Differentiation Via More Gears
Gasoline did not hit $5 or $6 this summer in the US this summer as some hoped and others feared.
In time though, the immutable laws of supply and demand are bound to collide with growing global demand. One way for automakers to future-proof themselves is to create hybrids, electrics and go away from hydrocarbon based locomotion.
But the problem is that such technology is still expensive and despite tax subsidies (in the US), hybrid cars and electric cars are at least a few thousand dollars more expensive, and consumers need to drive 10-15 years just to break even on the premium paid. So except for a small slice of consumers that is gung-ho about green technology, the vast majority of consumers here and likely elsewhere are technology agnostic and what they really want are more miles from the same gallon of gas or liter of petrol they pump into their cars.
Chrysler, under CEO Sergio Marchionne may have just the solution to this conundrum: More gears.
In an article on Bloomberg, one of Chrysler’s VPs says:
Eight-speed transmissions, more common in luxury vehicles made by the likes of Bayerische Motoren Werke AG (BMW) and Volkswagen AG (VOW)’s Audi, will spread throughout Chrysler’s lineup beginning late this year, said Mircea Gradu, vice president of transmission powertrain and driveline engineering. The company will introduce the industry’s first nine-speed transmissions by the first half of 2013, he said.
This is a very innovative move on Chrysler’s part, with many advantages.
One, their investments in this new technology are going to be significantly lower compared to developing a brand new hybrid car. Two, they mitigate the risk of trying to market hybrids and competing with established heavyweights such as Toyota. Three, most importantly, they are going to quickly differentiate themselves with consumers that are going to have one less reason to think of an expensive hybrid to achieve much higher gas mileage when a Chrysler brand car offers something in the same ballpark for a few thousand dollars less (the 300 and the Charger were already able to achieve up to 31 mpg, per the article). Four, it buys them time and if this move helps them be fiscally health in the long-run, they can piggyback on other hybrid or electric advances a few years from now and leapfrog ahead (for a cost, of course) without the risk or a lot of pain. Five, it enables them to quickly comply with the new federal mileage requirements (that are a few years away from taking effect) and new emission requirements.
It always amazes me how innovative companies can get when faced with tough competitive environments and other challenges…
Increasing the number of gear ratios is but one of multiple means of achieving superior fuel economy. Indeed, the one extreme of having multiple gear ratios is a CVT which technically has infinite gear ratios. Chrysler spent mutli-millions trying to develop this technology but with utter failure. On the other hand, they did very very little to introduce smaller engines (which are more effective in addressing fuel economy) to market while Ford and GM was crowding the small engine segment with the Focus, Aveo etc.
I’d say, Chrysler is very very late to this game. They usually do a better job differentiating themselves with the Dodge and Jeep brands. All the best to Chrysler though – hope some Italian finesse rubs off an otherwise macho type mindset!