Navigant Research Blog

Report Card: Smart Transportation Predictions for 2013

— February 11, 2014

While analysts spend most of their time making predictions and pondering the future of markets, it is also useful (and humbling) to look back at how our thinking has evolved over time.  As we have done for the last few years, below is a scorecard rating the accuracy of the Smart Transportation team’s annual predictions from 2013.

Capital Veers from Vehicles to Battery Components: C

While battery pack companies didn’t see an influx of capital investment in 2013, neither did component manufacturers.  However, considerable research and development (R&D) work is being done to improve the efficiency of lithium batteries, notably at startup Amprius, which in January 2014 received $30 million in venture capital.

Systems Integration Puts Electric Bikes on the Map: D

The e-bike market did not mature as quickly as anticipated in North America due to a continued lack of clear sales channels (and New York City’s ban on e-bikes didn’t help).  When we updated our forecast for e-bikes mid-year, we substantially lowered the forecast to 60,000 units for 2013.

48 Volt Batteries Put a Charge into Stop-Start Systems: A

During 2013, automotive battery supplier Johnson Controls announced a new 48 volt (48V) product, while Chinese original equipment manufacturer (OEM) BYD announced its first car using its own 48V battery.  Tier One suppliers Bosch, Continental, Delphi, and Schaeffler all made significant 48V component announcements during the year, which indicates a robust supply chain is developing.  The strong momentum for 48V throughout the year is detailed in Navigant Research’s recently published report, 48 Volt Systems for Stop-Start Vehicles and Micro Hybrids.

More Than 3,400 Fuel Cell Vehicles Hit the Road: D

The fuel cell industry continues to proceed slowly.  While Honda, Hyundai, and Toyota continue to promise commercial vehicles by 2015, the number of test vehicles on the road in 2013 was closer to 500.  The 3,400 number is more likely to happen in 2016.

Battery Swapping Gives Way to Battery Financing: B-

To the surprise of very few electric vehicle (EV) industry insiders, Better Place and its battery-swapping dream came to an inglorious end in 2013.  Surprising to the same group, however, was Tesla Motors’ summer announcement that it would offer battery swapping.  Battery swapping as a trend has likely seen its moment pass.  However, leasing batteries separate from the vehicle did expand in 2013, as the smart EV in the United States and the Nissan LEAF in Europe can now be purchased without batteries.

Germany Leads Europe’s PEV Growth: D

The BMW i3 and Volkswagen’s E-UP and E-Golf all debuted in 2013, expanding sales of EVs throughout Europe.  But the Nissan LEAF, Renault ZOE, and Tesla Motors’ Model S had a greater impact on sales than the combined German OEMs.  Audi and Mercedes were expected to begin selling EVs in Europe, but consumers are still waiting.

Coasting Technology Pushes Internal Combustion Engine Vehicles Closer to Hybrids: C-

Coasting technology slowly lurched toward commercialization in 2013, as Tier One supplier Bosch announced that the technology would be available for vehicles with 48V systems.  Stop-start vehicles with coasting technology are more likely to show up in model 2015 cars or later, according to the Society of Automotive Engineers (SAE).

Slow versus Fast Charging Debate Intensifies: A

The views on the appropriateness of slow (Level 1 and Level 2) versus fast (CHAdeMO or SAE Combo) in satisfying EV charging needs continued to be polarized throughout 2013.  Some companies (Nissan, Tesla, and several hardware suppliers) are committed to fast charging as vital to EV driving, while other companies that operate charging networks have limited interest.

Europe Enables Driving without Borders: B

Interoperability across EV charging in Europe continued to progress, thanks to charging networks plugging into the Hubject platform, which allows drivers to plug into charging stations from a variety of manufacturers.  During 2013, charging networks in Finland, Norway, Copenhagen, Amsterdam, Austria, and Belgium enabled their stations to accept payments using the eRoaming system.

The Natural Gas Glut Will Dampen Interest in Plug-In Electric Trucks: A-

The growing availability of natural gas in the United States has discouraged many truck manufacturers from producing plug-in vehicles in all segments (light, medium, and heavy duty).  Via Motors was among the companies to enter the market while natural gas truck sales are rising.  Navigant Research’s 2013 report, Hybrid and Electric Trucks, reduced our previous forecast for medium and heavy duty trucks for the United States from more than 2,000 to less than 300 due to the increased competition from natural gas.

