It’s too quickly to say goodbye to inside combustion

Oliver Wyman consultants argue that ICE automobiles are the money cows funding the trade’s transition into an electrified, software-dominated future

Main automotive markets are witnessing a speedy adoption of electrical automobiles (EVs). In Europe, battery EVs accounted for 9.1% of automotive registrations in 2021, and laws are in place to permit solely gross sales of zero-emission automobiles starting in 2035. However that leaves greater than a decade when automakers will nonetheless search for a major chunk of their annual gross sales to come back from inside combustion engine (ICE) automobiles. This consists of extra environmentally acceptable hybrid vehicles, which depend on ICE alongside EV batteries for energy.

Automotive firms recognise this and don’t have any plans to desert inside combustion powertrain manufacturing quickly. But, some wish to minimize off their funding in ICE and car platform R&D and focus all their sources on EV development. This could symbolize a missed alternative to enhance the effectivity and cut back the environmental affect of these ICE automobiles nonetheless to be manufactured, offered, and pushed for a few years to come back. These automotive gross sales—which at this level are extra worthwhile to producers than EVs—are the money cows funding the trade’s transition into an electrified, software-dominated future. Automakers can’t afford for that income stream to say no.

The place ought to automakers focus

Additional technological improvements are, actually, needed to permit inside combustion vehicles to stay part of the gross sales combine. Consequently, slightly than run away from ICE innovation, carmakers should develop methods to attain it effectively with out additional stretching already thinly unfold sources (and suppliers) or trying to clients to make up the distinction.

A assessment of state-of-the-art analysis exhibits numerous applied sciences may very well be leveraged to attain effectivity enhancements. These may result in potential reductions of CO2 emissions from ICEs of between 10% and 15%, relying on the car class, our calculations present.

Mazda has been clear that it plans to proceed on its “ceaseless quest to develop the best combustion engine”

Among the many methods a number of the new applied sciences obtain these positive aspects is thru enhancements in exhaust fuel recirculation, waste warmth restoration, and exhaust fuel thermal administration. Further emissions reductions will be realised by incorporating into fashionable engine design the benefits of low-friction coatings, superior turbocharging and turbo compounding, electrical consumption cam phasers, water injection, and pre-chamber ignition. By leveraging the benefits of longer strokes, variable compression ratios, leaner combustion, or fashionable variants of the Miller or Atkinson cycles to a larger extent, emissions may doubtlessly be decreased even additional.

By implementing such ICE improvements, we estimate that about 16 grams of CO2 per kilometer (gCO2/km) of emissions may very well be diminished compared to the present engine know-how era in a typical ICE-powered C-segment automotive. That is previous to any additional drivetrain electrification. In different phrases, this interprets right into a saving of over 1,800 kilograms of CO2 over a ten-year utilization interval if the numerous potential of at present out there applied sciences is leveraged to enhance upon the present Euro 6-TEMP customary.

This could indicate that in Europe alone, a complete of just about 60 million tons of CO2 emissions may very well be eradicated by means of ICE innovation alone. That is roughly what all vehicles in Spain emit in a complete 12 months, or the equal of taking greater than 4 million inside combustion vehicles off the highway. These applied sciences may show important, on condition that carmakers should cut back CO2 emissions 55% by 2030 in contrast with 2021 ranges.

Fairly than run away from ICE innovation, carmakers should develop methods to attain it effectively with out additional stretching already thinly unfold sources

Getting on the identical web page

That mentioned, there are various views on the event and financial feasibility of those improvements. Some trade consultants, together with The Worldwide Council on Clear Transportation (ICCT), consider that the required applied sciences are largely out there and possible, whereas others argue that the price of implementation could be too excessive for a lot of car segments. However given the potential financial savings, additional funding to resolve the disagreement appears warranted.

In parallel, extra superior applied sciences are additionally at present being investigated. This consists of utilizing artificial or e-fuels in ICEs. Present estimates recommend that the change would end in fewer emissions in contrast with a corresponding Euro 6 ICE car at this time.

Some gamers are additionally investigating the usage of hydrogen as a gas for combustion engines, which might be a zero-emission choice. Whereas this different continues to be fairly costly, there may very well be potential  with particular use instances and area of interest functions.


Oliver Wyman ICE
Determine 1: Examples of ICE improvements and their tailpipe emission discount potential

Nitrogen oxide efforts

Other than CO2 emission reductions, regulatory focus can also be on nitrogen oxide (NOx) emissions, with the following undisclosed iteration of Euro 7 targets anticipated to be way more stringent. The brand new laws are prone to come into impact within the second half of this decade, which leaves automakers to guess what to intention for within the meantime.

