SEMA eNews Vol. 12, No. 37, September 17, 2009

Death of the Gasoline Engine? Not Just Yet, says SEMA/CAR Report

  Galpin Auto's '65 Impala
  Environmental awareness and efficiency meets tire-shredding performance: Galpin Auto Sports' '65 Impala with 6.5L Duramax bio-diesel conversion.

These seem like hard times for automotive performance aftermarket companies. The entire paradigm on which many built their existence-the dominance of the internal combustion engine-appears to be collapsing.

Actually, the best of times for some specialty equipment companies is yet to come. The internal combustion engine will still be the dominant powertrain technology for quite a while. Aftermarket firms can continue to benefit from demand for products to make the internal combustion engine increasingly more fuel-efficient.

Meanwhile, alternative powertrains are grabbing greater market share and offer a myriad of business opportunities for SEMA companies as well.

A landmark study conducted by the Center for Automotive Research and commissioned by SEMA notes this and other powertrain trends. "Powertrain Forecast and Analysis: What is coming and what are the implications for the specialty equipment and performance aftermarket industry?" aims to help SEMA members capitalize on today's opportunities and plan for the future.

And the future is very promising for SEMA members, says John Waraniak, SEMA's vice president of vehicle technology.

"Niche markets are where SEMA members excel," he says. "Markets are fragmenting into smaller segments and automakers are building more models off of fewer platforms, so customization and personalization matter even more.

"Cost-effective lower volume production business models leverage SEMA members' strengths and capabilities. The future of vehicle electrification is fusing with the golden age of the internal combustion engine and that spells opportunities for today’s motorheads as well as tomorrow's."

There are certainly risks, but even greater rewards, Waraniak notes. The biggest risk is introducing a technology that doesn't meet consumer and marketplace expectations—think GM and its diesel engine in the late '70s, or the Honda Accord HEV. There is also the risk of choosing the wrong technology or one with a short market life.

SEMA companies are innovative, quick, small and nimble. They have the agility to build low volumes profitably, and move in and out of new markets more quickly, says Waraniak. That will help them to succeed in the changing powertrain landscape.

"Green performance is one of fastest growing segments in the specialty-equipment and performance aftermarket industry. The new generation of clean diesels, hybrid powertrains, extended-range and pure electric vehicles represent blank canvases for SEMA member companies,” he says.

The Making Green Cool Zone (MGCZ) at the 2009 SEMA Show will once again display the most innovative vehicles, products and people working to accelerate the adoption and commercialization of alternative powertrains, new technologies and continued improvements in the next generation of direct injection and turbocharged gasoline engines.

SEMA Show Making Green Cool Zone  
This George Barris-designed Prius was one of several display cars at the 2008 SEMA Show's Making Green Cool Zone.  

SEMA is dedicated to keeping members informed about the latest vehicle technology opportunities, challenges and solutions associated with high-performance engineering, energy efficiency and demonstrating that horsepower and green power can coexist without sacrificing the cool factor.

And no matter what the technology, there will always be ways to enhance performance, says Gale Banks, founder and president of Banks Power of Azusa, California. Looking to the past is not an option, he warns. “You can deal in retrotech or futuretech. Retrotech is a dying business opportunity," says Banks.

From gasoline direct injection to plug-in electric, Banks sees a common denominator in future powertrains—the electronics and software that control the mechanical devices.

"Get some electronics background, or form an alliance with someone who has one," Banks advises.

 

 

Gasoline engine dominance will diminish, but it ain't going away

The SEMA-CAR report surveyed 17 powertrain industry experts. All survey questions were asked in reference to U.S. light-duty vehicles with a Gross Vehicle Weight under 8,500 pounds. Two time points—2011 and 2015—were included, as were two gasoline price scenarios ($2.50/gallon and $6/gallon).

The experts agree that despite all the talk of vehicle electrification, gasoline engines will continue to have the most market share in 2015, even with gas at $6 a gallon. But stiffer CAFE and emissions requirements will create business opportunities for technology, such as turbocharging, that improves gasoline engine efficiency and boosts power, the report says.

SEMA member and turbocharger manufacturer BorgWarner of Auburn Hills, Michigan, predicts 15 percent of all North America's light vehicle gasoline engines will be turbocharged by 2015, up from 10 percent today, says Tom Grissom, director of business development for turbo emissions at BorgWarner.

"In order to achieve the (required) fuel efficiency, we will have to have smaller engines with more power,” Grissom says. “The most efficient way to significantly increase power output is through turbocharging, which allows for engine downsizing and reduced fuel consumption while maintaining performance.”

