Category Archives: automotive industry

Electric Cars Are Here But We Might Not Be Ready For Them

By Peter Lindfield, published in the Telegraph-Journal 7th September 2012

Are we ready for electric cars? After a number of false starts, they’re now available for sale in North America – the Nissan Leaf, the Mitsubishi i MiEV and the Ford Focus Electric are members of a growing roster of electric-only vehicles produced by major auto manufacturers. They join hybrid vehicles such as the Toyota Prius, which hedge their bets by having both gasoline and electric propulsion.

Pure electric vehicles and hybrids are popular, at least in principle, because compared with conventional internal combustion engine automobiles, electric vehicles have the key benefit of significantly reducing local air pollution.

But are electric cars ready to replace their gasoline- or diesel-powered counterparts? And are we ready to transition to vehicles that will require a substantial and expensive support structure to sustain? The answer to both questions is a resounding no.

Electric cars are not ready for prime time. Despite their potential benefits, the pervasive use of electric cars faces several hurdles and limitations. The future of electric vehicles ultimately will depend on the cost and availability of batteries with much higher specific energy, power density and longevity than is the case today.

The cost of their lithium-ion battery packs adds $4,000 or more to each vehicle, requiring many miles of operation before that cost can be recouped in conventional fuel savings. If history is any indication, many owners will have traded in their car before achieving break-even.

Driving on battery power won’t take you far either. Most electric cars can travel less than 300 kilometres before needing to be recharged, which can require six hours or longer. The expression “range anxiety” figures prominently in their drivers’ lexicon. The operating range of conventional internal combustion engine vehicles now routinely exceeds 1,000 km; you will need to stop for other reasons before the fuel runs out. The technology infrastructure is still only minimally equipped to support millions of charging stations. The network of residential, commercial and government facilities to recharge electric vehicles won’t be an inexpensive proposition.

And since electric vehicles need to be recharged, the reduction of greenhouse gas emissions at the point of operation doesn’t necessarily mean a free ride. Electric power needs to be generated at power plants that may burn coal or oil. In many regions, the limited availability of sufficient electric power may present problems.

Across Canada, many power generating plants already operate at peak capacity at least part of the time, and adding additional capacity to manage the draw of electric vehicles will require the rethinking of power grids and power usage patterns. Admittedly, many electric car owners will recharge their vehicles at night when load requirements are lower, but we don’t yet have a clear understanding of the implications of the added cost and how it will be borne.

Currently, big-money support for the transition to electric vehicles is a two-nation race. The U.S. and China have independently established policies and economic incentives to overcome existing barriers to fund more cost-effective battery technology and the further development of electric vehicles. The U.S. government has committed $2.4 billion in federal grants to fund the development of electric cars and batteries.

Electric vehicles would also lessen American dependence on foreign oil and directly address the ongoing American concern about vulnerability to oil price volatility and supply disruption. China recently announced it will provide funding of $15 billion to initiate the development of a competitive electric car industry.

The era of the conventional internal combustion engine isn’t quite over.

Innovations such as electronic engine management and advanced materials and assembly methods will mean that internal combustion engines will achieve increasingly better fuel economy even as more stringent emissions standards are applied. The application of innovation and technology may extend the lifespan of these engines for another 20 years.

Even so, the gasoline or diesel powered vehicles’ days are numbered, and the development of an efficient, cost-effective battery will change the world. Most communities across Canada are wholly unprepared for the eventual changes that electric vehicles will bring.

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Filed under automotive industry, Environment, Uncategorized

Is Government Regulation an Obstacle to Competitiveness?

Published in the Telegraph-Journal 27th March 2012

Is government regulation an obstacle to competitiveness? The federal government thinks it is. And it has answered this question in a number of ways. Early in 2011, Prime Minister Stephen Harper launched the Red Tape Reduction Commission and tasked it with working with all federal government departments to reduce unnecessary paperwork that reduce opportunities for growth. He made it clear that the scope and scale of the undertaking would be extensive, noting that “today’s government is expected to bring a healthy skepticism about government to Ottawa, and to ask hard questions about what government can do and cannot do.” The intended beneficiaries of the Commission’s work are entrepreneurs and small business who have lobbied the federal government to ease the paperwork burden that slows growth and job creation.

In one notable case, government regulation was considered to provide an obstacle to investment because regulatory jurisdiction was distributed among the provinces rather than under the federal government regulatory umbrella. Finance Minister Jim Flaherty’s plan to establish a single national securities regulator was recently rejected by the Supreme Court of Canada, which ruled that his proposed legislation was unconstitutional. He had complained that the current system of thirteen provincial and territorial regulators was unwieldy and inefficient, unable to provide consistent oversight for capital markets. Although Mr. Flaherty said he would respect the court’s decision, he continues to work toward the creation of a Canadian securities agency with the assistance of the provinces, noting that broader issues, such as systemic risk, are the jurisdiction of the federal government.

