Statement of John German, Manager

Environmental and Energy Analysis

Product Regulatory Office

American Honda Motor Company, Inc.

Before the

Senate Committee on Energy and Natural Resources

U.S. Senate

January 30, 2007

Good afternoon Mr. Chairman and members of the Committee. My name is
John German and I am Manager of Environmental and Energy Analysis with
American Honda Motor Company. We thank you for the opportunity to
provide Honda's views on the subject of transportation sector fuel
efficiency and the potential for increased oil savings through
technological innovation.

**Introduction**

The automotive industry is in a period of unprecedented technology
development, encompassing everything from gasoline engines and
transmissions to diesels, hybrid-electric vehicles, plug-in hybrids,
fuel cells, and vehicles powered by alternative fuels. In part, this is
because technology has been steadily improving ever since the first oil
crisis in the early 1970s and the easy improvements have already been
done. Up until now this new technology has been employed primarily to
respond to vehicle attributes demanded by the marketplace, such as
performance, luxury, utility, and safety, rather than to increase fuel
economy. The figure on the left shows the changes in vehicle weight,
performance, and proportion of automatic transmissions since 1980 in the
passenger car fleet. Even though weight
incr![](media/image1.png){width="6.5in"
height="3.8958333333333335in"}eased by over 500 pounds from 1987 to
2000, 0-60 performance improved by about 5 seconds (from just under 15
seconds to under 10 seconds), and the proportion of manual transmissions
dropped in half, fuel economy remained relatively constant.

It is clear that technology has been used for vehicle attributes which
consumers have demanded or value more highly than fuel economy. The
figure on the right compares the actual fuel economy for cars to what
the fuel economy would have been if the technology had been used solely
for fuel economy instead of performance and other attributes. If the
current car fleet were still at 1981 performance, weight, and
transmission levels, the passenger car CAFE would be almost 38 mpg
instead of the current level of 28.1 mpg. The trend is particularly
pronounced since 1987. From 1987 to 2006, technology has gone into the
fleet at a rate that could have improved fuel economy by almost 1.5% per
year, if it had not gone to other attributes demanded by the
marketplace.

There is no reason why this technology trend of improved efficiency
should not continue in the future. Even with the efficiency improvements
of the last 25 years, the energy efficiency of a typical gasoline
vehicle is still less than 20% during typical driving, so there is a lot
of room for improvement given sufficient leadtime for technology
development. This is supported by the LDT CAFÉ increases required by
NHTSA for the 2005 through 2011 model years of about 2.1% per year. The
challenge is to implement it to improve fuel economy instead of
attributes valued more highly by consumers.

**Gasoline vehicle technology**

Gasoline technology development is still proceeding rapidly. Many of the
technologies in the current fleet are only offered on a relatively small
portion of vehicles. Following is a list of conventional gasoline
vehicle technologies that have already been introduced in the market and
can be spread across other vehicles in the future:

-   Variable valve timing and lift

-   4-valve per cylinder overhead cam engines

-   Reduced engine friction

-   Direct injection engines, both with and without turbocharging

-   5-speed, 6-speed, 7-speed, and even 8-speed transmissions

-   Continuously variable automatic transmissions (CVT)

-   Dual-clutch automated manual transmissions (works like an automatic,
    but more efficient)

-   Lightweight materials

-   Low rolling resistance tires

-   Improved aerodynamics

-   Cylinder deactivation (for example, an 8-cylinder engine shuts off 4
    cylinders during cruise conditions)

-   Idle-off (the engine stops at idle)

-   Improved auxiliary pumps (power steering, water, oil, fuel) and air
    conditioning systems

Assessing the overall fuel economy improvements from these technologies
is a difficult task and is beyond the scope of our comments. However,
the 2002 National Academy of Science report on CAFE did a reasonable job
of assessing the benefits and costs of most of these technologies and is
a useful summary.

![](media/image2.png){width="4.125in" height="3.032638888888889in"}Honda
has a long history of being a technology and efficiency leader. Our
overall philosophy is to be a company that society wants to exist. One
of the results of this philosophy is Honda's leadership on vehicle
technology, including emission controls, conventional vehicle
efficiency, and hybrid vehicle development. For example, while virtually
all Honda engines have been aluminum block with overhead camshafts and
4-valves per cylinder since 1988, this technology is still used on less
than 70% of the entire vehicle fleet. Another technology pioneered by
Honda is variable valve timing and lift (i-VTEC). While Honda is now
using variable valve timing and lift in all of our vehicles, penetration
in the rest of the vehicle fleet is only a percent or two. Honda is also
a leader in the use of high-strength steel. Technology leadership is
what makes our vehicles more fuel efficient.

