Henrik Fisker, the co-founder of EV maker Fisker Automotive, has resigned his post as executive chairman.  The move is not uncommon, especially in the plug-in electric vehicle (PEV) industry.  Fisker joins Martin Eberhard of Tesla, Kevin Czinger of CODA, and Shai Agassi of Better Place as founders of next-generation automakers who are no longer part of the company they created.  The departure of the founder is often a necessary function of the company’s growth, as visionary perspectives of the market and the product must eventually give way to more market-driven and realistic outlooks.  Little information concerning the specific differences Henrik Fisker had with management is available; however, the circumstances that led to the split are well documented.

Fisker Automotive was founded in 2007 by Fisker and Bernhard Koehler in association with Quantum Technologies, which designed the plug-in hybrid (PHEV) drivetrain for the company’s first vehicle, the Karma.  The company’s goal was to bring the Karma to market by late 2009.  Fisker got a federal loan from the Advanced Technologies Vehicle Manufacturing (ATVM) loan program in 2009 to develop the company’s second vehicle, a lower-cost PHEV, the Atlantic.

The company’s product strategy and business model seemed sound.  Like Tesla, Fisker aimed to dilute the premium price of electric vehicles into the costs of a high class luxury vehicle.  The Karma developed a cult-like following, high profile investors, like Leonardo DiCaprio, and drivers, including Justin Bieber.  Where things went wrong for Fisker was the company’s inability to execute on its ambitious plans, plus a string of misfortune.

The company launched into the teeth of the financial crash and the ensuing recession.  After drawing $193 million on the ATVM loan, Fisker’s credit line froze after it failed to meet specific milestones set as conditions of the loan.  Nevertheless, Fisker powered through and began deliveries of the first Karmas to customers in July of 2011, missing its launch date by a 1.5 years.  Unfortunately the loan and the late start were not the end of the company’s problems.

Bad Karma

Fisker announced a recall at the end of 2011 because of problems concerning the vehicle’s battery pack supplied by A123.  Then, two Karmas mysteriously caught fire in mid-2012 – one while sitting in a garage, the other while parked in a grocery store parking lot.  The fires sparked the second recall to replace the low-temperature cooling fan that caused the fires.  Then the company lost over 300 vehicles to hurricane Sandy in November 2012, not long before its battery supplier, A123, declared bankruptcy.  Production of the Karma was halted indefinitely.

Unfortunately for Henrik Fisker, the company’s troubles are a reflection of the state of affairs in the PEV industry: it’s all about the battery.   Now, like A123, Fisker will most likely become a Chinese subsidiary.  The car and the business model aren’t likely to change; if anything the Karma and possibly the Atlantic could be in store for some much needed good news concerning production.  The luster and appeal of the vehicle, however, could fade along with the company’s founder and champion.

The ChargePoint/Ecotality joint venture, announced last week, underlined the fact that the EV charging sector is experiencing a bout of consolidation.  Earlier, Car Charging Group acquired New York-based Beam Charging, which will strengthen its presence in New York City.  This will be especially interesting if Mayor Bloomberg’s commitment to add 10,000 public parking spots by 2020 comes to fruition.  Better Place closed operations in North America and Australia.  In the United Kingdom, Chargemaster acquired Elektromotive last year.  These were two of the biggest charging equipment providers in the United Kingdom, so Chargemaster’s move positions the company well for the growing U.S. market.

This inevitable consolidation will continue, and it’s healthy for the industry.   There are too many companies chasing after too small a market right now.  This is not to say the EV charging market is small – please, no more stories on the “dying EV industry” – but Pike Research has found that there are well over 100 companies competing in the EV supply equipment (EVSE) sector globally.  These include not just companies that sell their own EVSE units but also “third party providers” that sell and service EV charging equipment made by others, like CarCharging Group.  Many of these companies are competing primarily for the commercial charging market – that is, units installed for use at offices, fleet depots, apartment buildings, parking garages, and a slew of public facilities like airports and retail outlets.

Globally the market for EVSE was around 180,000 units in 2012.  Half of those were residential units, so that means just 90,000 in commercial sales.  It doesn’t take complicated math to figure out that, if the market were evenly divided among the 100-plus companies offering EVSE, that would be a pretty small revenue base.

Catch-Up Time

Looking at the U.S. market alone, we estimate that sales of commercial EVSE were around 20,000 in 2012.  These units serve a total fleet of plug-in vehicles that reached around 71,000 at the end of 2012.  That is simply not enough demand to maximize utilization of these EV stations.  The PEV market is growing fast, so station utilization will rise and begin to match the expectations of the EVSE providers.  But for the near term, the EVSE market is out ahead of PEV sales, and the market will struggle to sustain the number of players wanting a piece of it.

So more consolidation is ahead, as companies look to secure a single geographic market or expand their portfolio of EVSE offerings by partnering with companies that have complementary technology.  For the moment, the industry would do well to focus its resources on the current EVSE equipment and networks in order to give PEV drivers the most seamless user experience possible.  This means keeping track of the basics, such as making sure equipment is working when drivers show up.  But it also means focusing on “interoperability:” making it easy for drivers to find and use all available EVSE units, something that the industry has been working on – by featuring stations from competing providers on a network app or enabling drivers to pay for charging without needing a network pass – but is still a long way from achieving.

