Navigant Research Blog

Is the BMW i3 Really in Trouble in California Already?

— January 9, 2014

An article from, an advice and news website for equity investors, has declared that just as the i3 is launching, a “critical BMW selling point has been removed, resulting in a huge victory for Tesla as well as BMW’s other competitors.”  The BMW i3 comes in two variations: a battery electric version and a range extended version (called the i3 REx).  The reporter, Anton Wahlman, observes that the BMW i3 REx will not qualify for a white carpool lane sticker in California.  That’s perceived by Wahlman to be a huge disadvantage for BMW.  Is it really?

First, a little primer on California carpool lane stickers is needed here.  There are two carpool lane stickers available in California.  White HOV access stickers are reserved for vehicles that meet federal Inherently Low Emissions Vehicle (ILEV) standards and green HOV access stickers are reserved for qualifying Advanced Technology Partial Zero Emission Vehicles (AT PZEVs).  The California Air Resources Board (CARB) maintains a list of vehicles that qualify for these designations.  (As an aside, the still well-recognized yellow HOV access stickers adorning the back of many a Toyota Prius in California have now sunset and are no longer available.)

Wahlman reports that BMW was working “with California’s regulatory bureaucrats to create a new class of car” that would qualify the i3 REx for a white sticker.  However, in conversations with CARB, I’ve learned that this is not necessarily the case.  The Street is likely referring to the regulatory category Range Extended Battery Electric Vehicle (BEVx) that was added in January 2012.  Regardless of whether in regulatory vernacular the vehicle is a BEVx or not, in order to qualify for a white sticker the vehicle has to qualify for the federal ILEV certification.  CARB told me that BMW has worked with them over the last couple years on several different iterations of the i3 REx prior to launch and it wasn’t clear whether the vehicle would qualify for the ILEV certification.  However, the bottom line is that, in its current form, the REx does not qualify for the ILEV certification and, therefore, does not qualify for the white sticker (the i3 without the range extender, however, does qualify for the white sticker because it is all electric without emissions).

Wahlman does correctly point out that there is a limit of 40,000 green stickers available, and the CARB website indicates that “as of November 8, 2013, 24,452 ‘green’ stickers have been issued.”  When these will run out is a pretty good question, though at the pace that Chevrolet Volts and Prius Plug-ins (both of which qualify for green stickers) have been selling in California, it’s a safe bet that they won’t be available this time next year.

So, is the BMW i3 dead on arrival in California, as The Street would have one believe?  Far from it.  First of all, the question really comes down to this: What will be the take rate of the i3 REx versus the i3 all electric version?  Wahlman claims that the i3 REx is “likely what most prospective BMW i3 customers wanted,” but I’m not sure how he came to that conclusion.  In fact, I suspect the all-electric version will outsell the REx in California, regardless of HOV access – in part, because the performance of REx hasn’t been getting the same rave reviews as the all-electric version, but also because it’s almost $4,000 higher in price.

Then, there is the question of whether this is coup for Tesla.  Competitively speaking, the i3 with the range extender is still almost $25,000 less than a Model S, and the two cars have significantly different body styles.  Are they competitors?  To some degree, yes, because the EV market is still small.  But in the increasingly mature market, they are likely competing in the same way a BMW 328 Grand Turismo competes with a Mercedes E-Class.  The small i3 hatchback will be a fit for some lifestyles (and wallets), while others will need the larger Model S.  While BMW may have been hoping for white stickers for the i3 REx, this hardly qualifies as a major setback for BMW – and it’s probably something they knew was coming.


Why the Argument Over EV Prices Misses the Point

— January 3, 2014

Our recent white paper, Electric Vehicles Consumer Survey, has caused a stir, but not for the reasons I would have expected.  Based on a survey of 1,084 Americans, the white paper covers responses to a range of opinions on battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and what consumers are looking for as they consider their next vehicle.

