Navigant Research Blog

Ford CEO’s ‘Perfect’ Comments in Context

— December 22, 2016

EV RefuelingThe potential softening of US Corporate Average Fuel Economy (CAFE) standards that has been discussed of late has reignited the debate about consumer acceptance of electric vehicles (EVs). Under current regulation, EVs are crucial to automaker compliance strategies, but not all EVs are the same, nor are they treated similarly under the regulations. It’s an important aspect to clarify here as the debate about CAFE standards questions whether there is enough consumer demand for EVs to enable automakers to meet the standard’s targets. The administrators of CAFE, the Environmental Protection Agency (EPA), suppose it does, but some in the automotive industry disagree.

The most recent commentary provided to the debate was by Ford CEO Mark Fields, which Business Insider claimed “just perfectly summarized the biggest problem for electric cars.” Fields, in arguing there is not enough EV demand stated: “In 2008, there were 12 electrified vehicles offered in the U.S. market and it represented 2.3 percent of the industry … fast forward to 2016, there’s 55 models, and year to date it’s 2.8 percent.”

Hybrids and Plug-Ins

Fields’ data point deserves some deeper analysis. In the automotive industry, the term EV or electric car encompasses hybrids, plug-in hybrids (PHEVs), and battery electric vehicles (BEVs) because all these vehicles use electricity either harvested from vehicle braking and/or from the grid for traction. Within the design of current regulations, PHEVs and BEVs are heavily incentivized and provide far more benefit to automaker CAFE compliance strategies than do hybrids (though hybrids are an important component).

Fields’ statement is accurate when considering the entire pool including hybrids, but it does not address the demand of plug-in vehicles specifically, around which most of the debate has centered. To start, the laggardly market growth for EVs over this time period is specific to hybrids, which have contracted from the 2008 2.3% figure to 2% year to date. Of note, a vast majority of sales come from one automaker (Toyota). Meanwhile, plug-in (BEV and PHEV) sales started in 2011 and now have over 0.8% of the market year to date, and there is no one consistent or dominant market leader. Lumping all EVs together in regards to CAFE compliance is inexact when automakers are generally complaining about the requirements for plug-in EVs, which are in reality gaining market share and increasingly common among automaker portfolios, and are the vehicles which are most critical to automaker compliance.

Reasons for Decline

Given that, there are many reasons hybrid share may be in decline. One that usually gets a lot of attention is oil prices, which not only historically reduces sales of hybrids, but also has prompted a growing percentage of new vehicle sales to be SUVs and trucks (a market nearly devoid of hybrids) and fewer passenger cars. Another factor is the increasingly more fuel efficient non-EVs (due to CAFE standards), but the last and more critical reason is competition from the plug-ins themselves. Before the plug-ins arrived, hybrids were the energy efficiency leaders. Since plug-ins arrived, sales have arguably taken away from hybrids, and the impact to the overall hybrid-inclusive EV market has been relatively marginal in growing sales, which fuels the arguments for those who are critical of consumer demand for EVs.

Ultimately though, the feasibility of automaker compliance with current regulation hinges on consumer acceptance of plug-ins, not hybrids. To that effect, Fields’ data in relation to consumer demand and CAFE compliance is not perfect. Hybrids and other fuel efficiency technologies are certainly helpful but cannot be relied upon in isolation. Consumer response to battery cost and energy density improvements teased by the Tesla Model 3 and represented in the near-term BEV rollout of the Chevrolet Bolt will provide greater clarity here. However, regardless of the success these models may realize or have already realized, it is unlikely to have a significant impact on whether CAFE standards will be softened or not.


Washington Utility Tests New Path to Integrating EVs

— July 27, 2016

EV RefuelingEastern Washington isn’t an especially well-known plug-in electric vehicle (PEV) market, given most PEV sales in the state are concentrated in Seattle and along the Pacific coast. However, the utility serving a large portion of eastern Washington, Avista, has made an ambitious and refreshingly unique move in preparation for the emerging technology. On July 27, Avista announced it will develop a pilot to demonstrate vehicle-grid integration (VGI) technologies in partnership with Greenlots across 200 Level 2 chargers and seven direct current (DC) fast chargers at residential, workplace, and public charging sites.

