 emissions by segment, 2009 vs. 2008 and 1997 (Source SMMT)
- 10. What is the industry doing today?
- 11. Maintaining the momentum / driving further progress Clean diesel engines • Down-sizing and advanced turbo charging technology offers perhaps 10-20% more improvement Direct injection gasoline engines • DI downsized gasoline engines can achieve close to today’s diesel levels of economy at a substantial cost advantage Automated transmissions • Driver advantages including around 5% over manual transmissions Hybrid powertrain • Offer significant opportunities for CO2 reductions particularly in a city / urban environment Electric and plug in electric • First volume applications likely to be in cities. Costs and range remain a limitation
- 12. NAIGT Technology Road Map (source: NAIGT) Maintaining the momentum / driving further progress
- 13. Ford – a low carbon product portfolio
- 14. Consumer awareness driving the market for low carbon cars
- 15. Consumer awareness - the market for low carbon cars is here and accelerating
- 16. Summary • The CO2 challenge and how to create the market for low carbon vehicles? National infrastructure challenge? • Focus on environmental messaging – yes. But also cost of ownership advantages • Better clarity and transparency – clear, consistent messaging • Industry must be credible and Government consistent • Innovative ways to engage with the customer – websites, interactive tools • Above all - great products that deliver ‘all the customer needs’ - that are affordable
- 17. New exciting low carbon Ford products for CHANGING TIMES
Editor's Notes
- I’m grateful for the opportunity to present on green transport innovation from an automotive perspective and I hope I can share with you some of the industries experiences. I’d like to start off by giving my own thoughts on some of the challenges facing the automotive sector and specifically the key factors influencing demand for low carbon cars. I’ll then talk about industry’s progress to date and what vehicle manufacturers are doing today and will need to do in the future. I will share with you Ford’s approach to the rapidly evolving low carbon marketplace and the opportunities that undoubtedly exist. I’ll also touch on some of the UK industry initiatives that I believe are really starting to shift the needle and make a difference in terms of consumer awareness.
- But first, by way of an introduction, I thought I had better introduce Ford and provide a brief background on the Automotive Industry in the UK. The UK is a vital market for Ford. It’s our second biggest market outside of the US. We have held passenger car leadership here for 33 consecutive years and commercial vehicle leadership for 44 years. The Fiesta is currently the UK's No.1 best-selling car But we don’t just sell cars here. We directly employ over 15,000 people in the UK in research, engineering, manufacturing and administrative functions. 2011 is the centenary of Ford of Britain and of Ford manufacturing in the UK. Our engine plants in Dagenham and Bridgend have the capacity to produce over 2 million engines annually. One in three Ford engines globally is made in the UK. Our Technical Centre in Dunton, Essex is the biggest of its kind in UK, employing 3,500 engineers, with many working on low-CO2 technology. And we build the iconic Ford Transit in Southampton. Ford is the UK's 11th largest R&D investor across all sectors. The combined export value for Transits and engines exceeds $2bn.Our Purchasing spend with the UK supply base is $3.5bn. We recently announced a $1.5 billion investment over 5 years specifically to develop low carbon technology in the UK .So, as you can see, we have a very significant stake here in the UK.
