FT SPECIAL REPORT

The Future of the Carwww.ft.com/reports | @ftreportsFriday November 21 2014

Inside

IT and motoringExperts warn thatconstant monitoringwill increase privacyand safety worriesPage 2

Heads upLatest generation ofwindshields couldincrease people’s faith indriverless carsPage 3

Operating systemcould drive big profitsChinese and Germanpartners’ high hopesfor mobile networkPage 4

I magine driving on a busy roadsurrounded by speed cameraswhile trying to programme the satnav. And then the fuel starts to runout. Carmakers may feel they face a

similarchallengetoday.Governments worldwide are

demanding progress towards loweremissions and higher safety standards.New entrants such as Tesla are disrupt-ingtraditionalbusinessmethods.Mean-while, consumers want cars to be asmartphone on wheels. And groupswithin and from outside the sector areracingto introduceautopilot functions.

At the same time, a more prosaicchallengehasappeared:sellingcars.

For months, signs have been growingthat, after three years of improvingfortunes, the outlook for global automo-tive demand has turned. Russia andBrazil have gone from emerging marketdarlings to demons, with sales down 13per cent and 9 per cent in the year-to-date. India, too, has stalled. Europe,though improving, remains 20 per centbelow the pre-crisis peak. According toanalysts most new cars on the continentaresoldata loss.

Despite plant closures and job losses,European capacity utilisation remainsstuck at an average 70 per cent, accord-ing to AlixPartners research, versusabout92percent intheUS.

The US, the world’s second-biggestcar market, is expected by researchersat JD Power to achieve record sales nextyear. But other analysts fear the marketis nearing its peak, over-reliant on sub-prime auto loans and stalked by thespectreofarise in interestrates.

And China, a region that has beenresponsible for 50 per cent of global carsales growth since 2009, is slowing.

Year-to-date sales are up by a relativelymodest 7 per cent. The era of double-digit expansion in the world’s largest carmarketseemsover.

Harald Hendrikse, an analyst at Mor-gan Stanley, says: “This is coming at atime when cost headwinds from regula-tion and legislation are hitting theindustry likeneverbefore.

“At the same time, manufacturers are

under pressure to come up with the carof the future, which requires a com-pletelydifferent levelof investment.”

How will the industry respond? Willinnovation suffer in an environmentwhere revenues are slowing and car-makersarebeingforcedtocutcosts?

There is mounting concern – evenanger – among chief executives thatin the current sales environment,

Automakers spy hazards aheadTechnological andregulatory demandsforce manufacturers toinvest as vehicle salesface difficult times,writes Andy Sharman

regulators are demanding a level of fuelperformance that consumers areunwillingtopayfor.

Pure electric cars, which are seen asnecessary if carmakers are going tomeettheEUtargetof95gofCO2 perkilo-metre by 2021 and avoid fines, areexpected to account for less than 1 percent of global sales for the rest of this

Continued on page 3

FT.com videoRohit Jaggi test drivesthe BMWi8 – ahybridsports carthat is fastas well asfrugalft.com/futurespeed

Hydrogen versuselectric vehiclesLack of filling stationsposes a threat toalternative fuelsPage 2

Shanghai express: although they have been responsible for 50 per cent of global vehicle growth since 2009, car sales in China are slowing – Aly Song/Reuters

2 FINANCIAL TIMES Friday 21 November 2014

The Future of the Car

A car is travelling down a road but thedriver has not noticed the van ahead isstationary. Moments from impact, cam-eras on the moving vehicle detect theobstacle and automatically activate thebrakes,avoidingacollision.

The system that prevented the crashis autonomous emergency braking andit is being hailed by safety experts as thegreatestnewtechnology inmotoring.

Improvements to vehicle safety areseen as one of the big contributors to thereduction in road deaths in the EU overthe past few years and crucial to its tar-get of halving fatalities between 2010and 2020. There were more than 26,000deaths on Europe’s roads last year andsome 199,000 people were seriouslyinjured – a stark reminder that moremustbedonetoreducethosenumbers.

The European Transport SafetyCouncil recommends that autonomousemergency braking becomes manda-tory when the EU revises its vehiclesafetyrequirements inthenextyear.

The organisation is also pressing forthe compulsory introduction of intelli-gent speed assistance – which tells driv-ers when they are breaking the speedlimit – and seatbelt reminder warnings.The costs of introducing such technolo-gies drops when they become manda-tory, saystheETSC.

In Sweden, which has the world’ssafest roads, deaths plunged by 59 percent between 2001 and 2012. One of thereasons was that the majority of newcars sold had a top, five-star, safety rat-ing, says Ellen Townsend, policy direc-torat theETSC.

At present, autonomous emergencybraking is fitted on only a small percent-age of cars. In the UK, it is fitted on 29per cent of new vehicles, slightly aheadof the European average, according toThatcham, a motor research centrebasedinBerkshire,England.

Vehicle makers say the path to roadsafety is an “integrated approach”, com-bining better vehicles with improveddriver training and input from the roadplanners. But it is also true that roadsafety has been a hallmark of the Euro-peanproject.

“As a whole, the EU is doing well, butto reach the 2020 target, we’re going toneed a lot more effort, especially in thelesswell-performingcountries,” saysMsTownsend.

Countries lagging behind includeRomania and Estonia. Overall, however,road deaths across the EU fell by 18 percent between 2010 and 2013. Mostimproved was Slovakia, which reducedroad deaths by 37 per cent between2010and2013.

The political will to make changes isvital to success. Once politicians aremotivated, it needs only three or fourroad safety measures to see figuresimprove, experts say. Those might bemore intelligent road layouts, a penaltypoints system to encourage saferdrivingandbetter lawenforcement.