BorgWarner supplies turbochargers to both the aftermarket with its AirWerks brand and automakers such as Ford Motor Company, which is using it to turbocharge its Ecoboost engines.

Gasoline direct injection technology is also seen as a big beneficiary of rising fuel prices and stiffer government regulations. If gas rises to $6 a gallon, the CAR report predicts that 15 percent of gasoline engines will have direct injection.

"GDI engines are inherently compatible with turbo chargers," says Grissom.

Electrification Equals SEMA Opportunity

Electric vehicles, including hybrids, plug-in electric and all other types, could grab nearly 30 percent of the powertrain market by 2015 if gas prices hit $6, the report forecasts. Even with lower gas prices, the report predicts the market share for electric vehicles will top 5 percent

The electrification trend is allowing smaller, faster, entrepreneurial companies to compete, at least in the short run, with the industry giants.

Take lithium ion battery manufacturer and SEMA member A123 Systems of Watertown, Massachusetts. The small company couldn't comment for this story because it is preparing for a stock market listing. But according to its Securities and Exchange filing, A123's revenue in 2007, the most recent full-year data available, was $41.3 million, up from $749,000 at the end of 2005.

Ric Fulop, co-founder of A123 Systems, will be one of the featured speakers at SEMA's Driving Green vehicle technology briefing seminar in November.

  A123 Prius
  A123 Systems displayed its 100+ MPG Prius at the 2008 SEMA Show. The lithium battery maker posted 2007 revenues of $41 million, making it one of the smaller specialty companies able to run with industry leaders.

The filing documents also illustrate the risks of the new technologies, however. An example, from the "Risk Factors" section: "Rapid and ongoing changes in technology and product standards could quickly render our products less competitive or even obsolete if we fail to continue to improve the performance of our battery chemistry and systems."

Of course, that need for continual improvement and commercialization of these technologies offers new and exciting business opportunities for SEMA members, Waraniak notes.

"Find a problem and fix it," he advises, whether it be cooling the battery, controlling it, increasing its performance, or a myriad of other issues.

Diesel still has legs

Diesel engines don't play a large role in the current administration's energy policy, which focuses on electrification.

Nonetheless, Lars Ulrich, director of diesel system marketing for Robert Bosch in Farmington Hills, Michigan, figures diesel's market share will continue to rise in the U.S.

"We need to rely on all solutions to reach the CAFE targets," says Ulrich.

The SEMA-CAR report predicts there will be a niche for diesel technology applications in pickup trucks, large SUVs, and CUVs.

SEMA members are well positioned to take advantage of that niche, says Ulrich. "They have the technology in their portfolio because the pickup is such a large market in the U.S.," he says. "It's not a radical change; it's a migration compared to electrification."

It's all about efficiency

The SEMA-CAR report includes input from traditional manufacturers. But SEMA members should also consider developing accessories for some of the new non-traditional companies such as H-Line Conversions and start-up car manufacturers such as V Vehicle Car Company of Monroe, Louisiana, says Waraniak.

"If you aren't selling much to existing or declining vehicle markets, shift part of your development efforts and product portfolio to the emerging vehicle markets with these new companies," he says.

V Vehicle aims to produce high-volume, low-cost, environmentally-correct cars. It has been quite secretive exactly what technology that car will use, however.

H-Line's Johnathan Goodwin, whose friend and partner, musician Neil Young, recently dubbed him the Motorhead Messiah in his latest video release, advises SEMA members to look for ways for their product or service to make vehicles more efficient and environmentally-friendly. Then emphasize efficiency and environmental friendliness, as well as performance, in your advertising, says Goodwin.

"Not more horsepower; more miles per gallon plus extra horsepower," he adds.

And don't fixate on one powertrain technology.

"There is no one end solution,” Goodwin says. “Creating efficiency is where the core focus is." —Alysha Webb

Additional details of the SEMA-CAR Report will be provided at the "Driving Green" vehicle technology briefing seminar during the SEMA Show on November 3 from 9:30 a.m. to 12:00 p.m. in Room N254-N256. Gale Banks, Ric Fulop, Johnathan Goodwin, Beau Boeckmann of Galpin Auto Sports, Dean Tomazic of FEV, Eric Cahil of the Progressive Automotive X Prize, Dan Kapp from Ford and Justin Ward from Toyota are among the panelists.

A media briefing in the Making Green Cool Zone at the show will immediately follow the seminar and offer SEMA members the opportunity to network with the speakers. Members can follow this link to access the SEMA-CAR Report.

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