28 April 2008

Magna Proposes Plug-in Hybrid

An article by George Keenan in the Globe and Mail has revealed that Magna International Inc., the huge Canadian automobile parts manufacturer, is proposing to build a plug-in hybrid vehicle by 2010. The owner, Frank Stronach, was interviewed by Keenan and stated,

New technologies such as hybrids offer a great market for Magna's parts and its ability to build complete vehicles, Mr. Stronach said in an interview, noting that cars with Magna-developed hybrid engines are already being tested in Europe. "You don't have to be a great scientist to know that we're going to be out of oil sooner or later," Mr. Stronach said.

The effort is being fronted by Magna Steyr in Austria. Steyr actually builds complete vehicles that are badged under other manufacturers. Magna is budgeting $30 million for the effort, which is hardly insignificant when you consider it's only over two years, even for corporate research (i.e. no cheap graduate student labour). Overall I think that their project will be late, however, unless their goal is simply 'proof of principal'. That said, Magna claims to already be working on the project, so who knows how long they've kept this under wraps. Magna is also involved with the Tesla Roadster.

My personal suspicion is that Magna is looking to get into the hybrid parts business, and developing a complete vehicle is a way for them to achieve this. Magna has previously stated that they think hybrid sales will top 1.7 million a year by 2013. Right now Ford's hybrid efforts are stymied by the fact that most of their supply chain is Japanese. GM will have similar issues with the Volt.

This project is largely simply good business practice by Magna in the face of increasing fuel costs. The article makes clear that the viability of a plug-in hybrid is a function of the difference between the price of oil and the price of gasoline. Fortunately, plug-in hybrid technology can be rolled out in small increments, gaining market share first from the early adopters and then through economic advantage as the price of batteries declines and gasoline increases.

I did take a look at the comments in the article (probably a mistake), and I was a little annoyed to see that people were suggesting that we didn't have the electricity or power would be supplied by "Ohio coal plants." Practically, all the early adopters of plug-in cars can be recharged by the idle capacity that exists and night-time. Giant thermal plants aren't easily throttled down, so there is typically a surfeit of power that is otherwise wasted at night. In the future, plug-ins can be aggregated to act as 'deferrable demand' for the power utilities, smoothing out the intermittency of solar and wind power, and allowing greater market penetration from those technologies.

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