Nobody wants to provide an estimateof the costs of implementing road safetymeasures. Instead, those working tosave lives prefer to focus on the sumssaved by avoiding deaths, estimated at

€18.7bn for the reduction in road deathsbetween2011and2013.

As Europe reduces the numbers ofpeople harmed on its roads, it must dealwith evolving challenges. For example,London, which is seen as setting anexample, has seen an increase in theproportion of cyclists and pedestrianshurt even as the number of its motoristswhodie incrashes falls.

“You need to go into a higher level ofdetail,” says Ben Plowden, director ofsurface strategy and planning at Trans-port for London. Police records of acci-dents are scrutinised and overlaid withdata from other sources, to get a moresophisticated understanding of whatcausedanincidentandhowtotackle it.

Londonhasastiffer target thantheEUstandard: its mayor has ruled that aswell as cutting deaths, the number ofpeople seriously injured must also bereduced. The transport department atthe European Commission is expectedto do as London has done, and add a tar-get for reducing serious injuries by 2020.

Further ahead, the ambition is thatalmostnobodywillbekilledorseriouslyinjuredonEurope’sroads.

Introductionof automaticbraking willsave lives

Crash prevention

Improvements to vehiclesafety are seen as a bigcontributor to thereduction in fatalities inthe EU, reports Jane Wild

26,000The number ofdeaths onEuropean roadslast year

€18.7bnAmount savedby cutting roaddeaths between2011-13

The car used to be one of the purchasesthat said the most about you. Today, itmight be better to think of it as the thingthatknowsthemostaboutyou.

Drive a new car out of a showroomand hundreds of sensors, scanners andcameras begin tracking every aspect ofyour driving, as the car’s communica-tion systems link you to the outsideworld.

These systems make you safer andhelp you reach your destination moreeasily. But they also open up previouslyundreamt of revenue streams for car-makers, insurers and telecoms compa-nies. And they present a privacy andsecurityminefield.

“Data transmitted from a connectedcar could tell someone a lot about thedriver,” says Prasad Satyavolu, head of

innovation at Cognizant TechnologySolutions. “How fast [and how well]they drive, where they are, what routesthey take, what times they typicallydrive,evenwhatmusic they listento.”

Mr Satyavolu, whose company buildsconnected car systems for a range ofmanufacturers, says: “There are bene-fits to carmakers and insurers from thedata, but with consumers more aware ofdata privacy than ever, it is importantthat there is transparencyonwhichdataareshared,withwhomandwhy.”

Electronics appeared on the dash-board in the 1930s with the first in-carradio and cassette players arriving 30years later. General Motors introducedemergencyservicesmonitoringsystemsin 1996, while satellite capability firstappearedcommercially inthe1980s.

Today’s cars can boast iPad applica-tions, full mobile communication sys-tems, and technology that allows forcomplete remote monitoring of teleme-try and component status, such asengine temperature or reporting a bro-kenwindscreenwiper.

That means drivers can check theiremails, stream music, call home and

spot the nearest McDonald’s, while alsobenefiting from safety alerts, fuel effi-cient route recommendations and auto-matedschedulingofpartsservicing.

GM is now leading the rollout of cam-era technology that can track eye move-ments and spot distracted drivers, whileFord is close to commercialising carseats thatdetectpotentialheartattacks.

Having access to data from cars couldbe lucrative for almost all in the auto-motive revenue chain. Carmakers coulduse in-car data to see which functionsare used and those that are ignored,helpingthemfine-tunefuture features.

Insurance companies could find outhow safely cars are driven, or tailor poli-cies according to how often a car is serv-iced. The number of insurance policiesin the UK tied to telematics, or a

monitoring device in the car, trebledbetween2011and2013to300,000.

Advertisers could also use time androute information to discover whatofferswouldbemostrelevant todrivers.

“As long as consumers have the abilitytoopt inandcansee thebenefitsof shar-ing their data, and manufacturers areputting in place measures to anonymiseand store data safely, then it should bedown to the individual to determine theline between cost savings and their datause,”saysMrSatyavolu.

The demand seems to be strong.According to a survey of developed carmarkets by Accenture, 56 per cent ofdrivers would like to read and dictateemails while at the wheel and 52 percent want cars that identify traffic sig-nals,accidentsandtrafficcongestion.

The pace of innovation – and a racebetween carmakers to be seen as themost cutting-edge – has pushed forwardthe implementation of always-con-nected technologies into today’s cars,while regulators have encouraged theiradoptionforsafetyreasons.

The EU has implemented rules man-dating the installation of an “eCall”

system in new cars by the end of 2015,which wirelessly sends airbag impactsensor data with GPS information toemergencyservices if there isacrash.

The eCall system will mean that wire-less information gathering tools will beinstalled in almost 7m cars in Europe by2016, according to research from theGSM Association of mobile telecomcompanies.

The other side of the boom in wirelesscommunication technology in cars con-cerns security. Hackers have shown thatcommunication systems, such as tyresensors, can be accessed and used tocontrolotherpartsof thevehicle.

“Currently, there is little or no secu-rity in cars,” says Gary Newe, director offield systems engineering at F5 Net-works, a data networking and securitycompany. “A car thief can open some ofthemostmoderncarswithoutakey, justby using a computer and radio equip-ment.”

He adds: “The fact we are starting toconnect these cars to the internet, andshare data between consumers, manu-facturers and others, should concerneveryone.”

Constant monitoring raises privacy and safety worriesIT and motoring

Rush to include cutting-edgetechnology in cars could be asecurity minefield as well asa boon, says Henry Foy

‘A car thief can open someof the most modern carsjust by using a computerand radio equipment’

From next March, Londoners will beable to book electric cars using mobilephonesandsmartcards.

The “car sharing” venture is thedream of French billionaire tycoon Vin-cent Bolloré and is based on the successof the Autolib’s scheme in Paris. TheLondon scheme will allow drivers to usea car for £5 for half an hour, plus a £5monthlymembers fee.

