To evaluate the performance and costs of advanced vehicles, OTA conducted a series of
calculations based on physical principles and cost accounting methods. The performance
calculations are explained in more detail in appendix A. Briefly, most vehicle fuel economy
calculations follow the work of GM Research Laboratory scientists Sovran and Bohn,^2 who
derived an equation for vehicle fuel consumption over the Environmental Protection Agency
(EPA) test cycle. Fuel economy calculations for so-called parallel hybrids--vehicles that have two
separate power sources driving the wheels--require more sophisticated computation, and OTA’s
estimates for these vehicles are rougher approximations than those of the others.
OTA’s cost calculations derive a “retail price effect” (RPE) of new technologies--the change in
retail price that would occur if a new technology is substituted for a baseline technology when
designing a new vehicle--based on tracking variable and fixed costs from component supplier to
vehicle assembler to sales outlet. This methodology uses an approach followed by industry and
regulatory agencies. A primary assumption in the analysis is that the industry is competitive
enough that manufacturers earn only the normal returns on capita1^3 --that is, they are not able to
charge a premium because no one else has the technology. The estimated RPE may not
correspond to a particular model because companies sometimes subsidize one model or size class
with another; however, the RPEs should be good reflections of the industry average.
Types of Vehicles Examined
The discussion first establishes a baseline--vehicles believed to be representative of the mass-
market fleets in 2005 and 2015 without shifts in energy policy, large changes in oil prices, or
major technical breakthroughs. As will be seen, these vehicles are projected to be both more
efficient than today’s and superior in safety, acceleration performance, and other characteristics
important to consumers. The projected improvements are based on an evaluation that they make
market sense under an assumption of oil prices rising at a moderate pace, either because fuel
savings are sufficiently high (at sufficiently low cost for the improvements) to attract consumers,
or because the improvements add value to the vehicles in terms of performance and other
customer attributes.
Four kinds of advanced vehicles are then discussed that might have the technical potential to
enter the marketplace in this time frame, if very strong research and development efforts were
pursued:
l Advanced conventional vehicles. These vehicles have conventional drivetrains--internal combustion
engines (ICES) and transmissions--but each part of the vehicle is substantially improved from today’s
and is superior to what otherwise would be expected in this time frame.
(^2) G. Sovran and M.S. Bohn, "Formulae for the Tractive Energy Requirements of Vehicles Driving the EPA Schedule," SAE paper 810184,
February 1981. 3
These returns reflect the oligopolistic nature of the auto industry, and are somewhat higher than they would be if the industry were perfectly
competitive.