Navigant Research Blog

South Korea Looks to Jump-Start Its PEV Market

— June 10, 2015

South Korea has evidently tired of being a laggard when it comes to plug-in electric vehicle (PEV) adoption. Total PEV sales in 2014 were 850, well under one-tenth of 1% of the country’s 2014 light duty vehicle (LDV) sales. Compare this to its neighbor Japan, which had around 33,000 PEV sales in 2014. While that is still less than 1% of all LDV sales, Japan had around 110,000 PEVs in use as of the end of 2014, compared to around 1,800 in South Korea.

South Korea is now looking to jump-start the PEV market, announcing major investments in charging infrastructure and promoting technologies that can make PEV charging as easy as possible.

It’s somewhat surprising that South Korea’s PEV market has been slow to develop given the country’s reputation as a high-tech center and, more significantly, its strength in the lithium battery market. The lack of truly market-competitive PEVs has been a key factor. The Kia Soul electric vehicle (EV) was introduced in 2014 and quickly shot to the top of the PEV sales figures for South Korea. This year is expected to see the Hyundai plug-in hybrid go on sale, so Navigant Research expects faster sales growth of PEVs in South Korea. But a potential roadblock will be the difficulty of home charging in a country where much of the population lives in multi-unit dwellings.

Removing the Roadblocks

The government in South Korea’s largest city, Seoul, is looking to remove this roadblock with an innovative plan to support 100,000 new charging locations. As of the end of 2014, Navigant Research estimates there were fewer than 100 public stations in Seoul and around 700 to 800 privately owned stations.  So, at first glance, installing 100,000 stations seems challenging indeed, but the stations will really be standard 220 outlets, where a portable charger can be plugged in. South Korean company Powercube manufactures the chargers, which reportedly cost under $1,000 and can be equipped with an RFID reader that will allow Powercube to track the user’s electricity consumption.  The EV driver will be billed directly by Powercube. The RFID reader also transmits the time of the charging session, which suggests that the driver can take advantage of time-of-use rates.

The city government is looking to secure parking spots in garages and apartment complexes where drivers will have ready access to an outlet to plug in. The chargers, called  EV-Line, only charge at 3.3 kW/hour, so they won’t be especially fast chargers. This could hinder interest, if the drivers knows it will take up to 8 hours for a full recharge, and could also cause problems with drivers unable to access an outlet as an EV occupies the designated parking spot for many hours. The program seems to be a way to address the charging problem without the massive investment that would be required to install large numbers of Level 2 public chargers, which cost $2,500 and up and have significant installation costs, as well.

Making the Commitment to the PEV Market

South Korean company Kodi is also jumping in to the low cost charging market. The company is set to release a 3.3 kW mobile charger, the MTC, that will also use a standard 220V outlet and be made available for under $1,000. Drivers will be able to manage the charger through their smartphones, which will also allow them to be billed for electricity used.   Other initiatives include POSCO ICT’s commitment to installing its charging stations in hotels and across South Korea and telecom company KT Corporation’s pilot program to re-purpose unused telephone boxes into charging stations.  South Korea is showing a real commitment to making PEV ownership more attractive and significantly moving the needle on PEV sales.


Incentives for EVs Continue to Drive the Market

— June 5, 2015

Can cleantech incentives be too successful?

This is a question that Norway is grappling with as the country considers dropping its generous electric vehicle (EV) subsidies. EV drivers in the county receive a number of benefits, including free parking and bus lane access, but the biggest by far are the tax exemptions. Since taxes in Norway can double the price of a conventional car, an EV without sales tax suddenly becomes much more affordable. One study estimated that total subsidies for EVs in Norway equated to around $8,200 per car per year. And they’ve worked. Norway has the highest EV adoption rate in the world. Navigant Research has estimated that battery electric vehicles were around 13% of the country’s annual light duty vehicle sales in 2014.

