Selection of Electrification Technologies of Automotive Powertrains and Uncertainty Management Strategy

Abstract

This paper argued strategies to address uncertainties incurred by the electrification of automotive powertrains. We employed a real option perspective and used event trees to describe the transitions of powertrains of Toyota, Nissan, and Volkswagen. Toyota's product strategy has the flexibility to switch to plug-in hybrid electric vehicles and battery electric vehicles (BEVs) by adding or withdrawing relevant components to/from hybrid electric vehicles (HEVs). However, its option value will decrease when environmental regulations delist HEVs from the category of zero-emission vehicles. Nissan isolated market uncertainties by developing a BEV with a dedicated platform, which in turn limited creating derivative products. VW mitigated the uncertainties by proactively corresponding its product strategy to technical standards and environmental regulations. Their modular platform (MQB) enabled VW to attain flexibility to develop various electrified vehicles. However, possible obsolescence of the design rule of the product architecture will undermine the option value of MQB.