Which Automotive Technology Will Win?

IN THE ENVISIONED TRANSITION away from gasoline-powered cars, Nissan's CEO Carlos Ghosn firmly believes the next technological paradigm will be electric motors. Mr. Ghosn calls hybrids a "halfway technology" and suggests they will be a temporary phenomenon at best. A number of startup companies, including Tesla Motors in the United States and BYD in China, share Ghosn's belief in this future scenario. One of the biggest remaining impediments to large scale adoption of electric vehicles, however, is the lack of appropriate infrastructure: There are few stations on the roads where drivers can recharge their car's battery when necessary. With the mileage range of electric vehicles currently limited to some 200 miles, many consider a lack of recharging stations a serious problem (so called "range anxiety"). Tesla Motors and others, however, are working hard to develop a network of superfast charging stations. Nissan's Mr. Ghosn believes electric cars will account for 10 percent of global auto sales over the next decade. In contrast, Toyota is convinced gasoline electric hybrids will become the next dominant technology. These different predictions have significant influence on what technology they decide to back and how much money Nissan and Toyota invest in that technology. Nissan's fully electric vehicle, the Leaf (an acronym for Leading, Environmentally friendly, Affordable, Family car), built at a plant in Smyrna, Tennessee, was introduced in 2010 in Japan and in 2011 in Europe, the U.S., and Canada. As of 2013, the Nissan Leaf is the best-selling all-electric car, with global sales of some 100,000 units. Toyota is expanding its R&D investments in hybrid technology. Toyota has already sold some 4 million of its popular Prius cars since they were first introduced in 1997. By 2020, Toyota plans to offer hybrid technology in all its vehicles. Eventually, the investments made by Nissan and Toyota will yield different returns, depending on which predictions prove more accurate. An alternative outcome is that neither hybrids nor electric cars will become the next paradigm. To add even more uncertainty to the mix, Honda and BMW are betting on cars powered by hydrogen fuel cells. In sum, many alternative technologies are competing to become the winner in setting a new standard for propelling cars. This situation is depicted in Exhibit MC12.1, where the new technologies represent a swarm of new entries vying for dominance.Only time will tell which technology will win this standard battle. DISCUSSION QUESTIONS Review Chapter 7: Business Strategy: Innovation and Entrepreneurship.

1. For how many more years do you think that the gasoline engine will remain the dominant technology?

2. What factors do you think will be most critical in setting the next industry standard for car propulsion? (what will determine which technology will win)?

3. Which one of the competing technologies mentioned in the case do you think will win? Why?

4. If this happens and your predicted technology wins, what will change / what will it mean for the future of:

a. Oil companies?

b. Car manufacturers?

c. Gasoline stations? 

d. Consumers?