Innovation In Product Markets Commerce Essay

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Humans throughout the ages used a variety of ways for land transportation. In the last 150 years, we have achieved great engineering progress and were able to evolve carriages to machines called cars. While disruptive and radical technologies are very imaginative, most technological progress has been made by continuous incremental improvement of available technology, products and processes (Utterback, 1994). Throughout the decades, several resources were used to power cars like petrol, gasoline, ethanol, alcohol, electricity or a combination of them. Due to pollution though and environmental problems, new measures are needed in transportation. This report will focus on electric cars impact on the environment, while analyzing whether electric cars can contribute to environmental sustainability or not. We start with a brief historical flashback to uncover the evolution of the contributing technologies to the existing form, followed by a brief discussion about the environmental problems that cars have caused. Then we will analyse the opportunities and the options for electric cars to save the environment while simultaneously trying to reveal the technological trajectories and technological discontinuities that led to the current state (Dosi, 1982), followed by a conclusion. What follows is a travel back in time to see the evolution of cars, and more specifically of electric cars.

Figure 1.1: Photo of Electric car charging.

2. Electric cars & History

In over 100 years of inventions, such as the telephone, radio, television and computers, the automobile clearly influences our world. Different technologies have emerged throughout the decades, and electric car was one of the most significant in auto industry. The term electric vehicle refers to the system of propulsion. Full electric vehicle (EV) - has only an electric motor and uses no fuel. Though, many may consider hybrid-cars in the same category as electric cars, but on this report we will treat hybrid cars as an intermediate step towards the full electricity-powered vehicles (Grossman et al., 2009).

Electric cars, even though may seem as a new innovative technology, which has the ability to save the environment, it is not. Between 1832 and 1839, Robert Anderson of Scotland invented the first crude electric carriage, powered by non-rechargeable primary cells (figure 2.1). However, it was not until 1881 in France that G.Trouve made the first electric vehicle to be powered by a secondary plante battery. In 1897, electric vehicles found their first commercial application in the U.S. as a fleet of electrical New York City taxis, built by the Electric Carriage and Wagon Company of Philadelphia. Even at that time people had already realised that it would be unsustainable in the long term to use the finite resources of our planet as fuel for running cars (Anderson and Anderson, 2010).

Figure 2.1: First electric carriage.

Electric car is a radical innovation that was evolved from the traditional car by replacing the internal combustion engine (Doll, 2008). Additionally, electric car was a competence destroying discontinuity as it rendered obsolete the expertise required to master the technology that it replaced. However, nowadays we see many incremental, competence enhancing innovations on electric cars to increase their efficiency (battery improvement etc) (Tushman and Anderson, 1986).

Figure 2.2: Photo of Thomas Edison with an electric car, 1913.

Acceptance of electric cars was initially hampered by a lack of power infrastructure, low distance range and long hours of charging restrictions. As a result, development of electric cars was abandoned. For these reasons, they did not become dominant design for cars in the market. Instead, combustion engine cars became dominant. In recent years though, someone can clearly see that there is a wave of innovation and acceptance in electric cars. Due to pollution, global warming, oil prices and the general long-term sustainability, electric (mostly hybrid at the moment cars) are encouraged.

Figure 2.3: Photo of First electric cars charging, 1913.

3. Electric cars & Environment

The transportation sector is one of the largest emitters of greenhouse gas emissions. According to last projections, the world fleet will triple by 2050, primarily due to the increase in demand across developing countries (Bento, 2010). Even though the conditions to adopt electric-cars a few decades ago were unsuitable and the technology was insufficiently developed, now we can see a rebirth of this same concept. On the beginning (mid 19th century), the driver of innovation was supply rather than demand. The reason was that people were not fully aware yet of the environmental damage that they and the future generations would cause. The conditions now are more favourable. Across the world, consumers are pushing for alternative transportation, because of economic and political reasons and to aid the global struggle against the processes of climate change (Grossman et al., 2009). In these terms, we can understand that the driver of innovation this time is demand and more specifically inchoate demand (Utterback, 1994).

