How Porsche Plans To Keep Its Gas-Powered Cars On The Roads

[Music] it's been around for more than 50 years a flagship model of a brand that has commanded an unmatched loyalty from fans with unique engineering a strong racing pedigree and a long lasting Heritage of rear-mounted combustion engines but in the middle of an EV Revolution how can a brand so linked to the technology of the past survive Porsche thinks it may have the answer [Music] in late March 2023 the European commission was approaching a deal to ban internal combustion engines by 2035. but there was one crucial holdout at the very last minute Germany held up its hand and said it refused to approve the standards what Germany wanted and obtained was an exception for a new kind of Technology called e-fuels it works just like gasoline but is made in a factory with carbon captured from the atmosphere opponents say that makes it carbon neutral it turns out Porsche an iconic German automotive brand has invested more than 100 million dollars in the development of e-fuels we cannot reach the fleet emission targets regarding CO2 by improving technique on the combustion engines it was not sufficient so we thought about how can we reduce the CO2 footprint the idea came up to work on synthetic fuels to replace fossil fuels in our cars he fuel is another name for synthetic fuel that's fuel that has been manufactured rather than extracted from crude oil the process starts with extracting hydrogen from desalinated seawater and then combining the hydrogen with carbon extracted from the atmosphere this creates methanol which can be used as a fuel for some applications such as shipping using another process the methanol can be upgraded to gasoline or other fuel types Porsche partnered with Siemens energy and Exxon Mobil among others to produce the fuel the partnership produced the hif highly Innovative fuels project led by Andes Mining and energy a company based in Chile there is a pilot project in the magayanas region of Chile an area on the southern tip of the country wind is exceptionally abundant there two turbines in the area can produce the same amount of energy as six in Germany we love electric vehicles new electric vehicles Meg gentle is the executive director of the board of hiff global the U.S holding company created in 2022 to develop the e-fuels projects originally founded by Chilean power company AME 260 million has been invested in development stage Capital by Porsche EIG Baker Hughes and gemstone Investments so we're trying to tackle decarbonization of that existing Fleet and then we'll be you know migrating essentially our e-fuels production into the shipping sector and into the aviation sector in December the Chilean plant began producing its first fuels two Porsche board members marked the occasion by ceremonially filling a Porsche 911 sports car with the first fuels produced by the factory commercial operations began in March 2023 during the pilot phase about 130 000 liters will be produced per year Porsche will buy all of that for its Motorsports programs and programs at its tracks and off-road course facilities known as Porsche experience centers between 2026 and 2028 more than 1 billion leaders will be produced between the plant and Chile one in Texas and another in Australia there are some challenges though a key piece of equipment the electrolyzer that breaks the water down and extracts the needed hydrogen is not available at the scale the project needs to ramp up getting carbon dioxide out of the air is a challenge too you need to have the technique for direct air capturing this technology is in fact not as far developed as the other technical parts so this is a kind of a challenge to make this technique available and through the scale up somewhat of a jewel in the automotive world it's an exclusively premium brand the cheapest car starts at about sixty thousand dollars and it has a strong Heritage in racing engineering and design they've always delivered on their brand promise and queued very closely to their Roots which is delivering a very engaging highly Dynamic well-engineered sports car [Music] foreign that started with the 356 it's extended all the way to current 911 and they've they've been true to that through even the products that they branched out into like the the Panamera four-door sedan the Cayenne SUV and most most recently the the tycon electric vehicle and because of that everybody knows what a Porsche does car people know this um and they get excited about it they're very loyal spun out a Volkswagen group in an initial public offering in September 2022 Porsche has since watched its market value surpass that of its former parent shares climbed more than 40 percent from the IPO to late April 2023. so why e-fuels after all many signs point to a phase out of internal combustion vehicles in 2022 the International Energy agency reported that already about 25 percent of the global car market was subject to either a 100 zero emission vehicle sales Target or an internal combustion engine ban by 2035. that was before the March EU decision American states like California and countries such as Canada Chile and Costa Rica have also proposed Bans [Music] Porsche's home country of Germany was Europe's largest ev Market in 2022. EVS accounted for 25 percent of all new cars sold in the country and Germany has some of the highest subsidies for EVS in Europe Europe's total Eevee share of new car sales is 17 percent VW group the second largest automaker in the world still owns 75 percent of Porsche's stock the two companies share the same CEO Oliver bloom in March 2023 VW reiterated its big bet on EVS by announcing that two-thirds of its 193 billion dollar five-year investment plan will go toward electric vehicles and digitization EVS made up 11 of Porsche's sales in 2022 and in part because of that relationship with VW Porsche is making money on the EVS it sells the secret behind is that Porsche they simply have access to to Volkswagen scale effect uh because the company still intends for 80 percent of its sales to be electric by 2030. one exception to this perhaps the main exception is the 911 sports car it is considered Porsche's Flagship model and arguably the one over the last several decades most responsible for Porsche's powerful reputation 911 makes up 13 of Porsche's total sales volume and in its various forms tends to command very high prices you think of the Corvette you think of the Mustang those are very American models you think of the 911 that's a global model that's a that's a model that every every country collectors or car enthusiasts aspire to the 911 is built around its unusual engine configuration While most vehicles have an engine in the front of the car and many sports cars have one mounted toward the middle the 911's engine is mounted closer to the rear of the vehicle this configuration with the engine in the rear makes it very hard to build a comparable electric analog without essentially creating a totally different car and that could be a problem for its customer base 911 buyers tend to be very interested in in the lineage of the car and anytime there's been a major change in some of the technology behind it there's been a bit of an upwork if possible and if the regulatory conditions are are good and the customers want for Porsche it would be an