Evidence suggests these incentives are important drivers in other markets, as well. In the United States, HOV lane access has been strongly correlated to demand for hybrids and EVs in markets like the Washington, D.C. area and California, where traffic delays are legendary. Georgia has seen a significant uptick in EV sales since implementing an EV tax break—one that the state is now considering ending.

One complaint made against these incentives is that they are essentially subsidizing the rich, or at least the well-off. And there is some truth to this. A $100,000 Tesla S is certainly a car out of reach for most households. Even mainstream EVs like the Nissan LEAF, while affordable, represents a significant premium over the price of a comparable car. The same complaint can be made for most clean energy subsidies, whether for solar, wind, or fuel cells: initial adoption is likely in the higher income brackets.

Why Governments Still See Subsidies as Useful

However, subsidies are very often the carrot to the government stick of regulatory mandates. In the United States, automakers are facing increasingly tough fuel economy and greenhouse gas emissions targets. By model year 2025, passenger vehicles in the United States will be required to meet an estimated combined average fuel economy of 54.5 mpg. As Navigant Research found in its Automotive Fuel Efficiency Technologies report, these standards cannot be fully met simply by the downsizing of internal combustion engines and the introduction of stop-start or hybrid capability. EV sales will be a necessary component to meeting these standards. Add to this the zero emissions vehicle mandates set by California and adopted by 9 other states, and the government is in essence requiring the sale of EVs.

EV sales have seen steady growth since 2010, and are poised to see faster growth. However, even with the introduction of more models, they will still be offered a price premium that will keep them at a niche sales level. In its Electric Vehicle Market Forecasts report, Navigant Research projected global PEV sales would rise from under 2% of annual light duty vehicle sales in major markets like North America and Western Europe to around 4-5% in 2023.

Even with cheaper and longer range EVs coming to market, the price premium can keep these cars from reaching the sales level needed to meet these standards without some incentives; these will continue to be necessary for the next decade.


Innovation in New Mobility Offerings

— June 2, 2015

Rideshare app company Uber is continuing on its phenomenal growth trajectory. In the 6 years since the company launched in San Francisco, it has expanded into 300 cities in 58 countries. What’s more, Uber has raised $5.9 billion in 10 funding rounds. During the most recent funding round, in early 2015, the company was valued at an astonishing $40 billion, and it anticipates a $50 billion valuation in its next funding round. The much smaller rideshare app company Lyft, which operates in over 60 cities, has raised around $1 billion and was valued at $2.5 billion in its most recent funding round.

It is interesting to compare these companies to another company in the new mobility sector, carshare company Zipcar. Since it was founded in 2000, Zipcar has spread to around 250 locations and boasts more than 700,000 members. Although this is not an apples-to-apples comparison, it is interesting to note that Zipcar’s valuation from its 2011 initial public offering (IPO) was $1.2 billion; yet, in 2013, Avis Budget Group purchased Zipcar for $500 million.

Comparing Rideshare and Carshare

Uber is essentially being valued as a tech company, whereas carshare companies are more like a traditional business. This difference may seem somewhat counterintuitive since rideshare apps and carsharing are both part of the growing mobility sector. Both are services that thrive in the digital age. Rideshare services like Uber and Lyft would not exist without the smartphone. These services take advantage of the perpetual connectedness that a smartphone offers, for both drivers and users. Carsharing, on the other hand, is not dependent on smartphones, but it has embraced the ease of use that smartphones offer. While carshare companies can still operate from website and smart card access, the use of a smartphone app to locate and book cars opens up new business model opportunities like one-way service, where the vehicle can be returned to any location. One-way service encourages more impulse usage, with someone realizing that a car might be an easier way to get where they are going based on traffic or weather conditions.

