Monday, 30 January 2017
Torotrak cuts V-Charge in favour of KERS
When a company begins a statement to the effect that “priorites have changed”, you know there’s trouble ahead. And so it is with Torotrak which is refocusing on KERS and IVTs. And it's all the fault of EVs and diesel technology.Torotrak, which still claims it is “a leading developer and supplier of emissions reduction and fuel efficiency technology for vehicles, has announced an “update” on the process to license its technology and the strategic actions it proposes to take as a consequence.
Torotrak has been in commercial discussions with passenger car Tier 1s and OEMs as they seek to understand the full capability of V-Charge. These have confirmed that the V-Charge product “works and delivers attractive fuel savings/emissions reduction benefits”, but – and here is the rub – the priorities for new product spend for many players in the European passenger car market have “profoundly changed in recent months.”
As a result, there is an “accelerating focus” on electrification projects, in particular driven by the mass market adoption of 48V hybrid electric vehicles.
In addition, there has been and increased regulatory attention on eliminating noxious emissions, including banning diesel vehicles in some major cities, looks likely to result in a substantial reduction in the demand for, and investment in, diesel engines.
Torotrak sees both of these industry trends look set to materially reduce the mass market opportunity for V-Charge in passenger cars, particularly in Europe.
The company remains convinced however believes that there will remain “important opportunities for V-Charge to be adopted in segments such as commercial vehicles, performance cars and markets where consumers will not pay for the increased costs of 48V hybrid electric vehicles, or where tax incentives promote the use of small highly efficient engines. These markets can still offer significant volume potential.”
As a result it will take Torotrak longer to engage with potential alternative Tier 1 partners and the licence value of V-Charge is likely to be lower than previously expected. We will continue our programme to license V-Charge, building on our increased market understanding and proven product performance.
Consequently, Torotrak’s engineering and financial resources will now be focused exclusively on the continued development and commercialisation of the KERS technology. Good progress
It claims KERS is making “good progress”, particularly in the off-highway markets, with the first product, a hydraulically connected flywheel-based energy recovery system ('ERS') for excavators and wheel loading shovels, having achieved the cost reduction targets the Group set.
The ERS product is “on track” to launch on excavators in H2 2018 and will give operators attractive fuel savings and a payback typically of 18 months or less. We continue to be well engaged with our OEM partners whom we expect to take the technology forward.
Torotrak is also in discussions with on-highway commercial vehicle OEMs about the potential to adopt the Group's KERS technology in an innovative new configuration that could materially reduce the installed cost, and improve operator payback times to less than three years.
However, to efficiently pursue these growing opportunities for KERS in off-highway and commercial vehicle markets and the licensing opportunities for V-Charge, Torotrak has decided to suspend further V-Charge engineering development activity, given the successful in-vehicle demonstrations and technical validation of the product; focus engineering and cash resources on generating the higher value, nearer-term opportunities for the KERS products and technology; actively seek buyers/licensees for the Group's IVT/CVT intellectual property and tangible assets, with a view to realising value wherever possible; begin employee consultation process with a proposal to consolidate engineering resources.
Torotrak is also exploring other actions that could be taken to reduce cash operating costs. In view of all these comments will Torotrak shutter its Silverstone operation?
Adam Robson, Torotrak’s chief executive said: "The clear shift towards electrification and the move away from diesel engines that has occurred across the industry over the last few months has forced mainstream passenger car Tier 1s and OEMs to refocus their investment on electrification projects. We will take the appropriate actions to prudently manage our resources. We will focus our efforts on delivering shareholder value from KERS which is addressing the off and on-highway markets in which mechanical solutions remain attractive, and we will continue to work to unlock value from V-Charge. We remain determined to realise the value from our extensive intellectual property and attractive commercial opportunities."