End of the road for Diesel cars!

Maruti Suzuki declared today that they would not manufacture cars with diesel engines starting from 1st April 2020! That is the day on which BS 6 norms for pollution will be implemented in India. This time the government is very stringent, and it is declared that from this date, only the cars BS 6 norms will be registered. Forget the selling; there will be no registration of cars other than BS 6! It is a great thing that the government means business, now!

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But is this the beginning of the tumultuous scenario in the automobile domain? Is it a mini tsunami? Has this statement started indicating the way things would happen in the auto industry? All these years life was much more straightforward; introduce a new model, play around a bit with the price and periodically change pollution norms when government forces you. The smooth ride was the norm! But a statement by Maruti says that the cost of development of BS 6 compliant diesel engine and the cost of making the BS 6 engine will be so high that in the small car segment, customers may not be able to afford them. Currently, the price difference between petrol and diesel model of a car is around Rs. One Lac. They feel that this difference could be Rs.2/ lacs for BS 6 cars ( ten lacs is a Million). On a vehicle costing Rs. 5 to 6 lacs, difference of two lacs will be too much, and customers may not be able to afford these cars. For cars/SUV’s costing Rs.10/ lacs and above, though the difference will be similar, % increase would not be high. How this sector will perform from next financial year needs to be watched. For SUV (both mini/standard) good news is Maruti Brezza will not be sold; hence manufacturers will rush to pick up the market share up for grabs. Maruti, however, has left the option open for 1.5 L diesel engine cars, used in Brezza.

Diesel engine cost issue due to BS 6, was expected. Volvo has already declared that they will stop making diesel cars when the norms change from Euro 6 to Euro 7, because of the cost of development and the price of the vehicle. Compared to trucks, the number of cars sold is much higher hence a smaller number of diesel cars will be better from the pollution angle.

Why did people use small cars with diesel engines? The lower price of diesel was the main reason. These cars cost approximately Rs. One lacs, plus plus, more than petrol cars. If the usage of vehicles was not enough, then owning such a car was not cost effective. On top of this, diesel engines have periodic mandatory maintenance cost which petrol cars don’t have. In many cases, it was not viable to own a diesel engine car.

With the imminent entry of Electric Vehicles in large numbers, the market is expected to be shaken further. In the late ’90s of the last century, Toyota came up with Prius, their first Hybrid car. (For those new to this subject, a hybrid car is one which runs on petrol and battery combination; each manufacturer has its own combination of the technology) It was expected that Hybrid would be the future and Toyota was expected to be the leaders. Yes, they are still the leaders in Hybrids. But a maverick called Elon Musk decided to plunge into EV’s. General Motors had manufactured around 500 EV’s at the beginning of this century, but then what happened? Petroleum lobby made sure that this initiative was killed. A few years later GM scrapped the vehicles.

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Combination of Tesla’s efforts, cheaper battery sets (hopefully!) at some stage, fast charging technology are pushing humans towards EV’s. Range per charge still remains the primary concern. Add to this reduction in the price of solar systems is making cheaper fuel for the EV, the Electricity. Now, what is adding to making it more difficult for petroleum products further, are the pollution norms for diesel cars?

What will be the future of diesel engines in the car segment? In India, the overall car segment is under pressure. In the last financial year, four lac more old cars were sold than the number of new cars that were sold. It looks like more small vehicles are being sold in II and III tier cities. Will Maruti’s prediction about diesel engine cars affect thinking by other car manufacturers? Will they also go away from diesel engine cars? Only time will tell.

The current financial year is going to be very tricky for car manufacturers. Let me explain what is involved, as the last date on which the BS IV car will be allowed to be registered. That date is 31/3/2020. To achieve this target, they will have to attempt and sell BS VI models from 1/1/2020. To meet this date, they will be required to push in BS VI vehicles from 1/10/2019. During this transition period, there will be tricky scenarios. BS IV cars will be produced less and less, but customers may want to buy them, as these will be cheaper than BS VI models. There is a possibility that in certain areas there will be customers and no cars; in other areas, there will be cars but no customers. All unsold BS IV cars will have to be sent back to manufacturers for conversion to BS VI at a considerable cost. Predicting requirement from 1/10/2019 to 31/3/2020 is going to be a nightmare for sales teams and along with them the dealers. The trend of lower sales is going to add to the difficulties further.

