[natefish]

Peak Oil Investments I'm Putting My Money On: Part X, Improving Vehicle Efficiency

According to Dr. Sperling, in the last twenty-five years, auto manufacturers have made great strides in engine efficiency... but they have used the progress to deliver more power at the same MPG, rather than increasing MPG. Since 1985, average fuel economy has dropped 5%, while vehicle weight has risen 29% and average horsepower has increased 86%. That's what makes vehicle efficiency easy: even without further advances in engine efficiency, we could greatly increase fuel economy by just returning vehicle weight and horsepower to 1985 levels.

In February, our own John Petersen provided a list of technologies for increasing vehicle fuel economy, compiled from a report by Robert W Baird & Co. The table shows nine different technologies, many of which can be combined in a single vehicle which increase vehicle efficiency an average of 12.5%.
Efficiency
Hybrid Electric Technologies Gain
Prius-class strong hybrids with idle elimination, electric-only launch, recuperative braking and acceleration boost. 40%

Insight-class mild hybrids with idle elimination, recuperative braking and acceleration boost. 20%

Engine Technologies
Direct Fuel Injection (with turbocharging or supercharging) delivers higher performance with lower fuel consumption. 11-13%

Integrated Starter/Generator Systems (e.g. stop-start systems) automatically turn the engine on/off when the vehicle is stopped to reduce fuel consumed during idling. 8%

Cylinder Deactivation saves fuel by deactivating cylinders when they are not needed. 7.5%

Turbochargers & Superchargers increase engine power, allowing manufacturers to downsize engines without sacrificing performance or to increase performance without lowering fuel economy. 7.5%

Variable Valve Timing & Lift improve engine efficiency by optimizing the flow of fuel & air into the engine for various engine speeds. 5%

Transmission Technologies
Automated Manual Transmissions combine the efficiency of manual transmissions with the convenience of automatics (gears shift automatically). 7%

Continuously Variable Transmissions have an infinite number of "gears", providing seamless acceleration and improved fuel economy. 6%

The table shows it should be possible to increase fuel economy by the 40% from 2009 levels by 2016, as required by current law using only engine and transmission technologies. Hybrid technology, smaller vehicle size, light weighting, low rolling resistance tires, better aerodynamics, or reducing engine power could each increase efficiency further. Hence, automakers have a wide variety of potential strategies to meet the 2016 targets with existing technology. While this plethora of options is good news for automakers, it is not all good news for investors. With the wide choice of existing options for increasing fuel economy, it's difficult to foresee which technologies will bring the greatest returns to investors. Further, few of these technologies are proprietary to any single publicly traded company.