ETF Trends
ETF Trends

The next 25 years of automotive powertrain technology belongs to the internal combustion engine, according to oil & gas giant ExxonMobil. While many will dismiss this as the wishful thinking of an industrial dinosaur, it’s worth remembering that 25 years isn’t that long of a timeframe in the automotive world.

As we speak, automakers are already planning for what products will be on the market within the next decade. As it stands now, they must meet increasingly stringent emissions targets in the United States and the European union by 2025, in the form of both CAFE and the next round of Euro regulations that call for a fleet average of 95 grams of CO2 per kilometer (for comparison, a Toyota Prius emits about 100 grams per km).

One way of meeting this target is through the use of hybrid technology – a sector that ExxonMobil sees as making rapid, substantial gains over the years. At this point, every single OEM has some kind of hybrid technology that can be adapted to their volume models in a way that is efficient in terms of both packaging and cost. This is sure to be the case for plug-in hybrid technology as well.

The zero-emissions front is substantially more fraught. The battle between battery electric vehicles (BEV) and hydrogen fuel cell vehicles has barely begun, but supporters of the two camps are already locked into a Betamax vs. VHS style conflict. As it stands, there is minimal infrastructure for both systems, and a combination of low oil prices and consumer skepticism is likely to stall its growth for the foreseeable future. And while BEVs technically have a head start on hydrogen, their market share is, in real terms, negligible.

In 2013, BEVs had a market share of just 0.28 percent, or about 260,000 units. Even the relatively scarce plug-in hybrid segment managed to best pure electrics, with 0.31 percent of the new car market. Only in Norway, where BEVs receive heavy subsidies in the form of tax breaks, have electric cars made any real headway, and even then, they have barely cracked 6 percent.

While tales of daring and disruption and averting cataclysmic climate change make for great headlines, the reality is that technological progress, especially in the automotive sector, moves at a much more gradual pace – otherwise, we’d likely have seen a major breakthrough in EV battery technology by now, one that would allow for significant range and negligible refueling times. Utopian visions of a fleet of silent, zero-emissions vehicles are just that. Instead, we are likely to see a proliferation of hybrid technology throughout new model lineups – and much of this will likely be driven by regulatory inputs, as a means of helping vehicles meet government mandated fuel economy targets, even if consumers don’t necessarily care.

Advances in the internal combustion engine are also on the horizon. Homogenous Charge Compression Ignition (HCCI) engines, which allow for diesel-like combustion while running on gasoline, are expected to debut on Mazda cars by 2020. Mazda claims that they will provide a 30 percent fuel economy boost, while significantly lowering emissions. Between HCCI, increasingly cleaner diesel engines and incremental improvements to traditional engines, the ICE powertrains are likely to be ubiquitous due to their familiarity and what is sure to be a cost advantage. Barring any major, prolonged spike in energy prices or a wholesale shift in attitudes towards climate change and the environment, dollars and cents (not to mention sheer convenience) will remain the primary motivating factor in new car purchases. And that means that the internal combustion engine is well placed to continue its dominance through the next quarter century.