Navigant Research Blog

Dwindling Smart Sales Spark All-Electric Shift

— February 17, 2017

I first observed the smart car while traveling through Italy in 2006. Later that same year, the Da Vinci Code debuted back home in the United States, with smart deftly taking a page from Mini Cooper’s marketing playbook (playing starring roles in the likes of The Italian Job and Bourne Identity) by nabbing prime advertising space as Sophie Neveu and Robert Langdon’s escape vehicle. At the time, I considered the idea of this car revolutionary, in that it provided the space savings of a motorcycle partnered with the safety and comfort of a car.

Though the car didn’t seem right for me at the time, I figured if I was in a city my perspective might differ, and I wondered why that car wasn’t yet available in the United States. Two years later, in 2008, smart arrived and netted nearly 25,000 sales. That year was the company’s best in the United States, its second being the year immediately following. However, since 2009, sales have bobbed laggardly between 5,000 and 11,000. In 2013, smart joined the modern plug-in vehicle movement with the electric drive (ED) version of its offering. The ED has done relatively well, accounting for 17% of the brand’s sales since its introduction in the United States. Fast forward to the near future and the ED will likely account for 100% of the brand’s US sales, as Daimler is discontinuing the gas powered version of the vehicle in North America for the 2018 model year.

Gas Power Not So Smart Anymore

For the brand, sales are likely to retreat further. A refresh of the fortwo ED along with the expected range increase will probably encourage greater sales of the ED in 2017 than were witnessed in 2016. But the range increase isn’t substantial next to 2017’s new competitors like the Chevrolet Bolt, the Tesla Model 3, and more. Therefore, sales are unlikely to recapture smart’s small 5,000-11,000 sliver of the market unless a serious range increase or dramatic price cut is on the way for 2018.

Though the move will result in initial losses for the brand, it will likely benefit the parent. To start, sales of the gas-powered smart have receded, with a compound annual growth rate of -14% since 2012. The current low oil price environment isn’t going to change the trajectory here. Add to that the ever increasing range and affordability of plug-in powertrains in the microcar segment, and it was only a matter of time before the gas version could not find any willing buyers.

Additionally, canceling the gas-powered version while there is still some demand will increase the effect the ED has on the Daimler’s Corporate Average Fuel Economy and Zero Emissions Vehicle program compliance efforts. The regulations, designed as both stick and carrot, penalize automakers for noncompliance and reward others for overcompliance. Up to 2025, both programs’ sticks will become increasingly sharp, making the share of plug-ins relative to other powertrains a vital metric by which automakers maintain viability through their highly profitable, less fuel efficient offerings.

 

China Exploring New Avenues for Energy Storage in 2017

— February 8, 2017

BatteriesLooking back on 2016, the energy storage industry in China has had its positives and its negatives. Navigant Research believes that energy storage increasingly is valued based on the services that a system provides. Overall, China is an attractive market for energy storage, particularly lithium ion (Li-ion) batteries. Market activity in 2016 included increased sales of EVs throughout the country, electricity market reforms to spur grid-tied storage resources, and a multimillion-dollar increase in investment of national battery companies. The country is embracing a cleaner, more connected future going into 2017.

Electric Vehicles

Long projected to be the largest global EV producer and market (despite reports of inflated plug-in EV sales figures being used to garner government subsidies), policies that promote the development of alternative fuel vehicles drive EV sales in China. The central government began giving out subsidies for EVs in 2013, and the value of subsidies has decreased annually since then. The 2016-2020 Notice on the Financial Support Policy for the Promotion of New Energy Vehicles from the country’s Ministry of Finance announced that, compared to the 2016 level of subsidy, the 2017-2018 level and the 2019-2020 level will be reduced by 20% and 40%, respectively. In addition to the subsidy, the central government has also waived the vehicle sales tax. Additional subsidies in China can be found predominantly at city governments. For example, Beijing and Shenzhen allow a 1:1 matching subsidy for consumers, effectively doubling the national EV purchase subsidy.

On the grid-tied storage front, Navigant Research anticipates that China will be the single largest country market for energy storage, reaching 5.5 GW of new capacity by 2025 across the utility-scale market alone. Though the country’s electricity market has long been government-run, recent market reforms have allowed non-state wholesale power producers to enter the market, opening up opportunities for independent power producers (IPPs) to provide ancillary services by way of energy storage resources. Compounded with the big push for new variable generation resources within China, storage greatly improves the business case for renewables by eliminating the need for new transmission and distribution resources.

Battery Manufacturers

Large battery manufacturers headquartered in China (such as BYD, CATL, Lishen, and Wanxiang A123) have deployed several systems in various EVs and stationary storage installations; these companies introduced several rounds of investment plans to further develop their respective technologies. In April 2016, China’s Ministry of Industry and Information Technology announced that any EVs applying for the Chinese government subsidy had to utilize a battery manufactured by a Chinese-owned company listed on the ministry’s so-called White List, effectively eliminating competition from other large global manufacturers like Panasonic and LG Chem. Chinese battery companies are also targeting other applications in foreign markets. For example, Neovoltaic, GCL Integrated Storage, and Pylontech have launched residential solar plus storage solutions ranging from 2.5 kWh to 8 kWh for residential customers in Australian, German, and American markets. Several other Chinese Li-ion battery providers are looking to establish partnerships with other systems integrators to further expand into other attractive storage markets.

