SEMA News - April 2010

Interview By Steve Campbell

Looking Forward With John Waraniak, SEMA Vice President of Vehicle Technology

	Steve Pruitt's American Le Mans Series Corsa Motorsports Zytek Hybrid. Photo courtesy of American Le Mans Series

Vehicle technologies are accelerating as rapidly as an American Le Mans Series racer exiting a hairpin onto a straightaway. The new watchwords for automotive development include vehicle electrification, hybrids, gas direct injection (GDI), clean diesels and next-generation green performance. For SEMA-member companies, the landscape is erupting with innovation and opportunity. But where is it all going? Where are we now, and where are we headed? We asked those questions and many more when we sat down recently with SEMA Vice President of Vehicle Technology John Waraniak.

SEMA News: Where does the industry stand currently regarding advanced vehicle technologies? What systems should SEMA-member companies be aware of, especially concerning the four megatrends—driving green, connected, safe and cool—that we’ve been talking about for the last 18 months?

John Waraniak: Our industry hasn’t seen this much change and opportunity since it began 100 years ago. Every part of virtually every SEMA business is affected by advances in active-passive safety systems, connected-vehicle technologies and alternative powertrains. This is truly one of the most exciting times to be in the automotive specialty-equipment industry—particularly if you are an enthusiast and really have a passion for cars, trucks and the automotive lifestyle.

This is a new day, with new players and new rules that favor quick, agile and smart companies that can outperform the big and slow companies with products and solutions that answer immediate and short-term industry and consumer needs as well as more mid-term and future trends. As evidenced by the bankruptcies at General Motors, Chrysler and many original-equipment suppliers, there will be fewer giants, more startups and infinite opportunities for those SEMA companies and entrepreneurs that find innovative ways to leverage this once-in-a-career convergence.

Driving green, connected, safe and cool continue to lead the way in describing the four major dimensions of growth that the auto industry is focused on as it restructures. Green performance and connected-vehicle technologies are two of the fastest-growing segments within SEMA and are aligned with the automakers’ and U.S. government’s priorities for mobility, safety, environment and consumer acceptance. The new generation of clean diesels, GDI turbocharged engines, gas-electric hybrids and plug-in electric vehicles are leading the reinvention of the automobile for performance aftermarket companies and bold new automakers, as are programs such as the U.S. Department of Transportation’s IntelliDrive(SM) and products such as MyFord Touch, Lexus Enform and mbrace from Mercedes-Benz.

The road to accelerating the deployment and commercialization of electric vehicles and creating a critical mass of connected vehicles that can communicate with one another to prevent crashes goes right through SEMA. Making connected and electric vehicles cool and demonstrating their benefits is the fastest way to ensuring consumer acceptance, reducing costs and driving the profitability and growth of the electric-vehicle industry, connected-vehicle technologies and emerging markets segments.

	Simon Saba, CEO and founder of Saba Motors in San Jose, California, shown here with Terri Waraniak, wife of SEMA’s John Waraniak, exhibited his Progressive Insurance Automotive X Prize vehicle at the 2009 SEMA Show in November and is a leading competitor to win the coveted $10 million X Prize.

Hybrids and electric vehicles have to connect with consumers’ lifestyles and experiences. Consumers will not adopt a new technology unless it’s better in every way than what it’s replacing, and anecdotal evidence of emerging markets does not drive consumer acceptance. Logic and traditional OEM business, revenue and organizational models alone won’t get us there. We need an emotional connection to the new generation of eco-friendly vehicles.

Most of today’s marketing of electric vehicles is focused on two things: function and cost. Value is defined as the intersection of the two. Now don’t get me wrong, value is certainly an important factor and prerequisite, but it’s not the deciding motivational factor. Electric vehicles must win the minds as well as the hearts of consumers in order to be accepted. The Apple iPhone illustrates that point. It provides value as well as personalization and social currency. I don’t know what sustainable marketing of hybrids and electric vehicles looks like yet, but the cool factor is certainly central to their success and acceptance.

Advanced vehicle technologies, such as connected vehicles and electric propulsion, follow a “hype cycle” of development and deployment consisting of five phases that describe how and when technologies move beyond hype and become acceptable.

First, there is a technology trigger point, where a breakthrough, product or concept vehicle is introduced that generates significant interest and buzz. That creates a peak of inflated expectations in which over-enthusiasm and unrealistic expectations are created by media buzz and publicity. The third phase is a trough of disillusionment where the technology fails to meet the over-hyped expectations and quickly becomes perceived as unrealistic and not ready for deployment.
Today, we are in the fourth phase with connected and electric vehicles, when a slope of enlightenment has evolved and innovative companies are experimenting and developing new applications of the technology—this is the stage where SEMA companies shine! With some vehicle technologies, as with the internal-combustion engine, we are heading toward the fifth phase—a plateau of productivity in which technologies reach a point of maturity, commercialization and mass production.