- The UK automotive sector generates a manufacturing turnover of around £52 billion and supports around 800,000 jobs. 180,000 jobs rely on automotive manufacturing / 640,000 jobs on automotive supply, retail and servicing. The UK is home to seven volume car manufacturers and eight commercial vehicle manufacturers. We are home to a selection of premium and high performance sports car manufacturers and dominate the world of Formula One. The UK is home to more specialist car manufacturers than any other country in Europe. 19 out of the top 20 global components suppliers have a base in the UK. We dominate the world of Formula One The automotive sector accounts for approximately 10 per cent of annual total manufacturing turnover value, and has seen an export value of over £20 billion (10 per cent of total UK export value) and net capital investment of £1.9 billion. The automotive sector is Europe’s largest investor in R&D at €20 billion. Ref. aviation (in total) UK key figures for comparison (2008 figures): Supports 580,000 jobs directly and indirectly Generates £22bn value added contribution to GDP (vs. £10bn for automotive) £13bn UK export value (vs. £20bn in automotive)
- The development of the market for low carbon cars is one of the most pronounced trends we have seen in recent years. Here are some of the main drivers of the change. In the last decade concerns over man made CO2 emissions and climate change has moved significantly up the political agenda and public awareness of the issue has increased substantially. EU legislation on car CO2 emissions has also been introduced with direct implications for vehicle manufacturers. Environmental pressures are one factor. Government’s fiscal policies are also now increasingly focused on the CO2 emissions performance of the car. In the UK we now have both VED and company car tax based on CO2 emissions – with substantial incentives for low CO2 cars. The reality is however, for the majority of consumers, environmental concerns are not yet at the top of the priority list when it comes to buying a new car. Consumer attitudes have developed though and increasingly we see CO2 emissions as an important factor in buying decision. Most consumers are, however, interested in the overall cost of ownership – this is particularly the case in the current tough economic climate and with the continuing upward pressure on fuel prices. This, I believe, is the key to further developing the market for low carbon cars.
- European legislation is the toughest in the world. Requirements are significantly more stringent than in the US or China for example. Only Japan has similar standards. This slide tells you something else too – there are several regional and national targets to meet. The current EU legislative requirement is for a EU fleet average of 130g/km in 2015. The EU Commission proposal is for a 95g/km fleet average by 2020 - a remarkably ambitious goal. All vehicle manufacturers are faced with a substantial challenge going forward. The 95g/km target represents a huge task from both a technical and business perspective. It’s not an exaggeration to say that reducing vehicle CO2 emissions is the single most significant challenge for the auto industry going forward and it has and will continue to drive huge cost into the business. The need to reduce CO2 emissions will also mean that the industry has to embrace a wide range of innovative new technologies – more about that later in the presentation.
- So the CO2 challenge is clear. Today all major car companies make reference to their vehicles CO2 performance in promotional literature. Increasingly, car advertisements and websites feature information promoting the low carbon credentials of particular models. All major brands are developing their own low carbon identity. There are different approaches of course. BMW’s efficient dynamics message is used extensively in their advertising. VW have the blue motion brand. Toyota have capitalised on their leadership in hybrid vehicles and have used the Prius as their brand champion. Manufacturers need to continue to work to move CO2 up the prioritisation list as a ‘reasons to purchase’. This has undoubtedly started but there’s still some way to go. The low carbon technologies that will be necessary to deliver future CO2 emissions savings all have costs associated with them Manufacturers need therefore to ensure the customer places a real value in low carbon vehicles. The way that car companies market their vehicles will play a vital part in achieving this. It’s in everyone’s interests that the market for low carbon cars continues to develop
- The industry has made substantial improvements in CO2 emissions with emissions falling in each of the last 12 years The progress reflects the consumer demand for fuel efficient vehicles and the delivery of a wide range of technologies as well as regulatory pressure In the UK average CO2 emissions have fallen by over 21% since 1997 and progress is accelerating. In 2009 alone emissions were down by 5.4% Industry is delivering with 2009 UK average emissions 149.5g/km vs. 189.8g/km in 1997 (a 40g average reduction) It’s also worth making the point that over 27% of cars registered in the UK in 2009 were below 130g/km with scrappage last year an important factor …………next slide For reference: Ford performance (EU level). EU fleet average 139g/km = 27% fleet average reduction since 1995.
- And it’s interesting to note that substantial improvements have been made across all vehicle segments. Both volume and premium manufacturers have made real strides forward Last years fleet average emissions for the mini segment were 6.7% lower than in the previous year. Taking a longer term view. On average, MPVs sold in Britain produce 28.6% less CO2 emissions than in 1997. Executive cars have seen over a 25% reduction in their emissions in the same time. But more needs to be done and will be done. This downward trend is accelerating fast as I have said. We will see further significant improvements in the future. But this will only happen if we are able to take the consumer with us. Continuing to build the market for low carbon cars is a feature of the industry’s strategy going forward. The NAIGT Report identified a likely technology roadmap and the mix of advanced technologies that manufacturers will have to deploy in the next decade and beyond to meet the ambitious EU CO2 emissions targets. The technology is necessary to support the political objective but ultimately the market has to embrace the technology. This process is under way.