Will everything be hunky dory after 1/4/2020? That is again a very tough question. To achieve better fuel efficiencies and to go away from petroleum products, there will be efforts to introduce hybrid cars. But except Toyota, nobody has real expertise in this area. The predicted numbers for 2030 are 30 % EV’s, 30% Hybrids and balance IC engine cars, mostly petrol and CNG version. Does it mean that it is a death knell to diesel cars?

Another prediction by Maruti is that for small EV’s, where numbers are high in the typical small car segment, the volumes can be tricky as the price could be between 9 to 12 Lacs. This price is based on battery packs being manufacture in India. Larger cars will cost much more, but the high-price segment is less sensitive to the price tag. How the volumes will be achieved in EV’s, will be difficult to predict. I have not even discussed the charging station infrastructure issues! In India, most cars are parked on the roads for the night, so how and when will the charging be done?

At least in India, there is a significant turmoil about where the car market will go? Will Maruti continue to lead the pack? Will others follow Maruti and go away from small diesel engine cars? Only time will tell.

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A little deviation!

I generally avoid writing about things that are in public domain and especially related to politics. But some recent events have forced me to temporarily tweak my rule, maybe just this one time! So, pardon me. Many actions in public domain are supposedly taken with elections in view, or some such ulterior motives. As usual ruling party and oppositions parties do not see eye to eye on most things. Only time both sides seemed to have come together, are during national emergencies. But there have been no such emergencies. I am not talking of this government or that party. 

Today I read about a small plane carrying Rahul Gandhi and his close aides, flying from Delhi to Hubli. It appears that as the flight was approaching Hubli, the airplane suddenly lost height, became unstable, and pilots lost control. This was during day time and weather was clear with no obvious winds. Pilots took charge of the plane by shifting from Auto Pilot to manual mode and landed safely. On landing, the entourage approached the police and lodged an FIR, claiming sabotage. The FIR is lodged against the pilots! Do pilots not know if the plane crashed, they will also die? I do not know why FIR was lodged. All, including crew were petrified. If someone wanted to kill the leader why will they put the lives of unknown persons also, in jeopardy? The plane could fall and kill a few on ground too! Are we such a vicious country that we will try to kill some senior leader because of elections? Are we a set of “Stupids” to react this way? Are we so malicious, that we want to charge our opponents of murder? After getting down, the complaint could have been made to authorities. These authorities could have been requested to stop flying the plane for thorough inspection. (apparently this is now done) Who advised this group of people to complain about saboteur? What is this, stupidity or viciousness, naivety?  

On the other side, due to the rise in Oil prices in international markets, petrol and diesel prices at home are also sky rocketing. With elections around in some states and national elections next year, this is supposedly a disaster for the current government. But they are sticking to basic finance rules and not taking any action to reduce these rates by way of subsidies. Sometime back, Indian petroleum sector was linked to international oil prices. A couple of years back, we got the benefits of very low petrol/diesel prices. Popular measures may be good politics but it is not good for the nation. This is an extraordinary courage being shown by the government.  

Supreme Court Chief Justice issue is one more such saga. I do not understand much about law of the land. But it was apparent from the beginning that this action was going to boomerang on the people who started the action. First and foremost was that the opposition parties could not form a coalition, based on similar thinking. The numbers were not there, and according experts, logic behind the action was not tenable. With this background there was no point in moving ahead. But why they moved forward is a mystery! Do they have no other agenda? Do they have nothing viable to pressurize the government?  

AFSPA is Armed Forces (Special Powers) Acts (AFSPA), are Acts of the Parliament of India that grant special powers to the Indian Armed Forces in what each act terms “disturbed areas”. Tripura government has withdrawn this act after 18 years. This was promulgated when situation there was bad and there was no option left. But somebody has reviewed this and taken a decision to withdraw these. This is creditable because generally nobody wants to bell the cat. Decisions in the government, are generally left to bureaucracy and their motto is status quo! Generally, there will be no review, things keep on lingering. One arm does not know what the other arm is doing! That reminds me of a small anecdote from Solapur district. In the district collector’s office, there was a file called “Report for the Queen”! Nobody knew what it was. But every month a group of officers was creating a mundane report, to be sent to the queen (of England), naturally! This procedure was started more than 100 years back during British Raj and continued till the year 2000! Review? What is that! 