Automotive News wrote a story on the survey focusing on the fact that most of those surveyed expect their next vehicle purchase to be under $25,000, which will be a challenge for many BEVs and PHEVs.  This story got retold by other outlets including Autoblog, Edmunds,, Wall Street Cheatsheet, and this oddball video reading of the story.  While the original piece by Automotive News seemed to cover the survey as a whole, the subsequent stories tended to focus on the price issue.  Like any good game of telephone, the issue got a little skewed from the original message that a majority of respondents are planning (perhaps “hoping” is a better word to use) to spend $25,000 or less on their next vehicle (note that I did not use the term “EV” in that sentence).  The result was statements like “A recent survey has all but confirmed that there appears to be a $25,000 threshold for EVs that most buyers have great difficulty in breaching.”  The implication may be there, but it’s certainly not confirmed by these survey findings. then wrote a response that, for the most part, more closely examined our methodology and the use of surveys in general. correctly pointed out that the sample consists of a general snapshot of Americans, including 19% who do not currently own vehicles and questioned whether that skewed the responses.  That’s an easy check by filtering responses (see the table below), and the short answer is: no, it makes very little difference in this sample.

The Price is Right

So, if the sample is valid, what do we make of the $25,000 price point responses?  I think an analogy can be formed from other data in the survey.  We asked people to rank order their preferred vehicle body-style for their next purchase, and only 25% selected pickup truck as a first or second choice.  Should the headlines from that finding declare “Good luck selling pickup trucks!”?  Of course not.

A more interesting way to examine this issue is look at different vehicle ownership filters in the survey.  Hybrid and current plug-in vehicle owners are significantly more likely to spend $30,000 or more on their next vehicle than the total sample.  That merely points to the fact that BEVs and PHEVs are still niche vehicles, and that’s how Tesla can be successful with a $70,000 to $95,000 Model S, at the same time that Nissan can be successful with $28,000 LEAF.

However, all of this misses the most surprising survey finding: BEVs and PHEVs aren’t even likely in the consideration set for consumers because many consumers don’t know much about them.  When asked about the operating costs, features, and excitement of owning an EV, between 14% and 21% of vehicle owners couldn’t even form an opinion on those three questions.  That tells me the market has a long way to go before shoppers in the mainstream will add EVs to their consideration set.

Selected Electric Vehicle Consumer Survey Questions by Vehicle Ownership, United States: 2013

EV Survey Blog Table (1-3-14)

(Source: Navigant Research)


All-in-One E-Bike Wheels Arrive

— November 26, 2013

Risk_webThe market for e-bicycles has historically been one of relative commonality, with bikes available in limited segments focused mainly in the comfort and commuter segments.  However, that has changed in the last couple of years, with 2013 marking a significant broadening of product segments available.  In Europe, sportive, mountain, and folding e-bikes have all grown in availability, and now the fat bike niche within a niche of the mountain bike market has also hit the e-bike market in a big way (pun intended).  In the United States, the significantly smaller e-bike market is anticipated to reach about 72,000 units in 2014, which means that companies have struggled to find one or two silver bullet-type products and are now shifting to something more analogous to buckshot to cover the market.

To wit, enter an entirely new e-bike segment spawned within the last 2 months: the all-in-one e-bike wheel.  In October and November, the U.S. e-bike market has seen three companies break into the all-in-one e-bike wheel: Belon Engineering with Currie, which is available now, and two start-ups: FlyKly’s Smart Wheel and Copenhagen Wheel, which will be available in early 2014.

Basically, these products all offer batteries and motors contained in the center hub of the wheel, allowing traditional bicycles to be easily converted to e-bikes without the necessity of running electronics or connecting separate battery packs in racks.  The all-in-one solution is designed to make it very simple for consumers to convert any old bike into an e-bike without having to go through the conversion process.

Coming Soon

The all-in-one e-bike wheel has been under development for a while.  In 2009, the Copenhagen Wheel was introduced as a concept by MIT students and acquired by Superpedestrian.  Then, in 2010, FlyKly began work on the Smart Wheel, which had a very successful kickstarter campaign.  A Taiwanese firm, DKCity, began marketing an all-in-one wheel in Europe and Asia in 2012 (while it’s supposedly available in the United States, I’ve been unable to locate one available for retail purchase).  In Italy, ZeHus has been working on a similar electric assist wheel since 2010, launching in early 2014.