- (Images: Mini-E, Plug in Prius , VW Golf Bluemotion(x2), Focus Econetic, Honda Leaf EV, Honda Insight hybrid, Jaguar Limo Green, GM Ampera) I’ve said all major manufacturers are currently focused on reducing the CO2 emissions of their vehicles. This is being driven by a powerful mix of regulation, fiscal stimuli, industry innovation and consumers attitudinal change. I’ve talked about EU CO2 legislation. The challenges are clear. The UK Government has recently announced that it supports a 30% reduction in CO2 across all sectors. So it is clear that the pressure to reduce vehicle CO2 emissions will continue. Ultimately the target has to be zero tailpipe emissions – but that’s some way away. In addition to the legislative pressure CO2 has become a significant competitive issue and examples of low carbon products are now available in all segments. In other words this is now a competitive issue in our sector Ford’s ECOnetic Fiesta and Focus ECOnetic models both have CO2 emissions of just 99g/km. But Ford is not alone. Many manufacturers are now offering models that are sub 100g. Several are pictured here (ref slide). And low carbon doesn’t have to mean small and medium sized cars. Larger family and executive vehicles are also available with remarkably low CO2 emissions. I note the new Jaguar XJ diesel has emissions of just 184g/km which for a vehicle of its type is impressive. Most manufacturers are also looking at alternative powertrain technologies like hybrid and battery electric. Whilst cost challenges exist these technologies will be increasingly deployed in the next few years…………………….(next slide)
- One of the most important new developments in our sector has been the formation of the Automotive Council. The Automotive Council Technology work stream is clear that reducing fleet average CO2 emissions going forward will require a wide range of technology approaches Down-sized advanced turbo charging technology offers perhaps 10-20% more improvement for next generation clean diesel engines. Direct injection gasoline engines (also significantly downsized) will achieve close to today’s diesel levels of economy at a substantial cost advantage. Automated transmissions bring another 5% fuel and CO2 reductions over manual transmissions - and have real driveability benefits too. Hybrid powertrains offer significant opportunities for CO2 reductions particularly in a city / urban environment. We will see the first volume applications for electric and plug in electric cars in cities where range is less of a constraint to customer acceptance and where infrastructure is more readily available.
- Here is the NAIGT Technology Roadmap I referenced earlier. It charts the industry’s future direction and highlights how vehicle technology will develop with timescales and phases of introduction. The roadmap, a consensus industry view, describes the next generation combustion engines, micro hybrid, full hybrids and plug in hybrids and mass market electric vehicles, bio fuels and fuel cells. The newly formed Automotive Council demonstrates the cooperation that exists between industry and Government. It was eestablished to provide an advisory and consultative forum for government and the automotive industry in the UK. For the automotive industry in Britain this is a major development. The UK’s top industry executives are sitting down with Government to guide and develop the strategic direction of the UK Motor Industry It is the Council’s belief that the UK can become a global leader in low carbon transportation. Automotive Council objectives are: to promote the UK as a base for the development of low carbon vehicle technologies. to strengthen the UK supply chain. to make the UK a compelling investment proposition for the global automotive industry. Here then is another potential stimulus for creating a market for low carbon vehicles – the economic opportunity for UK Plc of engagement in the low carbon economy and market development.
