Navigant Research Blog

EV Industry Better Off Without Better Place

— May 28, 2013

I’d like to say I was surprised to hear that $850 million bust Better Place has entered bankruptcy, but the company’s audacious vision for electric cars was a longshot from the start.  Founder Shai Agassi started in 2007 by raising hundreds of millions and quickly staffed up a global operation as the company attempted to prove that being able to swap out a car’s battery pack in minutes was a requirement for EVs to succeed.  This message ran contrary to the rest of the industry’s strategy to convince motorists that EVs could be sufficiently charged for local travel through a combination of overnight home charging, public charging, and the occasional fast charge.

But as I wrote 3 years ago, the risky strategy of positioning battery swapping as a panacea (while denigrating fast charging) was not a good one for consumers, and was only suited to specific applications.  For taxis or fleets, where maximizing time on the road is crucial, the extra cost of building a network of battery swapping stations could make sense.  Better Place could not even gain traction in its home turf of Israel, a small country where employers purchase many of the vehicles.

Better Place could only have succeeded if multiple auto manufacturers had designed cars for battery swapping, and once it was clear that only Renault would be a partner, the implosion clock started ticking.

Beyond Battery Swapping

As owners of the Nissan LEAF, Tesla Model S, and other battery electric cars have realized, public charging, supplemented with occasional fast charging, is sufficient for most local driving needs.  With Better Place gone, consumers will no longer receive mixed messages about what is required to keep EVs on the road.

Over the last few years I’ve spent hours chatting with many very bright and committed people at Better Place who were underutilized and mismanaged.  Better Place failed to go beyond being an incredible marketing engine and leverage its other assets that could have increased its prospects.  The company’s software and communications system, which recognizes electric vehicle driving patterns and monitors performance, could have been licensed to other EV charging companies.  Despite the nearly billion dollars Better Place raised, the company made very little effort to develop an energy storage solution for its reserve battery packs, which could have generated revenue from utilities or grid operators.  While neither of these options was a guaranteed success, they could have diversified the revenue stream during the years that the company was hemorrhaging cash.

We haven’t heard the last of battery swapping though.  If the cost of infrastructure can be kept to a minimum, a battery swapping taxi or delivery fleet could make financial sense.  That is what Slovakia’s GreenWay Project is doing, and I was encouraged by what I saw when I visited it in April.  For less than $100,000 (or 20% of the cost of a Better Place location), the company has an operational swap station for replacing a delivery van’s battery pack in under 10 minutes.  For battery swapping to survive, a targeted rather than a bold vision is called for.


Is the Specialized Turbo a Game Changer for E-Bikes in the United States?

— May 27, 2013

Last month Specialized announced that it is launching its new electric bike, the Turbo, in the United States.  This is significant for two reasons: first, it’s from Specialized, known for fast and high-tech traditional bikes; second, it’s designed specifically to engage with Specialized’s traditional bicycle customer base – a target not typically pursued by e-bike manufacturers.

The Turbo e-bike is a pedal-assist (pedelec) model with a 250-watt rear hub motor, a 342 watt-hour lithium nickel manganese cobalt oxide (LiNiMnCoO2) battery, and SRAM drivetrain components.  The e-bike has a top assisted speed of almost 28 mph and includes brake energy regeneration capabilities.  The LiNiMnCoO2 battery is integrated into the downtube, so the bike resembles a traditional model.  The battery can be charged either on the bike or while removed and has a 300-cycle or 2-year expected lifespan (which means it retains 75% of its original capacity at that point).  It also includes a wireless user interface and integrated front and rear lights.  The cost is $5,900.

The key words chosen to promote the Turbo on Specialized’s website are “fast, integrated, clean, sexy, and strong” – in that order.

There has been a lot of press regarding this bike and its significance in the U.S. e-bike market.  No doubt the price positions this bike at the top end of the market, where volumes are low and competition is stiff: Currie’s e-Flow, Stromer, and Prodeco’s Titanio 29er to name a few.

So is the Turbo a game-changer in the U.S. e-bike market, or just another high priced toy for a particular niche?

I’d say it’s probably analogous to Tesla’s Model S: definitely successful, but within a niche.  The Specialized Turbo won’t likely achieve blockbuster sales, and Specialized still has a lot of work to educate its dealers on how to sell the e-bike.  But it seems poised to show other manufacturers, particularly cycling giants like Trek, Giant, and Cannondale, that the U.S. market is ready for dramatic new products, it’s a growth market, and they are at risk of falling even farther behind.


A Step at a Time, The Connected Home Advances

— May 27, 2013

Small but notable steps are advancing the connected home for energy management. Coming from different industry stakeholders taking different approaches, they include:

  • Smart Energy Profile 2 (SEP 2): The ZigBee Alliance ratified the SEP 2 standard, which paves the way for IP-based home area networks and devices that can interoperate over ZigBee, Wi-Fi, or HomePlug protocols.
  • Wi-Fi-enabled Whirlpool appliances: The manufacturer introduced four appliances (refrigerator, dishwasher, clothes washer, and dryer) that can connect over Wi-Fi and be controlled with a mobile application.
  • Collaboration between Ford Motor Company and KB Home: The automaker and leading home builder are jointly promoting the benefits of new technologies aimed at helping consumers lower their home energy bills and reduce their environmental impact.