The idea – which is being supportedby Transport for London, the bodyresponsible for most public transport inthe UK capital – underscores just howrapidly car-sharing schemes are beingrolledoutworldwide.

With urban centres becomingincreasingly congested, car sharing isexpected to expand quickly over thenext decade, particularly in cities that

are being forced to review the car as thedominantmeansof transport.

According to Frost & Sullivan, a con-sultancy, membership of so-calledcar-sharing organisations grew by about50 per cent in 2013, providing transportfor3.5mmembersusing70,000vehiclesworldwide. The consultancy estimatesthat membership will grow by a further43 per cent this year and hit the 5mmark, while vehicle numbers willincrease by a third. The top car-sharing countries in 2013 were the US,with 1.03m car-sharing club members,andGermany,with760,000.

Zipcar, which claims to be the biggestcar-sharing club in the world, said lastsummer that it had more than 800,000membersworldwide.

Similar services are expanding else-where. Kandi Technologies opened anhourly car rental service in Hangzhou,China, this year and Comos, an electri-cal car service, is already operating inMalaysia.

Chas Ball, chief executive of Carplus, aBritish lobby group, sees car sharing as acomplement to other environmentally-friendly modes of transport such as

walking, cycling, buses and trains.“There are many times you need a car,butyoudon’tneedtoownone. If thesys-tem allows you to book one – almostusing the system [as though it were]public transport – it becomes a comple-mentarysystem,”hesays.

He points to research showing thatany city where 30 per cent or more oftrips are done by car makes “gettingaround less pleasant”. “Public transportdoesn’t run so freely and you are conse-quentlyhittingdeadlock,”hesays.

The increase in car sharing comes at atime when car use per capita is fallingafter nearly 80 years of growth. DavidMetz, author of Peak Car: The Future ofTravel, says the number of journeys bycars in most developed countries isdeclining, creating opportunities for carsharing. “The world is experiencing ashift away from cars in successful cities.This creates opportunities for car shar-ing, particularly for people who don’tneedacarall thetime.”

Although car sharing is open to all,take-up has been greatest amongyounger, technology-savvy people inhigh-density cities such as Seattle, New

York and Montreal. “It’s wrong to char-acterise it as a young people’s service, but they are the early adopters,” says MrBall. “They need a smartphone morethan a car and it seems that they are justnot as excited about owning a car andsometimesnotable toafford it.”

In the US, for example, people aged55-64 were found to be more likely to bebuyers of new cars than drivers aged35-44, according to a University ofMichiganstudyofsales from2007-11.

As with other forms of the shared

economy – such as Airbnb, the internetapp that allows homeowners to rent outspare rooms – car sharing is shaking uptraditional transport industries. Railoperators such as Deutsche Bahn, theGerman train company, have pushedthe boundaries and formed partner-ships with a wide range of car and bike-sharingschemesatrailwaystations.

Meanwhile, car manufacturers havealso invested in car sharing schemes.Daimler’s Car2go operates in about 30cities, while Peugoet Citroën, BMW andVolkswagen have also entered the mar-ket. Traditional car-rental companieshave introduced car-sharing services,includingHertzandUhaul.

However, variations are constantlyemerging. EasyCar Club, the creation ofSir Stelios Haji-Ioannou, founder of theeasyJet airline, and Brent Hoberman,the lastminute.com founder, allows carowners to make money by renting theirvehicles to other members when theyarenotbeingused.

Although the service only launched inBritain in February, the company sayssubscriber numbers have grown and itplanstoexpandtheschemetoEurope.

Youngergenerationmovesaway fromowning a vehicleCar sharing and hire

With cities becoming morecongested, schemes areexpected to expand rapidly,reports Gill Plimmer

Zip code: car sharing is taking off

J aguar Land Rover attracted theattention of global media lastmonth when Queen ElizabethII opened its £500m factory inWolverhampton, a homage to

the internalcombustionengine.On the same day, Honda held a party

in Swindon to celebrate an alternativetechnology, when it opened the UK’sfirst commercial-scale, solar-poweredhydrogenrefuellingstation.

The Japanese carmaker opened thesite, capable of producing 20 tonnes ofhydrogen a year, in an attempt to kick-start the adoption of ultra low-emissioncars intheUK.

Drivers have been put off hydrogenfuel cell and electric vehicles because oftheir cost and by fears they may becomestrandedwithnowhereto fillup.

Battery electric vehicles struggle tomatch the single-trip mileage of a petrolor diesel car. While hydrogen vehicles can achieve better distances, refuellingoptions are so limited that the technol-ogy is considered to be still in the dem-onstration phase. This lack of infra-structure is at the heart of the industry’sdrive to find a way to power cars in thefuture while meeting demands for loweremissions fromglobalregulators.

“I hate the phrase ‘chicken and egg’,but it explains the problem perfectly,”says Robin Hayles, sustainable fuel

development manager at Korean manu-facturer Hyundai. “There’s no point inhaving the stations if you haven’t got thecars,andthere’snopointhavingthecarsifyouhaven’tgot thestations.”

Hybrid vehicles have had some suc-cess – particularly in Japan, where theyaccount for one in every five new carssold, according to auto parts makerBosch. But pure electric cars are stillexpected to make up less than 1 per centof thetotalvehiclemarketby2020.

A survey by PwC of 1,500 car buyersin Germany, France and the UK foundabout 99 per cent would not considerbuying an electric car. There are only ahandful of hydrogen fuel-cell vehicleson Britain’s roads, so any infrastructureput in place would be serving futureneedsnotmeetingexistingdemand.

“Local authorities don’t want to beseen to be ‘wasting money’ on chargers[and fuelling stations] that may well notbe used,” says David Bailey, an auto-motive expert from Aston BusinessSchool. But there are signs that momen-tumisgatheringbehindbothzero-emis-siontechnologies.