 

‘Dying’ EV Industry Set for Growth

— February 6, 2013

DeathReuters posted an interesting “news” article on February 4th claiming that EVs face a dead end.  This article was very selective in its reporting and missed an obvious fact: sales of plug-in vehicles in the U.S. more than tripled in 2012, and continue to outpace the growth of the supposedly more mainstream hybrids.

Despite the “public’s lack of appetite for battery-powered cars,” as Reuters put it, 54,000 plug-in hybrid and battery electric cars (known collectively as plug-in electric vehicles, or PEVs) were sold in 2012, up from more than 17,000 in 2011.  As the chart below shows, PEV sales in their two full years on the market are well ahead of where hybrids were at this point in their lifecycle, and we forecast that they’ll stay ahead of hybrids in the years to come.

U.S. HEV vs PEV Sales

 

(Source: Pike Research, HybridCars.com)

In 2014, when Cadillac, Honda, BMW and Audi will also be offering mainstream plug-in vehicles, nearly 100,000 PEVs will be sold.  For a “dying” segment, that’s pretty impressive; Detroit would be ecstatic if every automotive segment displayed growth like this.

Satisfied Consumers

It is true that Nissan’s overly-optimistic plans for EV dominance with its Leaf have fallen well short of expectations, forcing the company to regroup.  Despite falling short of its goals, however, the Nissan-Renault alliance increased sales in 2012 by 83 percent.  Also, the all-electric Tesla Model S is off to a racing start, selling an estimated 1,500 units in December alone, while more than 23,000 Chevrolet Volts were sold in 2012.  The Toyota Prius Plug-in and Ford C-Max Energi plug-ins are both well reviewed and are in demand from consumers.  Consumer satisfaction ratings for EVs are through the roof, and  car of the year awards for EVs have been piling up like a junkyard full of gas guzzlers.

While it is also true that PEVs sales won’t be a double-digit percentage of the auto market anytime soon, the gradually rising cost of gasoline will prompt more consumers each year to test drive something with an electric motor.  The pre-holidays drop in the price of gas abated quickly, as average gas prices jumped a whopping 18 cents during the last week, and many consumers and fleet owners would like to avoid such uncertainty in the transportation fuel costs.

While the payback period for some EVs today is too long, we are still in the early days of the industry.  Improvements and cost reductions in EVs and their batteries will parallel the advances in recent years of smart phones, which were originally written off by many as too costly and insufficiently robust.

Reuters also referred to recent announcements about fuel cell vehicle partnerships as another indication that EVs are on the way out.  However, Toyota (one of two companies that Reuters interviewed) has never had much enthusiasm for battery-powered vehicles.  The fuel cell vehicle industry, which has been gestating for decades (see the rosy projections from 2003), would love to someday accomplish what this round of EVs has attained in only a few years.

 

Is ‘Strategic Intelligence’ an Oxymoron?

— April 11, 2012

An essay on TheAtlantic.com by Eric Garland, a former strategy analyst and author of Future Inc: How Businesses Anticipate and Profit from What’s Next and How to Predict the Future…and WIN!, recounts Garland’s growing disenchantment with the field in which he’s made a living for 15 years: strategic intelligence.

I don’t particularly trust anyone who writes books with titles like that (particularly ones with totally ungrammatical subtitles), but Garland’s indictment is stinging and persuasive. “The market for intelligence is now largely about providing information that makes decision makers feel better, rather than bringing true insights about risk and opportunity. … Our future is now being planned by people who seem to put their emotional comfort ahead of making decisions based on real — and often uncomfortable — information.”

Garland is mostly talking about strategic intelligence at the corporate and nation-state level, but his definition of “strategic intelligence” (“researching trends, analyzing their potential impact, and reporting the possibilities to decision-makers”) could certainly apply to the field of clean technology research and analysis that we inhabit at Pike Research, as well.  He identifies three trends that are making it harder for empirical evidence and clear-eyed analysis to overcome institutional biases, internal politics, and short-term thinking.  First, “the explosion of cheap capital from Wall Street has led major industries to consolidate,” leaving a smaller pool of firms, many of which operate in markets distorted by politics, protectionism, and government handouts.  Second, this concentration of capital and economic clout has created giant bureaucracies in which “conventional thinking and risk avoidance become paramount.”  When you’re part of a large bureaucracy far removed from the real-world consequences of individual decisions and actions, it’s harder, and less rewarding, to base your thinking on strategic intelligence.

Finally, the influence of policy-makers is stronger than ever before.  This may seem counter-intuitive at a time when the United States can’t even craft a national energy policy, but Garland makes the case that national governments are now in the business of shielding large corporations – GM, Verizon, big banks – from the turbulent forces of globalized capitalism.

