Gasoline Efficiency or Hybrid Electrics: Which Should Have Higher Priority?

There is a great deal of public and political enthusiasm for hybrid electric vehicles.  This is founded on the idea, no doubt true, that hybrid electric vehicles can reduce gasoline consumption and dependence on imported oil in the United States.  But are they the best short term solution?   In the summer of 2008 when gasoline exceeded four dollars per gallon in the U.S., there was a surge of interest in smaller, more fuel efficient cars and hybrid electric cars.  Gasoline prices have returned to about two dollars a gallon, but many consumers now believe it is only a matter of time before prices go up again.  Previous gasoline crises, however, have shown that consumers have a very short memory for pain.  Based on past behavior, there is a good possibility that consumers will return to larger cars, pickup trucks and SUVs if gasoline prices stay low for three or four years.  To be ready for that possibility and still be able to reduce pollution and dependence on foreign oil, it is essential that those vehicles have better fuel mileage.   There are several emerging technologies that can significantly improve the efficiency of gasoline engines in the short term: gasoline direct injection; dual clutch transmissions; electronic valves and electrically powered auxiliaries for example.  Together these technologies could improve gasoline mileage by 15% to 25%.  The engineering investment to bring these technologies to market is much less than the investment needed to further develop hybrid electric cars.  Cars with more efficient gasoline engines will cost less than hybrid electric cars; and the automobile companies will make a profit on them, which many believe will not be achievable for hybrid electric vehicles for five to ten years.   As pointed out in the recently published Semico study MA102-09 titled, “Hybrid Vehicle Electronic Control: Keeping the Current Going,” hybrid vehicles will be a very good opportunity for the semiconductor industry.  The revenue for semiconductors used in hybrid electric vehicle control systems will triple from 2008 through 2013.  Semico believes that hybrid electric car development should be continued, but there are practical problems.   

Automobile companies worldwide are having financial problems.  They are short on cash and losing money so badly that some are in danger of bankruptcy.  It is going to be difficult to find engineering development money.  Although hybrid electric vehicles may be a better long-term solution to gasoline consumption and pollution problems, Semico believes that improving gasoline engine efficiency should have priority in the short term.  It promises quicker results for less investment by the auto companies, while their available engineering development dollars are severely pinched.  The semiconductor industry wins in either case because most of the technologies necessary to improve vehicle efficiency will require some form of electronic control. 

Morry Marshall

Senior Automotive Analyst