Contrary to the trends in most other sectors, greenhouse gas emissions caused by the transport sector are still increasing, and are predicted to grow further in the coming years, if current policies are not changed (Kampman et al., 2010). As there is no single solution to the challenge of achieving CO2 reductions in transport, it has become clear that a large range of efficient and effective CO2 reduction measures will have to be taken. In the coming years, electric and plug-in hybrid vehicles could play a significant role in this move towards sustainable transportation. If these vehicles run on renewable electricity, they could substantially cut CO2 emissions and improve local air quality. Compared to internal combustion engine technology (ICE), battery electric vehicles (EV) have a number of benefits for both the transport sector and the environment. The first one is the large range of energy sources, including all types of renewable energy, in combination with high-energy efficiency. Then, there is a great potential for sustainable and carbon neutral (CO2-free) mobility if powered by renewable energy sources in order to reduce emissions. Finally, less or no air pollution (depending on the type of power production) and lower noise levels could be achieved (Kampman et al., 2010).

4. Analysis

4.1 Electric cars

Can electric cars save the environment? To answer that question we first need to analyse some features of the electric cars, and establish a unified thinking framework. Even though electric cars have been originally created in the mid 19th century, they still have not become dominant design in the automobile industry (Teece, 1986). Now, electric vehicles (EV) and hybrid vehicles (HV) are challenging the dominance of ICE cars, although they are not totally new technological options (Midler, 2010). The rate of product innovation in electric cars is high and is still in the fluid phase (figure 4.1) (Geroski, 2003, Utterback, 1994).

Figure 4.1: Rate of Innovation

In addition, the adoption rate of electric cars is still low (Appendix 3) which means that they are still in the transitional phase between introduction and growth phase on the diffusion curve of the product life cycle as seen on figure 4.2 (Harrell, 1981).

Figure 4.2: Product Life cycle

4.2 Future technology with yesterday's infrastructure (Standards - Lock-in)

Some say, the reason electric cars' sales have yet to achieve high volumes of sales is that they need a high investment on infrastructure (power plants, renewable energy, and charging stations) in order to be fully functional and realistic. On the other hand, some others say that it would be impossible to have the infrastructure ready in a few years and still have old transportation technology. That means that electric cars will have to wait until the infrastructures are ready, to be fully functional. In the meantime, hybrids are conquering the market. Hybrids are frequently considered as an intermediate step towards fully electric powered vehicles or fuel cell cars. They are not restricted to a particular technology, but can make use of improvements in battery as well as in common combustion engine technologies. Hybrid vehicles combine the today's infrastructures with tomorrow's technology. Even though they are not as green as pure electric cars, this transitional phase is needed. However, electric or hybrid cars cannot be very revolutionary in their design. They face some constraints of the established standards, technological lock-in and path dependance. They have to satisfy the needs that are established throughout the decades with the existing cars and should fit the existing and future infrastructures as well. Electric and hybrid cars face shape, size, driving range, features, refuelling, and design constraints due to established standards that everyone are expecting to have on their cars. Electric cars according to Robin Cowan and Steffan Hulten, have the potential to overthrow (escape) the technological lock-in dominance of ICE cars, but they also argue that ''to escape lock-in, it is not enough that the competing technology is better ''(Cowan and Hultén, 1996).

4.3 Environmental impact

The type of electricity production used to charge the batteries of the electric car (EC) is important. If electricity is produced from lignite or coal, CO2 emissions are typically higher than or equal to the emissions of a comparable internal combustion engine car. When the electricity comes from gas-fired power plants, emissions are significantly lower. Electricity from renewable sources, such as wind, solar or hydro energy, would result in zero CO2 emissions. ECs can be environmental friendly with zero emissions but with the right infrastructure. If this is combined with a shift in renewable energy then ECs will have succeeded their goal (Appendix 2). Oil consumption and associated CO2 emissions will decrease and this would result a more environmental sustainable transportation solution (Kampman et al., 2010). But all these need the right initiatives and policies.

4.4 Policy Instruments

Policies could be implemented to ensure that the additional electricity production for these vehicles is 100% 'green'. The best policy option is national regulation to ensure that renewable electricity targets are increased by the additional amount of electricity consumption from ECs. For example, governments or car dealers can promote the voluntary purchase of green electricity by electric car owners while electricity suppliers, local governments and companies that own and operate charging points can ensure that renewable electricity is used for charging these cars. National governments could support these developments, for example through fiscal policies (Kampman et al., 2010). However, there are always some limitations.