A new generation of electric vehiclesis now on the roads, in the form of theBMW i3, the latest Nissan Leaf and theModelS frompremiumcarmakerTesla.

The Californian company set up itsown infrastructure to support custom-

ers. Tesla has installed 128 supercharg-ingstations in theUS,capableofa50percent charge in 20 minutes. Europe has87 Tesla superchargers and there are 34inAsia.Thecompanyhasagreements toinstall a further 500 chargers in Chinaalone, says ISIAutomotiveResearch.

Arndt Ellinghorst, head of globalautomotive research at ISI, says: “Teslaand its owners are a testament to thefact that the private sector can andshould support the necessary infra-structure, alleviating private and publicsector investments in costly hydrogennetworks.”

Alternative infrastructure options arealso emerging for public transport.Cities from Málaga to Milton Keyneshave tested dynamic inductive charginglanes for buses, which allow the vehiclestoberefuelledwirelessly.

Similar technology being pioneeredby tech group Qualcomm will be used inFormula E, the electric car racing cham-pionship, tochargevehicles inthepits.

Hydrogen cars, too, are improving.Hyundai last month launched the firstseries-production fuel-cell vehicle(FCV), the ix35. Toyota, which appearsto be stepping back from its partnershipwith Tesla, has also pledged to launchMiraiFCVintheUK,GermanyandDen-markin2015.

Governments in Europe, the US and

Japan have each made commitments tohydrogen technology. The UK, forinstance, last month announced £3.5m– to be matched by industry – for up tosevenhydrogenrefuellingstations.

It has also committed £2m to makeeight existing trial sites accessible to thepublic. The UK H2Mobility project saysabout 65 stations would ensure nationalcoverage. Even JSainsbury, the UKsupermarket chain, has announcedplansto installarefuellingpoint.

Yet the UK’s commitment is dwarfedby the Japanese plan to go from about adozen hydrogen stations today, to asmany as 100 by the end of March 2016underaY40bn($350m)scheme.

One danger for development of vehi-cle infrastructure is lack of consensusover which technology should prevail.Mr Ellinghorst says Toyota’s move intofuel-cell vehicles is likely to support thedevelopment of hydrogen infrastruc-ture to the detriment of electric vehiclechargingpoints.

But research has shown most electric-car charging takes place at home or theworkplace, says Tony Harper, head ofresearchat JaguarLandRover.

“This is actually quite good news,” hesays. “It means you don’t necessarilyneed an awful lot of infrastructure forelectric cars to become a viable optionformostpeople.”

Hydrogen andelectric vehiclesbattle forsupremacy

Infrastructure A shortage of recharging pointsthreatens new technologies, writes Andy Sharman

Gettingconnected: aTesla Model S isplugged inoutside thecompany’sfactory inCaliforniaJustin Sullivan/Getty Images

‘Localauthoritiesdon’t wantto be seento be“wastingmoney” onchargers’

Friday 21 November 2014 FINANCIAL TIMES 3

ContributorsAndy SharmanMotor industry correspondent

Chris BryantFrankfurt correspondent

Gill PlimmerReporter

Kana InagakiTokyo correspondent

Henry FoyCentral Europe correspondent

Jane WildTransport reporter

Tom MitchellBeijing correspondent

Tanya PowleyManufacturing correspondent

Rohit JaggiAircraft, car and motorcycle columnist

For advertising details, contact:Liam Sweeney on +44 (0)20 7873 4148,or email liam.sweeney@ft.com

The Future of the Car

World

EasternEurope

Asia

Source: LMC Automotive

Sales forecasts by major regionand per cent change, 2007-18

70.3m 102.9m 46.4%

1.3%

148.9%

5.4m 5.5m

South America

49.5%

3.9m 5.9m

North America

7.6%

18.9m 20.3m

48.1m19.3m

WesternEurope

16.9m 15.6m

-7.4%

Global car sales forecasts

decade at least. But the pressure meansadvances in clean technology areassured. Spending on connected orautonomous innovation, however,couldsuffer.

“You’re notgoing togeta fine fromtheregulator if you haven’t got a connectedcar by 2020,” says Mr Hendrikse.“Carmakers are going to be looking tocut costs wherever they can, but thefuture positioning of these companies isatstake.”

A study last month from Boston Con-sultingGrouppaintedableakpicture,asa number of manufacturers staged aretreat in the annual listing of theworld’s most innovative companies,elbowed out by tech and telecomsgroups.

But that was not for lack of trying.According to another report, from theStrategy& consultancy, six carmakersranked among the top-20 research anddevelopment spenders globally, andranked second only to healthcare as anindustry. Top of the list was Volkswagen– a company that plans to slash €5bnfrom its annual outlay at its core VWbrand by 2017 and which spent $13.5bnonresearchanddevelopment lastyear.

Clearly, carmakers know the impor-tance of evolution. “You need to inno-vate to stay alive,” says Colin Lawther,senior vice-president in Europe for Nis-san. “You create a new technology andtwo years later everybody has it. Thenyou have to innovate again to drive thebrandforward.”

The power train, the beating heart ofthe vehicle, is at the heart of change in

Continued from page 1 the industry. Electric cars such as theBMW i3 and the Nissan Leaf offer prac-tical, if still pricey, alternatives to theinternalcombustionengine.

Hyundai and Toyota are advancingthe case for hydrogen fuel-cell technol-ogy, with models coming out this yearandnext.

Autonomous technology is beingincorporated into cars at an advancingpace, from the Mercedes-Benz S-Class –Daimler’s luxury executive car, whichcan drive unaided in free-flowing andheavy traffic – to the latest Qashqai, Nis-san’s popular crossover 4x4, which cansee all round itself, brake automaticallyandspotroadsigns.

