Navigant Research Blog

Tesla Looks to Fuel a Battery Revolution

— June 18, 2014

Elon Musk, CEO of Tesla Motors, stunned the automotive world with his announcement that he was making all his company’s electric vehicle (EV) patents open source.  “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology,” he said on his blog.  Musk explained that he decided to do this because the “world would all benefit from a common, rapidly-evolving technology platform.”

Automotive companies are well-known for developing proprietary solutions for almost anything in an effort to get one step ahead of the competition, even for a short time.  But this approach means that often the opportunity to share in the rapid growth of a new technology is lost, and suppliers can miss out on the potential for much higher volumes.  Some have speculated that this change in attitude to patents is a move to create bigger demand for battery cells from Tesla’s planned Gigafactory.

Weight and Range

Conventionally powered vehicles are still the main business of all major automakers, which are continually investing in new ways to make these vehicles more efficient.  One of the current trends is to develop stop-start technology to capture some of the efficiency gains of a full hybrid at a fraction of the cost premium.  Full details on the latest developments are discussed in Navigant Research’s 48 Volt Systems for Stop-Start Vehicles and Micro Hybrids report.

When designing an electric or electrically assisted powertrain, manufacturers have to weigh a number of characteristics for each particular model.  Not all hybrid vehicles and EVs are optimized for economy.  Some use the stored energy to boost power or drive an additional pair of wheels.  Bigger batteries cost more and also add weight and take up space, but they provide greater electric-only range.  Small, light vehicles can travel further per kilowatt-hour of battery capacity than larger, heavier vehicles.  These compromises are difficult to resolve, and battery manufacturers have a role to play.

Step Up

Anticipated sales of battery electric vehicles (BEVs) are projected to be large enough to lead the demand for lithium ion (Li-ion) batteries in the automotive world.  Even though sales numbers of hybrid electric vehicles (HEVs) dwarf those of plug-in hybrid electric vehicles (PHEVs) and BEVs, a much larger battery capacity means that at least 60% of the Li-ion batteries made for automotive use will end up in a BEV over the next couple of years.  That percentage will increase slowly until the end of this decade, after which stop-start vehicles will begin to influence the distribution.  Maybe this move from Tesla will be an incentive for the established carmakers to put more effort into their BEV product range.

Navigant Research expects that the overall market for vehicle Li-ion battery revenue will reach $26 billion by 2023, and that revenue could exceed that if newly emerging 48V micro hybrid technology delivers on its promise of fuel efficiency at a low-cost increment, and a significant number of original equipment manufacturers choose to implement it with Li-ion battery packs.  In addition, the expected steady lowering of per-kilowatt-hour cost will encourage the market if manufacturers pass the savings on to customers.  Full details of the automotive market for Li-ion batteries are covered in Navigant Research’s report, Electric Vehicle Batteries.

 

Brickyard City Hosts Carsharing Experiment

— June 10, 2014

Indianapolis, Indiana, is set to become the site of one of the biggest electric vehicle (EV) carsharing programs in the United States.  The Bolloré Group kicked off the “BlueIndy” carshare program, the company’s first in the United States, in May.  The Bolloré Group is large French conglomerate that, among other things, produces electrical components for capacitors and lithium polymer batteries.

Indianapolis is an odd choice for an EV carshare service location compared to a city like Paris, where Bolloré’s Autolib one-way EV service has been a huge success since its launch in December 2011.  Autolib was one of the first carshare programs to combine EV technology with the one-way carshare model, which allows users to drop cars off at any of the service’s designated parking spots.  The Autolib program has expanded beyond Paris and now has around 140,000 users across France.  According to Hervé Muller, the president of BlueIndy and vice president of Bolloré subsidiary IER, the cars in the Paris Autolib program are used an average of 7 times per day and the program is set to become profitable just 3 years after its launch. The company is now targeting the United States.

Charge Here

So why Indianapolis?   The city has limited public transportation, and its downtown, although quite suitable for hosting the Super Bowl, lacks the concentration of residential living that successful carsharing cities like Paris, Boston, and San Francisco have.  What it does have, though, is a mayor who made the carshare program one of his major priorities and an electric utility that stepped in to pay for charging equipment.

Setting up a public charging network fulfilled a key goal for Indianapolis Mayor Greg Ballard.  Indeed, this program demonstrates a creative way for a city to rapidly establish a charging network.  Bolloré will let other EV drivers use the stations, thus adding an additional revenue stream.

Bolloré has committed to bringing 500 Bluecar EVs and 1,000 public charging stations to Indianapolis. This represents a $35 million commitment from the company.  Indianapolis Power & Light (IPL) has also partnered to support the charging deployment, although there is some question about whether IPL can secure a rate hike to pay for it.  In my conversation with him, Muller said Bolloré expects the BlueIndy service could take up to 6 years to reach profitability and noted that the company is taking a long-term view of developing its U.S. carshare business.

Students and Tourists

It will be instructive to track how this service is used.  Typically, public transportation can be a key ingredient for successful carsharing services, because it allows city residents to get around easily, with the carshare filling in the transit gaps.  In Indianapolis, BlueIndy may essentially take the place of a widespread public transit network.  This is an advantage of the one-way model, with cars being easily used for short trips across town, for example.

The Bolloré Group is also looking to draw membership from the city’s large student population, travelers using the Indianapolis airport, and local businesses that could use the carshare program in place of fleet vehicles.  It’s an ambitious plan. Bolloré has yet to deliver its first U.S.-approved EVs and the program could take several years to reach viability. But if it works, the Indy experiment could serve as a model for other similar U.S. cities.

