Navigant Research Blog

In Growing EV Market, Volkswagen Is On the Rise

— January 20, 2015

Navigant Research estimates that plug-in electric vehicle (PEV) sales in 2014 surpassed 320,000, 60% above 2013 sales.  The U.S. market accounts for over one-third of all sales; however, the largest growth has come from China, with 2014 sales estimated to have nearly quintupled those in 2013.  The biggest developments of 2014 were BYD’s introduction of the Qin and BMW’s global introductions of the i3 and i8.  The two automakers, which combined only accounted for about 2% of the global market in 2013, now account for more than 10%.  Although 2014 wound up being a good year for the PEV market, with double to triple-digit growth in every major region, 2015 will be far better.

In Navigant Research’s report, Electric Vehicle Market Forecasts, we forecast that PEV sales in 2015 will surpass 570,000, growing nearly 80% from 2014.  The U.S. market, which grew around 30% in 2014, is expected to grow by more than 70% in 2015.  Similar gains will likely be made in China and Europe.  The bump in 2015 comes from the introduction of Tesla’s next vehicle, the Model X, alongside a number of new PEV models, primarily from Volkswagen (VW).

Late Bloomer

Likely the most significant development in 2015 will be the dramatic expansion of VW’s PEV market share.  VW has been slow to enter the PEV market, but it is now one of the largest players.  Eight PEV models (six plug-in hybrid electric vehicles [PHEVs] and two battery electric vehicles [BEVs]) are available in various regions through different brands: VW (two PHEVs, two BEVs), Audi (one PHEV), and Porsche (three PHEVs).  In 2013, VW accounted for less than 1% of the global PEV market; in 2015, Navigant Research expects the automaker to account for 10%.  This will likely make VW, along with Mitsubishi, the third-largest PEV maker, behind Nissan and Tesla.


PEV Market Share, World Markets: 2015

(Source: Navigant Research)

The German Wave

Further strengthening VW’s position in the PEV space are its plans to roll out even more PEV adaptations to existing luxury vehicle model lines from Audi, Porsche, and Bentley to compete against Tesla.  Navigant Research believes that VW is likely to overtake Nissan in 2017, but still trail Tesla.

VW’s broad adoption of PEVs is similar to the strategies of other German automakers, including BMW and Daimler.  These types of commitments are uncommon in Japan and the United States, where major automakers, besides Nissan, have been hesitant to enter the PEV market in force.  The net effect of this trend could produce a PEV industry synonymous with German engineering, not unlike Japan’s preeminence with hybrids.


Have Oil Prices Peaked?

— December 30, 2014

Increasing non-Organization of the Petroleum Exporting Countries (OPEC) oil supply and waning worldwide demand has resulted in an oil price dive.  The U.S. average retail price of gasoline is now at its lowest point since 2009, and given OPEC’s commitment to maintaining current production rates, the dive has no clear end.  The far-reaching implications of this plunge are explored in the latest issue of NG Market Notes from Navigant’s Global Energy Practice.  The most likely impacts will be on energy sector job growth, oil production expansion, and the hotly debated Keystone XL pipeline.

The historic volatility of oil prices leaves little certainty that current low prices will persist.  However, increased and sustained production capacity growth from non-OPEC sources appears to provide predictable downward pressure.  Given that, OPEC expects that the U.S. oil boom will last until 2020 before declining.  By then, the shale boom enjoyed by the United States is unlikely to be an isolated North American occurrence.

A Spreading Boom

Instead, the technological innovations that have enabled the extraction of tight oil at competitive prices in the United States are likely to migrate to a number of plentiful basins in Russia, China, South America, and elsewhere.  As a result, low prices could become the new norm.  Similarly, thanks to a combination of energy efficiency technologies and tightening government policies, world energy demand is likely to remain sluggish, further sustaining the oil glut.

The BP Statistical Review of World Energy indicates that annual global production of oil was around 4.1 billion metric tons (4.5 billion U.S. tons) in 2013, while Navigant Research’s report, Transportation Forecast: Global Fuel Consumption, projects that the global road transportation sector will consume nearly 1.7 billion metric (1.87 U.S. tons) in 2014, over 41% of production.  In North America, Europe, and some developed Asia Pacific nations, demand from this sector is anticipated to drop significantly from 2014 to 2035.  The increasing use of biofuels, plug-in electric light duty vehicles, natural gas-powered commercial trucks and buses, and national fuel efficiency standards will all contribute to this fall.

The Peak Behind Us

The Navigant Research report anticipates that global oil consumption will continue to grow, despite the above trends.  But that growth is peaking and is entirely dependent on increasing vehicle ownership in rapidly growing economies that already have significant traffic congestion and environmental concerns.

All of this is likely to temper new vehicle sales and increase government adoption of alternative fuels and fuel efficiency standards.  As a result, current low oil prices may not be temporary, after all.  Peak oil price may be reached before peak oil.