The purpose of the pilot is to determine how much PEV load can be shifted from peak load times to off-peak times without using time-of-use (TOU) rates. The hope is that the pilot will show that PEV load may be managed in a manner that reduces grid operating costs and increases grid reliability, thus optimizing potential benefits of PEVs to both utilities and ratepayers.

A Unique Approach

What makes Avista’s pilot unique is its holistic approach encompassing all forms of charging and the use of more nuanced demand-side management mechanisms than TOU rates. Including residential, workplace, and public charging within the pilot enables Avista to collect data on the uninfluenced charging behavior of program participants and then assess how demand response (DR) signals sent to PEV owners changes charging behavior across the charging network. The use of DR signals rather than TOU rates prevents new peak creation at the beginning of off-peak periods and maintains higher levels of revenue per kWh consumed by PEVs than would a TOU rate while still providing energy savings to PEV owners.

The pilot kicks off this August and will run for 2 years. Single-family and multi-unit dwelling residences will have 120 chargers installed, while the remaining 80 chargers will be placed at select workplaces or public locations alongside the seven aforementioned DC fast chargers. The chargers will be integrated into Greenlots’ SKY charge management platform, which is also being leveraged in a similar pilot for Southern California Edison that looks specifically at workplace charging.

Fast Growing Customer Base

Avista’s pilot comes in response to the strong possibility that its PEV population is going to increase dramatically. Washington’s Electric Vehicle Action Plan seeks to ensure 50,000 PEVs are on the state’s roads by 2020, up from the 12,000 registered in early 2015. As of the writing of the action plan, only a few hundred of these registrations were in counties served by Avista. Yet, the market for PEVs is anticipated to increase significantly in the next 3 years as 200-mile range battery EVs (BEVs) at under $40,000 are introduced.

On behalf of mass market long-range BEVs, Navigant Research forecasts in its Electric Vehicle Geographic Forecasts report that Washington will meet its 2020 goal sometime in 2018, with sales expanding into suburban and rural markets. If the PEV market lives up to this forecast, then PEV populations in eastern Washington counties are expected to be at least 7 times greater than current levels by the end of 2020.

PEVs in Use in Eastern Washington Counties: 2016-2020

Washington PEV

(Source: Navigant Research)


BEVs Moving Beyond 200 Miles

— June 14, 2016

EV RefuelingBy the end of 2016, the first long-range battery electric vehicles (BEVs) for the mass market will finally become available. Over the next 3 years, the long-range BEV is expected to emerge as the market standard as BEVs with ranges below 100 miles disappear from automaker new vehicle lineups. The long-range BEV under $40,000 is a marked achievement in the industry that is expected to significantly increase plug-in electric vehicle (PEV) adoption past the 1% penetration rate it has struggled to surpass in all but a few global markets. But how far past 1% will the 200 miles/under $40,000 move penetrate?

Practical Limitations

The leap in range and affordability is a significant achievement, but BEVs still have to overcome significant hurdles before the tech can effectively replace the conventional internal combustion engine (ICE) vehicle. For all its flaws (expensive fuel, upkeep costs, and emissions), the conventional option cannot be matched yet in terms of cost, fueling convenience, range, and capability. Parity across all these factors, among all light vehicle types, is a long way off.

Even at a 200-, 250-, or 300-mile range, a BEV is a hard sell to anyone without a place to charge their vehicle at their residence or at their work. For those without this specific access, charging needs are likely only met through fast charging when the BEV state of charge nears depletion. Unless one is so fortunate to have access to a Tesla Supercharger, charging a 60 kWh+ BEV from 0% to 100% on public fast charging equipment (around 50 kW) will likely be an hour(s)-long engagement, and the energy cost savings analysis is not encouraging in this scenario unless subsidized.

In the United States, the share of the market without access to workplace or residential charging is not likely a minority. Over 56% of respondents to Navigant Research’s annual Electric Vehicle Consumer Survey indicated they did not have access to an electrical outlet at their residential parking space.