SN: What about green vehicle technologies specifically? Have one or two systems become more predominant? Is there increasing interest in green vehicle technologies and opportunities among SEMA companies?

JW: The era we are in is like the Wild West. There are many competing new powertrain technologies, but it’s not clear which one may dominate. The internal-combustion engine will be around for at least another 20 years, but production will erode as new, more efficient powertrain technologies emerge. Ford’s EcoBoost combination of GDI and turbocharging is its short-term solution for increased fuel efficiency and improved performance, but Ford is also launching four new hybrids and electric vehicles over the next three years, and the company’s current hybrids will receive a new generation of more powerful lithium-ion batteries in 2012.

	A touch-screen center stack display is the key interface on MyFord Touch. The interface includes dual 4.2-inch LCD screens with corresponding five-way button steering-wheel controls and the 8-inch touch screen, all controlled by simplified Sync voice commands.

The term “green” means different things to different people. To some, it’s a fad or movement that may or may not impact them, their businesses or their lifestyles. To some it’s a threat; to others it’s an opportunity. Regardless of what you call it—green, eco-friendly, sustainability, clean-tech or whatever—it’s here to stay and will be part of the foreseeable future for the automotive industry, SEMA members and anyone involved with the performance and specialty-equipment industry.

When I talk about green vehicle technology at SEMA, it’s important to note that I’m not talking about soy-based seat foam or hemp-woven floor mats. I’m talking about the next generation of performance technologies for muscle and high-performance electrics, hot rods and sport hybrids. As Bill Ford said at a recent electric vehicle conference that he and I participated in, “The question is: Will customers want these vehicles? The short answer is: It depends on how many trade-offs they have to make.” Bill Ford summed it up very well; however, consumer acceptance of alternative powertrains, connected vehicles and active safety systems is still highly underestimated by many industry stakeholders. And as I’ve said before, hybrid and electric vehicles represent blank canvases for SEMA-member companies. SEMA is uniquely positioned to demonstrate that horsepower and green power can coexist without sacrificing performance or the cool factor.
Green performance may be more appropriately described as “next-generation performance” from a SEMA perspective. Consumers are demanding greater fuel efficiency without sacrificing performance but are also unwilling to pay a premium for it. There is no dominant technology with the proliferation of alternative powertrains in the industry, and that spells opportunity for innovative SEMA companies that know how to provide low-volume parts, systems and performance enhancements to make these vehicles go faster and farther.

Next-generation performance is fusing with the golden age of the internal-combustion engine. It’s right in the middle of this 100-year industry transition. As I said, the gasoline engine will be around for at least a few more decades, but
so will many of these new and emerging technologies, and that’s where the action will be—along with the engineering, R&D, business opportunities and the next generation of performance enthusiasts.

	Driving green, connected, safe and cool continue to lead the way in describing the four megatrends that the auto industry is focused on as it restructures. Vehicle technologies are accelerating as rapidly as an American Le Mans Series racer exiting a hairpin onto a straightaway.

Next-generation performance isn’t just about powertrains, it’s about making vehicles lighter and more aerodynamic. It’s about better brakes, performance wheels and tires, replacing mechanical systems with electronics, better lubrication, increased cooling and so on—many of the same things that gave birth to the hot-rod industry and were on display at the first SEMA Shows under the bleachers in Dodger Stadium and at Anaheim back in the ’60s.

SN: I saw a story recently about a guy who converted a vehicle from a gasoline powerplant into an all-electric car. He did the conversion himself for a total of, I believe, less than $15,000. Obviously, not everyone has the technical ability to do something like that, but doesn’t it reveal business opportunities for specialty-equipment entrepreneurs?

JW: Absolutely. Johnathan Goodwin, an innovator and speaker in our Vehicle Technology Briefing Program who is also known as Johnny Magic on musician Neil Young’s latest music video, converted a ’59 Lincoln Continental into a 100-mpg clean diesel hot-rod hybrid with 500 hp and 500 lb.-ft. of torque. Simon Saba, CEO and founder of Saba Motors in California, is another excellent example. Saba, who describes his vehicle as “the Model T of high-performance electric vehicles,” exhibited his Progressive Insurance Automotive X Prize vehicle at the SEMA Show in November and is a leading competitor to win the coveted $10 million X Prize. Steve Pruitt of Corsa Motorsports in Sandy, Utah, also displayed his American Le Mans Series award-winning vehicle—what The Wall Street Journal called the “The World’s Baddest Hybrid”—along with his kinetic energy recovery system (KERS) at the SEMA Show. He is now commercializing his KERS innovation and gaining market exposure through SEMA’s Vehicle Technology Briefing Program and the Green Performance Conference (see “2010 MIA/SEMA The Race Has Gone Green Conference” sidebar on p. 69), as are Goodwin and Saba.