Certainly the simplicity of the design is attractive, but in the end, the rear wheel designs of the FlyKly and Superpedestrian may prove frustrating for those running gears or who want disc brakes.  The front wheel design of the 19-pound Currie Electron wheel is likely to have a significant impact on the handling of the bike (though I have yet to ride one) but leaves gearing unaffected.  However, estimating the sales potential is challenging; FlyKly’s kickstarter has sold about 1,000 of the wheels starting at $550.  The Copenhagen Wheel claims to have had 14,000 inquiries since first announced in 2009 and now expects products to be available within 60 days.  Meanwhile, Currie’s Electron Wheel went on sale on November 18 for $999.

A Niche of a Niche

To me, it seems the all-in-one wheel market is likely yet another niche within a niche.  The niche of consumers who are inclined to convert their traditional bikes to e-bikes will find this attractive, and this may grow as consumers who wouldn’t normally convert a bike will consider one of these for the flexibility of reverting back to a traditional bike.  However, at the price points these wheels sell at (I’d expect the $650-$1,100 price point is potentially profitable), the market for compromise e-bike products is not likely more than a niche.  But in a small market, anything like this that can expand upon the 72,000 e-bikes expected to sell next year should be viewed as a positive.  Perhaps even more encouraging, these products seem likely a stepping stone into more costly, better riding, ground-up designed e-bikes.  If I were FlyKly or Superpedestrian, I’d be planning that product expansion rather quickly.


China’s Smog Crisis Brings New Crackdowns

— November 20, 2013

Harbin, a city of 11 million people in China, saw air pollution hit dubious records in October, reminiscent of pollution levels from Beijing last January.  While the bulk of the pollution is attributed to burning coal for heat and electricity, road pollution has also been cited as a major contributor.  This is not particularly surprising.  The automotive market in China surpassed U.S. sales in 2010 and is on track to sell 19.5 million cars and trucks this year.

The particulate matter cited for contributing to the smog in China is labeled PM2.5 (meaning that it’s 2.5 microns or smaller in diameter and can lodge deep within the lungs).  PM2.5 is mostly produced by burning fuels, such as coal, diesel, or even wood.  In China, diesel vehicles are responsible for 85% of the PM2.5 produced by motor vehicles.  The Chinese Academy of Sciences claims that in Beijing, 23% of PM2.5 is coming from vehicles (which is similar to the 20% the Environmental Protection Agency has concluded comes from motor vehicles in the United States).

A Bit Lax

Beijing, a city of 20.7 million people that is growing at a rate of 2.5% annually and has 5.4 million vehicles, has gone to the extreme to cap vehicle licenses at 6 million vehicles.  Additionally, the government has enacted a number of emissions rules in the last year that target both electricity generation and motor vehicles.  China follows the European Commission in its vehicle emissions rules.  In the most polluting vehicles, heavy duty diesel trucks, emissions restrictions are comparable to Euro IV in most major cities and Euro III nationwide.  However, the follow-through on the restrictions is where more aggressive action may be needed.

Part of the challenge in meeting the emissions restrictions lies within the diesel fuel itself.  While in the United States the sulfur content is required to be below 15 parts per million (ppm), in China the sulfur content varies from 250 ppm to 2,500 ppm across the country.  Engine manufacturers cannot meet Euro IV and V requirements without improved fuel – which means higher cost fuel.  The backlash against higher fuel costs in 2011 was so strong that the government delayed implementation until 2013, pushing back the Euro IV vehicle emissions restrictions nationwide until 2014.

Slower, Cleaner

Another part of the challenge lies with enforcement of the rules already in place.  While new vehicles manufactured generally meet the requirements, enforcement of emissions restrictions from older vehicles tends to be inconsistent nationally.

What does this mean for China’s air pollution?  When greater enforcement has meant higher costs and slower growth, the government has a poor track record of following through.  However, the appetite for slower economic growth may be more appealing as public health impacts rise and increasingly wealthy city residents look to improve their quality of life.  While the bad air days in China will continue, China’s tough new vehicle emissions rules may finally show some teeth.


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