“How can you use classical competitive analysis to examine the future of markets when the relationships between firms and government agencies are so incestuous and the choices of consumers so severely limited by industrial consolidation?”

Watch Out for the Elephants

I have a couple of responses to this lament. One is that, although many cleantech sectors (electric vehicles and solar power, to name two) are certainly influenced by – many would say “distorted by” – government policy and government handouts, I have not found it the case that that limits the usefulness of evidence-based analysis and quantitative market sizing and forecasting.  Quite the opposite: the companies we talk to every day need independent intelligence more than ever, in large part because the actions of governments can be so unpredictable and so market-changing.  When you’re trying to run through an elephant herd it helps to know which way the trunks are swinging, as it were.

Second, the lamentable state of strategic intelligence is not news.  Garland never refers to the invasion of Iraq nor the intelligence failures (or misuses) that led up to it, but his critique certainly springs from the dark days of 2002, when an entire generation of CIA intelligence gatherers and analysts saw their work distorted and repurposed to further a predetermined foreign policy objective: the invasion of Iraq.  In 2007 John Heidenrich wrote a long essay on the CIA’s official website called “The State of Strategic Intelligence,” which made the same complaint that Garland makes today:The architects of the National Security Act of 1947 would be greatly surprised by today’s neglect of strategic intelligence in the Intelligence Community.”

Last year former Fortune managing editor Walter Keichel III published an essay on the Harvard Business Review site in which he noted that the entire business model of corporate strategic analysis has shifted: “Behemoths such as McKinsey and BCG … have broadened what they do and moved down the food chain. McKinsey teams are beavering away in places like the United Arab Emirates and the ‘Stans — Turkmenistan, say, or Tajikistan — but they’re as likely to be doing operations projects as pure strategy work.”  These days the real money, Keichel notes, lies not in corporate strategy but in “semi-permanent, year-in, year-out relationships with companies rich enough to pay scores of millions annually for help and advice.”

That reminds me of the old Woody Allen joke: “I know therapy works – I’ve been doing it for 30 years!”  (To be sure, though, ongoing customized client relationships are often not only more lucrative to the consultant but more valuable to the client than one-off, high-level strategic studies.)

Garland’s overall point is inarguable.  “The study of the future used to be easier to sell, maybe because the analysis usually predicted the growth of the consumer economy or the next great gadget,” he writes.  “But the future is no longer nearly as palatable, and the customers are less interested.”

But the customers who aren’t interested in hard truths about an unpalatable future aren’t good customers, anyway, because they’re not going to be around for very long.

 

Energy Storage: Half Empty or Half Full?

— April 6, 2012

One of the difficulties of the energy storage market is that technologies have such diverse cost and performance characteristics that making fair comparisons across technologies is difficult (some would claim impossible). In building Pike Research’s database of energy storage projects globally, we take an application-based approach to evaluating the value of the market.

If we look simply at cumulative capacity by storage technology, pumped storage is the obvious winner.  (The energy in a pumped storage installation is stored as water in a reservoir.)  This is no surprise, as it has been commercial for a hundred years and is a materials-based energy storage technology, meaning that it’s cheaper on an energy basis than mechanical (such as a flywheel) or electrochemical-based storage (such as a battery).  That’s why traditional pumped storage installations dwarf newer, less mature technologies such as advanced batteries.

However, if we highlight the relatively small number of installations based on newer technology, it becomes clear that there is a great deal of diversity in the emerging portion of the energy storage market.  Advanced batteries, variants on pumped storage, compressed air, flywheels, and hydrogen all have significant niches, though collectively they’re still only a small percentage of the overall market.  Over time, as the markets catch up and begin to recognize the value that these technologies offer, this percentage will grow. The tipping point will likely be in the 2014-2015 timeframe, when the technology costs come down enough, and the markets structures allow the value of the technology to be commoditized.

For now, long lead times, even for battery systems, are holding up installations and delaying growth in these newer technology segments.

If we use a different metric than capacity, and focus on installations (or number of projects), the outlook is turned on its head. The chart below shows greater diversity and activity in the industry, particularly if we are comparing only “new” technologies.  This view offers a fairly optimistic view of market diversity.

These two charts demonstrate that, in the energy storage industry, there are so many measurable characteristics that it’s easy to take a pessimistic or an optimistic view of the market, depending on how your view the data.  Over the next few years the half-empty glass will undoubtedly start to look more than half-full.

 

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