SN: Have the OEMs been swayed by arguments in favor of open architecture for vehicle systems? Ford and GM seem to be going that way, and the Scion brand is something of an industry benchmark for the concept. Are other companies becoming more enlightened?

	“Truly great competitions are aligned with the best motor racing venues in the world, and the benefits of competing extend well beyond the checkered flag,” said John Waraniak, SEMA vice president of vehicle technology.

JW: Building unprofitable cars for people who don’t want them is a failed business model. Enlightened OEMs and NOEMs—niche original-equipment manufacturers—are starting to understand that no one is rich enough or smart enough to go it alone today. The best companies have realized that collaboration, open innovation and decoupled development are key strategies for profitable growth in these transformational times.

The old approach of proprietary architectures and closed systems and the OEM’s old business, revenue and organizational models haven’t died yet, and the new, more collaborative model of open innovation is just beginning. Many great SEMA companies built their reputations on doing what OEMs cannot or are unwilling and unable to do, so this is a great time to complement OEM book smarts with SEMA street smarts. I believe that SEMA-member companies are positioned very well to take advantage of the current industry disruption and OEM restructuring.

Ford is an excellent example of a company that is challenging the conventional wisdom of closed systems with non-traditional open systems and innovative thinking. When Alan Mulally was hired as CEO in 2006, he stated that Ford was a car company but that it would learn how to think like an electronics company. His strategy has paid off with well-executed initiatives, such as Sync, where Ford partnered with Microsoft and Continental, and now MyFord Touch, where the company partnered with Sony, INRIX, Pandora, Gracenote and others to accelerate their time to market and, even more importantly, their time to profit.

			“Regardless, of what you call it—green, eco-friendly, sustainability, clean-tech or whatever—it’s here to stay and will be part of the foreseeable future for the automotive industry, SEMA members and anyone involved with the performance and specialty-equipment industry.” —John Waraniak, SEMA Vice President of Vehicle Technology

Consumers want seamless on-board vehicle connectivity with their homes, offices and the rest of the world. The challenges and opportunities for the aftermarket lie in how effectively these features, devices and accessories can be integrated into vehicles by OEMs, suppliers and specialty-equipment manufacturers, retailers and installers. Flexible systems, interoperability, open platform architectures and OEM-aftermarket-retail collaboration are the way forward. Open innovation and collaboration with nonendemic automotive partners to connect consumers’ lifestyles with vehicles, brands and experiences have their challenges but even greater rewards—particularly when you consider that there will be 4 million new drivers every year for the next 10 years who will demand personalization and connectivity with devices and vehicle interfaces that don’t distract. Telematics was considered a novelty just 10 years ago, and now, according to Gartner, by 2016, consumers will not buy a vehicle if it does not offer connectivity.

SN: In the last 12 months, we’ve seen automakers eliminate models and even whole nameplates. What can SEMA-member companies do to enhance their standing with the OEMs as a channel through which to provide product differentiation and personalization?

JW: Markets are continuing to fragment into smaller segments, and the automakers have been forced to achieve even greater economies of scale and cut costs by building more models off of fewer platforms. The good news for SEMA members is that personalization and product differentiation matter even more to today’s consumers and the next generation of drivers and enthusiasts. Traditional mainstream products and mass markets used to define the edge.

Today, the edge defines the mainstream, and SEMA companies live a lot closer to the edge—what I call the pulse of the consumer and niche markets.

SN: What technological challenges should SEMA companies prepare for? How can technology be used to an aftermarket company’s advantage?

JW: Vehicle complexity, systems integration, interoperability and consumer acceptance will continue to be major challenges facing OEMs as well as the automotive aftermarket. Advanced vehicle technology is a dual-edged sword. It can help solve problems and reduce costs, but it can also create the new kinds of challenges and problems we’ve seen in recent recalls involving software integration and drive-by-wire and brake-by-wire systems. 

	Next-generation performance isn't just about powertrains, it's about making vehicles lighter and more aerdynamic.

The recalls have forced a reevaluation of the way vehicle technology is designed and integrated and how much consumers need to know about how a vehicle system works when it malfunctions. Also, distracted driving has gone from a dangerous practice to a deadly epidemic over the past few years with the proliferation of mobile electronics and digital connectivity in vehicles.

Charging time, durability and safety issues surrounding lithium-ion batteries are wildcards, and new technologies could be game changers for hybrids and electric vehicles. SEMA companies that can help solve battery-pack cooling problems and develop applications for improved energy efficiency, recovery and storage will do very well in the coming years. A lithium-ion battery glut may be looming that could create new opportunities for the private sector and SEMA members that build muscle electrics and hot-rod hybrids. Ultra-capacitors and super-capacitors could become the next-generation performance aftermarket’s equivalent of turbochargers for sport hybrids and electric vehicles.

