Sunset carmakers should look to a new dawn

American, European and Chinese carmakers are calling on governments to come to their aid with a large infusion of public funds and warn that if help is not forthcoming, they could face collapse. While some politicians favour a bail-out, fearing a catastrophic blow to the economy, others argue that the companies should be cut loose and allowed to survive or perish in the open market. There is another way to approach the problem, but it would necessitate a radical change in perspective about what is happening in the motor industry and what should be done about it.

The introduction of the internal combustion engine and the highway infrastructure marked the beginning of the oil era and the second industrial revolution in the 20th century, just as the introduction of the steam engine, the locomotive, and the railway infrastructure marked the beginning of the coal era and the first industrial revolution in the 19th century.

The second industrial revolution is heading into the sunset and its prime energy and technology are on “life support”. The dramatic rise of the price of oil over the past few years signals the beginning of the endgame, not only for gas-guzzling cars, but also for the internal combustion engine itself.

The reality is that growing demand for oil has been bucking up against a limited and dwindling supply. The result was steeper prices, which created an inflationary spiral across the logistics and supply chain, putting a damper on global consumption, especially as oil began to tip over $100 a barrel. We hit the firewall of “peak globalisation”. This is the point at which the global economic engine stalls, the economy contracts and energy prices fall because the world is using less oil. The motor industry is the early warning system that tells us we are approaching the twilight of the second industrial revolution.

So what do we do? We need to shift the conversation from rescues and bail-outs of the internal combustion engine to research, development and deployment of electric and hydrogen fuel-cell plug-in vehicles powered by renewable energy. The shift in our energy regime and automotive technology is the entry point to a third industrial revolution and a post-carbon economy in the first half of the 21st century.

To make this transition happen, we need to understand that transport revolutions are always embedded in larger infrastructure revolutions. The coal-powered steam engine revolution required vast changes in infrastructure, including a shift in transport from waterways to railways and the ceding of public land for the development of new towns and cities along critical rail links and junctions. Similarly, the introduction of the petrol-powered internal combustion engine required the building of national road systems, the laying down of oil pipelines and the construction of new suburban commercial and residential corridors along the interstate highways.

The shift from the internal combustion engine to electric and hydrogen fuel-cell plug-in vehicles requires a comparable new commitment to a third industrial revolution infrastructure. To begin with, national power grids and transmission lines will need to be transformed from centralised control to distributed, digitalised management. Already, Daimler has partnered RWE, the German utility, and Toyota has partnered EDF, the French utility, to install recharging points along highways, in car parks and garages and in commercial and residential areas.

To accommodate plug-in vehicles, utility companies are beginning to transform the power grid, using the same technologies that created the internet. The so-called smart grids or intergrids will revolutionise the way electricity is produced and delivered. Millions of homes, offices and factories will be converted or built to serve as “positive power plants” that can capture local renewable energy – solar, wind, geothermal, biomass, hydro and ocean waves – to create electricity to power the buildings, while sharing the surplus power with others across smart intergrids, just as we now produce our own information and share it with each other across the internet.

The electricity we produce in our buildings from renewable energy will also be used to power electric plug-in cars or to create hydrogen to power fuel-cell vehicles. The electric plug-in vehicles, in turn, will also serve as portable power plants that can sell electricity back to the main grid.

The shift to a third industrial revolution infrastructure will require a big public-private financial commitment. We will need to retool the motor industry, reconfigure the power grid and convert buildings into power plants. It will cost hundreds of billions of dollars. Some argue that we cannot afford it. But, then, they will need to explain how they expect to re-grow a debt-ridden global economy dependant on a failing energy regime.

The third industrial revolution brings with it a new era of “distributed capitalism” in which businesses and homeowners become participants in the energy market. In the process, we will create millions of green jobs, start a new technology revolution and dramatically increase productivity, as well as mitigate climate change.

By positioning the motor industry at the centre of an infrastructure shift from the second to the third industrial revolutions, we begin to change the public debate from bailing out companies to how best to invest in a new economic game plan for the world.

The writer is an adviser to the European Union and to several European heads of state. He is president of the Foundation on Economic Trends in the US