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Strategic Management of Strategic Management of Innovation: the Case of Clean Innovation: the Case of Clean
AutomobileAutomobile
Professor J.J. CHANARONProfessor J.J. CHANARON17 September 200917 September 2009
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Conditions for Innovation• Innovations are successful when they are
simultaneously:1. Scientifically and technically possible, i.e. when
they have the technical performances expected by customers and users
2. Commercially vendible, i.e. when their price meets the demand as well as the after sale and maintenance costs
3. Industrially feasible, i.e. when their manufacturing costs and quality are satisfactory to all stakeholders
4. Politically, socially and culturally acceptable, i.e. when they get political support and full customer acceptance
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Required Success Factors
INNOVATIONINNOVATION
CUSTOMSCUSTOMS
Socially and CulturallySocially and CulturallyAcceptableAcceptable
IDEOLOGIESIDEOLOGIES
SOCIALSOCIALPRACTICESPRACTICES
MARKETINGMARKETING
SALESSALES
SERVICESSERVICES
EconomicallyEconomicallyVendableVendable
ENGINEERINGENGINEERING
MANUFACTURINGMANUFACTURING
METHODSMETHODS
Industrially FeasibleIndustrially Feasible
RESEARCH &RESEARCH &DEVELOPMENTDEVELOPMENT
ScientificallyScientifically& Technically & Technically
PossiblePossible
DESIGNDESIGN COSTSCOSTS
PRICEPRICE
BusinessBusinessModelModel
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Available Options
ICEV Internal Combustion Engine Vehicle Vehicle powered by a gasoline or diesel engine
AICEV Advanced Internal Combustion Engine Vehicle
Vehicle powered by ICE using bio-fuels, natural gas or hydrogen
HEV Hybrid Electric Vehicle Vehicle powered by both ICE and electric power trains
PHEV “Plug-in” Hybrid Electric Vehicle HEV with “plug-in” rechargeable batteries
ERHEV Extended-Range Hybrid Electric Vehicle
Vehicle powered by electric power train and batteries recharged by a small ICE
FPBEV Full Performance Battery Electric Vehicle
Full electric vehicle powered solely by batteries
FCEV Fuel Cell Electric Vehicle Full electric vehicle powered solely by fuel cell
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NGVFactor Degree of
achievementCurrent Status
Long Term Perspective
Political, social and cultural acceptability
CO² performances
Very good Excellent Excellent
Fossil fuel dependence
Total Total Reserve for 100 years but geographically distributed
Infrastructure Excellent Different according to countries
Relatively easy and cheap to develop
Technological Possibility
Overall Total Total Excellent
Safety Good
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NGV
Factor Degree of achievement
Current Status
Long Term Perspective
Commercial vendibility
Customer acceptance
Relatively good
Still some resistance over safety
Resistance will disappear
Pricing Correlated to oil pricing trend
Subsidized by governments
Industrial feasibility
Cost Good Small premium Will vanish with economies of scale
Engineering Good Good Will improve
Component supply
CNG kit available
Fully available
8/35
Bio-fuel VehicleFactor Degree of
achievementCurrent Status
Long Term Perspective
Political, social and cultural acceptability
CO² performances
Very good Excellent Excellent
Fossil fuel dependence
None None
Competition food/transportation
Bad Bad Progress in output/ha and efficiency
Infrastructure Good Good Relatively easy and cheap to develop
Ecology Require genetically modified seeds
Poor
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Bio-fuel VehicleFactor Degree of
achievementCurrent Status Long Term
Perspective
Technological Possibility
Overall Total Total Excellent
Safety Not an issue
Raw materials Limitations Limitations Opening to new sources: straw, exotic plants, garbage
Commercial vendibility
Customer acceptance
Relatively good Good
Pricing Good Subsidized by governments
Will improve with economies of scale
Industrial feasibility
Cost Relatively cheap Will decrease with economies of scale
Manufacturing New infrastructure to be built up
Under construction in Brazil, USA and Europe
Will expand rapidly in some countries
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HEV
Factor Degree of achievement
Current Status
Long Term Perspective
Political, social and cultural acceptability
Environmental friendship
Slightly better
Might be improved with new generations downsized gasoline engine & better batteries
Fossil fuel dependence
High Reserve for 40-50 years but could be extended with downsizing
Infrastructure Excellent Total availability
Not an issue
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HEV
Factor Degree of achievement
Current Status
Long Term Perspective
Technological possibility
Overall performances
Good Similar to current ICE
Should not change substantially
Range/autonomy
Limited <20km on electric drive
Lithium-Ion battery will improve
CO² Performances
Limited ≤10-15% improvement
Fuel consumption performance
Limited 5-10% in Europe15-30% in the US
Should improve slowly
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HEVFactor Degree of
achievementCurrent Status Long Term
Perspective
Commercial vendibility
Customer acceptance
Relatively weak
Customer preference for mono-energy power train
Might benefit from change in behavior
Pricing Relatively weak
Premium of US$2,500
Price will decrease with volumes
Industrial feasibility
Cost Higher >10-15% Will decrease with economies of scale and scope
Engineering More complex Under control of very few OEMs
Will improve rapidly