Present emission management programs already convert NOx emissions with over 99% effectivity in freeway driving situations, however additional work is required to cowl larger emissions in city driving situations. Applied sciences, reminiscent of bigger catalyst volumes, continued powertrain hybridisation, and superior aftertreatment, are being developed to this finish.

Business consultants estimate that such improvements will be carried out with out too many prices. For example, the ICCT estimates that an entry-level, gasoline-powered automotive can obtain higher cold-start emissions utilizing a small electrical catalyst heater costing a further €150 (US$160), whereas adoption of 48V programs at round €600 may help diesel mild automobiles obtain Euro 7 compliance.

Reaching the correct R&D steadiness

Whereas there’s a clear case for persevering with to put money into ICE improvements primarily based on regulatory compliance alone, carmakers and their suppliers are severely resource-constrained and should concurrently deal with creating future EV know-how and architectures. Because of this, trade gamers are going to should consolidate efforts round these choices that supply the perfect probability to increase the lifetime of this sunsetting know-how.  There isn’t any aggressive or strategic benefit in creating ICE platforms in-house or in silos. In opposition to this backdrop, we see three strategic instructions rising.

In Europe alone, a complete of just about 60 million tons of CO2 emissions may very well be eradicated by means of ICE innovation alone

Firstly, carmakers want to hunt trade partnerships, even with rivals, in order that they’ll consolidate volumes and unfold prices, by means of shared engine platforms. Providing ICE platforms to different gamers may help carmakers generate scale by means of third-party enterprise. This will also be adopted for the ICEs utilized in hybrid automobiles with drastically decrease numbers of ‘{hardware} variants’ — referring to powertrain choices from which clients can select.

Ultimately, this could result in ‘final man standing’ enterprise fashions, with a single participant taking duty for improvements and growth of the engines and turning into the popular provider for a number of carmakers. One international engine producer is already adopting such an strategy within the industrial car sector. Specialised funding funds may doubtlessly be enticed to finance such enterprise fashions.

Secondly, carmakers can shift the locus of innovation with nations like China or India turning into the brand new epicentre of ICE innovation. A number of main carmakers have already got intensive R&D presence in these nations to leverage their plentiful engineering expertise base.

Rising markets and new entrants

Markets outdoors Europe and North America account for about two-thirds of annual international automotive gross sales however may have longer instances to transition absolutely to zero-emission automobiles. Though China has been aggressive on EV adoption, carmakers there are additionally creating new ICE platforms.

Restricted or delayed emissions regulation in elements of Asia and Africa—with Thailand and South Africa two examples—necessitates contemplating new plant places there, whereas the South American market may doubtlessly focus extra on biofuels. Shifting the epicentre of ICE innovation would assist carmakers deal with this demand over the long run.

Audi e-fuels
Audi has been creating a spread of other fuels to be used in ICEs

Lastly, a shift is already evident within the powertrain methods of a number of carmakers. Whereas new entrants are focusing totally on pure electrical or hybrid automobiles, a number of the smaller carmakers in Europe with modest gross sales volumes have taken daring choices to completely electrify their portfolio a lot earlier. A possible, albeit dangerous, different for others may very well be to modify to extra nascent applied sciences like e-fuels or hydrogen-powered ICEs

Whereas ready for the longer term

Whereas it’s more and more evident that battery-powered EVs would be the dominant powertrain know-how for mild car section sooner or later, that future has not but arrived. Vehicle manufacturing is at present in a transition interval by which ICE and EV should coexist.

Given that there’s little probability we will skip this step, a compelled and untimely cease in ICE R&D may undermine what the worldwide economic system is attempting to attain by means of a change to electrification. To assist the trade make it by means of the transition, extra readability and stability in regulation is required, with  clear, dependable, and lifelike timelines on ICE phaseout and emission discount.  A great working example could be the Euro 7 targets and timeline.

This can permit automakers to leverage as a lot new know-how as attainable to make inside combustion much less of a burden on the atmosphere and extra of a plus for the auto trade and its clients.

Concerning the authors: Simon Schnurrer is a companion and automotive professional at Oliver Wyman, primarily based in Frankfurt.  Srinath Rengarajan and Thomas Schiel are automotive consultants at Oliver Wyman, primarily based in Munich.

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