Tesla’s latest technology will meanthat drivers can summon their vehiclefrom the garage to pick them up at thedoor.

Carmakers are scrambling to employsoftware engineers as they vie to controlthe systems that will run the car of thefuture. According to Rogue Wave, a USsoftware group, the average luxury cartoday has more than 300m lines of code– compared with about 8m in the F35fighter jet.

But innovation comes with risks. Bythe end of July, carmakers had alreadybroken the previous annual record forrecalls, highlighting how regulators, andmanufacturers, are ever more sensitiveto safety issues. The number of patentsfiled for airbags and seat belts alonejumped almost 40 per cent in 2013,accordingtoReutersresearch.

Furthermore, high-tech car innova-tion must be accompanied by advancesin safety, say experts, to avoid the sce-nario of a vehicle being hijacked by acyberattacker.

“A successful hacking attack whilesomeone is driving a car? Thiswould . . . be a show-stopper,” saysRainerMehl,headofautomotiveatNTTData, the IT services group. “It has thepotential tohalt innovation.”

Automakers spy hazardsas sales face difficult times

300mLines of computercode estimated tobe found in aluxury car

$13.5bnSum Volkswagenspent on researchand developmentin 2013

C ruising on the highway inlight traffic, an autonomousvehicle suddenly brakeshard. But the “driver” is notworried that the car may

havemalfunctioned.The augmented reality windscreen

has marked in red a deer in the distancethat has stepped on to the road; thedriverreturnscalmlytohiscrossword.

Once the stuff of Hollywood movies,augmented reality windscreens are on thevergeofenteringproduction.

Head-up displays (Huds) projectinformation directly into the field ofvision, so the driver does not have tolook down at the instrument cluster.First used by pilots, these systems havebeen available in cars for more than adecade, first in more expensive vehiclesandthenhittingthemassmarket.

The information seems to float infront of the windscreen in exactly thespot a driver should look. Until now,Huds have tended to show only basicinformation generated by the vehicle,such as speed and navigation com-mands. But a new generation is set tofuse this with additional data from thecar’s cameras, radar and GPS. This is setto draw the driver’s attention to possibledangers, road features or points of inter-est, thereby giving the driver “aug-mented”visualpowers.

With navigation commands overlaidgraphically on the road ahead, youmight never take a wrong turn again.Think of it as an in-car version of aGoogleGlassheadset.

As well as improving safety and navi-gation, the industrybelievesaugmentedreality Hud systems will support“autonomous” driving – or letting thecar itselfhavemorecontrol, leadingper-haps ultimately to driverless cars – asHuds could make those in the vehiclesfeelmorecomfortable.

Marc Necker, manager of augmentedreality at Daimler, says: “There will besome customers who are reluctant to letgo [of the wheel]. By showing the cus-tomer what the car ‘sees’, we canincreasetrust inthesystem.”

Continental, the German parts sup-plier, is developing an augmentedreality Hud system that will be ready forproduction in2017.

This year, the Hannover-based com-pany demonstrated a prototype thatprovides full-coloursupport for thecar’sadvanced driver assistance systems,including a visual warning that the car isdriftingoutof its lane.

‘In an emergency, you do not want toshow information [about the danger]somewhere where the driver has to lookfor it – it needs to be in the field of view,”says Eelco Spoelder, Continental’s headof instrumentation.

The Continental Hud offers a largervisual plane than previous systems.Dashboard space has limited the size ofdisplays, as their complex and bulkyoptics systems must be stored below thewindscreen. Obscuring too much of thedriver’s field of vision is clearly notdesirable forsafetyreasons.

“Every object you place in the driver’sfield of view is potentially covering upsomething happening in the road,” saysHans Roth, director of technology mar-keting at the infotainment division ofHarman,asupplier.

Jaguar Land Rover is working to makedisplay units smaller and has also been

experimenting with a variety of scenar-ios for augmented reality. For example,it aims to make the bonnet of its SUVsappear transparent, to enable the driverto“see”theobscuredterrain.

“It’s about adding value to the driver.If you are off-road and can’t see a pot-hole, you drive into it,” says Lee Skryp-chuk, who specialises in such systems atJaguar. “This can help people who don’t

have the experience or knowledge todrive inparticularconditions.”

Augmented visual information is notsupplied solely by a Hud. The latestincarnation of the luxury Mercedes-Benz S-Class features a night-vision sys-tem in the instrument cluster. TheLCD display shows the road ahead andidentifies potential dangers such aspedestriansandanimals inred.

Heads up on latest in augmented reality displaysTechnologyWindscreens take on alife of their own andcould increase people’sfaith in driverless cars,reports Chris Bryant

“Video and head-up technology com-plement each other. The size of thehead-up display is limited, so you haveto think what you want to show there,”saysMrNeckeratDaimler.

Indeed, some of the most promisingaugmented-reality applications for thecar make use of smartphones and tab-lets, ratherthanin-car technology.

Metaio, an augmented reality tech-nology company based in Munich, hasbuilt a service and maintenance app forVolkswagen’s ultra-fuel-efficient XL1.Bypointingatablet’scameraat thecar,atechnician can see an image of the vehi-cle and its parts, and a virtual represen-tationof theworkstepsrequired.

“Augmented reality helps you under-stand an ever-increasing stream ofdigitalised information,” says ThomasAlt, Metaio chief executive. “This is nota gimmick, but driven by the need tomakeprocessesmoreefficient.”

In theory, the era of full vehicle auton-omy could allow an augmented realitywindscreen to show more informationabout passing points of interest. But fornow, drivers need to focus on driving, sodistractionmustbekept toaminimum.

“It’s going to be some time before thedriver can sit back, relax and watch amovie,”saysMrSkrypchuk.

