Navigant Research Blog

Even If It Doesn’t Survive, the Tesla Vision Has Already Won

— December 14, 2017

Whatever the ultimate fate of Tesla as a business, the vision of its founders seems assured to come to fruition. They set out nearly 15 years ago to build an electric sports car that would show a skeptical public that EVs aren’t the car form of broccoli (good for you, but not much fun). The envisioned electric car would be a gateway to electrifying all transportation.

With every new job at an EV maker, we are moving closer to that goal. Sales of the Chevrolet Bolt EV climb steadily with each month, Nissan is about to launch the second-generation LEAF, and more options will arrive in the coming months. Perhaps most importantly, the future combination of automated driving and electrification will provide great synergy in making transportation clean and safe.

The Bolt and LEAF are examples of automakers taking inspiration from Tesla and mixing traditional expertise in mass manufacturing and support. These automakers and most others are now aggressively developing and planning deployment of automated EVs like the Chevy Bolts being tested in San Francisco, California by GM unit Cruise Automation.

Can Tesla Stay Afloat?

Sadly, Tesla’s own quarterly financial statements don’t bode well for the brand that kick-started this next era of mobility. The company has shown an inability to execute on the core task of profitably building consistently reliable, high quality products to customers. The 3Q 2017 report showed the company was spending more than $2,000 per year per vehicle providing service while only generating $1,000 in revenue. Given the reduced maintenance an EV should require compared to an ICE, this is a clear indicator of Tesla’s spending on honoring warranties. As the in-service vehicle fleet grows, this problem will grow rapidly unless the company can come to grips with the basics of mass manufacturing.

As Tesla attempts to ramp up production of the Model 3, it must first address these challenges—or the reputation the brand has built around Elon Musk’s cult of personality will be squandered.

The Quandary of Some Typical Tesla Customers

Take, for example, a Northern California couple that can afford to buy a Tesla, including the Model X they own. He loves technology and is the definitive early adopter, often buying the latest life-enhancing gadgets. His CEO wife is far more pragmatic, though she also appreciates what technology can do to make life easier and better. She wants to replace her current premium German performance car with an EV when the lease is up in the next month. On the surface, another Tesla would be the obvious choice, but they’ve had numerous issues with it that have taken multiple service trips to resolve. Some issues, like an Autopilot system that has a predilection for randomly shooting toward guardrails, remain unresolved.

They looked at the 2018 LEAF this week, and she is seriously considering it. While it lacks the performance of the Tesla, she expects it to be far more reliable, coming from a company that knows how to bend and weld steel. Despite the problems with the Tesla, her husband wants to stick with the brand to support the vision. Fortunately, he’s in a financial position where he can do that. Most of the car buying public can’t afford to be so tolerant.

If Musk wants Tesla to remain a viable business after he rockets off to Mars, he needs to start listening to frustrated Tesla owners like this pragmatic CEO rather than reveling in his adoring fans.

 

Maps Transform into Long-Range Sensors for Cars

— November 16, 2017

In My Day

When I was young, maps were printed on paper, either bound into atlases or large sheets that were a puzzle to refold. We plotted routes to get from where we were to where we wanted to be. In-car electronics were largely limited to the AM/FM radio and maybe a tape player.

Maps in the car now are a mass of bits and bytes. Increasingly, the car itself is reading that data directly to make control decisions without any direct input from us mere humans.

The Decline of Paper Maps

The transition from paper maps to in-vehicle digital navigation got rolling in the mid-1990s. Early attempts at dead-reckoning navigation systems were limited and error-prone. The opening of the military’s satellite global positioning system (GPS) to civilian use was the key to success. The advent of the consumer smartphone a decade ago with built-in GPS and access to cloud-based Google Maps made it seem for a time that those pricey built-in navigation systems with costly annual map updates might become consigned to obsolescence.

Exploring Embedded Digital Maps

Recently, I’ve had the opportunity to spend time with several different production cars using increasingly detailed embedded maps to improve fuel efficiency and safety in ways that a smartphone-based system is not capable. The humble map has now become a crucial long-range sensor input in cars ranging from the $25,000 Hyundai Ioniq to the $150,000 Mercedes-Benz S560.