The battery energy storage industry in China goes where the government steers it. Though the effect of policy and demand-side incentives varies by territory, the country seems to have a clear plan on what role storage will play in its clean energy future. As the industry matures, customer needs and grid needs will evolve and allow for EVs and energy storage systems to penetrate new markets. It remains to be seen whether China’s aggressive clean energy adoption strategy will be successful in the long term.

 

Forward Momentum in EV Charging

— February 7, 2017

Let me join the many analysts writing to declare that “the private sector will move forward with XX energy innovation even if the US federal government stops supporting it.” This insight has gone from a contrarian hot take to conventional wisdom in record time. And it is a perspective that occasionally carries with it a whiff of wishful thinking.

That said, I can offer the projection that the deployment of charging infrastructure to meet the demands of a growing plug-in EV market will be pushed forward by the industry regardless of any changes in federal policy.

There is something to be said for industry stakeholders acting as if they are on their own in pursuing this goal. Not that the US federal government role has not provided momentum for the EV charging market. Federal funding helped fund the first rollout of public charging, though that program’s results were decidedly mixed. Some installations proved to be poor long-term opportunities and poorly maintained. But many others did help form the backbone of a nascent US public charging network.

The US Department of Energy’s (DOE’s) Workplace Charging initiative supported significant growth in workplace charging growth from 2014 to 2016. In its Mid-Project Review from December 2015, the DOE reported that “the number of planned and installed charging stations has increased by 70% since June 2014.” Granted, that was from a small installed base initially, but that did amount to over 2,000 stations. Most recently, the DOE collaborated with an effort by the US Department of Transportation to identify a network of locations that can be designated as ready for installing direct current (DC) fast charging.

Moving Forward

The EV market has changed significantly since 2009. Major automakers are planning to offer EVs in multiple segments over the next 5 years. Battery EVs (BEVs) that have over 200 miles of range are coming to market at more moderate price points. Automakers in Europe are already partnering to roll out ultra fast charging infrastructure. In the United States, utilities are waking up to the potential for EVs to provide new revenue.

In this environment, stakeholders are ready to work together to move the US market forward—and there is some benefit to industry not looking at the federal government as a white knight. This can direct focus toward coming up with innovative solutions to challenges like developing business models for the needed public fast charging infrastructure, managing spikes in electricity load, recognizing the potential for demand charges, and educating consumers about EVs in a compelling way, to name a few. If the federal government continues to play a role, that will be a bonus to any industry efforts, but industry seems prepared to take action regardless.

 

Companies Aim to Fast Track Ultrafast EV Charging

— January 31, 2017

The fast charging of EVs at power levels surpassing 350 kW is quickly moving from concept to reality. In 2016, momentum accelerated for developing solutions that can charge a battery electric vehicle (BEV) to 80% capacity in 5 to 10 minutes, and 2017 will see the first solutions available. Many automakers are excited about the potential for closing the gap between electric and gasoline refueling, though there is currently no definitive standard or available light duty vehicle charging at 350 kW or higher.

At January’s Consumer Electronics Show, EV charging company ChargePoint unveiled the ChargePoint Express Plus, a modular charging system that can be upgraded to higher power levels over time, up to a maximum of 400 kW. Power to multiple charging stations are provided by ChargePoint-designed Power Cubes, which offer up to 500 kW of direct current (DC) output and can be coupled with other Cubes to accommodate more charging stations at a single location. According to the company, power can be distributed to up to four charging stations from a single Power Cube, and power output is dynamically distributed to the vehicles being charged.

ChargePoint Express charging stations will be constructed of multiple Power Modules that deliver up to 31.25 kW of power each, a unique approach for future-proofing charging stations. ChargePoint says the systems will be available in July 2017.

ChargePoint Express Plus

(Source: ChargePoint)

Last November, several automakers announced plans to co-develop a fast charging network in Europe that will provide 350 kW charging. Just a few weeks later, Energy company Enel joined with Verbund, Renault, Volkswagen, Nissan, and BMW in announcing EVA+, a fast charging network connecting Italy and Austria that will enable BEVs to be charged in 20 minutes. Never one to be upstaged, Elon Musk tweeted in December that Tesla Motors would be adding capabilities to the SuperCharger network to surpass 350 kW of power delivery for its proprietary network.

With the knowledge that BEVs are being developed with much faster charging capabilities, companies considering adding DC fast charging stations are now challenged on how to future-proof their investments. The tradeoff is between keeping the not inconsequential cost of offering DC fast charging under control today while preventing the sites from having to undergo costly increases in power delivery from the utility and having to replace the existing equipment in future years.

Companies investing in 350 kW fast charging stations today are hard pressed to get payback in electricity sales within 3-5 years, so to ask them to make ready a location with distribution equipment and capacity for up to 1 GW of EV charging is a tall order. Site hosts anticipating the ultrafast future of charging will also need to work with utilities to identify locations where they will not be disrupting the distribution grid.

 

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