Leveraging advanced vehicle technologies requires effective balancing and knowledge of systems-level trade-offs. SEMA companies have to be careful not to compromise one aspect of performance in order to improve another. For example, low-rolling-resistance tires improve fuel efficiency but decrease wet braking performance, and installation and integration of infotainment devices increase consumer connectivity but may increase driver distraction.

As an engineer, I think vehicle technology is great. But commercialization and consumer acceptance of these technologies are the multipliers to achieving industry growth, increased sales and market share. Innovation doesn’t come from the discovery of technology but from being the first to use technology to meet consumer needs and wants.

SN: Part of your role at SEMA requires that you spend a lot of time with the automakers and suppliers. What do your contacts seem most excited about from a technology standpoint?

JW: One of my primary responsibilities is to provide members with relevant information and insights that help them compete and grow their businesses today while also offering increased awareness of major vehicle technologies and engineering trends to help them prepare for tomorrow’s challenges and opportunities. There have been some major developments in these areas over the past 18 months.

	In Ford's EcoBoost engine, spent gases are pushed through the exhaust valves, where they are routed to turbochargers for the efficient conversion of exhaust gasses into energy to drive the turbos. The result is increased fuel efficiency with improved performance and an example of how horsepower and green power coexist.

Ford’s turnaround plan is based on vehicle electrification—both hybrids and battery electric vehicles (BEVs). General Motors is committed to making electric motors, power electronics and batteries its core technologies. Although hybrids and BEVs make up only 5.5% of the current U.S. market, they will grow to 9% over the next five years and represent more than 15% by 2020.

Alternative powertrains and dedicated platform architectures, such as the Chevy Volt, may seem too small and insignificant for SEMA companies to be concerned with, but they represent the direction of vehicle technology, engineering and—perhaps, most importantly—the next generation of enthusiasts and performance products. Performance is not the top priority of the OEMs with these vehicles. Automakers and original-equipment suppliers are more focused on safety, reliability, durability and cost. Performance ranks only fifth—and that represents new and exciting opportunities for the growth of SEMA companies.

Connected-vehicle technologies and automotive interiors are significant areas of growth for SEMA members. The typical instrument panel and center stack is quickly evolving into a cockpit-type dashboard with a blank screen to which drivers may add personalized applications for safety, connectivity and performance. Drivers use a variety of senses for connecting
and interfacing with their vehicles, including graphics, touch and voice. I can envision a day soon when innovative dealers and independent installers become automotive applications stores specializing in customization, accessorization and personalization. Our Vehicle Technology Briefing Program at the 2010 SEMA Show will include a session on “Apps for Autos” to help SEMA members take advantage of the new opportunities being created with connected-vehicle technologies.

Leading automakers and suppliers recognize that growth in the new auto industry doesn’t lie in disrupting large, over-served markets but in disrupting long-tail, under-served niche markets. Growth lies in emerging segments, such as hybrids and battery electric vehicles, and that spells opportunity for SEMA companies and startups with cost-effective, low-volume-production business models with democratized technology for new, used and retrofit vehicles. Henry Ford democratized technology in the auto industry 100 years ago by racing and making a car with a new type of engine that nearly everyone could afford. It’s the same challenge today.   

2010 MIA/SEMA The Race Has Gone Green Conference

The Race Has Gone Green Conference, which will be held Friday, April 16, in conjunction with the Toyota Grand Prix of Long Beach, is part of SEMA’s Technology Briefing Program. The conference is designed to provide SEMA members with an exclusive opportunity to gain valuable information and insights from some of the world’s leading automakers, teams, drivers and organizations participating in the race, events and activities at the track.

“Truly great competitions are aligned with the best motor racing venues in the world, and the benefits of competing extend well beyond the checkered flag,” said John Waraniak, SEMA vice president of vehicle technology. “In fact, the most important race is not on the track. Once the finish line is crossed, you are left with innovations and proven technologies that impact what you and I drive today and tomorrow. The American Le Mans Series (ALMS) competing at the Long Beach Grand Prix is an excellent example of relevant racing and represents the future of racing.”

The conference will include keynote presentations and panel sessions in which attendees will interact with the speakers. The guest speakers lineup includes Scott Atherton, ALMS CEO; Robert Davis, Mazda senior vice president of quality, research and development; Jamie Allison, Ford director of North American motorsports; Steve Pruitt, Corsa Motorsports; and former Formula One and ALMS champion driver David Brabham.

To sign up for the conference, visit www.SEMA.org/racegonegreen. The $275 fee for SEMA members and $375 for non-members includes not only the conference and its wealth of information and business networking opportunities, but also a luncheon and paddock tour where attendees will meet and talk with team owners, drivers, crew chiefs and engineers on pit row.