Navigant Research Blog

Suddenly Popular, Carsharing Services Seek Profits

— December 18, 2013

Carsharing, suddenly, is hot.  A slew of media stories has documented the dawning of the era of the shared economy, where consumers feel less need to own things than to have access to them.  Whether this movement is attributed to the recession, smartphones, demographic changes, or Napster, many observers think it promises to transform the automotive industry.  Navigant Research developed its first forecasts for this market this year.  Our report, Carsharing Programs, forecasts that membership in global car sharing programs will reach 12 million, up from around 2.3 million as of 2013.

Annual Revenue from Carsharing Services by Region, World Markets: 2013-2020


(Source: Navigant Research)

These programs have unquestionably boomed in the past decade.  According to the Transportation Sustainability Research Center at UC Berkeley, there were 350,000 members of carsharing programs in 2006, so Navigant’s 2013 forecast represents a 31% compound annual growth rate since then.  Automakers and traditional rental car companies have been jumping into the carsharing sector.  The U.S. General Services Administration (GSA), one of the largest fleet operators in the United States, is testing carsharing services as a way to reduce costs.  China is implementing one of the biggest and most ambitious carsharing programs, with a fleet of 100,000 electric cars.  But as appealing as the concept is, and as much as it is in tune with the zeitgeist of collaborative consumption, carsharing still faces some challenges as a business.

Take Zipcar for example.  Even though Zipcar is by far the biggest carsharing company in the world, with around 760,000 members as of 2012 – that is 43% of global membership in 2012 – it has struggled to find profitability.   In 2012, after 12 years in business, Zipcar finally reported net income for an entire fiscal year.  Zipcar was then acquired by Avis, in a move that the two companies expected would help reduce Zipcar’s operational costs and thus improve the bottom line.  Like any merger between a small, nimble startup and a conservative corporate behemoth, this move was fraught with risks.  So far, Zipcar seems to have been able to retain its brand identity a high-tech company with cool cars, which has been critical to its success.

We are likely to keep seeing carsharing companies partner with or be purchased by bigger companies, either traditional rental car companies or automakers, as has happened with BMW and GM.  Carshare companies, though, must search for new revenue opportunities.  One that seems to be gaining traction is selling the company’s expertise in fleet management.  Zipcar is developing fleet management solutions for New York City and Houston.  Switzerland’s Mobility Cooperative launched a subsidiary business intended to exploit its software expertise.  Renault is using the company’s software to operate its some of its Twizy BEV carsharing services.  Another opportunity lies in expanding into new market segments such as government fleets or airports.  Turning a profit will require a delicate balance between exploring these expansion opportunities and maintaining the brand identity of the carsharing company.


Why Tesla Should Sell Trucks

— December 13, 2013

If you want to attract media attention for an idea, attach Elon Musk’s name to it.  Any technology he proposes taking on instantly attains a higher profile, whether it’s autonomous vehicles, high-speed public transport, or space travel.  Musk is also not afraid to buck conventional wisdom: he announced that Tesla would explore battery swapping immediately after battery swap pioneer Better Place declared bankruptcy.  Now, you can add electric pickup trucks to the list of challenging new transportation technologies that Musk wants to tackle.  A Tesla pickup truck would not have quite the same cachet as a Model S, but Musk says he wants to develop one because of their popularity in the United States.  He has mentioned modeling a Tesla electric pickup after the best selling Ford F series pickups.

The pickup truck vehicle segment actually seems like a good target for better fuel efficiency in the United States.  In spite of the move toward more fuel efficient passenger cars, pickup trucks continue to be among the top-selling vehicles in the United States, with the Chevy Silverado and Dodge Ram set to join the Ford F series among the top 10 best-selling cars in the United States in 2013.  Some of this may be due to pent-up demand, as these are quite likely to be work vehicles for contractors, landscapers, and other businesses that have been in a belt-tightening mode following the global recession of 2009.  But since pickup trucks are consistently big sellers in the United States, they represent an obvious target for any efforts to reduce overall transportation fuel consumption.  Musk specifically says he isn’t interested in developing an electrified commercial truck, like those used by Fedex or UPS, since that market is much smaller.   In 2012, the Ford F series, Dodge Ram, and Chevy Silverado combined for sales of 1.36 million.  By contrast, Navigant Research projects that U.S. sales of all medium and heavy duty trucks – the primary models sold to commercial users ‑ will be just over half a million in 2013.

