New vehicles powered by hybrid electric or “clean” diesel engines are expected to garner 11 percent of U.S. sales by 2012 — up from 4.8 percent in 2005 — according to a report by J.D. Power-LMC Automotive Forecasting Services.
Hybrid cars, which amounted to just 0.5 percent of the American market in 2004, are expected to increase to 3.5 percent market share by 2012, while diesels are expected to grow from a 3 percent market share in 2004 to 7.5 percent.
“Higher gas prices are acting as a catalyst for automakers and consumers to find alternatives to the traditional gasoline internal combustion engine,” says Anthony Pratt, senior manager of global powertrain forecasting at the company. “We anticipate this will lead to dramatic growth, particularly with diesels, over the next several years.”
However, new U.S. Environmental Protection Agency regulations, which go into effect in 2007-2008, require cars and light-duty trucks to meet Tier 2 emissions standards of 0.07 grams of NOx per mile.
“Most consumers are already familiar with diesel technology, whereas automakers are still trying to educate consumers about hybrid technology,” Pratt says. “Outside of meeting future emission standards, the biggest challenge for automakers concerning diesel technology will be convincing consumers that today’s diesel engines have increased performance and run cleaner and quieter than previous-generation diesels.”
The price premium associated with alternative powertrain vehicles continues to be a prohibiting factor that will limit the potential for both hybrids and diesels, he adds.
Pratt notes that manufacturers will have to reduce this premium to attract buyers who are not currently motivated to purchase these vehicles.
Despite the price premium, the study shows the number of hybrid electric models on the market is expected to increase from 10 in 2005 to 44 by 2012, while the number of diesel models is expected to grow from 14 to 26 in the same period.
“The bulk of the growth in hybrid models will be in SUVs and midsize cars,” Pratt says. “The bloom of diesel vehicles will be in the pickup truck segment, as well as the luxury car and SUV segments.”
A market on fire
Politics continue to come into play, with environmentalists contending that the latest government initiatives are weak at convincing the major automakers to get with genuinely effective fuel-saving programs.
This view is often expressed with the notation that oil companies are reaping record profits as consumers pay more and more for the fuel.
There’s a strong sense that domestic car manufacturers remain ever-mindful of how they are still struggling to recover from missing the boat during the nation’s previous experience with gas lines, when American drivers began opting en masse for smaller vehicles — a market that overseas producers were all-too-willing to fulfill.
“It will be interesting to see what happens with the emergence of clean diesel,” observes Marc Brammer, director of research for Innovest, an international investment research firm headquartered in New York City. In the U.S., “most people still think of dirty trucks and under-performing VWs” when diesel is discussed.
“You’re seeing all these diesels in play, especially in Europe,” says Brammer, anticipating that American OEMs will push the concept to keep pace with foreign fleets. “They’re always trying to go for the global platform just to achieve economies-of-scale.”
In Minnesota, “This is truck country,” says Tomm Johnson, CEO of Red Rooster Stores. “The SUV is still king,” and there is an increasing attraction for diesel-powered pickups and related aftermarket products. Ditto for diesels in Michigan, a place where overseas nameplates have yet to become a defining force.
“The diesel truck market is just on fire,” according to Bill Haynes, general manager for the performance division of Auto Wares, Inc., based in Grand Rapids, Mich. What had been the domain of rural residents has spilled over into the urban areas, with the category’s growth anticipated at 30 percent to 40 percent over the next five years.
Renewable resources
Colette Brooks, founder of a high-powered marketing company that’s fielding a fleet of classic cars running on vegetable oil, likes to tell the history behind Rudolf Diesel: When he first displayed his new invention at the 1900 World’s Fair in Paris, the engine was designed to run on peanut oil so that farmers could be self-sustaining by growing and processing their own machinery fuel.
Petroleum eventually took over, but vegetable oil in the form of biodiesel and other varying formulations is catching the attention of french fryin’ legions interested in harvesting this renewable alternative in the U.S.
“As a matter of fact, my fuel does grow on trees,” says Brooks, founder and chief information officer of BIG Imagination Group in Culver City, Calif.
Her fleets are “diesel vehicles that run on B1, which is soy. It’s completely renewable with domestically grown feedstock. We have a dozen biodiesels — my Prius is my gas guzzler,” she quips, referring to her newer hybrid car.
BIG’s fleet is maintained by E&E Automotive Service, Inc. of Santa Monica, Calif. The conversion systems had been installed elsewhere, but owner Edward Evans reports that his ongoing knowledge of diesel repair has him well positioned to properly serve this account. “I keep on top of what’s going on with them” by taking advantage of technical education opportunities.
Wally’s Super Service in Mahopac, N.Y., is a certified repair center for Greasecar, which manufactures and markets vegetable oil engine conversion kits. They are promoted as do-it-yourself applications, but many customers opt to have them professionally installed. Wally Little, owner of the four-bay shop, attracts conversion business from a wide geographic area encompassing several states. He says it provides a significant boost to his general repair and classic-vehicle restoration facility.
