Alternative fuels and powertrains: Automotive strategy in a world of diverse mobility

Published: October 2, 2018

Executive summary

Over the next 12 years, the automobile and truck industries will diversify their powertrains considerably. Besides internal combustion engine (ICE) vehicles, popular automobiles will more than likely include plug-in hybrid electric vehicles (PHEVs), fully battery-powered electric vehicles (BEVs), and fuel cell electric vehicles (FCEVs) running on hydrogen. It’s still not clear precisely which vehicles customers will prefer; nevertheless, auto makers need to make strategic decisions today regarding their fuels and powertrains.

This report provides a detailed analysis that compares the total cost of ownership (TCO) for each type of fuel and powertrain — today and projected through 2030. The estimates are based on factors such as required infrastructure, cost of fuel, taxes, regulations, mileage requirements, efficiency improvements, depreciation, maintenance, and insurance. Knowing the total cost of ownership can help auto makers generate a strategic road map during this period of disruption.

Although TCO will rise for the ICE, it will remain the most cost-effective vehicle for many drivers. However, technological advances in batteries, and other factors, will make BEVs increasingly competitive. FCEVs will also drop in cost. To be strategically ready for change, auto makers and suppliers should consider four broad actions today: prepare to ramp up production for the vehicles they choose to produce; optimize product costs across powertrains; focus on innovation (including more collaborative innovation); and recruit and train engineers familiar with the new powertrain alternatives.

Fuel and Powertrain Study 2018

Conclusion

The auto industry is at a critical juncture, equivalent in its impact to a 100-year storm. Auto maker and supplier executives cannot afford to ignore the change staring them in the face. Our analysis of when alternative powertrains will be cost-effective provides an essential set of data points around which to build a design and production strategy. The auto industry must plan for a future when its portfolio will be nothing like the present. But without a clear awareness of the future of fuel and its costs, auto makers risk being left in the past.

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Alternative fuels and powertrains: Automotive strategy in a world of diverse mobility