 

Shifting Its Fleet, Toyota Strives for ZEV Mandates

— June 9, 2014

In mid-May, the news broke that Toyota has, for the time being, backed out of battery electric vehicles (BEVs) in favor of plug-in hybrid electric vehicles (PHEVs) and fuel cell vehicles (FCVs).  The company ended production of the small Scion eQ in 2012, and will end production of the RAV4 EV in 2014.  The move is not much of a surprise, since the original plan was to sell only 2,600 RAV4 EVs in California from 2012 through 2014 to comply with the California Zero Emission Vehicle (ZEV) program.  Toyota now plans to stay in compliance by introducing its first FCV in California.  That will be Toyota’s only vehicle falling within the definition of ZEV, as defined by the California ZEV program.

The ZEV program mandates automaker development and deployment of a number of fuel efficiency vehicle technologies to California and seven other states.  A specific regulation mandates that large automakers must sell a minimum amount of ZEVs as a percentage of their total sales in these eight states or be fined for non-compliance. Vehicles falling under the ZEV definition are BEVs and FCVs, and automakers subject to this requirement as of 2013 include Chrysler, Ford, GM, Honda, Nissan, and Toyota.

At face value, these regulations would mean that these six automakers would have to sell around 30,000 ZEVs in 2015 in California alone.  This, however, is not the case.  The ZEV program is governed by a system of credits that may be traded between any automaker or third party.  Therefore, if a large automaker is unable to meet its ZEV mandated requirement in a given year, it may buy ZEV credits from an automaker that has a surplus of credits.

A Sales Challenge

Further complicating this program is the fact that not all ZEVs sold receive the same number of credits.  For instance, a RAV4 EV receives 3 credits, a Tesla Model S receives 4 (it used to receive 7), and an FCV with a range of over 300 miles receives 9 credits.  This essentially means that the sale of one FCV by Toyota in 2015 would be worth the sale of 3 RAV4 EVs.  Therefore, Toyota does not actually have to produce and sell enough ZEVs to reach 3% of its total number of vehicles sold in 2015, as the ZEV program states – which would be good news for Toyota.  It does, however, mean that the company needs to start selling around 1,000 FCVs annually in just California for the next 5 years or it will likely have to start buying ZEV credits.

1,000 FCVs may not sound like much, considering Toyota sold slightly over 1,000 RAV4 EVs last year.  However, FCVs have considerable market challenges that BEVs do not, including:

  • Hydrogen infrastructure is expensive to build and few stations exist today, while electrical infrastructure is cheap and ubiquitous, including in homes.
  • The cost savings of driving on hydrogen rather than gasoline are questionable, while the cost savings for driving on electricity are significant and well documented.
  • Lastly, the first FCVs are anticipated to be far costlier than BEVs.

The advantage an FCV offers is a range over 300 miles and fast refuel times.  Toyota bets this advantage is substantial enough to drive sufficient consumer interest to achieve compliance targets.  If Toyota is wrong, the abandonment of the company’s BEV compliance programs will prove extra costly.

 

U.S. Drivers’ Wait for Electric SUVs Continues

— June 5, 2014

Sales of plug-in vehicles in the United States continue to grow at an encouraging rate, but American customers looking for larger vehicles can only wait and watch developments in Europe with envy.

First, Tesla Motors postponed the launch of its crossover Model X until 2015, and now the Mitsubishi Outlander plug-in hybrid electric vehicle (PHEV) sport utility vehicle (SUV) won’t be coming to the United States until late 2015 or possibly 2016.  Mitsubishi blames California regulators for the delay, saying that adding the required battery monitor that reports the health of the pack has delayed the launch by more than a year.

That’s too bad, considering the success of the Outlander PHEV in Europe, where it makes up nearly a third of all Outlander sales and recently won an award from Fleet World for Mitsubishi’s aggressive pricing strategy.  The Outlander PHEV is available for lease in the United Kingdom for as little as £219 ($366) a month or for purchase starting at $47,200 after the government incentive.  In EV-crazed Norway, the Outlander PHEV even outsold the Tesla Model S in April.

I Want My SUV

Europeans can also buy the Volvo V60 plug-in wagon, which is doing so well that a sport package is being added.  Volvo hasn’t committed to bringing the plug-in diesel vehicle to the United States, since diesels make up such a small part of the U.S. market.

Since we Yanks are crazy for our SUVs, the lost opportunity due to the delays is significant.  Mitsubishi is on track to sell approximately 33,000 gasoline Outlanders in the United States in 2014, so selling 10,000 or more of the PHEVs annually should be achievable once the vehicle is launched.  Based on the success of its first two vehicles, demand for Tesla’s Model X will likely also be high once it enters the market.

The environmental benefits of buying a plug-in versus a low-MPG SUV are several times more than shifting from an internal combustion compact to a plug-in.  For example, the gas Outlander PHEV reduces CO2 emissions by more than 70% when compared to the diesel model, according to Mitsubishi.  Since SUVs are among the most carbon-intensive vehicles on the market, the net reduction in fuel consumed is much greater.

Many families who have become accustomed to the storage and passenger capacity of an SUV would never go to a smaller plug-in vehicle.  So for soccer moms and dads in the United States, buying a plug-in SUV remains a dream deferred, at least for now.

 

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