absolute option to keep the 911 as a combustion engine car for for a longer time another reason Porsche might be interested in e-fuels it helps keep classic Porsches on the road and preserves the strong Enthusiast culture around the brand there is an off-cited statistic that more than 70 percent of all Porsches ever built are still on the road nobody counted these these cars it's I think it's not possible but we are very confident that most of the cars are still running Porsche has a strong reputation for reliability and given its Heritage it's a brand beloved by collectors hagerty's average insured value for a Porsche is about one hundred thousand dollars significantly higher than other brands the total value of all 2 600 911s sold at auctions throughout North America in 2022 was 335 million dollars an average of one hundred twenty seven thousand dollars per car [Music] the second most valuable name was the Chevrolet Corvette selling for an average price of about seventy four thousand dollars the company has a whole business in restoring and providing parts for classic Porsches Porsche's other argument for e-fuels is that there are about 1.3 billion gasoline burning vehicles on the roads worldwide today it could be decades before the full Global Fleet transitions completely to EVS let alone their die-hard fans who tend to keep their cars for as long as possible the fleet renewal is not that high that we are fast enough to reach the climate Targets in the complete transport sector and therefore we are looking for a additional option to reduce the CO2 footprint of the existing car Fleet but e-fuels may be easier said than done the international Council on clean transportation is a non-profit that researches decarbonization Technologies according to the group only 52 percent of the electricity the energy that goes into the fuel production process is actually captured in the final fuel the rest is wasted on top of that 70 of the energy in the fuel itself is wasted when it burns in the engine that means that only 16 percent of the total available energy is used so if you were to start with 100 energy units in renewable electricity from solar panels 48 of those energy units would be lost when converting the electricity to e-fuels that would leave 52 units in the fuel itself burn that in the engine and now 70 percent of those 52 units or 36 units are lost as heat during combustion that leaves only 16 units to power the wheels compare that to electric vehicles about 19 percent of available renewable energy is lost during the charging process and another 20 percent is lost to the motor when the car is driven so 72 percent is still available I do agree that e-fuels have a lower you know Energy Efficiency than fossil fuels the benefit is that it has such a better Carbon outcome and then the second like big consideration is that much of this energy is being 100 percent wasted today and all over the world we could give examples of solar and wind that is just like Blowing by and not being used so whatever we can use we think is a step forward but the problem really comes down to the fact that it's an inherently expensive and inefficient Technologies and so there's just no way that as electric vehicles keep getting cheaper and are supported by policies that any consumers are are going to want to choose the more expensive gasoline vehicles running on these extraordinately expensive fuels producing e-fuels today would cost consumers something like ten dollars per gallon at the pump Porsche's CEO Oliver Bloom has said prices could be as low as two dollars per liter or 7.57 cents per gallon depending on the scale of production I think it's it's understandable that the e-fuels are high at costs but if we do the industrialization if we do the scale up we are sure that we can get competitive even if we take into account that fossil fuel has an impact on the climate change we're definitely bringing that cost down in several ways so um first we have a benefit from the support that the U.S you know tax credits are bringing from the inflation reduction act we view that quite frankly as an investment from the American people in creation of a new industry so we have to take this time and reduce the cost in production to low-hanging fruit to go after first one is the cost of producing the hydrogen one is reducing the cost of capturing the carbon dioxide the goal is to be like right on parity with fossil fuel price plus whatever the value of carbon is in the market renewable energy costs can be controlled in part by choosing locations where a natural energy source such as wind or sunlight is plentiful and competition for that resource is scarce hence the Chile plant which is in one of the windiest regions of the world costs may come down over time such as in the cost of the electrolyzer the device that breaks water down and extracts hydrogen but that can only do so much according to the icct the bulk of the costs will come from generating renewable electricity and there are limits to how much those can fall what we're really worried about is that automakers are using e-fuels as an excuse to delay electrification which is the solution that we really need to decarbonize Road Transport as quickly as possible even those skeptical of e-fuels for Road use say there are applications in some areas of Transportation specifically in aviation and Marine aviation in particular is a really difficult sector to decarbonize we expect to see some penetration of electric planes on really short routes and maybe some penetration of hydrogen but there's really not that many good options while ships don't quite pose the same challenges they are still tougher to Electrify than cars there's huge potential everywhere where battery electric doesn't work because of the wage you can't fly planes with batteries it could be the best solution for very expensive cars is like proportion 911 but the cost factor is less relevant it's very hard to argue that in any environment any setup is the best solution it will not replace electrification in general Porsche has proven it can sell an impressive electric product the ticon has been a huge success but Porsche's real challenge lies ahead of it the taikon was not a product that was replaced in an existing Porsche the challenge is now coming with a Macan and then the Cayenne into 71a they are replacing existing Porsche models with combustion engines and only then you will find out how loyal your customers are and with everyone who bought the 718 was a combustion engine going forward by an electric 718 maybe that's a bit of the risk factor that's different from the Titan launch and then I set the 911 is then again as a special car even within the Porsche portfolio because that's the the identity of watch brand and that's why what they wanted to keep as a commercial engine and maybe that's even more important than the argument about the architecture of the car and the the weight on the reaction [Music] foreign

Channel: CNBC

Views: 326,025

Keywords: CNBC, CNBC original, business, business news, finance, financial news, money, economy, news station, porsche, efuels, hif, germany, automaker, auto, green gasoline, synthetic fuel, high-end car, transportation, driving, technology, fuel

Id: a7z3NF7dIdw

Length: 17min 7sec (1027 seconds)

Published: Sun Apr 30 2023