Reference no: EM132651505

The Evolution of Electric and Hybrid Cars

The Evolution of Electric and Hybrid Cars The car industry is an excellent example of a large complex sociotechnical system that has evolved over many years, such that the current system of firms, products, consumers, and infrastructure interact to restrict the degree and direction of innovation. Since the 1930s, the dominant design has been based around a gasoline (petrol)- or diesel-fueled reciprocating combustion engine/Otto cycle, mass-produced in a wide variety of relatively minimally differentiated designs. This is no industrial conspiracy, but rather the almost inevitable industrial trajectory, given the historical and economic context. This has resulted in car companies spending more on marketing than on research and development. However, growing social and political concerns over vehicle emissions and their regulation have forced the industry to reconsider this dominant design and, in some cases, to develop new capabilities to help to develop new products and systems. For example, zero- and low-emission targets and legislation have encouraged experimentation with alternatives to the combustion engine, while retaining the core concept of personal, rather than collective or mass travel. For example, the zero-emission law passed in California in 1990 required manufacturers selling more than 35,000 vehicles a year in the state to have 2% of all vehicle sales zero-emission by 1998, 5% by 2001, and 10% by 2003. This most affected GM, Ford, Chrysler, Toyota, Honda, and Nissan, and potentially BMW and VW, if their sales increased sufficiently over that period. However, the US automobile industry subsequently appealed and had the quota reduced to a maximum of 4%. As fuel cells were still very much a longer-term solution, the main focus was on developing electric vehicles. At first sight, this would appear to represent a rather "autonomous" innovation, that is, the simple substitution of one technology (combustion engine) for another (electric). However, the shift has implications for related systems such as power storage, drive train, controls, weight of materials used, and the infrastructure for refueling/recharging and servicing. Therefore, it is much more of a "systemic" innovation than it first seems. Moreover, it challenges the core capabilities and technologies of many of the existing car manufacturers. The US manufacturers struggled to adapt, and early vehicles from GM and Ford were not successful. However, the Japanese were rather more successful in developing the new capabilities and technologies, and new products from Toyota and Honda have been particularly successful. However, zero-emission legislation was not adopted elsewhere, and more modest-emission reduction targets were set. Since then, hybrid petrol-electric cars have been developed to help to reduce emissions. These are clearly not long-term solutions to the problem, but do represent valuable technical and social prototypes for future systems such as fuel cells. In 1993, Eiji Toyoda, Toyota's chairman, and his team embarked on the project code named G21. G stands for global and 21, the twenty-first century. The purpose of the project was to develop a small hybrid car that could be sold at a competitive price in order to respond to the growing needs and eco awareness of many consumers worldwide. A year later, a concept vehicle called the "Prius" was developed, taken from the Latin for "before." The goal was to reduce fuel consumption by 50% and emissions by more than that. To find the right hybrid system for the G21, Toyota considered 80 alternatives before narrowing the list to four. Development of the Prius required the integration of different technical capabilities, including, for example, a joint venture with Matsushita Battery. The prototype was revealed at the Tokyo Motor Show in October 1995. It is estimated that the project cost Toyota US$1 billion in R&D. The first commercial version was launched in Japan in December 1997 and, after further improvements such as battery performance and power source management, introduced to the US market in August 2000. For urban driving, the economy is 60 MPG and 50 for motorways - the opposite consumption profile of a conventional vehicle, but roughly twice as fuel-efficient as an equivalent Corolla. From the materials used in production, through driving, maintenance, and finally its disposal, the Prius reduced CO2 emissions by more than a third and has a recyclability potential of approximately 90%. The Prius was launched in the United States at a price of $19,995, and sales in 2001 were 15,556 in the United States, and 20,119 in 2002. However, industry experts estimate that Toyota was losing some $16,000 for every Prius it sold because it costs between $35,000 and $40,000 to produce. Toyota did make a profit on its second-generation Prius launched in 2003, and other hybrid cars such as the Lexus range in 2005, because of improved technologies and lower production costs. The Hollywood celebrities soon discovered the Prius: Leonardo DiCaprio bought one of the first in 2001, followed by Cameron Diaz, Harrison Ford, and Calista Flockhart. British politicians took rather longer to jump on the hybrid bandwagon, with the leader of the opposition, David Cameron, driving a hybrid Lexus in 2006. In 2005, 107,897 cars were sold in the United States, about 60% of global Prius sales, and four times more than the sales in 2000, and twice as many in 2004. By 2013, Toyota had sold over 1.5 million units in the United States alone. In addition to the direct income and indirect prestige the Prius and other hybrid cars have created for Toyota, the company has also licensed some of its 650 patents on hybrid technology to Nissan and Ford, which introduced their own hybrid vehicles. Mercedes-Benz, Honda, Hyundai, and others have also lunched their own models. Sources: Pilkington, A. and R. Dyerson, Incumbency and the disruptive regulator: The case of the electric vehicles in California. International Journal of Innovation Management, 2004. 8(4), 339-54); Why the future is hybrid, The Economist, December 4, 2004; Too soon to write off the dinosaurs, Financial Times, November 18, 2005; Toyota: The birth of the Prius, Fortune, February 21, 2006. The top-right quadrant is probably the most fundamental contribution of innovation to sustainability. It is here that new sociotechnical systems coevolve. Developers and users of innovation interact more closely, and many more actors are involved in the process of innovation. In this case, firms are not the only, or even the most important, actor, and the successful development and adoption of such systems innovation demand a range of "externalities," such as supporting infrastructure, complementary products and services, finance, and new training and skills. For example, the microgeneration of energy requires much more than technological innovation and product development. It requires changes in energy pricing and regulation, an infrastructure to allow the sale of energy back to the grid, and new skills and services in the installation and service of generators. Such innovations typically evolve by a combination of top-down policy change and coordination and bottom-up social change and firm behavior. Summary In this chapter, we have looked at some of the wider issues in capturing value to support goals such as economic development, sustainability, and social innovation. While the core business model literature cited in the previous chapter is a good place to start exploring, value creation in these contexts also has some specific resources that are useful.

Kindly assist with answering the following questions based on the above information.

Questions

1. Is there an innovative result here, and, if so, what is it, is there more than one?

2. What were the 'core technologies and capabilities' (noted at the top of page 2 of the case) challenged by the development of electric cars?

3. Where is the result of the innovation process occurring?