For Self-Driving Cars, Automakers Consult Silicon Valley

— December 10, 2014

The fully autonomous vehicle (AV) is coming, and early models will be on roads sometime around 2020.  To reach this milestone, automakers are turning to Silicon Valley for its expertise in connected devices, the Internet of Things, and human-machine interfaces.  A recent tour of the 18-month-old Nissan Research Center (NRC-SV) in Sunnyvale, California underscored the importance of this trend in relation to the automotive industry’s development of the AV of the future.

While some autonomous drive systems that rely on cameras, lasers, and sensors, such as lane keeping and automatic braking, don’t require vehicle connectivity, the fully autonomous vehicle will.

Reaction Time

The fact that AVs are likely to be far safer than non-autonomous, human-driven vehicles has been well-established.  However, to provide the type of near guaranteed safety the auto industry and customers require, the fully autonomous vehicle described by NRC-SV Director Martin Sierhuis will be “the most complex system in the world.”

For starters, the fully autonomous vehicle needs to be able to communicate with other vehicles and infrastructure, anticipate/predict human and non-human (animal) behavior, be personable, constantly observe and relay information back to the Internet, and act quickly upon information received from all these sources.

Watch for Deer

Information on weather conditions, traffic congestion, and road construction are valuable assets to other vehicles and, in an ideal system, can be transferred seamlessly.  Further, observations made by vehicles can be used to maintain a near real-time map of the world, given changes to road infrastructure.  However, the most valuable pieces of information will be on how AV predictive systems can be improved and how AVs fail.

A major challenge for AVs is the unpredictability of the world.   The awkward four-way stops, the sudden trajectory deviations, the deer on the side of the road, the ear buds-wearing bicyclists in downtown San Francisco, etc. all have to be accounted for.  To function effectively, an AV must be able to predict both human and animal behavior better than humans do.  Predictions are based on data; as more data is accumulated on humans through AVs, they will in turn be better able to predict human behavior and, therefore, safer in the more pedestrian-centric urban environments.

The above are all examples in which the sharing of information from AV to AV will avoid catastrophe; however, it must be assumed that failures will eventually happen.  Yet, the silver lining will be that when the AV eventually does fail, the circumstances of that failure will be shared, and the overall system will learn from it.  As Sierhuis explained, “The same accident will never occur again.”


How EVs Can Aid the Smart Grid

— December 8, 2014

The plug-in electric vehicles (PEVs) available today can help grid operators manage the grid – although few in use actually do.  This is not too much of a problem now, but as more PEVs populate roads, utilities are likely to become increasingly concerned with managing and making use of these mobile assets.  Today’s PEVs represent a significant increase in residential electricity demand and, if unmanaged, could cause problems with distribution-level transformers and could drastically increase demand during peak hours when PEV owners return from work and plug in their vehicles.  The effect would force utilities to make upgrades to distribution networks that would likely be passed on in the form of higher rates to consumers.

Contrarily, PEVs also represent an increase in load that could be used to capture renewable electricity generation and help balance generation with demand, theoretically making electricity marginally cheaper and cleaner.

This latter scenario would likely decrease electric bills, as the utility would be able to provide more energy through the existing infrastructure, thus avoiding transformer capacity upgrades.  Most of the technologies to accomplish this process have already been developed, and multiple companies and organizations, such as GreenLots, PowerTech Labs, and the Electric Power Research Institute (EPRI), are busy testing respective platforms for future deployment.  However, to achieve such a paradigm, utilities need to develop demand response (DR) programs that are both simple and compelling to the consumer – not an easy task.

Thin Margins

A PEV owner’s understanding of why the charging of his or her car should be scheduled or managed by the utility is not fundamental to the owner’s participation in any given utility DR program.  However, the price at which the PEV owner will choose to participate in the program is.  In other words, the more money saved, the more PEV owners will be willing to participate.  Given that, there is a problem: driving on electricity is really cheap.

Most battery electric vehicles in use have an operating efficiency of around 3 miles/kWh, and the average residential electricity price in the United States is around $0.13/kWh.  This means that if the average electric vehicle is driven 1,000 miles in a month, energy costs will be slightly over $40.  This low energy cost means the actual savings from participation in a DR program would also be low and might not justify the investment from the utility or the energy aggregator for the smart charging infrastructure.

On the other hand, investment costs are zero for the PEV owner, as much of the necessary system elements already come standard on PEVs.  They will likely be low for utilities and/or energy aggregators depending on how many vehicles participate.  Additionally, the costs and savings equation will vary widely across the United States, based on a utility’s ability to balance the grid without PEVs.  The trick for utilities and energy aggregators will be to make DR compelling enough to attract future PEV owners who may be less tech-savvy than initial PEV adopters.


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