Torotrak outlook soured by diesel engine unpopularity

30th Jan 2017 12:35

(ShareCast News) - Emissions reduction and fuel efficiency technology developer and supplier Torotrak announced an update on the process to license its technology on Monday, as well as the strategic actions it proposes to take as a consequence.The London-listed firm had previously reported commercial discussions with passenger car Tier 1 and OEM companies as they seek to understand the full capability of V-Charge.It said they have confirmed that the V-Charge product works and delivers attractive fuel savings/emissions reduction benefits, however during the discussions it became apparent that the priorities for new product spend for many players in the European passenger car market had profoundly changed in recent months.Torotrak said there was now an accelerating focus on electrification projects, in particular driven by the mass market adoption of 48V hybrid electric vehicles, and increased regulatory attention on eliminating noxious emissions, including banning diesel vehicles in some major cities, likely to result in a substantial reduction in the demand for, and investment in, diesel engines.Both of these industry trends looked set to materially reduce the mass market opportunity for V-Charge in passenger cars, particularly in Europe, the board warned.It said it believes that there would 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.Those markets can still offer significant volume potential, Torotrak claimed."The impact of this change in market opportunities is that 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," the board said in a statement."We will continue our programme to license V-Charge, building on our increased market understanding and proven product performance."Beyond that, Torotrak said the engineering and financial resources of the group could now be focused exclusively on the continued development and commercialisation of the KERS technology."KERS is making good progress, particularly in the off-highway markets, with the first product, a hydraulically connected flywheel-based energy recovery system 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."Torotrak said it was 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.It said that, in order to efficiently pursue growing opportunities for KERS in off-highway and commercial vehicle markets and the licensing opportunities for V-Charge, the board has decided upon a number of actions.Torotrak would continue the commercialisation process with current and new potential buyers for V-Charge, but suspend further engineering development activity, given the successful in-vehicle demonstrations and technical validation of the product.It would also focus engineering and cash resources on generating the higher value, nearer-term opportunities for the KERS products and technology, and actively seek buyers and licensees for the group's IVT/CVT intellectual property and tangible assets, with a view to realising value wherever possible.As a result, it was preparing to commence an employee consultation process with a proposal to consolidate engineering resources."If this proposal is implemented, any changes will happen progressively so that the ongoing commitments to customers and funding partners are respected and the value of the assets and technologies is maintained."The board said it believes there is significant potential value to be generated from the KERS technology and value in V-Charge, if the appropriate market applications can be secured.It was also exploring other actions that could be taken to reduce cash operating costs."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," said chief executive Adam Robson."We will take the appropriate actions to prudently manage our resources."Robson reiterated the company would focus its efforts on delivering shareholder value from KERS, which was addressing the off and on-highway markets in which mechanical solutions remain attractive, and they 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."