Ipsos predicts that efficient hydrocarbon-fuel vehicles are likely to prove more popular than fuel-cell electric vehicles (EVs) in emerging markets.

Automotive manufacturers are focusing on lower-priced models for emerging markets, entailing more efficient manufacturing processes and standardized parts.

Toyota, for example, plans to use just three types of chassis for multiple vehicle models and ultimately standardize some 80 percent of parts.

'€œWe can also expect an increase in manufacturing facility set up, partnerships and alliances, both among carmakers and across industries,'€ said Ipsos Business Consulting country manager in Indonesia Domy Halim.

The popularity of low-cost fuel efficient cars has been evidenced in Indonesia by the increased sale of what are known as low-cost green cars (LGCG).

The government'€™s LCGC initiative has driven the recent launches of Toyota Agya, Daihatsu Ayla, Suzuki Karimun R and Honda Brio Satya, according to Ipsos.

Since the first launch in September 2013, 10,000 to 15,000 LCGC car models have sold on average per month.

'€œThe growing competition in the LCGC segment is expected to result in cheaper prices for consumers, but will also have an effect further upstream. Here the challenge is with the automotive parts producers who will need to source raw materials locally and efficiently to keep their costs down,'€ Domy said.

'€œThose that do so will find their products in greater demand than ever,'€ he said.

According to Ipsos, consumer demand for eco-cars was also growing in emerging markets, and the manufacturing industry was developing new processes to address demand profitably, spurred on by government incentives in China and some Southeast Asian countries.

The diversification of fuel sources has brought entirely new players into the automotive market, while others will disappear.

Many engine components will become redundant with the shift toward new power sources, while the increasing computerization of cars brings electronics manufacturers into the market, according to Ipsos.

Passive safety (seatbelts, airbags, etc.) is evolving into proactive safety (automatic brakes, anti-skid systems, etc.) to prevent accidents in the first place. Smart cars take things a step further. Sensors detect surrounding conditions and generate automatic responses accordingly.

Nissan aims to commercialize such vehicles by 2020, and General Motors wants to have autonomously-driven vehicles on expressways by 2017. Significantly, Google began public road tests three years ago and has a target of 2017 for fully-operational autonomous vehicles.

Growth engine

Ipsos said that the growth engine of the global automotive industry is now the emerging markets. '€œAfter the global financial crisis, they overtook developed markets in overall vehicle sales, and are forecast to account for two-thirds of global production next year,'€ Ipsos said.

According to Ipsos, foreign direct investment in Indonesia'€™s automotive sector, for example, had increased by 114 percent per annum between 2010 and 2013. This is aligned with the expected implementation of the ASEAN Economic Community in 2015.

With environmental concerns forcing governments to introduce stringent emissions regulations, diversification of power sources is already happening. In China, the government will subsidize the sales of electric vehicles (EVs) and plug-in hybrids (PHVs), aiming to have 5 million on the road by 2020, according to Ipsos.

It said that the Nissan Leaf was the first mass-produced EV, launched in December 2010. Others have followed, but many have postponed plans. Limited battery life and a lack of recharging stations make long-distance driving unrealistic. Sales of EVs are well below forecast.

'€œFuel-cell electric vehicles (FCVs), powered by hydrogen, are attracting attention among manufacturers as a viable long-term solution. Many people see these as the ultimate eco-car, as they only emit water. They fill up at hydrogen stations, and can travel up to 700 kilometers on a single tank,'€ the business consultancy said.

Meanwhile, Toyota revealed its FCV in 2013 and will start commercial manufacture next year. The initial launch will be in California, where some 50 hydrogen stations will be installed by the end of 2015.

The industry needs to ensure a stable and competitively-priced supply of hydrogen as well as a network of refueling stations, but this is considered simpler than grappling with the battery problems of EVs.

According to Ipsos, there are a variety of short-term solutions. '€œMicro-compact two-seater EVs are now designed for short trips. Then there are the more familiar hybrid electric vehicles [HEVs], such as the Toyotas Prius, which switches between an internal combustion engine and an electric motor,'€ it said.

'€œThis offers improved fuel economy and lower emissions. But HEVs are relatively expensive and less capable of reaching high speeds. Plug-in hybrids are newer and can travel further on their electric motors, but are very heavy,'€ it added.

'€œThere are ongoing technological developments to conventional internal combustion engines. Reducing their emissions and improving fuel and even thermal efficiency are playing a bridging role until zero-emission eco-cars become commercially viable,'€ it said.

Flexible fuel vehicles (FFVs) reduce emissions by mixing conventional fuels with varying proportions of bio-ethanol derived from vegetable material, it said.

'€œSuch more efficient hydrocarbon-fuelled vehicles are likely to prove more popular than EVs in emerging markets where EVs are relatively expensive and the refueling infrastructure is poor.'€ (JP)

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