Mercedes-Benz debuted predictive navigation as a powertrain control input several years ago with the S-Class plug-in hybrid and the Ioniq and Kia Niro are now doing the same. These electrified models take advantage of topographic information in their maps to manage the blending of power delivery from their electric motors and internal combustion engines.

How Do Embedded Maps Work?

By looking down the road on the map, the vehicles can detect when they will crest the peak of a grade they are climbing to go downhill. In such a situation, hybrids would typically limit the depth of battery discharge to help maximize battery longevity. However, if the powertrain control knows a downhill is approaching where it can recover energy through regenerative braking, it can increase depth of discharge (run longer on electricity) while climbing. This displaces use of the gasoline or diesel-powered engine, resulting in improved overall efficiency.

What Do Map Capabilities Mean for Automakers?

As automakers deploy ever more automated driving capability, they are also leveraging those digital maps to provide smoother and safer control. For the 2018 Cadillac CT6 with hands-off, partially automated Super Cruise, GM uses high-definition maps to geofence use, limiting it to divided highways. Once in use, the maps are used to augment the camera and radar sensors by looking 2,500 meters down the road for curvature and banking. If Super Cruise determines that the current speed set by the driver is too fast to safely get through a curve, it will automatically reduce the speed going into the curve and then resume the previous speed.

On the 2018 S-Class with Intelligent Drive, Mercedes takes this a step further. The Mercedes system requires the driver to keep hands on the wheel but allows its use on all roads. When active, it looks ahead for features like curves and roundabouts and automatically reduces the speed to a safe level. Activating the turn signal will cause the car to slow down as it approaches the next intersection on the map, allowing the driver to go around the corner without touching the brake pedal.

The Evolution toward Self-Driving Vehicles Saved Embedded Navigation

Thanks to the increasing interest in drive automation, the embedded navigation systems that seemed like they would be killed off by the smartphone are set to become a standard feature on all new cars in the next several years.

 

There Are No Self-Driving Cars for Sale Yet

— October 25, 2017

Let’s be absolutely clear about something. As I write these words in October 2017, there are exactly zero self-driving vehicles available for consumers to purchase in America. In fact, Elon Musk’s proclamations and pre-sales of non-existent technology aside, it will likely be at least several more years before an individual can buy a self-driving vehicle. With that in mind, the media needs to stop using the term self-driving in the context of any production vehicle.

Misleading Headlines

In recent weeks, Cadillac has conducted a cross-country media preview of the 2018 CT6 sedan with the first production application of its Super Cruise system. From the event launch in Manhattan to its arrival in Los Angeles 2 weeks later, media outlets including NBC’s Today show, USA Today, Business Insider, and Fortune have referred to Super Cruise as self-driving. In doing so, they are doing a disservice to their own credibility, to consumers, to General Motors (GM), and to every engineer working on automated driving technology.

To its credit, GM itself never calls this self-driving or automated technology. Following the 2014 ignition switch recall, GM instituted new safety review procedures on new products and those changes are reflected in the capabilities and limitations of Super Cruise.

What Is the 2018 CT6 Super Cruise?

This is a very capable advanced driver assistance system (ADAS) similar in principle to Tesla Auto Pilot, Volvo Pilot Assist, and Mercedes-Benz Drive Pilot. Navigant Research’s Automated Driving Vehicle Technology report projects that these types of systems—defined as Level 2 partial automation by SAE—will account for nearly 59 million sales annually by 2026.

I personally spent nearly 900 miles with the system over 2 days. Within its operating domain, it works very well. But the key is that operating domain or definition of where the system can work. This is a supervised partially automated assisted driving system. On divided highways where there are no intersections, cyclists, or pedestrians, Super Cruise can handle steering, acceleration, and braking with the driver taking their hands and feet off the steering wheel and pedals.

That doesn’t make it automated. As the Super Cruise branding implies, this is a more advanced adaptive cruise control. The driver must still watch the road and be ready to take over when the system encounters a situation it cannot handle such as a construction zone, lane merge, or faded lane markings.

