Navigant Research Blog

For EV Range, 200 Miles Changes Things

— July 23, 2015

The rapid growth of plug-in electric vehicle (PEV) sales in the last 4 years has slowed in the United States as of late. Low gasoline and diesel prices have likely had an effect, but more likely, the slowdown is coming from a lag between the introduction of next-generation models and the clearing of first-generation inventories. Notably, second-generation PEV development is focused on significant range increases at lower costs, which will greatly impact the PEV market as well as create interesting implications for infrastructure developers and electricity providers.

The most near-term second-generation introduction is the Chevrolet Volt, which is slated to enter production in August. Besides the significant redesign of the vehicle body, the Volt’s all-electric range has been extended by 12 miles and the price starts around $34,000. This is $7,000 less than the original 2011 Volt. Further afield, Nissan has announced its intention to increase range of the next-generation LEAF beyond 200 miles. The second-generation LEAF is not likely to be introduced for quite some time, however, it is rumored that some of the battery technology designed to achieve this 200-plus mile range will feed into the 2016 LEAF, assisting that vehicle in breaking the 100-plus mile all-electric range mark.

When the second-generation LEAF is finally introduced, it won’t be alone. 200-plus mile all-electric range introductions are expected from Tesla and Chevrolet at price points from $30,000-$40,000. Similarly, some premium brands, specifically Audi, are likely to introduce 200-plus all-electric range vehicles to compete against Tesla’s large sedan and SUV platforms. The introduction of these vehicles makes all-electric drive a more viable option for a larger population. However, it also drastically changes things for electric vehicle service providers by increasing demand on a per-vehicle basis and expanding that demand to intra-city locations.

Longer Range = More Use

Most battery electric vehicles (BEVs), aside from the Model S (which already has a 200-plus mile range), are acquired as the second vehicle in households with two or more vehicles, and use is limited by vehicle range. Initial studies on average annual vehicle miles traveled (VMT) for BEVs have indicated that these limited-range BEVs travel around 9,650 miles a year. Meanwhile, light duty vehicles average around 11,250 miles.

However, for the Model S, average annual VMT is higher than for the average BEV. Last month, Tesla was the first automaker to announce that drivers of the Model S have surpassed 1 billion all-electric miles, with 68% of those miles being driven in North America. This equates to roughly 13,200 miles per Model S sold in the United States and Canada through May 2015. Given estimates on Tesla’s U.S. monthly sales, the average Model S has been in service for over 1.3 years. This means average annual mileage is around 10,400 (or 7% more than other BEVs).

Granted, Model S owners have great incentives to drive often, as the Supercharger network makes long-distance travel fuel costs free. Yet, these drivers also have the benefit of a vehicle that can get them to the network stations. Soon enough, owners of non-Tesla’s will, too, and these vehicles will need their own networks.


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.


Daimler Bets on Battery Leasing

— May 9, 2013

The advanced lithium ion battery in a plug-in electric vehicle (PEV) accounts for as much as one-third of the vehicle’s cost. Without government incentives, PEV premiums can top $10,000 over a similar conventional gas-powered vehicle. Even with lucrative government incentives, EVs are still a hard sell. However, automakers are diligently working out ways to bring purchase costs down so that potential owners can absorb the PEV initial purchase costs over time.

In Europe, automakers Renault, Daimler, and Mia Electrique have pioneered the battery lease option, whereby PEV owners buy the vehicle but lease the battery for a monthly fee. In the states, automakers have not warmed to the idea, instead offering cheap lease deals with low signing dues. That could change, beginning when Daimler deploys its smart fortwo ED to the United States next month with a battery lease option.

In Europe, the battery-leasing option for the fortwo ED reduces the vehicle’s purchase price by over $6,700, but requires the vehicle owner to pay roughly $83 a month for the battery. In other words, the purchase price discount accounts for about 80 monthly payments. Under the lease agreement, Daimler, which retains ownership of the battery, ensures its life, thus easing concerns PEV owners may have over battery longevity. Theoretically this option also enables Daimler to find additional value from the batteries by reusing them for stationary energy storage applications once they’ve been removed from the vehicle. The appeal of the offer is clear, as around 97% of the fortwo EDs bought or leased in Europe have included this option.

Swap It Out

Battery leasing has also been pursued by battery swap developers like Better Place which has deployed more than 50 battery swap stations for national networks in Israel and Denmark, and the State Grid Corporation of China (SGCC), which has more than 200 battery swap stations in various Chinese cities. These two companies take the battery lease concept a step further by literally separating the battery from the vehicle. Their business models require both companies to keep excess batteries on hand to supply customers. This allows them to generate additional revenues from the unattached batteries through grid-tied energy storage services.

The major challenge to the battery swap business model is that each company needs automakers to develop vehicles compatible with their systems, and few have. Renault has built the Fluence Z.E. to be compatible with Better Place’s system, while Chinese automakers Kandi Technologies, Zotye, and Zap Jonway are building or have built PEVs compatible with the SGCC system.

The terms of Daimler’s battery lease option for the states have not yet been released. Even without the option, the fortwo ED will be the lowest-priced highway-capable PEV available in the United States, with a $25,750 MSRP before federal and state incentives. When coupled with government incentives and the lease option, the fortwo ED will have a significant impact on the world’s strongest market for PEVs.

If the lease is as enticing in Europe as it is in the states, then other automakers will take note and more battery lease options for PEVs will follow. Nissan has already announced it is entering the fray as it plans to sell the LEAF with a battery lease option in the United Kingdom this year.  As automakers become more comfortable with the idea of battery leasing, they will also become more comfortable with developing vehicles that are battery swap-capable, allowing a third party like Better Place to manage the battery liabilities, lease arrangements, and the recycling.


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