Manufacturing Easy Electronic module is the key component
Quality Equivalent Equivalent
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FPBEV
Factor Degree of achievement
Current Status
Long Term Perspective
Political, social and cultural acceptability
Environmental friendship
Excellent Excellent
Fossil fuel dependence
None Excellent
Infrastructure Weak Weak Recharging stations, national grids to be adapted
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FPBEVFactor Degree of
achievementCurrent Status Long Term Perspective
Technological possibility Overall performances Very poor, far from expected levels
Limited mileage autonomy
Must improve substantially
Range/autonomy Limited <100-150km Lithium-Ion battery will probably improve but alternatives should be investigated
Durability/Number of recharging cycles
Relatively good Still in question for real use conditions
Must improved
Recharging time Long Too long : Consumers want the ability to be able to do a quick recharge
Must improve radically
Recharging infrastructure
Not available To be extendedGrid to be up-graded
Must be improved and expanded
CO² Performances Limited when electricity is produced from fossil fuels (oil and coal)
Poor in North America and Japan, Better in nuclear energy oriented countries
Energy consumption performance
Good Good Should improve slowly
Technological options Prototypes Very few Basic research and applied development are required
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FPBEVFactor Degree of
achievementCurrent Status Long Term Perspective
Commercial vendibility
Customer acceptance
Relatively weak
Customer preference for petrol
Might benefit from change in behavior thanks to hybrid technology
Pricing Relatively weak
Very high premium
Price will decrease with volumes
Maintenance/Repair
Good Costly if change of battery stack required
Should be improved
Industrial feasibility Cost Much higher No reliable data so far7,000€ for 120 km range
Will indeed decrease with economies of scale and scope
Engineering Simpler than ICE
Under control of some OEMs and battery manufacturers
Will improve rapidly
Manufacturing Relatively easy Still limited for high volume and high performance batteries
Battery manufacturing is the key element
Quality Equivalent Equivalent
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Issues
• Impact on recharging grid is significantImpact on recharging grid is significant: most countries will not be able to cope with the production and distribution of electricity
• Theoretical performances of lithium-based batteries probably not sufficient
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FCEV
Factor Degree of achievement
Current Status
Long Term Perspective
Political, social and cultural acceptability
Environmental friendship
Excellent Excellent Very likely after 2020
Fossil fuel dependence
None Excellent Perfect
Safety Weak Weak due to H2 leaks and refueling risk
To be improved
Infrastructure Weak Weak Huge need with high cost of producing and distributing H2
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FCEVFactor Degree of
achievementCurrent Status Long Term Perspective
Technological possibility
Overall performances Still weak, far from expected levels
Limited mileage, high temperature, problem in cold weather, life cycle unknown
Must improve substantially
Range/autonomy Acceptable <500-600km for the latest generation
Range will probably increase
Durability/Number of refueling cycles
Relatively good Still in question for real use conditions
Must improved
Anode and membranes Poor Platinum anodes are very expensiveCurrent membrane are not resistant enough to high temperature
Basic research and applied development are required
CO² Performances Perfect if H2 is not produced by electrolyze from fossil fuel power generators
Good
Energy consumption performance
Good 30 to 50% electrical efficiency
Should improve slightly
Technological options On-board H2 refining, Liquid H2
Basic research
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FCEVFactor Degree of
achievementCurrent Status Long Term Perspective
Commercial vendibility
Customer acceptance Relatively weak Customer preference for petrol
Might benefit from change in behavior thanks to hybrid technology and other electric vehicles
Pricing Relatively weak Extremely high premium
Price will decrease with volumes
Maintenance/Repair Good Costly if change of cell and battery is required
Should be improved
Industrial feasibility
Cost Much higher No reliable data available so farPlatinum on anode is very expensive
Will indeed decrease with economies of scale and scope
Engineering Simpler than ICE Under control of some OEMs and fuel cell manufacturers
Will improve relatively rapidly
Manufacturing Relatively easy Still limited for high volume and high performance cells
Cells manufacturing is the key element
Quality Equivalent Equivalent
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Comparing Energy Storage
Unit Gasoline Diesel ElectricityNatural
gasLiquified
gasCompressed
H2 Liquid H2
State Liquid Liquid Chemical Gas Liquid Gas Liquid
Temperature Centigrade Actual Actual Actual-300° Actual Actual Actual -253°
Pressure Bars 1 1 1 >200 5-25 350-700 5
Energy Wh/kg 11900 11800 30-200 2200 7080 1200 500-1000
Energy Wh/l 8900 9900 70-300 2500 4300 450 1800
Refueling time Minutes 5 5 30-360 5 5 5 5
Battery Exchange Time Minutes 5
Tank-to-Wheel efficiency % 30-35 40-42 80-85 20-38 30-35 ~50 ~30-35
Weight for 60 litres Kg 45 50 90-150 70 36 90-100 100-200
Range Km ~900 ~1000 30-120 160 430 200-300 ~180
Sources: Syrota, 2008 and press cuttings.