Danger signs: a BMW simulation of a heads-up screen at work

4 FINANCIAL TIMES Friday 21 November 2014

The Future of the Car

In the world of cars, green typicallymeans “go”. But that does not apply tosupposedly environment-friendlyelectric vehicles, which have failed totake off as many had hoped.

Electric cars are considered by manyin the industry as the most likelyreplacement for internal combustionengine vehicles but drivers have giventhem a lukewarm reception. In mostcases, they make up less than 1 per centof sales in developed car markets.

“The demands and preferences of thedrivers clearly highlight the dilemmafaced by manufacturers,” says Phil

Harrold, partner in the automotivepractice at PwC.

He says carmakers need to changethe primary concern in buyers’ mindsfrom cost to conservation.

Nissan has been the most successfulto date by appealing to early green caradopters with its Leaf.

Caely Beecham, an analyst at LMCAutomotive, says: “While generallymissing sales targets, it has been,without doubt, the most successfulbattery electric vehicle so far.”

According to LMC, there were morethan 46,800 sales of the Nissan Leaf in2013, compared with 22,100 sales ofTesla’s Model S vehicle, the second mostpopular electric car.

Ms Beecham says that, like Toyota’sPrius, Nissan’s Leaf makes a statementby having a unique look, offering goodperformance and being well built.However, despite being the world’s

most popular electric car, sales havefailed to meet expectations.

Renault-Nissan’s chief executiveCarlos Ghosn said last year that saleswere at least four years behind targetswhich he blamed on the slow rollout ofsupport infrastructure. Poor sales alsoprompted Renault-Nissan to delay itsnext electric vehicle – an all-electricversion of the Renault Twingo.

Xavier Mosquet, senior partner in theautomotive practice at BostonConsulting Group, says consumers whoare more likely to buy electric vehiclesare typically buyers of expensive cars.

He says this explains the goodpositioning and success of Tesla. “Itsprice allows for enough battery capacityto give it sufficient range. It is also awell-designed car, with seven seats anda great consumer interface. Probablythe best choice if you want to feeldifferent,” he adds.

While most electric vehicles can onlydrive under 100 miles on a charge,Tesla’s Model S has a top range of about260-300 miles and can charge 80 percent of the battery in 40 minutes.

Car analysts also point to sales ofBMW’s i3 electric vehicle, which waslaunched in the US in April. LMC

Automotive says it sold more 9,600vehicles in 2014, up from 505 last year.

“BMW has been radical in the designof the i3 and this has resulted in betterperformance and range than the typicalbattery electric vehicle, Teslaexcepted,” says Ms Beecham.

Car experts say cost has been one ofthe main factors holding back sales.

“It is more difficult for mass-marketbrands to succeed in this field, becauseof the high cost of the electric vehiclebattery. This inevitably makes the carexpensive compared with conventionalrivals,” says Ms Beecham.

She believes the efficiency benefits ofsuch vehicles are often outweighed bythe cost. For example, a Nissan Leaf inthe UK costs about £25,000 beforegovernment incentives, while a petrol-driven Ford Focus with EcoBoosttechnology starts from about £18,295,according to LMC Automotive.

Range limitation and rechargingproblems also play a role. DavidRaistrick, head of UK automotive atDeloitte, says electric vehicles havebecome popular in places such asCalifornia because most people live insuburbs and have their own drive way,

so they can park securely and chargeovernight. He says: “The majority ofEuropean cities don’t work in the sameway. Roads aren’t equipped with thespace or the infrastructure to installrows of charging points.”

Many in the industry believecarmakers are shifting their focus awayfrom electric vehicles to plug-in hybrids(see story, below left). LMC Automotive’sforecast assumes plug-in hybrids willoutsell electric vehicles, as fewercompromises, particularly concerningrange, are required.

However, Mr Raistrick says there isno consensus on what will power thecars of the future. “Hybrid technology,diesel, highly efficient small petrolengines and hydrogen cells are allbeing developed as a way of achievinglower emissions and meeting theincreasingly strict regulations [being]imposed.”

Cost of electric vehicles outweighs their ‘green’ credentialsCustomer resistance

Manufacturers need to flagup environmental benefits,reports Tanya Powley

A little-noticed agreement,signed on the sidelines ofOctober’s Sino-German“joint cabinet” summitcould help determine the

shape of internet connectivity andautonomous driving – where vehicles dosome of the thinking – in the world’slargestcarmarket.

Deutsche Telekom, which agreed tobuild a car network with state-ownedChina Mobile, also hopes the deal willopen a backdoor on to a previouslyclosed market, illustrating the potentialopportunities stemming from advancesinconnectedcars.

The two companies will marry ChinaMobile’s nationwide 4G network to anoperating system Deutsche Telekomcurrently uses for 2m German vehicles.China Mobile, the world’s largest cellu-lar company, will have built the world’s

biggest 4G network, with 500,000 basestations and 50m subscribers, by theendof thisyear.

Liu Xin, head of China Mobile’s datadivision, says Deutsche Telekom’stechnology has been tested in the field,while his company is “confident thatsometime early next year we’re going toreach1m[4Gbasestations]”.

Internet connectivity in cars isbecoming more common globally.Deutsche Telekom and China Mobilehope their 50-50 joint venture willbecome a platform, like Apple’s iOS orGoogle’s Android operating systems,which third-party application develop-erscanbuildon.

“Based on our infrastructure you canbuild entertainment, TV, insurance andrepair services,” says Horst Leonberger,senior vice-president of the Germancompany’s T-Systems division, respon-

sible for in-car connectivity. While thesystem would allow other companies todevelop apps, the two partners wouldhope to take a proportion of any trans-actioncostsmadeovertheirnetwork.

They also want cars to talk to othercars through their operating system. MrLeonberger says that if enough vehicles,were “meshed” together Chinese driv-ers could avoid jams in the country’snotoriouslycongestedcities.Hereckonsthat 10 per cent of cars need to join,“because then you can really use algo-rithmstopredict traffic flows”.