For the future, Honda has announced plans to introduce two new
efficiency technologies within the next two years. One is a more
advanced version of Honda\'s four-cylinder i-VTEC technology. Honda has
improved its VTEC (Variable Valve Timing and Lift Electronic Control
System) technology with the development of the Advanced VTEC engine,
which provides high performance along with outstanding fuel economy and
lower emissions. The new engine combines continuously variable valve
lift and timing control with the continuously variable phase control of
VTC (Variable Timing Control) to achieve a world-leading level of
performance and a 13% improvement in fuel efficiency versus our current
VTEC engine.

The second is a more advanced Variable Cylinder Management (VCM)
technology for six-cylinder engines with up to an 11 percent improvement
in fuel efficiency.

Even longer term is work on gasoline technologies such as
Homogeneous-Charge Compression-Ignition (HCCI), camless valve actuation,
and variable compression ratio. HCCI can improve efficiency up to 30%,
but control of the self-ignition is very difficult. The self-ignition
region needs to be expanded and it may require camless valve actuation,
such as electro-magnetic valves.

Camless valves would eliminate throttling losses and significantly
improve efficiency. They would enable additional combustion efficiency
improvements by switching from HCCI operation at light load to Atkinson
cycle at medium load and Otto cycle for maximum performance.

![](media/image3.png){width="3.3625in"
height="4.5159722222222225in"}Variable compression ratio increases
compression ratio at lighter loads to improve efficiency, while
maintaining power by reducing compression ratios at high loads. This
technology may be especially effective when combined with turbocharging.

While production timelines are uncertain, these advanced technologies
offer the potential to increase gasoline engine efficiency to
near-diesel levels.

**Diesels**

Diesel engines have seen dramatic improvement in recent years and
several manufacturers, including Honda, have announced production plans
for diesel vehicles meeting the US Tier 2 bin 5 emission standards.
Honda will introduce a 4-cylinder diesel in the U.S. market in 2009. We
are also working on the development of V6 diesel engine technology,
which is a key development goal for Honda.

Gasoline engines presently employ three-way catalytic converters that
offer NOx reduction rates as high as 99 percent, but this performance is
possible only at stoichiometric air-fuel ratio. In the oxygen-rich
environment of a lean-burn diesel engine, three-way catalytic converters
only reduce NOx levels by approximately 10 percent. Honda\'s
next-generation diesel engine employs a revolutionary NOx catalytic
converter that efficiently reduces NOx in a lean-burn atmosphere. This
catalytic converter features the world\'s first innovative system using
the reductive reaction of ammonia generated within the NOx catalytic
converter to \"detoxify\" nitrogen oxide (NOx) by turning it into
harmless nitrogen (N~2~).

The new catalytic converter utilizes a two-layer structure: one layer
adsorbs NOx from the exhaust gas and converts a portion of it into
ammonia, while the other layer adsorbs the resulting ammonia, and uses
it later in a reaction that converts the remaining NOx in the exhaust
into nitrogen (N~2~). Ammonia is a highly effective reagent for reducing
NOx into N~2~ in an oxygen-rich, lean-burn atmosphere. This ability to
generate and store ammonia within the catalytic converter has enabled
Honda to create a compact, lightweight NOx reduction system for diesel
engines. The system also features enhanced NOx reduction performance at
200-300^o^C, the main temperature range of diesel engines.

Honda designed the catalytic converter for use with its 2.2 *i*-CTDi
diesel engine, which has earned widespread praise for quiet, clean
operation and dynamic performance since its introduction in 2003 on the
European Accord model.

By further advancing combustion control, the 2.2 *i*-CTDi delivers
cleaner exhaust to the NOx catalytic converter. Honda achieved this by
optimizing the combustion chamber configuration, reducing fuel injection
time with a 2,000-bar common rail injection system and boosting the
efficiency of the EGR (exhaust gas recirculation) system. Thanks to
these improvements, Honda has reduced the amount of NOx and soot
normally found in engine exhaust, while increasing power output.

Along with developing superior technology for cleaning exhaust gas,
Honda plans to address other technical challenges in developing clean
diesel engines. Two key challenges are meeting U.S. on-board diagnostic
system requirements and the lower cetane number in diesel fuel, which is
unique to the U.S.