Vehicles are already rolling off assembly lines equipped to run on biodiesel or ethanol-laced gasoline; the more organic grades require the aftermarket conversion kits, and manufacturers report that it’s been difficult to keep up with demand.
“I think it’s a mainstream product at this point,” says Peter Kleeman, a spokesman for Greasecar, based in Florence, Mass. “We’re seeing a lot more sales with pickup truck owners. When I started, it was mostly VWs; there’s been more of a growth in the pickup market — you can switch between straight diesel and vegetable oil, and there’s a lot of fry oil out there in small towns and cities.”
Ethanol “is in use, not surprisingly, in the corn states, but ethanol is difficult to transport,” says James Kliesch, a research associate at ACEEE, the American Council for an Energy-Efficient Economy. “You have to use railcars or tanker trucks” because existing pipelines are not suitable.
Shops such as Analog Motors in East Cleveland, Ohio, are garnering additional business by offering both alt-fuel conversions and dispensing facilities. Owner Phil Lane says his partnership with Midwest BioFuels’ filling stations is poised to deliver “the three E’s: Economic Development, Energy Independence and Environmental Responsibility.” Various fuel blends are available; for example, “B5” contains 5 percent soybean oil blended with 95 percent petroleum.
More than 450 retail biodiesel pumps dispensing various blends are in place throughout the nation. Some 500-plus commercial and governmental fleets are already up and running on this alternative.
The propane proposition
Propane is another player in the fuels arena, as is natural gas. The “chicken or the egg” issue remains a quandary, however: Drivers don’t want to buy a vehicle that they can’t conveniently gas-up, and fuel providers don’t want to build sparkling service stations that aren’t regularly patronized.
“It’s going to be a good business to pursue, but it might be a little early,” according to Mike Millikin, publisher at the Green Car Congress media firm. “What will be needed is even higher gasoline prices” to steer alternative fuels into the mainstream, says Millikin.
“From a business standpoint, do fleets first” if you wish to seek alternative-fueled aftermarket accounts, he suggests.
“The key thing before jumping into this is checking into your market,” Millikin stresses. “I’d do some open houses or an informational workshop” to detect the level of interest. “You don’t want to have the inventory or expertise without making sure you have a market and the business is there.”
On a national scale, Innovest’s Brammer says the alternative fuels aftermarket will be a better investment once these vehicles capture a 5 percent sales rate rather than the current market share of less than 2 percent.
The larger OEM suppliers have negotiated limits with carmakers on the availability of aftermarket parts related to warranties, but this will loosen up as more vehicles hit the streets.
“It’s going to make a lot of sense to have an aftermarket as soon as they can” once consumers reach their limit on high gas prices, contends Brammer. “A major event could drive it — it could happen overnight if there is a major flood or drought” that results in a critical gasoline shortage or a catastrophic wake-up call regarding the reality of global warming. Hurricane Katrina could very well be that event.
“The wild card is what happens with the government and government policy,” according to Brammer. He says our elected leaders have the power to drastically change the country’s outlook on fuel based on what incentives are offered.
A change in political power, such as Democrats becoming the predominant party, could open the floodgates — and the aftermarket will want to move quickly, observes Brammer, citing hybrid technology as an example. “You’ll have electronic parts becoming a part of the parts market, and that shift will be significant.”
Gaining traction
“There needs to be more uniformity and more volume,” says Bill Pichardo, who specializes in muscle cars, “exotic imports” and hybrids at his 14-bay shop, Slipstream Auto, in Boulder, Colo.
In left-leaning Boulder, hybrids are a popular choice of transportation among the populace. “They are largely still taking them to the dealer, but we are gaining traction and we’re pursuing it,” says Pichardo. “Hybrids are here to stay, and the market is rapidly expanding.”
The shop has been in business more than 25 years, and a number of clients prefer Slipstream over taking the car to the dealer.
Female motorists, in particular, are relying on Slipstream as they ponder purchasing used hybrids. “We have a lot of customers bringing us cars for pre-sale inspections.”
The company placed well in a hybrid-only road rally, and a newspaper account of the victory has resulted in new clients coming through the door seeking special expertise.
“We provide consultation and support for the customers,” Pichardo explains, whether they are shopping for a hybrid or have questions about their warranty.
Tom Gebbie, manager of Gebbie’s Auto Care in Lansdale, Pa., says, “We recycle just about everything that comes in this place.”
The operation has participated in a hybrid-only road rally event and obtained “Green Star” certification based on its environmental policies. “I don’t have a plaque out front, but people understand through word-of-mouth what we’re about.”
Tom’s father, Harry, owns the enterprise, and “he thinks it makes sense, too. He knows that our supply won’t last forever.”
