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Disrupting the business of producing automobiles: alternative power train technologies.

Disrupting the business of producing automobiles: alternative power train technologies. Clovis Zapata Research Associate BRASS Centre Cardiff University. Presentation Structure. 1.Innovation; 2. Regulatory innovation;

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Disrupting the business of producing automobiles: alternative power train technologies.

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  1. Disrupting the business of producing automobiles: alternative power train technologies. Clovis Zapata Research Associate BRASS Centre Cardiff University

  2. Presentation Structure 1.Innovation; 2. Regulatory innovation; 3. Alternative fuels and powertrain technologies: Incremental and radical innovation; 4. Case studies; 5. Conclusion.

  3. 1. Innovation • Christensen’s effect How incumbents fail due to the introduction of innovation. (Disruptive innovations) – The innovator’s dilemma. • Radical innovation as a discontinuous change that sweeps away much of the firm’s existing investment in technical skills and knowledge, designs, production techniques, plant and equipment. Utterback (1996). • Radical innovations present both macro level innovativeness characteristics ( new to the world, the market and the industry), and micro level characteristics, (novel to the firm and consumer). Garcia and Calantone 2002.

  4. 1. Innovation • Innovations can be radical in nature but not disruptive. The radical nature of the innovation is related to the technological dimension while the disruptiveness has to be related to the market effect to the incumbents. • Disruptiveness can be technological less-radical or technological more radical but is necessarily related to the phenomenon of the consumer changing tastes and switching from the mainstream product to the new one. The definition is fundamentally influenced by the organizational-level abilities and competences Rogers (2003)

  5. 1.Innovation • It is difficult to clearly provide an ex-ante definition of disruptiveness, following all the characteristics defined by Christensen. The definition is fundamentally influenced by the organizational-level abilities and competences. Danneels (2004) • In this sense, we have opted to conduct the analysis on the observable ex-ante characteristics of the nature of the innovation focusing on the radical innovation concept.

  6. 2. Regulatory innovation • “The operation, on an industrial basis, of a new system or process which, in whole or in part, represents a significant step forward for a particular industry in terms of product quality, cost savings, or the safety of the workforce”. (Bhaskar 1988: 2). • state aid regulation in the European Community  

  7. 2. Regulatory innovation • The economics of the automotive industry - If an alternative automotive energy source requires either the creation of very high new capital-intensive systems, or the premature abandonment of existing high capital-intensive systems, it is likely to meet considerable resistance from the industry. • If an alternative energy source can be used within the existing capital investments, its chances of being accepted by the industry are so much higher.

  8. An alternative fuel is an energy source that can be used with no or minimal modification in existing engines. - Incremental Innovation • Alternative powertrain replace the existing internal combustion engine with a different system, thus rendering existing sunk investments in internal combustion engine technology obsolete and requiring new investments into a different manufacturing system for a different type of powertrain. - Radical Innovation

  9. “They are prisoners of enormous sunk costs which they treat as unamortized assets, substituting accounting for economic principles…This mindset is a critical obstacle…new ways cannot diffuse without displacing old ones that resists with distinctive vigour” (Lovins et al. 1993: 17). • Safeguarding existing investments until fully amortised is a key concern of the car industry. This explains the industry’s comparative willingness to embrace hybrid technology, but also its reluctance to do the same with fuel cell technology.

  10. 4. Case Studies 4.1 -The Brazilian experience with ethanol; 4.2 - The Toyota Hybrid Technology; 4.3 - Hydrogen Fuel Cells;

  11. 4.1 -Biofuels – The adoption of Ethanol in Brazil • 1925 – the first experiments • 1975 the proalcool program. (1975-1979) E20/E25 (1980- 1986) E100 (1986-1998) decline • 2003 Flexifuel technology

  12. 4.1 - Biofuels – The adoption of Ethanol in Brazil

  13. 4.1 - Biofuels – The adoption of Ethanol in Brazil • Little engine development was required. • Just some fundamental mechanical issues (compression charges, carburettor calculation, pre-heating system that had to operate with higher temperatures, metal part corrosion and cold start). • The same rational can be used for biodiesel.

  14. 4.2 - Hybrids – The Toyota experience with the Prius • A group to forecast the future perspectives in the automotive industry for the 21st century was established in 1993, as a response for The Partnership for the Next Generation of Vehicles (PNGV). • an extremely economical mid-sized family car based on new production methods. (47.5 miles per gallon.) • The group decided to attach an electrical engine. • For the 1995 Tokyo Motor Show, Toyota prepared a concept car with the system, presenting it as the Toyota’s vision of the future (Taylor 2006).

  15. 4.2 - Hybrids – The Toyota experience with the Prius

  16. 4.3 - Hydrogen Fuel Cells • The problems with hydrogen technology appear to be in three areas: vehicle integration, manufacturability and infrastructure (cf. Nieuwenhuis and Wells, 2003, 72ff, Vergragt 2006, forthcoming and Van den Hoed & Vergragt 2006, forthcoming). 

  17. 4.3 - Hydrogen Fuel Cells • Practical hydrogen fuel cell vehicles within the next five years or so and certainly by the much forecast 2012-2015 period.  • In terms of manufacturability, Ballard is now in the early phases of setting up a manufacturing process for automotive fuel cells. • Ballard will be able to produce some half a million automotive fuel cell stacks each year. If we assume that the Japanese – led by Toyota – add a similar annual number, we have an annual production capacity of automotive fuel cells of around one million by 2015 (Nieuwenhuis 2005a).

  18. 4.3 - Hydrogen Fuel Cells • ‘optimistic scenario’ whereby 10,000 fuel cell cars would be produced between 2005 and 2008 and by 2010 this figure would be up to 300,000. One million a year would be reached before 2020 by which stage the technology would be cost competitive with conventional cars. Beyond 2020 10 new factories would be built each year. 

  19. 5 . Conclusion • The economics of the automotive industry must be fully addressed in order to provide ex-ante definitions of innovation in the automotive industry. • The distinction between incremental and radical innovation is fundamental to understand the innovation impact to automakers.

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