**Reaction Mechanism of the New NOx Catalytic Converter for Diesel
Engines**

![](media/image4.jpeg){width="4.78125in" height="2.125in"}\
**1**: During lean burn operation, the NOx adsorbent in the lower layer
adsorbs NOx from the exhaust gas.

**2**: As needed, the engine management system adjusts the engine
air-fuel ratio to rich-burn, wherein the NOx in the NOx adsorption layer
reacts with hydrogen (H~2~) obtained from the exhaust gas to produce
ammonia (NH~3~). The adsorbent material in the upper layer temporarily
adsorbs the NH~3~.

**3**: When the engine returns to lean-burn operation, NH~3~ adsorbed in
the upper layer reacts with NOx in the exhaust gas and reduces it to
harmless nitrogen (N~2~).

**Exhaust Gas Cleaning System Configuration**

![](media/image5.jpeg){width="4.979861111111111in"
height="1.2083333333333333in"}

**Alternative-Fueled Vehicles**

![](media/image6.png){width="4.593055555555556in" height="2.78125in"}

Honda is the only company that continues to offer a dedicated compressed
natural gas vehicle, the third generation Civic GX. We recently
co-marketed a natural gas home refueling station, called Phill, which
will expand the market beyond fleets to retail customers. Phill is
maintenance free, quiet, easy to use, certified for home use with 110
volt, and includes gas detection safety equipment.

Development of battery-electric vehicles continues and they have found a
niche in neighborhood vehicles for closed communities.

Honda is strongly supportive of biomass fuel development. Honda has
developed an E100 vehicle for sale in Brazil and is evaluating the
market for flexible fuel vehicles in the U.S. Also, as we announced last
year, Honda has achieved exciting advances in biotechnology research to
increase yields in bio-ethanol production by using the stalks and leaves
of plants that would normally be discarded. This improves the potential
for wider application of ethanol-powered vehicles and for further CO~2~
reductions. We plan to maintain this comprehensive focus on both
vehicles and fuels in our ongoing research and development.

Honda believes the most optimal use of the ethanol that we are currently
producing is to blend it with gasoline at up to 10% levels ("E-10"). All
vehicles on the road today are capable of burning E-10 and, unlike E-85,
E-10 does not require a new fueling infrastructure or vehicles specially
engineered to run on that fuel. If methods are developed to produce
ethanol from cellulosic feedstocks with economically viable processes,
the investment into infrastructure and vehicles might be a promising
course for the nation. Congress has appropriately allocated significant
resources for research into the production of ethanol from cellulosic
materials.

**Fuel Cell Vehicles**

Fuel cells are being heavily researched and developed. Honda was the
first company to certify a fuel cell vehicle with the EPA and the first
to lease a fuel cell vehicle to an individual customer.

![](media/image7.png){width="4.5in" height="2.692361111111111in"}The
fully-functional Honda FCX Concept vehicle features a newly developed
compact, high-efficiency Honda FC Stack as well as a low-floor,
low-riding, short-nose body. Limited marketing of a totally new fuel
cell vehicle based on this concept model is to begin in 2008 in Japan
and the U.S.

The FCX Concept is equipped with a V Flow fuel cell platform consisting
of a compact, high-efficiency fuel cell stack arranged in an innovative
center-tunnel layout. This has allowed designers to create an elegant,
low-riding, sedan form that would have been difficult to achieve in a
conventional vehicle. This new fuel cell stack is smaller, lighter, and
more powerful than the current FCX FC Stack. The result is a travel
range approximately 30 percent greater than the current FCX with an
energy efficiency of around 60 percent - approximately three times that
of a gasoline-engine vehicle and twice that of a hybrid vehicle.

The fuel side continues to be challenging. Honda's experience with home
refueling for our compressed natural gas vehicle is helping in
development of infrastructure technology for hydrogen refueling. Honda's
research on the experimental Home Energy Station (HES) is on its third
generation of development. This station aims to provide a home-based
refueling environment capable of providing sufficient fuel to power a
fuel cell vehicle while providing electrical energy needs for an average
size home.

![](media/image8.png){width="4.495138888888889in"
height="2.9895833333333335in"}

**Hybrids**

Hybrid-electric vehicles are in their 2^nd^ generation at Honda and
several other manufacturers have also recently introduced
hybrid-electric vehicles.