Analysis of survey responses reveals that people without access to residential charging are far less likely to consider BEVs than those with access. Near 30% of those without access indicated they would not consider a BEV regardless of range, while 34% of those without access that would consider a BEV would only do so if the vehicle achieved a range over 300 miles. In contrast, around 17% of those with access would not consider a BEV regardless of range and only 22% of those who would consider a BEV would only do so at over 300 miles.

As of yet, BEVs play particularly well to two or more car households where one conventional car can be used for more demanding driving requirements and the BEV can be utilized for short driving needs. 200 miles will likely expand the number of households replacing one vehicle with a BEV, but it will likely make little headway in convincing the two or more car household to replace an additional vehicle.

Addressing the Gaps

Residential and workplace charging are fundamental to market growth, but speedy increases in development will never address all the needs of those limited to on-street parking at both their residence and workplace. Public charging infrastructure that can match the speed of a pump alongside an actual marketing campaign for PEVs from the established OEMs will improve conditions for all consumers. However, the only way such an infrastructure is developed is if a robust fast charging business model emerges for fuel retailers—and the only way that happens is via the steady increase in the long-range BEV population (or via additional government support).

This is not to say that the battery will not eventually replace the ICE; it’s likely it will. But adoption will not follow the same speed of the disruptive technologies BEVs are so often compared with. An all-electric future is highly probable, but it is not near.


Unexpected EV Demand Has Automakers Looking to Lithium

— April 25, 2016

Electric VehicleWith the rush to reserve a Tesla Model 3 nearing 400,000 global pre-orders, the electric car race is on. This race is not characterized by vehicle speed but by range and cost. More than 200 miles of range at a price of under $40,000 has been the target for the initial market entrants since the first generation of modern plug-ins was introduced in 2010. Automakers that reach this threshold quickly will benefit greatly by seizing market share, establishing brand recognition, and, most importantly, creating advantageous supply chain contracts. Automakers slow on the take will find breaking into the plug-in market increasingly difficult, much in the same way that few automakers have made headway with hybrids besides Toyota and Honda.

Underestimated Demand

The response to the Model 3 is unheard of in the modern automotive era. However, Tesla isn’t the only electric car maker observing greater than expected demand. In February, a BMW spokesperson acknowledged that the company “just massively underestimated demand” in regards to the company’s plug-in hybrid electric vehicle (PHEV) 3 series variant, the 330e, in the United Kingdom. A month prior, General Motors (GM) affirmed its upcoming 200-mile range battery electric vehicle (BEV) will not be production-limited, and a volume of 50,000 Bolts in 2017 is possible if demand supports it.

Though plug-ins have met global light duty vehicle (LDV) markets in varying degrees of success, unanticipated demand is not new to the plug-in market. In fact, the most glaring example of the demand/supply imbalance has been going on for the last 3 years as a manifestation of Mitsubishi’s inability to introduce the Outlander PHEV to North America due to unexpected demand in Japan and Europe.

Looking to Lithium

Recognizing that annual sales of plug-ins are going nowhere but up, some automakers are thinking ahead and diving deep into the battery supply chain to secure raw materials before prices become a problem. Despite a general dive in global prices of oil, gas, and mineral commodities, lithium prices have been resilient and robust.

Lithium is a core component of batteries for mobile devices, EVs, and grid-tied or residential energy storage applications. With no clear alternative, Navigant Research anticipates lithium demand (and therefore prices) will rise substantially over the next decade. Within the battery, a lithium-based compound is layered onto the cathode and the battery is filled with a lithium-based electrolyte. In total, Navigant Research estimates lithium materials make up around 10% of overall battery production costs. All things being equal, a doubling in the price of lithium would mean a 10% increase in battery production costs.

Price increases from materials may be easily absorbed by battery makers as costs are cut elsewhere through economies of scale or energy density improvements. However, automakers that can help their suppliers hold raw material battery costs low while the market is in its infancy will likely achieve significant advantages over emerging challengers and witness Prius-like success in a technology segment with much more growth potential.


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