4.5 Limitations

Even though electric cars seem promising, in reality, governments and private-sector companies seem to be doubtful. The range allowed by the capacity of the battery is not large enough for certain populations; for example it could be a problem for taxi drivers, [1] . The batteries used are expensive and increase the price of the vehicle. Also, the battery waste need to be properly disposed. The time that it takes to recharge the battery is huge compared with the minutes spent on the gas station with today's cars. In addition, some say that the top speed or acceleration in ECs is not as good as the traditional cars. Some new models though like Tesla have overcome these problems and they are actually better than many internal combustion engine cars (Appendix 1). The main problem that remains is that ECs still need electricity to move. Electricity comes from power plants, which now are not environmental friendly and cause pollution. If this intermediate problem is not solved then the efficiency and environmental friendliness of the ECs is doubtful. CO2 emissions will continue to be a major issue indirectly from the consumption of electricity from the ECs from power plants (Kampman et al., 2010). However, some countries seem to be taking action already.

4.6 Steps towards the future

According to Economist magazine, in 2011 the world's most populous country and one of the world's smallest countries, China and Israel, have both drawn the conclusion that the electrification of transport is a critical step in moving towards a more sustainable future, breaking the inexorable connection between economic growth and oil dependence. China wants to avoid the vulnerabilities of an economy built on imported oil and to clean its urban centres of pollutants largely produced by exhaust pipes. The Chinese government has set a goal to become the number one producer of electric cars by 2012. In August 2010, the country announced that it had commissioned 16 state-owned enterprises to begin building the electric-vehicle industry (Economist, 2010). In 2011, Israel with the support of the government, will implement the world's first nationwide battery-switching and vehicle-charging network. The infrastructure created allows drivers to switch depleted batteries for full ones in less time than refuelling with gasoline. As a result, electric cars no longer require drivers to buy expensive batteries or to worry about limited driving distance. Their success could point the way, proving that political will and leadership can combine to create a cleaner future (Economist, 2010). Great Britain has also joined the countries willing to contribute. Mr. Sean Poulter, a report in Daily Mail newspaper wrote in 2010: ''David Cameron, Great Britain's prime minister, recently confirmed the Government would go ahead with a £20million grant to help Nissan build electric cars in the North East''. As part of the drive to replace petrol and diesel-powered cars, a Government incentive scheme also offers those who buy electric vehicles a £5,000 rebate. There are also plans to spend millions on building a network of charging points in London and other cities''(Poulter, 2010). However, not all these plans may work in the long term due to competition from hydrogen cars.

4.7 Competition

According to Nuno Bento, it is possible for the hydrogen car to replace the conventional one and become the dominant standard in the automobile in the future. If the electric car is the first to enter dynamically in the market, it can build an important consumer base, which, through increasing returns to adoption, will block the diffusion of the hydrogen car later. That leads us to the conclusion that, the diffusion of hydrogen cars is possible if there is not a major technological breakthrough in batteries or green energy factories, which would mean diffusion of ECs. Meanwhile, the plug-in hybrid vehicle is the only electric car that can compete with the fuel cell vehicle now, as it is closer to the market. Its early deployment in the presence of network effects could block the entrance to the market for hydrogen cars in the future. Governments should ensure that technologies have the same opportunity to show their potential, and then let the market choose the better one (Bento, 2010).

Figure 4.3: BMW's H2R - futuristic hydrogen car

5. Conclusion

Throughout this report, we have seen different perspectives for the ECs and the environment as well as their evolution through time. We analysed their limitations (standards and infrastructures) and their potential benefits to the environment and we can conclude that electric cars alone cannot save it. Lack of corporate wisdom and oil companies lobbying are keeping the adoption rate to low levels. If the introduction of electric cars is accompanied by an introduction of renewable energy power plants and appropriate 'green' infrastructures, then they could become fully functional and reduce emissions to zero. In addition, we analysed the main competitors of electric cars (hydrogen-powered cars), as well as some existing or planned policies around the globe. If we realise that for the long-term sustainability of our planet, and the reduction of gas emission, a more sustainable living is required then we could achieve our goal, which is to save the environment. Electric cars are a great step towards achieving the goal but more actions are needed. They can contribute towards a greener planet, but an overall radical change is needed to achieve their maximum potential. However, many countries seem to be taking initiatives, which is encouraging sign for the future of our planet.

Figure 5.1: Green Planet

6. References

7. Appendix

Appendix 1:

Comparison between electric & hybrid car models.

Appendix 2:

Projections for CO2 and Petroleum reductions by 2020 with Electric and semi-electric cars

(, 2010)