Internal Combustion Engine or New Electric one

There are many questions about new technology. Some critics question whether the technology will be obsolete by then. Toyota (TM), Nissan (NSANY), and General Motors (GM) all plan to sell plug-in hybrids or electric cars by around 2010. Their executives think the electrification of the automobile is the endgame everyone should be pursuing.

MCE-5 disagrees. Even if the lithium ion batteries used for electric cars get cheaper in the next decade, Rabhi says, "The future of the automobile will be the internal combustion engine for the next 20 to 30 years."

In the end, both will be right. If players like Mercedes and MCE-5 have their engines ready and the cost is really as low as they claim, the new engines could simply be mated to a hybrid system, says James N. Hall, principal of 2953 Analytics, a Detroit consulting firm.

There are other challenges to these engines. If you increase the compression ratios, it creates more oxides of nitrogen, or NOx, which is a component of smog. So the engines' makers will have to clean the emissions. "Everybody is working on it," Hall says. With gasoline prices expected to remain high, everyone has plenty of incentive.

MCE-5 has shown impressive results in the lab. But can it deliver the bang for the buck that its executives promise? The company's engine needs more parts, which add cost, says Gott. They also can cause more engine knock, which is a pinging noise most drivers find unacceptable.

The company admits a lot of work still needs to be done. But it has a number of well-heeled backers, including French carmaker PSA (PEUP), the parent of Peugeot and Citroën. Private investors have put in $30 million and the French government another $18 million. Later this year, MCE-5 plans to try the technology in a Peugeot car and hopes to sell it for some test fleets in 2012 or 2013, Rabhi says.

Mercedes-Benz (DAI) showed off its F 700 concept car with a similar kind of engine last year. The car is the size of its stately S-class flagship sedan (BusinessWeek.com, 5/10/06) that runs on a 44-mpg four-cylinder engine. Mercedes is excited about the technology, but says it won't be ready for the road until well after 2010.