- Ford supports a portfolio approach with a range of technologies developed at a global level. We believe the key to creating a true market for low carbon cars is to deliver affordable mass market technology that will in turn provide for the ‘democratisation of low carbon vehicles’. We believe that by offering high-volume, affordable solutions for millions of customers, we can make a real difference and a meaningful contribution to reducing the carbon footprint of Ford and its customers. There is much talk about alternative power trains such as electric and hybrid and rightly so – Ford is also developing these technologies, the internal combustion engine will continue to play an important role for years to come. Ford’s ECOnetic range of low carbon vehicles (Fiesta, Focus, Transit and Mondeo) offer best in class CO2 emissions performance – at affordable cost. Ecoboost is the next generation direct injection gasoline diesel engines which are just starting to be introduced into Ford products. Ecoboost has the potential to reduce CO2 emissions by around 20% and will progressively replace existing petrol engines.
- Let me talk briefly about how the industry is trying to engage with the consumer in a positive way on low carbon vehicles and some of the techniques we are using to create the market for low carbon vehicles. Ford’s website is just one example. Of course we provide clear CO2 information on all our vehicles and have worked hard to make this easily accessible for visitors to the website. Our Ford Website also includes an eco calculator that allows the customer to check how the fuel consumption and CO2 emissions of Ford’s ECOnetic models compare with that of their existing vehicle. The calculator allows the customer to compare the Ford with any make or model - not just other Ford models. It also calculates the amount that the customer could save based on their annual mileage and also the total number of kilograms of CO2 that they would save. We hope that by providing this information in a clear and ‘fun’ way we can help to emphasise the financial benefits of choosing the lowest CO2 emitting model. New media tools also offer new ways to engage with the consumer. Ford is working with Face book, U tube and twitter as a means of communicating with the customer.
- The SMMT colour coded new car fuel economy label is a good example of current environmental messaging. It has been around for some time now and research shows it has been very well received by the buying public. It is displayed on every new car in the showroom. The label provides customers with clear ‘at a glance’ information on the running costs, fuel consumption and environmental performance of all cars on display. Building on the success of the new car label the Low Carbon Vehicle Partnership, with support from the Department for Transport (DfT), the SMMT, the Retail Motor Industry Federation (RMIF) and VCA launched the used car fuel economy label in November last year. The Used Car Fuel Economy Label is available to car dealers throughout the UK. It is a voluntary scheme but the take up to date has been strong and the response from customers positive. We hope to see the used car label adopted universally.
- In conclusion, creating the market for low carbon vehicles is absolutely key. As I’ve said the beginnings of a market is already here. The question is how we develop that market in the coming years and at what pace new technologies are ushered in. What costs and functionality trade offs do they entail. How do we engage with the consumer most effectively using modern marketing tools. What about the infrastructure and investment challenges for the Government associated with electrification – the decarbonisation of electricity and recharging networks. As the technology develops we need to remain focused on the environmental messaging – absolutely. But we also need to make that message much more relevant to the customer by focusing on the cost equation - lower fuel consumption and overall cost of ownership benefits. Much has been done to improve the quality of the information we provide but more is required. We need better clarity and transparency and clear, consistent messaging. And above all, as an industry, we must be credible. Governments have an important role. Fiscal signals are vital whether that be through graduated vehicle excise duty (VED) or company car tax. But consistency is critical. Engaging with the customer through innovative communication techniques is a real opportunity that we must seize. High quality creative websites and other interactive electronic media offer new channels. Above all the market will be driven by great, innovative, products that deliver ‘all the customer needs’ at an affordable price
- I’m ending the presentation with some blatant advertising! Here is a glimpse into the immediate future – the new all new Focus, C-Max and new Mondeo. All available in the UK later this year or early in 2011. These are cars that do everything the customer wants and ………..are also LOW CARBON. They really are products for ‘changing times’. We are building the market for low carbon cars by making sure they are also fantastic products with affordable technology. We are shifting the market by making low carbon the norm. ‘Changing times’ require a new mindset. And for the automotive industry and maybe other sectors that boils down to investment in technology, competitiveness and the consumer. Note: new Mondeo (featuring the very latest British built ecoboost gasoline engine range - up to 19% better fuel economy than outgoing models) from October. All new C-max available in UK from Novenber. All new Focus available from March 2011. CO2 emission not yet announced . Headline CO2 emissions for new Mondeo TDCI 139g/km.