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t
PropulsionSystem
IC Engine andTransmissionImprovements
Hybrid and Plug-inHybrid Electric
Vehicles
Battery ElectricVehicles
Hydrogen Fuel CellBattery Electric
ElectricDrive
MechanicalDrive
ImprovedVehicle
Fuel Economyand
Emissions
DisplacePetroleum
2010 20302020
A Scenario of Consensus
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Characteristics for Scenario
1. Clean and efficient ICE will be substituted to conventional ICE during the next ten years culminating with a 75% market penetration in 2020 followed by a slow decline up to 2050
2. Hybrid solutions (conventional, plug-in or extended range electric vehicle) will progressively see their market penetration growing up to 25% around 2025
3. Full performance battery electric vehicles will start being commercialized in 2010 and see a growing but limited market penetration to 20% by 2030 and 30% in 2050
4. Fuel cell electric vehicles will not be seriously introduced before 2025 and then see their market penetration growing at a relatively high rate to reach more than 50% in 2050
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A Tentative Scenario
0
10
20
30
40
50
60
70
80
90
100
2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046
ICE Clean ICE HEV FPBEV FCEV
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Impact of the Current Crisis1. There is no obvious evidence that the
current crisis of the automotive industry would delay or accelerate technical change and innovation in powertrains
2. The Obama administration is associating financial support to a radical change of the « Big Three » model strategy towards downsizing and innovative powertrains
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Impact of the Current Crisis3. Financial resources of OEMs will limit
their R&D and innovation capabilities for years while priority is on market recovery and profit-loss optimization
4. Radical innovation on vehicle will need five years for market introduction and ten years minimum before being “visible” and even much more time before a real impact will be significant
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Impact of the Current Crisis5. European OEMs still do not invest so
much on hybrids and plug-in hybrids
6. Transfer of R&D and innovation expenditures and responsibilities for components on key suppliers will intensify
7. Downsizing and further move towards low cost and ultra-low cost models is an obstacle to radical change and innovation
Tata Nano
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Quasi-Standards
1. Lithium-ion for FPBEV and compressed hydrogen for FCEV are the worldwide quasi-standards
2. But basic R&D is still deeply needed on these two technologies
3. Basic R&D is still conducted by public laboratories and private corporations on alternatives to these quasi-standards
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Conclusions
1. No potentially dominant design such was and is probably still ICE
2. Diffusion curve of radical technologies will be slow
3. Real impact on pollution and energy will take years since 1 billion vehicles in use in 2010 with ICE
4. Still unclear industrial organization
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Pending Questions
1. Universal or local options?
2. Unique solution or concomitant trajectories?
3. Traditional automotive system or new industry?
4. Innovative leadership to developed or emerging countries?
5. Which role for Chinese OEMs or Chinese new entrants?
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Pending Questions
6. Which pricing level and tax incentive?
7. Recharging of replacing batteries for FPBEV?
8. Which supply system of energy or “fuel” hydrogen, electricity?
9. Total well-to-wheel figures to be calculated, up-dated and assessed: electricity generation sources such as coal might be worse than oil for global warming! Nuclear energy has strong opponents!
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Pending Questions
10.Which change(s) in customer behavior?
11.Which change(s) in customer preferences?
And probably the most important question:
12.12. Should the entire business model be Should the entire business model be changed? Vehicle sold with rented changed? Vehicle sold with rented batteries, for instance? Rented vehicles?batteries, for instance? Rented vehicles?
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And what if China?
• In China, a national research plan is involving all the best public laboratories - Tongji, Tsinghua, Jiao Tong, Dalian, CAS, etc.) on batteries and fuel cells
• Domestic OEMs leading the move forward: is it marketing bluff or real threat?
• Weaknesses in designing powertrains and in vehicle integration
• Bottlenecks to be resolved: costs, reliability, safety, and distribution infrastructure
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And what if China?• As at the end of August 2009, 91 models by 34
corporations with more than 15 millions of kilometers achieved so far
• A tough competition amongst Chinese stakeholders
• But a national consensus about the opportunity to leap-frog with Japanese and Western competitors
• A small level of motorization and a limited number of vehicles in use
• A strong political bargaining power capable to impose a solution and an acceleration
• High levels of urban traffic congestion and pollution