The internal combustion engine is far from dead

October 22, 2012: 11:22 AM ET

Carmakers from Volkswagen to BMW are finding new ways to work with what they have.

By Anne VanderMey, reporter

FORTUNE -- Auto manufacturers and drivers alike have long yearned for a simple solution to fuel efficiency. For a while, it looked possible. In 2009 Fortune wrote that, thanks to advances such as electric cars, hybrids and diesel vehicles, "It seems certain that the traditional gasoline internal-combustion engine is on the wane."

Truth is, an affordable technology to upend the standard engine still has yet to materialize. Forecaster LMC-Automotive predicts that by 2020, more than 98% of vehicles will still incorporate an internal combustion engine of some kind. And some 72% of new car sales in 2020 will run on gasoline only, says LMC analyst Michael Omotoso, down just a few points from today's 84%. (Most of the rest are hybrids, diesel or ethanol-powered.)

Absent a revolutionary breakthrough within the next few years, carmakers from Volkswagen to BMW are now finding new ways to work with what they have. That's becoming especially important with a looming hike in fuel economy standards in the U.S. to 54.5 miles per gallon by 2025. (America is the world's second largest car market, after China.) To meet the new standards, companies are combining an array of existing technologies to eke out every possible bit of fuel savings from the 120-year-old internal combustion engine.

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Asked about the disparate technologies being crammed into the standard engine, Society of Automotive Engineers's Andrew Smart puts it this way: "When you look at 2025, the expectation is there is no silver bullet, but there is plenty of silver shrapnel."

Ford (F), for one, took this approach in its new, much talked-about EcoBoost engine, which was introduced four years ago and has already sold more than 350,000 models. The EcoBoost is a compilation of long-standing technologies like direct injection, turbocharging and variable valve timing. Not much in it is new, but all together, the incremental improvements achieve a 20% gain in efficiency over its predecessors. (For more on the EcoBoost, click here.)

How'd they do it? For starters, the EcoBoost is light. The one-liter, 3-cylinder model it plans to release in the states next year will be the carmaker's smallest engine ever. Part of the weight loss is achieved by using aluminum instead of cast iron in the engine construction. It's also smaller, thanks to the other tweaks that allow it to downsize and still pack a punch.

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The engine's scale is in keeping with a trend. Throughout the industry, automakers have swapped V6s for four-cylinder engines. That applies to luxury cars, too, where once it was sacrilege to have anything smaller than a V8. Even BMW is joining in, with a tiny, three-cylinder engine slated to go on sale next year.

There are a few ways carmakers get smaller engines to deliver high performance. One is direct injection. The technology has been around for a while, but it has recently gained traction with U.S. manufacturers. To avoid wasting gas, precision injectors within the engine shoot fuel into an exact location in the cylinder. That allows for a cleaner burn, with a computer determining the exact amount of fuel needed and the exact spot it should land. Also, because the fuel goes directly to the cylinder without passing through other parts of the engine, it's cooler once it gets there. The colder temperature means the gas is denser, allowing for more of it to be used in a smaller space at higher levels of compression. The end result is a bigger punch.

Another method is turbocharging. According to Honeywell Transportation Systems, turbochargers were in about 25% of new cars sold globally, and could end up in 40% of cars as soon as 2017. The technology itself is nearly a century old, but automakers are increasingly embracing it. A few turbocharged engines: Ford's EcoBoost, Mazda's Skyactiv, BMW's EfficientDynamics. Turbocharging uses a car's own exhaust to power a pump that forces more air into the cylinders. That compressed air can mix with more compressed fuel (hello, direct injection), resulting in more power.

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Supercharging is a more expensive, but similar option. Superchargers do essentially the same thing as turbochargers, but instead of being powered by a vehicle's exhaust, they're mechanically driven, usually by the engine's fan belt. The supercharger's advantage is that there's no need to wait for exhaust to come out for the boost to kick in. The supercharger is more commonly used for performance rather than fuel economy.

This has been largely deemed too pricey to justify the extra power by U.S. automakers, Ford included (except for one high-performance Mustang variant). These firms have largely opted for turbochargers instead. However, some vehicles -- like the Volkswagen 1.4-liter TSI Twincharger four-cylinder engine -- have both. Volkswagen and its overseas counterparts were early pioneers of combining efficiency technologies, including diesel power, in engines for hyper-fuel conscious European customers.

Other increasingly common tactics include, but aren't limited to, reducing friction wherever there are moving parts. And variable valve timing, which was rare a decade ago and is now almost ubiquitous. Honda (HMC) pioneered the technology, with its VTEC system, which even got its own meme. And BMW has also made strides with its Valvetronic system. In cars equipped with the system, a computer intelligently times the opening and closing of air intake and exhaust valves to match a vehicle's speed and load.

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In the future, expect big gains from variable valve timing systems becoming more precise, says Eric Fedewa, director of IHS Inc.'s global powertrain and component forecasting. Also expect more hybrid electric engines to work as a support to traditional engines. At the same time, transmissions will get more speeds, in an effort to make engines operate at their most efficient. In 10 years: "engines will necessarily be a lot smaller and probably as powerful or more powerful than they are now," Fedewa says. In the past, gains have focused on power. "You've essentially got consumers driving race car engines," Fedewa says of today's cars. In the future, gains will focus on efficiency.

The impact of all these innovations is substantial. According to analysis by the University of Michigan Transportation Research Institute, fuel economy for light-duty vehicles has improved 18% since 2007, to 23.8 miles per gallon. Part of the credit for those gains goes to smarter engines, along with a host of other incremental improvements in vehicle efficiency. The increase isn't huge in real terms, but it's a giant leap compared with the scant 23% gain in the fuel economy of all vehicles between 1923 and 2007.

Of course, the world is still a long way from breaking its gasoline habit, and internal combustion won't change that. There's a physical limit to how small an automaker can make an engine and have it still power a car, and we've already hit it in large and midrange vehicles, says Automotive Engineering International senior editor Lindsay Brooke, and we're close in other classes. After that, to reduce fuel consumption the country will need more public chargers for electric cars, better batteries, and maybe even a new take on internal combustion. (Several startups are working on it.) But for now, it looks like the old-fashioned engine will be with us for a long time still -- and that might not be so bad.

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