US carmakers grapple with CNG vehicle demand

December 29, 2013 3:33 pm

US carmakers grapple with CNG vehicle demand

By Robert Wright in New York

US carmakers are struggling to reconcile customers’ growing interest in running vehicles on newly abundant natural gas with the logistical challenges of supplying the technology for the still-niche market, according to senior automotive executives.The interest in compressed natural gas vehicles is the result of a gas glut following theshale oil and gas

revolution. New drilling techniques have unlocked vast, previously inaccessible gas supplies in shale rocks.

Normal vehicles can use the plentiful fuel – which produces fewer greenhouse gas emissions than petrol or diesel fuel – with the addition of large fuel tanks and minor modifications to the engine. Big customers can sign long-term contracts to buy natural gas at low prices.

However, Chrysler, smallest of the big three US carmakers, is offering only one vehicle with a CNG fuel option, while General Motors, largest by sales, is offering only a few models.

Chris Collins, director of advanced power trains for Chrysler, said that Chrysler was confident in CNG’s long-term future as a fuel. While other manufacturers handed work to install CNG equipment to smaller, after-market suppliers, Chrysler was building a CNG-powered pick-up truck on its own assembly lines.

“We’re the only factory-manufactured supplier of CNG trucks,” he said.

GM was offering only “a handful” of pick-up trucks, two full-size vans and the Chevrolet Impala passenger car with CNG, Mark Maher, GM’s chief engineer for power train integration, said.

The company was working with after-market suppliers but wanted to keep tight control of the work, according to Mr Maher.

“We want to make sure that we’re presenting to the customer a complete solution that’s fully evaluated and so forth,” he said. “That has to a certain degree limited the number of offerings we can provide.”

Only Ford, the US’s second-biggest carmaker by sales, is offering a comprehensive range.

Jon Coleman, Ford’s sustainability manager for fleet sales, said it was using after-market suppliers to install CNG equipment and offering the “broadest portfolio of vehicles” it could.

“Commercial companies understand that relationship,” Mr Coleman said of after-market suppliers.

All of the companies attributed the limited demand for CNG vehicles to the shortage of CNG filling stations and the cost and size of the fuel tanks.

The limitations were restricting demand mainly to commercial fleet operators with their own fuelling stations, Mr Maher said.

“It’s going to be constrained and a very small percentage of the light-duty fleet for the foreseeable future,” he said.

However, John O’Dell, a senior editor at Edmunds.com, the car information site, said that if those challenges could be overcome the attractions were significant.

“Natural gas is as close as possible to a no-compromise replacement for gasoline or diesel,” Mr O’Dell said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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