Thanks, No Thanks

However, as I found researching for an update of the forthcoming Navigant Research report, Hybrid and Electric Trucks, U.S. automakers are not terribly interested right now in electrifying this vehicle segment.  GM announced it will be discontinuing all of its hybrid truck models in 2014.  Chrysler produced 35 Dodge Ram truck plug-in hybrids for testing with utility customers but has not announced any plans for commercial production.  Ford has announced that it is working on a hybrid system for its rear-wheel-drive pickups and SUVs; however, the company does not plan to introduce a commercial version until the latter part of this decade.

The reason is simple: low sales.  GM reported 2012 sales of around 2,800 Silverado, Tahoe, Escalade, and Yukon hybrids.  The major challenge for this market is that the businesses buying these cars are very price-sensitive and have rigorous performance requirements.  Edmunds found that the 2013 Silverado hybrid had limited towing capacity and fuel economy compared to the (non-hybrid) Dodge Ram, which cost thousands less.

The main companies in this space now are XL Hybrids and VIA Motors, both startups.  XL Hybrids is developing a hybrid drive that can be retrofit onto a Chevy Express van chassis or a Ford E Series chassis.  VIA Trucks has developed a plug-in hybrid powertrain to be integrated into Class 2 light trucks and vans, like the Chevy Silverado and Chevy Express van.   The company just announced it was beginning production in its factory in Mexico.  These two companies are still in the very early stages of producing commercial products, and it remains to be seen if they can succeed where the big OEMs could not.

No doubt Elon Musk will learn from these examples.  Succeeding in this market will require a vehicle with impeccable performance and significant fuel savings benefits, at a reasonable price point.


Fuel Cell Market Gets Real

— November 5, 2013

Is there such a thing as “the fuel cell industry”? The industry is really a collection of disparate applications and markets.  What exactly do companies focused on passenger cars, uninterruptible power, energy storage, residential power, or forklifts have in common? One thing that the hosts of this year’s Fuel Cell Seminar & Energy Exposition, in Columbus, Ohio, hoped they had in common was the supply chain, which is Ohio’s strength in this sector.  And, one thing I learned at the Seminar’s plenary sessions is that there is there is no fuel cell in the world that doesn’t have an Ohio component in it.

Beyond that, these markets have quite different stories to tell on where they are in the technology development timeline and where they are going.  But the one theme I heard repeated in Columbus was realism – realism about the need to reduce costs to compete in the commercial market.  Two companies, Honda and American Electric Power, stressed that fuel cell technology is ready, but the costs must come down to compete against the many other clean, efficient options available.  Honda’s Bill Konstantacos spent much of his talk  touting the advantages of its gas and hybrid vehicles, which seemed rather off topic, until the point was made that fuel cells have to compete with these technologies, and will not be adopted just because supporters think fuel cells are the best zero-emissions option.  Reducing costs brings us back to the supply chain, since that is where the costs are going to come out at this stage, more so than from any basic research and development.

New Markets for Natural Gas

Other speakers also veered off-topic, promoting their own fuel or technology in addition to fuel cells.  Thus, we had Kathryn Clay of the Drive Natural Gas Initiative touting natural gas vehicles – and, in spite of claims that natural gas infrastructure might be a pathway to hydrogen infrastructure, this does not seem likely.  That said, I credit H2USA, the group developing a road map for U.S. hydrogen infrastructure rollout, for getting the natural gas industry on board with its efforts.  Fuel cell vehicles that use hydrogen from reformed natural gas can offer another domestic market as U.S. gas supplies increase.  It will not be until the latter part of this decade at the earliest, but the U.S. natural gas industry has to be making long-term plans on how to utilize the supplies from the U.S. shale gas boom beyond the export option.