There are currently about 180m pas-senger vehicles on China’s roads withabout20mbeingaddedeveryyear.

“If you are driving a Volkswagen and Iam driving a Mercedes, I would like toknow when you are braking,” Mr Leon-berger says. “Either the industry muststandardise the exchange of data, whichwould take a lot of time, or we establishan open system that can. That is the rolewe would like to establish with this jointventure.”

A more distant prize is the ultimatecreationofanetworkthatwill allowcarsto drive themselves, one that is alsobeingpursuedbyGoogle.

Competition to build a network thatcouldonedayenablecars todrive them-selves in the world’s largest car marketwill be intense. “It’s a wide-open mar-ket,” says Mr Liu. “A lot of companiesare attracted to the connected car busi-ness and all have their own view of howit isgoingtodevelop.”

“The main competitor is Google,” saysMr Leonberger. “That’s the real threat –if they can get access to enough cars. Ifthe car manufacturers don’t do any-thing or don’t co-operate, then Googlewill win. They have already the Androidplatform and the biggest cloud-sourcingcommunityout there.”

However,Google facesbigobstacles inChina. In 2010, the company aban-

doned the country’s internet searchmarket after deciding its famous “do noevil” ethos was incompatible withBeijing’scensorshipregime.

China-based internet users areredirectedtoGoogle’sHongKongsearchengine, which is routinely blocked byChinese censors, as are the Californiacompany’s Gmail services. Both canonly be accessed via virtual private net-work(VPN)tools.

The Chinese authorities would cer-tainly prefer a joint venture involvingthe country’s largest mobile operator topioneer future car-to-car networks andautonomousdriving.

“We have to obey government lawsand regulations,” says Mr Liu, a US-educated former IBM executive, whenhe is asked if the joint venture’s operat-ing system will offer VPN services sobored teenagers in the back can accessYouTube, Facebook, Twitter and othersites routinely blocked by governmentcensors.

“By doing that, I don’t think we’regoingtoreduceourability tocompete.”

It is no accident that China Mobile hasdecided to partner with DeutscheTelekomrather than, say,aUScompanysuchasAT&T.

Germany is China’s closest westernpartner and both countries share a com-mon disgust with the extensive US sur-veillance activities unveiled by EdwardSnowden, the fugitive former US intelli-gencecontractor.

The joint venture also gives DeutscheTelekom unique entry to a telecomsmarket – the world’s biggest – where for-eign investors are effectively barredfrom offering fixed-line and mobileservices, while being limited to 50 percent stakes in companies providing val-ue-addedservices.

It was always unlikely that such anopportunity would be extended to a USorUKtelecomsoperator.

China choosesGerman partnerto build mobiledriving networkCar connectivity Plan to develop operating systemcould generate big profits, writes Tom Mitchell

Gridlock: a mobile network connecting cars in China’s busy cities could helpease road congestion in the country – Larry Downing/AFP/Getty Images

Car buyers do not purchase vehicles assuch. A mature advertising machinemakes sure they are buying associationswithfreedom,potency,happiness.

All that may well be illusory – and agridlocked expressway on a rainy nightwould certainly reinforce that suspi-cion. But buyers sold on the idea of theendless highway are not likely to be sat-isfied with the thought of an electric carthat has a range of less than 100 miles,with an enforced downtime of two orthree hours to charge up enough foranother100milesorso.

Which is why the future, for now,resides in hybrids that can be plugged inbutcanalsorefuelatgasstations.

Some of the better hybrids are, more-over, changing car owners’ perceptionsnot just about how functional electriccars can be, but also how exciting. Ashining example of this is the BMW i8hybridsupercar.

A most un-supercar-sized three-cylinder, turbocharged 1.5 litre gasolineengine sits at the back, its 231 horse-power driving the rear wheels. A 131hpelectric motor drives the front wheels.The electric motor on its own can propelthe car at up to 75mph and the batteriesalonecantake it23miles.

However, when the internal combus-tion engine joins in, the i8 needs to belimited to 155mph, and can deliver a0-62mph time of 4.4 seconds. The effectisalmostseamlesspower.

The additions to this near-£100,000plug-in hybrid are also arresting –vertically opening doors add to thesupercar looks.

Crucially, the i8 is helping to reverse

wariness about electric cars and its haloeffect is shining on the other electric orhybrid cars in BMW’s range, which arelessattractivevisuallyanddynamically.

The similar Lamborghini Asterion“technology demonstrator” super-sports car, its 5.2 litre V10 enginesupplemented by electric motors, willalsohelpshiftelectriccarsoutof thecat-egoryofworthybutdull.

The perception of cars being emo-tional accessories is deeply ingrained.But working with that perception,rather than hoping to overturn it,increases the chances of electric vehi-cles gaining the acceptance they needand, inmanycases,deserve.

To see Rohit Jaggi’s test drive of the BMWi8online, go to: ft.com/futurespeed

Sleek hybrids are likely to be thefuture of motoring – at least for nowOpinion

Carmakers need to play onthe emotions of potentialbuyers, says Rohit Jaggi

It is more than two centuries since thefirst electric battery was invented, butreductions in production costs havebeen surprisingly slow to arrive and therace for smaller, safer and more power-ful car batteries has produced few win-nerssofar.

An unlikely pair that emerged as topcontenders in the rechargeable lithiumionbatterymarket thisyear:SiliconVal-ley electric vehicle start-up TeslaMotors and Japanese electronics con-glomeratePanasonic.

Tesla, co-founded by billionaireentrepreneur Elon Musk, has defiedconvention with the success of its sportyModel S electric car, which claims to beable to travel three times further on asingle charge than other electric vehi-cles that average less than 100 miles percharge. Despite a $70,000 price tag,Tesla has sold nearly 25,000 Model Sunits since 2012 and expects to sellanother33,000thisyear.

