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In some ways, the 2008 North American Automobile Show was like most other recent major auto shows. Once again, automakers went out of their way to show us how hard they are trying to protect the environment and reduce our dependent for foreign oil.
General Motors and Toyota lead the rhetoric. Each claims to have a broad spectrum of programs that range from alternate fuels for internal combustion engines to full electric vehicles. I have to weigh in on this issue, because I’m seeing two strategies that are very different and tell you a lot about the companies they come from.
General Motors spent a lot of time talking about Ethanol, and is clearly lobbying for greater distribution outlets for the fuel. Has GM chosen to expend their efforts in a political battle to increase the availability of Ethanol as their primary tool to solve this issue? Ethanol-capable vehicle conversion is inexpensive, but the end result may leave consumers unsatisfied. Surprisingly, Rick Wagoner, GM’s Chairman, advocated Federal regulations mandating ethanol distribution across the country (won’t Iowa be proud?).

Toyota has clearly spent a lot of time, engineering effort and marketing to gain consumer acceptance in Hybrid technology. While some may criticize the early cost/benefit analysis of hybrid technology, consumers have embraced it. Isn’t consumer acceptance the ultimate arbiter of the best product? Furthermore, each hybrid vehicle sold reduces the development cost of hybrid technology, and every penny increase in a gallon of gasoline shortens the breakeven point for owners.
Between these two technologies, I have to side with hybrids for several reasons. Most important, hybrid’s focus on consumers first.

Hybrid
1. It’s easiest for the consumer. No special involvement required. Therefore early adoption leads to market penetration.
2. It’s already popular. Remember Betamax? Popularity is more important than technical superiority.
3. Internal combustion engines will end. Current investment in battery research is at an all-time high for a reason. Most long-range thought in ground transportation is aimed towards electric motors, which are simple, provide excellent torque and last for years.
Ethanol
1. Availability is currently an issue. Less than one percent of the nation’s 170,000 fueling stations carry ethanol. Most of these are in the Midwest. Until this issue is resolved, adoption will be slow.
2. Vehicles running on ethanol get an average of 20% fewer miles per gallon. This lower range can be translated into a price per gallon that is between mid-grade and premium, according to AAA. Many consumers will likely reject more frequent stops at the pump, thus slowing adoption further.
3. Ethanol’s effect on the environment and human health is unclear. According to Mark Jacobson, a Stanford researcher, E85 vehicles actually increase ozone levels. According to his research, which was updated last year, a full shift to E85 fuel in the United States would result in a mild increase increase in respiratory deaths.
4. More research is needed to gauge the economic effects that ethanol production will have on the price of grain. Pitting food against fuel is a serious game. Also, will comparative advantage lead to US outsourcing of grain to meet our ethanol requirements? “Organization of Grain Exporting Countries” sounds a lot like OPEC to me. GM announced at the show they were teaming with Coskata Energy a venture capital startup to convert biomass to ethanol. This would reduce dependence on corn-based ethanol and reduce garbage at the same time.
Coskata’s promotional blurb is below:
The Next Generation of Ethanol – Efficient, Affordable and Flexible
Coskata is a biology-based renewable energy company. Our technology enables the low-cost production of ethanol from a wide variety of input material including biomass, municipal solid waste and other carbonaceous material. Using proprietary microorganisms and patented bioreactor designs, we will produce ethanol for under US$1.00 per gallon.
I’m willing to bet the engineers at General Motors and Toyota come up with a better next step using Hybrids than battling the political and economic challenges that are faced by Ethanol. Time will tell about these two different approaches, but let’s not forget Ford’s EcoBoost system that is somewhere in between the GM and Toyota systems. See our story on EcoBoost from January 9, 2008.