I was surprised to see fuel cell vehicles (FCVs) placed in a very prominent role in the seminar’s plenary sessions.  FCVs have long played an outsized role in the public face of fuel cells, thanks to the (mostly contrived) battle between FCVs and battery electric vehicles, and because the media finds it more exciting to talk about cars than power boxes.  Frankly, this is not helpful to the rest of the fuel cell world because it creates an impression that the technology is not yet ready for prime time when, in fact, more than 28,000 fuel cell systems were shipped in 2012.  Still, there was some news on the FCV front – Honda has finally committed to introducing a new FCV in 2015 (its FCX Clarity is from 2008) and Toyota has said it is on track to produce its first production FCV in 2015.  Add to that the commitment in California to fund hydrogen fueling during the next 10 years, and there is continued momentum in the FCV arena.  It just requires being realistic about the timeline: Navigant Research’s report, Fuel Cell Vehicles, marks 2020 as the tipping point for this market.  In the meantime, other fuel cell applications are quietly making inroads into their respective markets.


E-Trucks and Chargers Headline 2013 Plug-In Show

— October 17, 2013

The Plug-In 2013 show in San Diego highlighted some key trends in the plug-in vehicle (PEV) and PEV charging markets.  In addition to the issues of interoperability and payment systems, below is a round-up of some themes that emerged this year.

Hybrid and Electric Trucks Make a Push

Electrified trucks had a big presence, literally, in the exhibit hall.  Boulder Electric Vehicle, Odyne, and VIA Motors all displayed their latest electric truck technology.  The positive impression from their presence belied the actual state of the electrified truck market, which is still in its earliest stage.  In the United States, hybrid electric trucks are facing stiff competition from natural gas, thanks to the low cost of gas and the high price premium of hybrids.  Odyne and VIA each announced new government funding awards, with VIA’s including emissions and fuel economy testing.  These awards will help demonstrate whether there is sufficient return on investment for plug-in technology in the truck market.

EV Charging Industry Slims Down

There were some noteworthy absences from this event, providing evidence of EV charging industry consolidation.  The two absences that loomed largest were Better Place and ECOtality, both of which have declared bankruptcy.  Many conference participants are worried about the effect the failure of these two companies could have on the industry by creating a perception that these investments – both from the government and the private sector – were wasted.  The Better Place and ECOtality experiences are really quite different.  Better Place failed because of a very risky technology concept.  ECOtality promoted a conventional charging solution but suffered from a poor business case.  That said, what they do have in common is they could have a chilling effect on private investors’ enthusiasm for funding startups in this sector.

PEV Choice Expands Dramatically

The strong automaker presence at the show highlights the proliferation of PEV models available or coming to market in North America through 2014.  Both Nissan and Chevrolet had a major presence, with Nissan touting its MY2013 LEAF and its larger onboard battery charger.  The exhibit hall also featured PEVs from Ford, BMW, Honda, Mitsubishi, and Toyota.  Based on my conversations, the BMW i3 generated the most buzz, followed perhaps by the Chevrolet Spark.  Those are also two of the first PEVs to be compatible with the new SAE combo fast charger plug.  Navigant Research’s report Electric Vehicle Charging Equipment projects that DC charger sales will rise rapidly in North America after 2014, as more SAE-compatible cars are  on the road.

Annual DC EVSE Unit Sales by Country, North America: 2013-2022

(Source: Navigant Research)

DC Charging Comes to the Fore

There was a surprising level of comity around the DC charging market, given that the market is still grappling with the dueling standards issue.  In the DC charging panel, Nissan’s Brendan Jones and BMW’s Cliff Fietzek each touted the importance of fast charging as part of the total charging puzzle for their customers.  They agreed that the first priority is putting DC chargers within the community to serve customers who need an emergency charge or simply want to extend their daily range.  They also agreed that using DC charging to create intercity electric highways is not a high priority right now.  Interestingly, although Nissan has backed the CHAdeMO plug, Jones sounded supportive of all standards and did not seek to argue against the SAE standard.  Fietzek argued that the combo plug is easier for the EV driver and lighter for the vehicle.

There is increased interest in lower power DC chargers and whether they may be more commercially viable than 50 kW chargers.  The major advantage of these chargers is the lower price tag.  They also can help charging installation hosts avoid demand charges, a serious cost issue that could hinder the DC charging market.  Interestingly, the DC charging panel did not necessarily see higher power AC charging as a viable alternative to the DC charging market, at least not in the United States.  Fietzek noted that the OEMs would rather remove weight and cost from the vehicle not add to it by putting on ever higher power chargers.  As a result, the United States may not see a push for ever higher power AC charging as parts of Europe have.


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