Its success also stems from usingPanasonic’s laptop batteries and com-bining these with its own technology forcooling battery heat and linking powercells to deliver faster charging and big-ger storage. The vehicle floor is packedwith thousands of Panasonic’s cylindri-cal18650lithium-ioncells.

Using a readily available commercialtechnology with an established record isa low-risk strategy for Tesla, sayanalysts, and the batteries have a costadvantage, as they can be mass pro-ducedinexisting factories.

Thanks to its deal with Tesla, Pana-

sonic’s share of the battery market forplug-in hybrids and pure electric vehi-cles stood at 36 per cent in the thirdquarter, followed by AutomotiveEnergy Supply Corporation – a jointventure between Nissan and NEC, an ITcorporation, both of Japan – with 28 percent, according to Lux Research. Pana-sonic’s share was only 3.5 per cent at theend of 2011, when AESC held a 47 percent share following the launch of theNissanLeaf in late2010.

“The winner right now is probablyPanasonic,” says Lux Research analystCosmin Laslau. “What sets it apart isreally good technology – and it pickedtherightpartner.”

Better known for televisions, Pana-sonic’s links with the auto industry dateback to the 1950s. In the hybrid sector,where nickel-metal hydride batterieshad been common, the Japanese manu-facturer supplied batteries to Ford,Honda, Volkswagen and Peugeot. It alsosupplies box-shaped, prismatic lithiumion batteries for Toyota’s plug-inhybridsandAudi’sQ5.

Historical links and a strong record inconsumer electronics have benefitedAsian manufacturers in a conservativeindustry that usually takes more than a

decade of testing to become comforta-blewithanewbatterytechnology.

The market has been brutal to start-ups without the capital to survive theslow adoption of electric vehicles; bat-teries make up nearly three-quarters ofthe vehicle price. In the past two yearsalone, US battery makers A123 Systemsand Ener1 as well as electric-car ventureBetterPlacehavefiledforbankruptcy.

With its$5bnbatteryplant inNevada,Tesla will work with Panasonic to bringdown the costs of battery packs by 30per cent, which will be needed to hit theprice target of $35,000 it has set for itsthird-generation vehicle that will have arangeofat least200miles.

Still, analysts warn Panasonic’s leadcould easily be shaken. LG Chem ofSouth Korea, which supplies batterycells for General Motors’ Chevrolet Voltplug-inhybrid, isworkingona200-milerangebatteryforanelectricvehiclewithapricetagof$30,000-$35,000.

Next-generation battery technologies– from lithium air to dual carbon – arealso on the horizon after 2020, whichcould vastly change the competitivelandscape.

A Tokyo-based start-up, Power JapanPlus, has developed a battery thatclaims to charge 20 times faster thanlithiumionbatteries.DubbedtheRydendual carbon battery, it uses carbonmaterials made from naturally grownorganic cotton. Since the battery doesnot contain rare earth or heavy metalssuch as nickel, it promises lower costsand durability. As the temperature isstable during operation, there is areduced risk of the battery catching fireor exploding. However, analysts say itwill take years for carmakers to haveconfidence inthenewtechnology.

Other promising technologies includelithium sulphur battery cells beingdevelopedbyUKfirmOxisEnergy.

French billionaire Vincent Bolloré ispromoting an all-solid-state lithiummetal polymer battery, deemed saferthan lithium- ion batteries. Renault willbegin producing Mr Bolloré’s Bluecarelectricvehicle in2015.

“Once these technologies are [com-mercially available], the market willstart opening up and that’s when we’llsee who the real winner will be,” saysVishal Sapru, research manager atconsultancyFrost&Sullivan.

Strong relationships and solid recordsboost Asian battery manufacturersPower technology

It can take years of testingbefore automakers arecomfortable with newproducts, says Kana Inagaki

46,800The numberof Nissan Leafcars soldin 2013

Under 1%Market share ofelectric vehiclesin developedcountries

The Ryden dualcarbon batteryuses carbonmaterials made oforganic cotton

Two-wheel vehicles have run ahead oftheir four-wheel counterparts in therace to populate segments of themarket for electric propulsion.

A tilting three-wheeled Piaggio MP3scooter was the first plug-in petrol-electric hybrid vehicle on the market,in 2009, on two, three or four wheels.

The Swiss MonoTracer E cabinmotorcycle was effortlessly achieving250km of range at real-world, highmotorway speeds two years ago or so.

However, the path has not beensmooth – the MP3 hybrid sufferedsluggish sales for example – butincreasingly competent electric two-wheelers are appearing. Take thosebeing made by US manufacturersBrammo and Zero Motorcycles (whichis claiming nearly 300km of urbanrange for one of its bikes). The UK-made Agility Saietta R is another two-wheeler that impressed me recently.

Even Harley-Davidson is testingopinion among its notoriously change-resistant enthusiasts for a prototypeelectric motorcycle, the LiveWire.

What seems clear is that the range

and rideability of plug-in electricmotorcycles is on an upward trend.Indeed, the fact many two-wheelersare used as commuters or sunny-daytoys means the transition to range-limited electric power may not be toogreat a problem for many riders.

Another favourite of futurists isvehicles that might also fly andprojects that could come on to themarket within a few years include theUS Terrafugia Transition and theSlovakian AeroMobil.

However, a three-wheeler thatconverts into a gyroplane, for shorttake-off runs and almost verticallandings, may beat them to market.

The Dutch PAL-V, tilting, enclosed-cabin two-seater may be ready fordeliveries in 2016. If that happens, thefuture will indeed have taken off.Rohit Jaggi

Electric propulsionWhy two and threewheelers could have aflying start over theirlarger counterparts

Sky’s the limit: the PAL-V