Although Audi AG's first hybrid-electric vehicle isn't on the market yet, the German auto maker already has begun development work on new HEV technology designed for widespread application across its entire vehicle lineup.

The second-generation HEV system is a modular, all-wheel-drive design that incorporates lithium-ion batteries, ultimately paving the way for plug-in technology, Audi's research and development head says in an interview.

The first application is expected to come in the Q5 cross/utility vehicle that will slot below the Q7 in size and price when it debuts in early 2009. The hybrid version of the Q5 is targeted to bow in 2010, Michael Dick, head of worldwide research and development, tells Ward's.

Unlike its first HEV system, which was developed with Volkswagen AG and Porsche AG, the new drivetrain is all Audi, though Dick says talks are under way with other auto makers — specifically BMW AG — about sharing portions of the technology.

BMW, which co-developed the so-called 2-mode hybrid system with General Motors Corp. and the former DaimlerChrysler AG and will employ it on its upcoming X6 cross/utility vehicle, denies it is in talks with Audi concerning future hybrid technology.

“Our system (under development) is a very good system for the car package,” Dick says. “It is very efficient and very flexible. And it is good with different drivetrain components. It is equal to whatever engine you have, (whether) it is a 4-, 6- or 8-cyl., a gasoline or diesel.”

Dick says he is fairly confident the Li-ion batteries will be ready for the Q5 in 2010. “The first tests with this system are very positive,” he says. “The challenge is to get a good package, with minimum weight and maximum capacity.”

Dick says Audi is “working hard” with Japanese battery manufacturers, and it also is looking forward to “making business cases together with (other) German car manufacturers” in order to share development and production costs.

The goal is to avoid “standalone solutions,” he says. “For example, in batteries, (perhaps) we can make (them) together. We are working with BMW to make solutions (so that) we can share the financial challenge there.”

Plug-in capability wouldn't be available in 2010, but is targeted for “the first half of the next decade.”

Audi showed off its HEV design direction at the Tokyo auto show last fall with its Metroproject small-car concept, also designated by the media as the A1. The 3-door hatchback seats four and employs a 150-hp 1.4L TFSI engine to power the front wheels and a 41-hp electric motor to drive the rear axle, providing all-wheel-drive capability.

Under acceleration, the electric motor produces an additional 148 lb.-ft. (200 Nm) of torque to supplement the gasoline engine. It also can power the car on its own at lower speeds and provide a range of up to 62 miles (100 km).

Audi says that while the electric motor adds about 154 lbs. (70 kg) in weight, the concept gains about 16% in fuel economy, to 48 mpg (4.9 L/100 km) in mixed driving and emits only 112 g/km carbon dioxide, well below Europe's pending 130 g/km bogey for 2012. The concept also features stop/start capability and regenerative braking and can be plugged in for recharging.

The system developed with VW and Porsche that will bow in the Q7 is a more conventional parallel-hybrid design. In this setup, the electric motor/generator is integrated into the drivetrain between the engine and transmission. It is fed by a nickel-metal-hydride battery pack and drives the wheels at speeds up to 31 mph (50 km/h). The vehicle can travel up to 1.2 miles (2 km) on battery power alone.

In the Q7 concept presented at the 2005 Frankfurt auto show, the hybrid powertrain was mated to a 4.2L V-8 engine, and another version of the concept was unveiled in 2007 utilizing a 3.6L V-6. With the 3.6L, Audi says the Q7 Hybrid can accelerate 0-62 mph (100 km/h) in 7.6 seconds and improves fuel economy 23% from the base model, achieving 24 mpg (9.8 L/100 km).

It is unclear when the Q7 Hybrid will be offered for sale, but Audi executives indicate it could debut in some markets as early as late-2008 but isn't likely to make it to the U.S. before mid-2009.

How far Audi will be willing to take its new hybrid technology — either the system developed with VW and Porsche or its in-house powertrain — also is uncertain, because officials are wary of future demand for hybrids.

“Everybody's talking in the U.S. and California about hybrid, hybrid, hybrid,” notes Ralph Weyler, head of worldwide sales and marketing for Audi. “So we have to offer one.” But Weyler says Audi also will pursue other fuel-saving solutions, with widespread availability of stop-start technology and more diesel and gasoline-direct-injection applications.

“There is hybrid, mild hybrid, synfuel, sunfuel, ethanol, electrical energy, energy with new batteries,” he says. “We will offer more technical solutions and the market will decide.

“And it is not only a question of consumption, it is a question of pricing; it's a question of recycling; it's a question of fun to drive. If we are only monolithically focusing on one objective we would be dead.”

Johan de Nysschen, head of Audi of America Inc., says simply, “We will have hybrid vehicles available, but we expect the volume of those cars to be limited.”

More emphasis will be placed on expanding diesels — and consumer acceptance — in the U.S. To that end, Audi showed off a diesel-powered R8 concept at the North American International Auto Show, boasting a 5.9L V-12 capable of 500 hp and 738 lb.-ft. (1,000 Nm) of torque, as a way to help generate some excitement around diesel power.

It will launch its first U.S. diesel application — a 3.0L V-6 in the Q7 CUV — by early next year.

“We have some countries in Europe where diesels are 80%-90% of the market,” Weyler says. “And we believe diesel is really the best technology to meet (fuel economy and emissions) requirements of the future.”

He points to the 30% better fuel economy, high-torque capability U.S. drivers favor and long range between fill-ups as factors that will win over Americans.

Consumers ultimately “cannot close their eyes to (these) good arguments (favoring diesels),” Weyler says. He predicts about 10% of Q7 customers will choose the diesel engine.

Other fuel-saving measures are on the way as well, Dick says, including a new 8-speed automatic transmission (expected for the Q7 hybrid), plus a dual-clutch gearbox for the S4 (initially for Europe only).

“Double clutch is a very good example of where we can (gain) efficiency in a manual gearbox and also get good sportiness from the car,” says Dick, adding Audi doesn't want to lose its fun-to-drive DNA as it chases improved fuel efficiency.

“We want to (meet the fuel economy and emissions standards), but we also have to look for our genes — sportiness, performance and premium.”

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