Reference no: EM132797925

It may not be quite Route 66, running across the USA from Chicago, Illinois to Los Angeles, California and made famous in song by Nat King Cole, Chuck Berry and the Rolling Stones among others, but London's route 76 is one of the world's busiest bus routes. Every six minutes a red double-decker bus makes the 40-minute trip from Waterloo Station just south of the river Thames to Tottenham in north London. Though they look like any other London bus, in fact the buses on route 76 are different. They are quieter, less polluting, more fuel efficient and smoother than other buses in London. How come? Well the 26 buses that service route 76 are special. They are all Volvo hybrid-electric buses. Volvo based in Sweden is Europe's second largest commercial vehicle (truck and bus) manufacturer (Sushandoyo and Magnusson, 2014). Back in the early 2000s Volvo signalled its ambition to take a lead in the development of hybrid-electric powered heavy commercial vehicles, by starting research into hybrid-electric technologies. Given that the commercial vehicle market is long established and one that has been firmly committed to the incumbent technology of the diesel engine for a very long time, this was a bold decision, not least because of scepticism from some of its own engineers. However, Volvo was a big company producing more than 250,000 trucks and buses a year, making it one of the world's largest producers of heavy vehicles. Although Toyota had successfully introduced a hybrid electric vehicle into the car market through its innovative Prius model, breaking into the market for heavy commercial vehicles was a tough call. On the production side, Volvo faced a high level of spending on R&D, the acquisition of much new knowledge that had to be integrated with existing knowledge, a long payback period and the risk of making a premature choice of technology (Sushandoyo and Magnusson, 2014). In the market, diesel technology was well established, and operating in a commercial environment vehicles had to be completely reliable and familiar to the staff who used them. Not unsurprisingly operators were generally reluctant to risk new and untried technologies, given the need to maintain a reliable and efficient service.

Against this background Volvo pressed ahead in developing a new kind of powertrain for heavy commercial vehicles. Whereas conventional automotive powertrains rely upon an internal combustion engine as the sole source of power, a hybrid-electric powertrain utilises an internal combustion engine, one or more electric motors and some form of battery. Hybrid technology allows kinetic energy from braking to be converted into electric power that is then stored until required by the electric motor. Vehicles using this kind of technology offer a number of benefits including improved fuel efficiency, lower emissions and a smoother ride. Hybrid technologies can follow one of two possible models, either series configuration where the vehicle is driven by battery topped up by a conventional diesel engine and kinetic energy from braking, or parallel configuration where the vehicle is driven by the battery, a diesel or a combination of the two. Volvo was one of several automotive firms to explore hybrid technology in the early 2000s. These included prototype hybrid trucks and buses based on a series configuration developed as part of Sweden's Strategic Vehicle Research and Innovation programme. However, trials in Gothenborg were disappointing. Although the prototypes exhibited low emissions they were not as fuel efficient as the company had hoped. Particularly significant was the vehicles' poor reliability. Volvo's engineers found that hybrid-electric systems using a series configuration were very sensitive to failure. If any of the electrical components failed for any reason the vehicle came to a complete standstill. This poor performance resulted in a lack of interest on the part of potential operators.
In the light of these setbacks Volvo managers initiated an advanced engineering programme in 2002 designed to investigate the relative merits of the two competing (i.e. series and parallel) hybrid configurations (Zolfagharifard, 2010). This found that the parallel hybrid configuration was the more versatile (see Table 8.1), although it was the more technologically complex because of the need to integrate diesel and electric technologies. In the light of this, Volvo opted to develop parallel hybrid technology and in 2006 CEO Leif Johannson announced that the company planned to launch a hybrid truck on the market by the end of the decade.

Having developed appropriate technology, Volvo was confronted with a choice when it came to the latter stages of the innovation process. Of the 250,000 heavy vehicles it produced each year, the vast majority (some 238,391 in 2011) were trucks, while barely 12,000 were buses. However, rather than try to break into the mainstream truck market, Volvo chose instead to utilise the new technology in bus applications, in particular the citybus market segment. Although this represented a relatively small specialist segment of the heavy commercial vehicle market, it was felt that this was where the environmental benefits of hybrid-electric technology were likely to be particularly apparent.

The biggest city bus fleet in Europe is in London, comprising some 8,500 buses that cover 700 bus routes and 19,500 bus stops. As the biggest potential customer London was an obvious choice when it came to trying out Volvo's new hybrid citybus. In addition, London's Mayor was keen to improve air quality in the city, which earlier reports had identified as problematic.

Consequently when Transport for London (TfL) announced plans to evaluate a number of alternative-fuel vehicles for bus operation in the city, Volvo agreed to participate in a large-scale field trial along with BAE Systems, Enova, Siemens and Allison. Volvo provided six prototype citybuses. These were the only vehicles to utilise a parallel configuration for their hybrid-electric technology. As part of the trials, Volvo provided specially trained technicians to maintain the vehicles and there were also regular visits from a technical team from Volvo's main R&D facility in Sweden. Some buses were even recalled to Sweden from time to time for detailed technical evaluation. In addition Volvo managers met with operating staff every three months to review progress. Analysis of how the new buses had performed showed that they had achieved a 50 per cent reduction in emissions and fuel savings amounting to 34 per cent. What was particularly impressive to operators like Arriva was their excellent level of reliability (one of the main problems to occur in the earlier trials in Gothenborg), with the new buses achieving 98 per cent availability, better than any competitor (Volvo, 2011). In addition, passenger surveys were positive, with passengers reporting the new vehicles were quieter and smoother.

Based on the positive results of these field trials, Volvo initiated series production of the new hybrid bus in 2010. Arriva, one of five major citybus operators in London ordered more than 50 examples of the new hybrid-electric buses from Volvo. And a total of 26 of them now operate route 76. In fact route 76 has proved something of a trailblazer, since having proven its hybrid-electric parallel technology in London, orders for Volvo's new hybrid have flooded in from all over the world. Volvo received orders for more than 200 in the first year alone. Spain, Finland, Mexico, Germany and Brazil are just some of the countries placing orders. In 2012 Volvo announced that they were ceasing production of low-floor inner-city buses (the largest city bus segment in Europe) with conventional powertrains and only offering hybrid-electric ones from January 2014.

Why are operators of heavy commercial vehicles likely to be wary of switching to new technology?

Which was the main market and which was the niche market?