A face tracking camera similar in principle to the Face ID system on the upcoming Apple iPhone X watches for facial and eye movements to ensure the driver is alert and attentive, something no other current ADAS does. Meanwhile, high definition navigation maps prevent inappropriate use on surface streets.

Misrepresentation Leads to Unrealistic Expectations

By continuing to call Super Cruise self-driving, media creates unjustified expectations of its capabilities with consumers. GM’s design approach should reduce the sort of misadventures we’ve seen from Tesla drivers on YouTube. However, customers that bought into the media hyperbole may be disappointed with the more cautious assisted driving technologies. Even as the technologies become more sophisticated, customers burned by misleading headlines today may remain skeptical and decide to hold off on future purchases, which damages the overall goal of improving safety on the road.

Patience

It’s one thing to take someone like Elon Musk at his word and assume he’s going to deliver what he promises (which he often eventually does, albeit over budget and months to years late). But by inaccurately portraying what a product can and more importantly cannot do, customer interest (and possibly safety) can be compromised. Truly automated vehicles will get here soon enough. Let’s not rush to mislabel.

 

Automotive Subscription Services May Aid in EV Adoption and Software Updates

— October 19, 2017

When Karl Benz went for his first test drive in 1886, the automobile changed the way that we live in ways that were unimaginable. Over the course of the 20th century, motor vehicles expanded our horizons, making travel easier and more affordable than it had ever been. The need for vehicles to keep pace with always advancing technologies like automation and connectivity will probably end personal vehicle ownership for most of us in the coming decades, but only after manufacturers create business models that replace individual sales. One increasingly popular approach is vehicle subscriptions.

Pro and Cons of Auto Subscriptions

The idea of getting customers to subscribe rather than purchase products outright has been an appealing one for companies in many markets. From the provider’s perspective, creating a recurring revenue stream is good for business and helps to add some predictability for planning purposes. For certain businesses such as software, recurring subscription revenue can be hugely important to help fund ongoing development and product improvement.

For automakers that have endured some spectacular market cycles over the years, the prospect of stable monthly revenue is particularly enticing. As automobiles become more software-defined, the prospect of continuous recalls to update bugs and security vulnerabilities is something of a nightmare scenario if automakers can’t charge customers for those fixes.

For customers, on the other hand, the thought of a perpetual monthly car payment is significantly less appealing. Thus, automakers have to strike the right balance between what customers have to pay and what they get in return.

Early Movers

Enter the car subscription model. In the United States, Porsche is the latest company to announce a subscription service, joining Cadillac, Volvo, and Atlanta-based startup Clutch. Porsche Passport and Cadillac Book are the most similar. For a flat monthly rate that includes insurance, registration, taxes, and maintenance, subscribers can choose to drive any of the vehicles available from those brands. Porsche offers two price tiers. The entry-level $2,000 per month plan gives access to the Boxster, Cayman, Macan, and Cayenne, while the $3,000 tier lets subscribers pick any current Porsche.

Clutch is similar, but rather than being restricted to a single brand, the company works with dealer groups to build local fleets of a broader range of vehicle types from multiple brands. Clutch currently offers three price tiers, each with more expensive vehicles. Care by Volvo is structured more like Apple’s iPhone upgrade program. Rather than allowing drivers to swap cars at any time, the Volvo plan is similar to a lease that includes maintenance, insurance, and registration but allows customers to switch vehicles annually.

Promise for the Future

These early subscription models are aimed at more affluent premium customers who are more likely to stomach a relatively high monthly fee. However, if these models prove popular, mainstream brands are likely to follow suit with similar programs. Regardless of the price point and brand, the recurring revenue provides an opportunity to fund continuing software updates. The inclusion of maintenance and regular vehicle swaps will provide an opportunity to keep vehicles fresh. Once over-the-air software updates become common, shop visits for those updates will become unnecessary.

Window to Increasing PEV Use

In addition to regular updates, the subscription model also provides automakers with another opportunity to increase plug-in EV (PEV) use. Customers that might not otherwise make a multiyear commitment to a PEV may be more willing to try one as part of a subscription, especially if they can skip a traditional dealer in the process. The transportation business is changing, and we’ll see plenty more experiments before everything settles out.

 

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