Last but not the least is current China visit by our PM. Both our countries are large and with big population. Somehow China has been coming in the way of many things that India wanted to do on the world stage. May it be Pakistan, Sri Lanka or United nations China has always tripped India; on top of that there has been continuous probing on border posts in Himalayas. These type of skirmishes, are always stressful and can prove to be very expensive, even money wise, with no tangible results. Our PM has realized this and has taken first step to cool down tensions with China. There will be give and take, but we need to be pragmatic and keep our egos aside! That is the real diplomacy. I always felt that India was always lagging in finesse in diplomatic relations, though there has been improvement in last ten years or so. There were no declarations, no noise, just tête-à-tête between top bosses; it appears that meetings will be regular in future! I felt that this is a feather in the cap of our Government!  

Are we showing maturity in our governance? Are we not afraid to take steps which may be termed bold? But one thing is sure, we continue to be idiots, stupids and smart at the same time. Mainly the political arena has to change! Can we be a little smarter in our internal political moves also and try to be less confrontational? Hope we mature in this area too!  

Jaihind!  

 

 

  

Game Changer or Disruption!

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I have been writing about Electric Vehicles; for updates I keep on talking to people in the industry, read on the net and am lucky enough to have someone in Tesla to update my understanding of EV’s. I am no technical expert in this field but I can feel that something big is definitely happening. Hope I am able to see some of these major changes in my lifetime. I was lucky to be part of two such events, Internet and Cell phone. These two disruptions have  changed the way our world has been operating! When Jaya was in the US for her MS, 1980-8;  talking to each other on phone, needed a lot of coordination. We did not have phone at home. So, she would write to me the timing when she would call, that too at someone else’s place. If we were lucky she could get through after ½ hour delay! By next year, I am told that cell phones can be used during the flights too!  That is game changer!

In IC engine cars, the Engine has been the heart for more than 100 years, and car performances have been defined by the quality of the engine! Then the quality of the overall car is said to be better when the exhaust system and engine jointly released least amount of pollutants. Of course, now exhaust parameters are mandatory world over. By 2023 these parameters will be so tough that company like Volvo has already declared that they have decided not to develop any new diesel engines post 2023, as development of the same will not be cost effective! Plus, cities and countries are slowly banning diesel cars to be driven within their boundaries.

The drive train today, is placed physically in between tyres, from front bumper to rear exhaust system! This whole drive train is being replaced in EV’s, (as shown in pictures above) so what will decide the quality of EV’s? What is the Engine for EV’s? The Motors, the electronic controllers, battery pack, inverter and  gear. So, the car which travels more distance per charge, which accelerates faster will be a better car, all are zero emission cars anyway! No, it is not that simple! This is just the beginning of the car revolution! The batteries will have better charge storage per unit area, they may cost lesser and lesser over a period of time but this becomes  commercial aspect. To me battery packs are petrol tanks! Better battery only increases the capacity of the “new petrol tank” and distance traveled per charge!

Major parts in the new drive train for cars are going to be the software and the sensors that are going to be there in a car, besides the battery pack, motors and ECU’s. Around 2010, some vehicles had software with about 10 million lines of codes! In 2016 it is supposed to have increased by 15 times to about 150 million lines of code! The software is related to car autonomy, safety and infotainment related codes. But this is going to change even more drastically over period. The whole system might become  a computer in the car! The car recalls will not be because of faulty clutch or a gear box it will be because of software glitches and sensors!