Honda introduced the first hybrid vehicle in the US in 1999, the Honda
Insight. This vehicle was designed to showcase the potential of hybrids
and advanced technology. The Civic Hybrid, introduced in 2002, was the
first hybrid powertrain offered as an option on a mainstream model. The
Accord Hybrid was the first V6 hybrid. The 2006 Civic Hybrid
incorporated significant improvements to the battery, electric motor,
and hybrid operating strategy to improve both efficiency and
performance. For example, we added the ability to cruise on the electric
motor alone at low speeds, increased the motor output by 50%, increased
regenerative braking energy recovery, and reduced the size and weight of
the battery pack and power electronics.

![](media/image9.png){width="4.498611111111111in" height="3.3in"}Taking
what we have learned, Honda's next step in hybrid vehicle development
will be the introduction of an all-new hybrid car to be launched in
North America in 2009. This new hybrid vehicle will be a dedicated,
hybrid-only model with a target price lower than that of the current
Civic Hybrid. We are targeting an annual North American sales volume of
100,000 units, mostly in the United States, and 200,000 units worldwide.

**PHEV**

Plug-in hybrid vehicles are being evaluated by a number of
manufacturers, including Honda. Plug-in hybrids have a lot of promise,
especially to displace oil consumption. Before plug-in vehicles can be
viable, however, there are a number of technology, consumer acceptance,
environmental and cost issues that still need to be addressed. The extra
batteries add considerable weight and take up considerable space, which
decreases performance and vehicle utility. Systems to plug the vehicle
in to the electric grid must be safe and easy to use and the customer
needs a garage or secure spot to plug in. Performance must be preserved,
which means that either the electric motor and energy storage must
provide performance equivalent to the engine; or the engine must be
started and used with the electric motor for harder accelerations and
higher speeds.

If the engine is not turned on for high accelerations, the vehicle is
entirely dependent on the electrical system for acceleration. This
requires a much larger electric motor and power electronics, which adds
cost and weight and requires more cooling. The high electrical demand
during high accelerations also generates high battery temperatures and
accelerates battery deterioration, especially when the battery is at a
low state of charge. If the engine is turned on only during high
accelerations, emissions become an issue because of the difficult in
keeping the catalyst at normal operating temperatures.

However, the principal issue is energy storage cost and durability. Some
industry analysts have been critical of hybrids because they cost more
and the fuel savings are not recoverable in the short term. Although
current hybrid vehicles have relatively small battery packs, the battery
pack is still the single largest cost of the hybrid system. Further,
energy flow in conventional hybrids is carefully monitored and
controlled to ensure maximum battery life. High and low battery charge
conditions, where more deterioration occurs, are avoided. Battery
temperatures are carefully monitored at many points inside the battery
pack and system operation is limited when necessary to keep the
temperature low and minimize deterioration. Also, the duty cycle of a
conventional hybrid is very mild and does not include deep discharges.

The battery pack must be many times larger for a plug-in hybrid, even
with just a 20-mile electric range. This adds thousands of dollars to
the initial price of the vehicle, not to mention the impact the extra
batteries have on weight and interior space. Further, the battery pack
is now subjected to deep discharge cycles during electric-only operation
and to much higher electrical loads and temperatures to maintain
performance. This will cause much more rapid deterioration of the
battery pack.

![](media/image10.png){width="4.125in" height="2.990972222222222in"}The
American Council for an Energy Efficient Economy (ACEEE) recently
published a report (September 2006) assessing the annual fuel savings
and the short and long term incremental costs for PHEVs. At \$3 per
gallon, the annual fuel savings for a compact-sized vehicle is only
\$705 over a comparable conventional vehicle and only \$225 over a
comparable hybrid vehicle. Even if the Lithium-ion battery can be
reduced to \$295 per kW-hour and last the life of the vehicle, the
payback period is still 6.4 years compared to a similar conventional
vehicle and 12.9 years compared to a similar hybrid vehicle. This
ignores the tradeoff between electric motor size and emissions, the
performance penalty from the additional weight of the batteries, the
space needed for the batteries, the increased risk of battery
replacement due to the deep discharge cycles, and the cost of safe
off-board charging systems.

Customer discounting of fuel savings is another long-term barrier that
will also need to be overcome. While some customers value fuel savings
more highly, the average new vehicle customer only values the fuel
savings for roughly his or her period of ownership. This is supported by
a consumer inferred payback period of only 1.5 to 2.5 years, as
determined by a May 2004 DOE survey. This means that, even at \$3 per
gallon, the average new vehicle customer would only value a plug-in
hybrid at about \$1,500 over a similar conventional vehicle (about two
years of fuel savings at \$705 per year) or about \$500 over a similar
hybrid vehicle (about two years of fuel savings at \$225 per year).