Most consumers have little idea what SEP 2 is or what it could mean to their home energy management.  Nonetheless, ratifying the standard is a key milestone.  Products built on SEP 2 will be able to communicate over the Internet and share information.  For instance, smart meters, thermostats, and appliances will be able to share data for the purposes of control and energy efficiency.  SEP 2 also enables the control of plug-in hybrid electric vehicle (PHEV) charging.  Interoperability testing of devices with SEP 2 continues, with products expected to be commercially available later this year or in early 2014.

Whirlpool’s new products – part of its 6th Sense Live smart appliances line – are not the first Wi-Fi-enabled appliances on the market.  Samsung demonstrated a Wi-Fi refrigerator in early 2011.  However, Whirlpool’s offerings signal new momentum for Wi-Fi in home appliances, given the company’s status as an industry leader and the fact it controls other well-known brands such as KitchenAid, Maytag, Amana and Jenn-Air.  It is reasonable to expect those brands will have Wi-Fi-enabled appliances in their product portfolios at some point, assuming the initial Whirlpool products find traction.  But momentum is likely to be gradual.  For now, Whirlpool’s new Wi-Fi appliances are only available in the Chicago area, with no word on when the company might expand sales to other regions.

Similarly, the Ford and KB Home collaboration is in its formative stage.  In April, Ford’s C-MAX Energi plug-in hybrid car joined KB Home’s ZeroHouse 2.0 model home demonstration project in San Marcos, California.  The effort also combines Ford’s MyEnergi Lifestyle initiative with KB Home’s vision of a net-zero energy home.  The idea is to show how electric-powered vehicles, solar power, smart appliances (from Whirlpool), and home design can synchronize around energy efficiency.  It’s a bold vision that brings together other key players, including Eaton, SunPower, Infineon, and Nest Labs.

Together these steps show that, after years of promise but little tangible progress, the energy efficient connected home is starting to emerge.  But, with a few exceptions (e.g., Oklahoma Gas & Electric and NV Energy), utilities have yet to engage on a wide scale.  And consumers will not be rushing to adopt the new products and services.  Appliance replacement cycles are long (e.g., about 15 years for refrigerators), and real-world examples of the payback must be demonstrated.  The connected home market is advancing.  But this is a long march.


Lessons From the Lithium Ion Leaderboard

— May 22, 2013

With the publication of Lithium Ion Batteries for Stationary Energy Storage, we launched our first Navigant Research Leaderboard report, which is the rebranded version of the Pike Pulse series.  This report looks at the landscape of lithium ion battery vendors in the stationary energy storage space.  To score each market participant, we looked at six elements of strategy and six elements of execution.  Once the results were tabulated, we ended up with a few surprises.  Here are some of the lessons learned from this report:

Entering bankruptcy is a surefire way to damage a reputation.  A123 Systems, the historical market leader in stationary storage, has placed more than 100 MW of batteries into stationary systems since its inception in 2005.  Its team of engineers, marketing executives, and senior managers is world renowned.  So how did it end up in the Followers category, the lowest quadrant of the Leaderboard?  The answer rests primarily with the fact that it entered bankruptcy after a series of manufacturing setbacks with its automotive batteries.  The company recently emerged from bankruptcy under new ownership.  Now it’s part of Chinese automotive parts manufacturer Wanxiang Group and is re-entering the business of manufacturing and marketing batteries.  As the company formulates and articulates its strategy going forward, it will likely recapture its market leadership.  But the immediate after-effects of the bankruptcy severely damaged the company’s scores.  We anticipate that A123 will score significantly higher next year.

It Only Takes One Fire

Battery fires burn more than just the battery.  Fires struck several battery makers, such as Electrovaya and GS Yuasa, driving some to the point of failure.  Unfortunately for the industry, these incidents have received an inordinate amount of media attention, leading to lost sales and severe public relations problems (luckily no deaths or severe injuries have been caused by any of the fires).  In other industries, safety breaches can be tolerated.  In the advanced battery space, however, a single fire event can lead to the company’s collapse.

China is still playing catch-up.  While Chinese lithium ion companies have made tremendous gains in the last 3 years in the consumer electronics sector, they are still market laggards in stationary storage.  ATL, Lishen, China BAK, and BYD (the four horsemen of the Chinese lithium ion industry) have all either avoided the global stationary storage market or failed to make a lasting impression with buyers.  Don’t expect this to continue, though.  All four companies have plans to develop their stationary storage businesses in North America and Europe as soon as they feel an investment is warranted.

There’s more than one way to score highly.  The two market Leaders in the Leaderboard, LG Chem and Johnson Controls, both scored much higher than any competitors.  However, they got their scores for very different reasons.  LG Chem bet the house in 2008 and 2009, building large factories on multiple continents and blitzing customers with an all-out marketing push.  The results have put LG Chem into the driver’s seat in the automotive space and made it a major competitor in the stationary space.  Johnson Controls, on the other hand, kept its powder dry.  It invested heavily in basic research into the nickel manganese cobalt chemistry that most industry participants agree will dominate the space in the next 5 years.  The company kept its scientists busy while making relatively small investments on manufacturing capacity.  Now Johnson Controls is in an excellent position to invest in manufacturing even as many of its competitors are struggling to keep factory doors open.


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