The cost of software currently in large cars can be about 10% of the Bill of Materials but is likely go up in next 10/12 years to 30%! So, this is going to be the first game changer. What happens to current vendors of engine parts? As the population of EV’s starts increasing, the population of new IC engine cars is going to come down! Instead of one set of vendors, who make drive train parts, new set of vendors from IT industry and electronic industry will take over! So, need for physical RM will start getting replaced by “products” which cannot be seen by naked eye! Players who are currently tier 2 or tier 3 vendors may start becoming tier 1 vendors. At the same time car manufacturers may stand on the toes of Operating system vendors so that they can control the distinct facilities they can offer. This cannibalization is already being observed in case of battery manufacture! Vehicle manufacturers themselves are producing battery packs now. In IC engine cars, batteries have a small functional role whereas in EV’s it is going to be the new “Petrol”! OPEC, I am sure is already having sleepless nights or nightmares!

It looks like software will follow the path of infotainment innovations, autonomous driving capabilities, intelligent safety devices which will be able to work even if some part of software fails! The software will integrate with hardware in the form of sensors! This my friends, is going to be future drive train! The whole system over a period will be of increasing complexity which will need newer and newer algorithms and will generate such a huge data that all the data generated from these cars will have to be stored to cloud! One important aspect of new drive train is temperatures; these are almost at room temperature compared to IC engine cars where exhaust temperatures can go upto 600 deg c! This normal temperature in “New Engine” will allow usage of lot of electronics, sensors, software and ECU’s.

What do we foresee? Basic car with body, trim, seats etc which will keep on changing as is happening now. But it is the “New Engine” in the form of sensors, software, ECU’s and cloud computing that will change the car and make it a different beast than what we see today!

First and foremost will be the infotainment area which will have full connectivity with our single “communicator” which is currently our cell phone! It will have all these functions plus, music, internet hookup, reverse drive screen, automatic parking capabilities. This will use cameras in place of mirrors and it will also be the GPS display screen! What new functionalities will be added is anybody’s guess! Next consolidation will be ECU’s. Currently, there are 8 to 10 of them per car. These will be consolidated over a period, to one or two ECU’s which will handle all functionalities . The “real engine” will be controlled through these ECU’s along with other systems like wipers, window regulators, AC’s and so on. Next important aspect is, each vehicle will generate so much data that storing the same can be an issue. So, all this data will be transferred to cloud. This data can be used for analysis, diagnostics, on improving performance of the vehicle. This will be real life data and give the car makers real life continuous flow of information; product improvement cycles will be much shorter! In most cases in future, product errors will be related more to sensors and software. Software errors can be updated easily by releasing patches to all concerned cars as these cars will always be connected!

Another game changer will be what is going to happen to car service industry! Cars will go to workshops only for sheet metal work! Or small odd jobs! This will also affect vehicle manufacturer’s spare part sales; we know that drive train component manufacturers, will go down over a period! These components will exist only for old cars as no new cars will not need their products!

Another new area that will come up is third party software products! We really don’t know what these products are going to be! Most of the products will be available for passengers, as the driver naturally cannot use them while driving. Oh, I forgot we will have driverless cars at some stage, then all are going to be passengers. So, possibilities are simply unlimited!

I could write on and on and on! Let us wait and watch; there have been car racing games for computers. But now you will be having computers which drive real life cars on real roads! That too on their own! As a game changer or major disruptor of business, it’s a great thing for humanity. But for those who are in business of making current drive train components, it’s going to be a nightmare. As my friend had rightly said during a discussion, “I am ok with this change because it is for my next generation to handle this and not me because real inflexion point could be 2030, by that time I will retire!”

 

Auto Industry 2040?

WOW! MMG! DISCO! These could be names of some of the leading auto component industries in the year 2040! Why have I selected the year 2040? Simply because everyone is talking of this year for the introduction of electric cars in a big way; from this year onwards, the real downward trend in the manufacture and use of IC engines in the vehicles, as we know them today, will begin. I am merely assuming that the cars will be available, similar to the cars of today. Masses of cars will be driven by humans, they will have a steering wheel and a power plant/train to give them. They will have some form of braking, the electrical system handling various functions, wheels and body with fuel storage area, air conditioning, and so on! Things inside could be fancier with more and more entertainment, superior navigation abilities, drivers may become more stress-free as cars systems will be able to understand many things and may take over some functions from humans. Internet of things (IOT) will allow things that are not even thought of today.