The electric two-wheel vehicle (E2WV) market in China has grown explosively in the past several years.  A lot of this growth has come from the supply side, as the number of E2WV producers has reached anywhere from 2,700 to 3,000 companies  While many of these manufacturers are building E2WVs from raw materials, numerous companies are manufacturing vehicles from completely knocked down (CKD) kits.  A manufacturer builds the frame and components from raw materials and then these pieces are sent as a CKD kit to another factory, which assembles and rebrands the E2WV.  (CKD kits are often sent across national borders by Chinese and other Asia Pacific and Western Hemisphere manufacturers, as well.)  Other manufacturers are assembling E2WVs from components and frames sourced from a variety of suppliers.

E2WV growth in China is also being driven by relaxed regulations.  In China, e-bicycles are defined as having pedals, a speed limit of 20 kph (12.4 mph), and a weight limit of 40 kg (88.2 lbs).  Not subject to licensing rules, they’re significantly lower priced than scooters or motorcycles.  The majority of the e-bicycles sold in China are scooter-style, meaning that they have step-through frames similar to traditional scooters, with almost useless pedals.  Many of these scooter-style e-bicycles skirt the 40 kg weight limit.  Additionally, the speed limits are met through speed limiters placed on vehicles capable of much higher speeds, and it is an open secret that many retailers will either disable these limiters or show customers how to do so.  Enforcement of the rules has been lax at best – a situation that has begun to change as the number of E2WVs has grown.

The first stab by the government of China at cracking down on this industry in 2009 was met, not unexpectedly, without enthusiasm from both consumers and manufacturers.  The new enforcement rules, which would have required e-bicycles to be licensed, were dropped before they went in effect.  But in 2011, a crackdown on lead-acid battery producers resulted in the closure of a number of battery manufacturers that supply the E2WV market (approximately a quarter of all lead produced in China goes to E2WV batteries).  The result was a shortage of batteries throughout the first half of 2012, limiting the growth of the E2WV market.  What’s more, the government now requires E2WV manufacturers to obtain licenses, leading to consolidation in the market during 2011 and 2012.  Cities and provinces have also tried cracking down on enforcement of e-bicycle rules, with limited success; some have decreed outright bans.

Additional regulation is inevitable.  As I pointed out in Pike Research’s report, Electric Motorcycles and Scooters, the details of the new rules remain unclear, but one of two results is likely: e-scooters will be reclassified as e-bicycles because of a change in the definition (higher weight limits or speeds, etc.) or e-scooters will get a boost as e-bicycle manufacturers are forced to change their definition to meet market demand.  Of course, the third option is that the government, faced with a backlash from consumers and manufacturers, will back down again – though this seems less likely than it was in 2009.

Annual Electric Scooter Sales, China: 2012-2018

(Source: Pike Research)

On February 19, the United Kingdom coalition government launched a new package of incentives to encourage the uptake of plug-in electric vehicles.  The total value of the funding is up to £37 million ($56 million), depending on how many people take advantage of the offer before it expires in April 2015.  Rather than offer more help with purchasing vehicles, the incentives are based on infrastructure spending: The government will provide 75% of the cost to install chargepoints.

Three types of purchasers are named in the announcement, including homeowners for personal chargers, train operators who can now get help to install chargepoints at railway station car parks, and local authorities seeking to install fast chargers and provide on-street charging for residents who do not have private driveways.  Public sector fleets such as the police, hospitals, and local government can recover the complete cost of the installation.

Nissan is understandably pleased about this announcement, as the company expects a boost to sales of its European LEAF model, which will soon be built in the United Kingdom with British batteries.  Although the £5,000 government subsidy to buy a LEAF helps to make the vehicle more affordable, the cost of the charger spoils the deal for some potential purchasers.  This new incentive provides a solution for that as well as more assurance that range anxiety will not be an issue for much longer.

Find a Plug

The availability of charging facilities has been brought up as a reason for poor sales of battery electric vehicles, although it remains something of a chicken-and-egg scenario.  In the United Kingdom in January 2012, there were more chargers installed than EVs on the road.  Now that fast chargers are being installed, the practicality of using an EV for longer journeys starts to become a reality.

Analysis of actual EV usage, however, has shown that the majority of owners can manage perfectly well by simply plugging in at home every night.  This is great for those who live in single-family homes with their own driveway and/or garage, but for those who live in apartments with communal parking it has made EVs impractical.  If local authorities take advantage of this offer, it will open up the EV market to a whole new category of customers.  Councilors who were elected thanks to promises of caring for the environment will want to make sure this happens.

The other side benefit could be increased demand from motorists who find that an additional advantage to owning an EV is a guaranteed parking space – at home, at work, and at the railway station.  Sometimes indirect benefits are more attractive than a simple price reduction.