More expansively, the federal government has signaled to the business community, as well as to international investors, that it is “determined to do what it can to create a greater degree of certainty for business and to establish realistic timelines to help make conditions that encourage competitiveness and investment,” according to Environment Minister Peter Kent. To achieve this, the federal government has stated that a modern and rigorous regulatory system characterized by transparency, effectiveness and efficiency is necessary.

Mr. Kent was referring specifically to environmental regulation, which has become a lightning rod of discontent for a number of industries, notably in the natural resources sector. The Prime Minister’s speeches to potential investors in countries such as China and Japan repeatedly feature references to Canada’s willingness to reduce the environmental regulatory burden for investment, particularly in energy projects such as oil and gas pipelines.

One underlying assumption of this line of thinking is that less stringent environmental regulation would produce a competitiveness ecosystem where energy companies would thrive. The accompanying assumption is that the environmental review and assessment process is an unnecessary obstacle to growth, job creation and prosperity.

The evidence to support these assumptions is mixed but research findings provide insights on the so-called Porter hypothesis, which maintains that the appropriately designed prescriptive regulatory framework raises corporate awareness and motivates new process and product innovation, promoting competitiveness. An instructive example of how innovation was encouraged by government regulation is the U.S. automotive industry. The Clean Air Act was passed by the U.S. Congress in 1965, with strident opposition from leading American automotive firms such as General Motors, Chrysler and Ford. In tandem with the Energy Policy and Conservation Act of 1975, government regulatory requirements committed the American auto industry to ever-more stringent emissions standards over time.

Additional federal regulations targeted at the automotive industry focused on new standards for consumer safety, corrosion resistance, bumper protection, crashworthiness and fuel economy. For the consumer, the consequences of industry innovation have contributed to vehicles that today are safer, last longer, are more reliable, possess superior performance, produce fewer emissions and are more fuel efficient.

A stringent but transparent regulatory framework can promote competitiveness. While regulatory waivers may be appropriate under certain circumstances, we do industry and society a disservice by setting the regulatory bar too low.

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Filed under automotive industry, Environment policy, Innovation strategy

Discontinuity is the new equillibrium

My May 10th, 2011 column in the Telegraph Journal “Bricklin saga has a lesson for province” outlined how the New Brunswick government’s experiment with direct investment in the manufacturing of Bricklin automobiles was a public policy failure. But the column also highlighted that it is important to ensure that as a consequence of that failure that we don’t diminish our capacity to support aggressive and ambitious initiatives that are outside our historical legacy. Entrepreneurs can break the mold to create a competitive enterprise in ways that is wholly unanticipated. My examples of Colin Chapman, Erik Buell and John Britten were textbook cases of individuals who developed world-class products and organizations when virtually everyone was telling them that it could not be done.

Entrepreneurship relies in part on the ability of individuals and teams to recognize paradigm shifts in advance of their occurrence. Apple designed and engineered a product before there existed a market for it. In many ways, Facebook, eBay, Amazon were swimming against the current. For years the business press published articles about how Amazon was not generating revenue and how that constituted its failure. Today, we know better. These firms were all operating on the basis of their ability to identify discontinuities and capitalize on them. Their bets were on how the world was changing, not on its stability.

Could companies achieve success in New Brunswick outside the mainstream? While we don’t have a definitive answer to that, it’s important to not say that it is impossible. We have pockets of capability and expertise and even natural resources in industries not currently on our radar that may bear fruit tomorrow. Thirty years ago, no-one thought that the Annapolis Valley could be the location for a growing group of grape growers and wine makers that would capture gold medals in wine competitions around the world. New Brunswick’s Kennebecasis Valley may have many of the necessary natural characteristics that exist in Nova Scotia. Whether there are sufficient heat units to grow current grape varieties is a key question, but viticultural expertise exists to potentially address that issue. In Nova Scotia, the wine making industry is transforming small centres such as Wolfville, New Minas and Gran Pre in large measure in relation to the tourism industry that has grown around it.

So yes, from an economic development perspective we should focus on what we are good at. My point is that decisions about what we are good at should not be left to committees, whether government or private sector. Funneling scarce resources into a half dozen industries that are prominent today is not the answer. Neither is picking potential winners based on the views of today’s business leaders, many of whom have vested interests. The government has a role to play to provide a competitive infrastructure and adjustment programs for industry to grow. Trade, industry and professional associations have another role to support their members within their industry. The rest of the energy, initiative and ambition needs to come from corporations and emerging entrepreneurs.

Let’s not hold anyone back.

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Filed under automotive industry, Business strategy, economic development, Innovation strategy, Uncategorized