This is part of the evolution of the human race, but this could be the culmination of major change that is taking place currently. The “new” car industry is putting its toddler’s steps today. Evolution is nature, as everything in this world is always evolving! The primary driver for these changes is computers and computer chips. The car industry will be using different chips and will capture lots of data generated by various systems. This data will be in an endless loop and will allow cars to function more and more efficiently.

What will be the difference in the cars of today and those in 2040? Today’s power plant, the Engine & Drive train will be replaced by Batteries and Motors. Today’s drive train, gearboxes etc. will just be not there. The exhaust system, as is known today, will be simply not be needed because there will be no IC engine, both Petrol and Diesel. Gearbox and the whole system is really not needed because their function can easily be handled by Electric Motors. Even today, in electric cars, there is a single gear which reduces the RPM to what is needed to drive the car at allowed speeds!

Many companies are manufacturing the components that are discussed above. These components may become redundant over some time due to the introduction of electric cars. Bosch, Denso, Continental, Valeo, Aisin Seiki are some of the major players that manufacture the cluster of these components. These companies together manufacture products worth US $200/ billions every year.  These products may comprise of 40% to 70% of their current turnover. The giants must be already studying the questions that have come to my mind. How are they handling these questions? I am sure it’s a tough call to all of them though they have the wherewithal and deep pockets to handle difficult situations. Some have started making navigation products, some are building parking assist, camera -related systems. But suddenly new names are being heard in these discussions as vendors. CISCO, NVIDIA are some of them. Some are direct vendors to car makers, and some are vendors to components manufacturers.
Where is the real scope for new development and business? Battery packs, battery charging technology to increase per charge distance that the cars can travel today! All other developments that are computer related can also happen in IC engine cars too! TESLA is already building a giga factory for their Battery Packs! So will the “new” component business be taken over by Car Manufacturers? Suzuki, Toyota and Toshiba are coming together in India for big battery plant! What happens to smaller manufacturers of these components? Will they survive the major change? Will “WOW! MMG! DISCO!” replace them? Only time can tell.

In car making, after a long time, new name TESLA, started coming into prominence. TESLA came mainly for the new product offering. It appears that technology like fashion goes round! Till the first two decades of the last century, IC engine based transportation was not very popular. Trains used steam, cars used electric power plants; but battery technology could not catch with the then needs. Hence IC engine cars and trains became popular. From the existing car manufacturers, some are already manufacturing electric cars more than what TESLA is producing. On top of that, they have a running profitable business producing IC engine cars. But one thing is for sure they have the humility and know where they lack. Look at what Volkswagen Brand CEO Deiss has to say about TESLA! 

VOLKSWAGEN brand CEO Diess has said that VW which manufactured 5,987,800 cars last year has to catch up with Tesla which produced 83922 cars last year. “Tesla belongs among the competitors which has abilities that we currently do not have,” Diess said in the interview with “Inside”, a publication for VW employees. Around half of Tesla’s engineers are software experts, while at VW’s core brand it is a much lower proportion, Diess said. Tesla has good electric motors, a fast charging network, autonomous driving technology, internet connectivity, and a new approach toward vehicle distribution. “This shows that we need to significantly improve. We can do this. We measure ourselves against Tesla quite deliberately. Our goal: Using our abilities not just to catch up, but even to overtake,” Diess drives an electric VW Golf.

 Current giants have ready infrastructure and eco system to make and sell millions of cars. They of course lack the Electric car eco system as mentioned by Diess above. Their main struggle will be recharging stations for electric cars; but TESLA is also going face the same problem! The question arises if TESLA, a loss making company, a start-up, survive? Let’s look at the startups from the Silicon Valley and the west coast, who really made it big in the computer industry sunrise era. Google, Facebook, Microsoft, Apple they all became very big with the products/services that never existed before. TESLA is pitted against the giants for making existing products where the main “driver” is only a different technology! That’s a huge disadvantage. Fighting against giants, who have woken up a bit late, like Mercedes, Honda BMW, Toyota, GM, Ford, Fiat, Hyundai is going to be very very tough for TESLA! Some of these giants are also going to suffer or may merge! My take, ESLA may cease to exist  by 2040 or even earlier as it is known today! Takeover? Maybe!