The possibility of more usage is key to the success of carsharing because, in spite of the enormous success of the carshare sector over the past 15 years, companies can still struggle to consistently report a profit. Carshare companies have significant expenses due to vehicle leasing, maintenance, and fueling, as well as parking, which can be very costly. By contrast, rideshare companies don’t bear the costs of physical infrastructure. Fundamentally, what these companies are is a matchmaker service, and this requires significantly less upfront investment. This is part of what has allowed Uber to expand so swiftly. And these services are used much more frequently, with over 1 million rides occurring daily. Carshare companies are more like a traditional business with ongoing physical infrastructure costs that make it harder to scale as rapidly.

What will be interesting is to see how Uber and Lyft can leverage their strengths to create new revenue streams. It will also be interesting to watch carshare companies evolve in this new environment. Zipcar has been rolling out one-way service, while Swiss carshare company Mobility Cooperative invested in sharoo, a company that offers a private carsharing platform. The new mobility space will increasingly encourage these kinds of innovations and partnerships.


Crowd Data Drives New Mobility Technology

— May 4, 2015

City planners and traffic management agencies are avid consumers of data, which is critical to both planning and managing transportation services. Traditionally, government agencies relied primarily on data from loop detectors installed in streets and highway. These sensors tell transportation officials how many cars pass by the sensors, allowing them to understand the volume of traffic on the roadways they manage. This then feeds into infrastructure plans, as cities understand where the heaviest demand is and where the pinch points are in the roadways.

This data is also used to report when traffic has stopped in the roadway, which is used for traveler information systems. What these sensors cannot tell you is where the traffic came from, where it ended up, or even how fast it’s traveling. And these sensors are not cheap. It’s a significant investment to install them in existing roadways, and even building then into new roadways is costly, given that the sensors must be highly robust and maintained throughout the year in challenging conditions.

Listen to the Crowd

Crowdsourced data, gathered from GPS navigation devices, cellphone records, or mobile apps, is becoming an increasingly viable way for cities and transportation agencies to acquire data without expensive infrastructure projects. And these crowdsourced data sources can supply new data points that help cities get a much more complete view of mobility, like pedestrian and bicycle traffic and parking usage.

Traffic data company INRIX has been incorporating data from a variety of sources to supplement its own vehicle probe data for years. The company aggregates data from GPS navigators and mobile phones in vehicles to provide a more complete picture of the traffic landscape in real time. AirSage utilizes cellular phone data for its traffic data offerings. Through partnerships with Sprint and Verizon, AirSage receives anonymized real-time data from cellular phone activity which the company provides to transportation planners and transit planners. AirSage provides origin and destination data, as well as speeds.

Cellular based traveler data also enables traffic managers and planners to see the movement of pedestrians and cyclists, as well as motorized vehicles Still, there are limitations: namely, that AirSage cannot tell what type of motor vehicle it is tracking.

We Know Where You’ve Been

But the most interesting new crowdsourcing data potential is from companies that aren’t even in the data aggregation business. Just as Google and Facebook have found data to be their most valuable assets,  app providers like Uber and Strava, are discovering the potential value in the data they amass.

Earlier this year, Uber announced it would offer its data to cities, with the Boston the first recipient. Uber is offering this as a free service, likely in part as an effort to present a kinder, gentler image after a recent spate of negative press. Uber has also partnered with the Starwood Preferred Guest program. Program members can receive reward points for using Uber; customers who opt-in to Uber’s Starwood point program agree to giveStarwood access to their Uber activity.

This sort of data exchange has huge revenue potential for Uber, as it’s easy to imagine how many businesses would be interested in tracking the travel habits of Uber users. trava, a company that allows runners and cyclists to log and share data on their athletic activity has also found a way to turn its data into revenue. The Oregon Department of Transportation (DOT) is buying Strava’s data to better understand the routes used by cyclists. This is another way for cities and states to fill out their picture of mobility and provide better services for their residents.  The potential for crowdsourced data is huge, and we expect to see more partnerships like these develop as transportation planners begin to grasp the full potential of crowdsourced data. You can also expect renewed privacy concerns, especially when the data comes from users who are not fully aware that they are opting in to share their data when they download an app.


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