![](media/image11.png){width="4.749305555555556in"
height="3.452777777777778in"}

Certainly there are customers that value fuel savings more highly and
other customers that will likely value the ability to recharge from home
on electricity. Thus, if lithium-ion battery development meets the
long-term targets specified in the ACEEE report (\$295 per kW-hour while
lasting for the life of the vehicle), a niche market for PHEVs should
develop. However, from a mainstream customers' point of view, there is
no business case unless fuel prices rise~~s~~ to substantially more than
\$3 per gallon, fuel shortages occur, plug-in hybrids are heavily
subsidized, or there is a breakthrough in energy storage.

By far the most important action the government can take is research
into improved energy storage. The Department of Energy is already
developing plans to identify plug-in hybrid research needs and
solutions. The Department of Energy held a Workshop on Plug-In Hybrid
Electric Vehicles on May 4-5, 2006 to discuss issues and questions on
plug-in hybrid research needs. The paper issued in advance of the
workshop presented an excellent outline of the advantages of plug-in
hybrids, the challenges faced, especially energy storage, the technical
gaps, and the questions that need to be answered. The paper is an
excellent resource for planning future research and development for
plug-in hybrids and should be read by everyone interested in promoting
plug-in hybrid vehicles.

The government may also wish to explore ways to incentivize the full
useful life savings to manufacturers or customers.

**Recommendations**

Development of all technologies is accelerating in response to growing
concerns about energy security and global warming. Global demand for
transportation energy is so immense that no single technology can
possibly be the solution. Fuel cells have the most promise to address
both climate change and energy sustainability issues in the long term.
Honda is making great advancements in fuel cell technology and is
working with the Department of Energy, the California Fuel Cell
Partnership, and others to help lay the groundwork necessary to move
toward commercial deployments. However, the challenges of hydrogen
production, transport, and storage will take continued effort to solve
and implement, especially on the volume demanded for transportation
worldwide. Biofuels are promising and can replace some fuel use, but
even development of cellulosic ethanol only has the potential to
displace, at most, 10 to 20 percent of the world's oil demand. The point
is that there is no magic bullet -- we are going to need rapid
development and implementation of as many feasible technologies as
possible. Honda is developing technology that meets both the needs of
our customers and those of society. Thus we are constantly exploring a
variety of technologies to achieve energy sustainability.

Different companies are working on different technologies, which is the
optimal way and makes good use of competition. Development of specific
technologies, including plug-in hybrid vehicles, needs to be viewed
within this context. In order to achieve significant market penetration
any alternative technology must be able to compete, in terms of cost,
performance and utility, with advanced gasoline and diesel engines. With
respect to hybrids and, especially, plug-in hybrids, the most important
factor is to reduce the cost, size, and weight of the battery pack. We
have found that the early hybrid customers are most interested in fuel
cost savings. But at this juncture, mainstream customers do not value
the fuel savings as highly and hybrid sales represent only about 1.5% of
annual sales. Market penetration will increase as the costs are reduced
in the future.

As Honda has previously announced, we believe it is time for the Federal
government to take action to improve vehicle economy. Given the rapid
changes in technology, performance-based incentives are the best way to
move the ball forward. It is impossible to predict the pace of
technology development and when breakthroughs will or will not occur.
Accordingly, technology-specific mandates cannot get us where we need to
go. In fact, previous attempts to mandate specific technologies have a
poor track record, such as the attempts in the 1990s to promote methanol
and the California electric vehicle mandate. The primary effect of
technology-specific mandates is to divert precious resources from other
development programs that likely are much more promising. If there are
to be mandates, they should be stated in terms of **performance**
requirements, with incentives and supported by research and development.

One example would be to increase the CAFE standards. The NHTSA already
has the authority to regulate vehicle efficiency and Honda has called
upon the agency to increase the stringency of the fuel economy
requirements and has supported efforts to reform the passenger car
standards. At the same time, Congress should develop a program of broad,
performance-based incentives to stimulate demand in the marketplace to
purchase vehicles that meet the new requirements.

The other effective action the government can take is research into
improved energy storage. The success of electric drive technologies,
including hybrids, plug-in hybrids, and fuel cells, depends on our
ability to build less expensive, lighter and more robust energy storage
devices.

I appreciate the opportunity to present Honda's views and would be happy
to address any questions you may have.