Navigant Research Blog

Ford Shifts Production Plans to Support Electrification Push

— January 3, 2017

In December 2015, Ford announced plans to invest $4.5 billion to introduce 13 new electrified vehicle models by 2020. The company provided no additional details at the time, but a big piece of that plan just became clear as CEO Mark Fields made a major investment announcement at the Flat Rock Assembly Plant near Detroit on January 3.

Ford has been criticized in the media for a seemingly lackadaisical approach to introducing plug-in electric vehicles (PEVs) over the past several years; however, this criticism is only partially valid. Unlike its more PEV-aggressive competitors Nissan and GM, Ford has avoided building dedicated PEV platforms to date—but that will soon change. The Focus Electric BEV has been called out for being merely a compliance car to meet California zero emissions vehicle mandates. Ford has been focused on pushing the plug-in hybrid variants of the Fusion and C-Max, which have been among the best-selling PEVs over the past 2 years.

Changes to an American Classic

According to Fields, Ford’s powertrain lineup will look very different by 2020. The best-selling vehicle in America for nearly four decades, the F-150 pickup, will be available with a new hybrid system that is expected to retain the towing and payload capabilities that customers in this segment expect. A rear-wheel drive hybrid system will be available for the truck and will also be applied to Ford’s most iconic car, the Mustang, when it gets its next update in 2020.

With the overall market shift away from cars toward utility vehicles, it has been a struggle for automakers to sell PEVs in volume. With that in mind, several of the new electrified vehicles will be SUVs, including the next-generation Explorer, which is built in Chicago. The police interceptor variant of the Explorer outsells the Taurus sedan by more than two to one, and the new generation will be Ford’s first hybrid with a turbocharged EcoBoost engine.

Big Plans for Flat Rock, Michigan

In addition to the Explorer hybrid, Ford will build a new, smaller SUV with a fully electric powertrain that offers a range of at least 300 miles. The electric SUV will be built at the Flat Rock, Michigan plant alongside the Lincoln Continental, Mustang, and a previously announced fully automated vehicle for ride-hailing that will debut in 2021. In order to support these new vehicles, Ford is investing $700 million to expand the plant, as well as adding 700 more jobs.

At the same time, Ford is canceling plans for a $1.6 billion small car plant in Mexico. During the 2016 presidential campaign, then candidate Donald Trump made a major issue of the plan to shift Focus production to Mexico from Michigan. The next Focus will instead be built at the existing Hermosillo, Mexico plant alongside the Fusion sedan. The small car market isn’t growing right now, limiting the need for companies such as Ford to expand the manufacturing of these vehicles. With sales of the Fusion slowing as well, there is plenty of capacity at Hermosillo to support both cars, plus the Lincoln MKZ.

Navigant Research’s recent Market Data: Electric Vehicle Market Forecast report projects that more than 6.8 million PEVs will be sold annually across the globe by 2025. Ford’s new electrification plan shows that the company is focused on applying the technology to vehicles where it believes it can do so profitably.

 

Ford CEO’s ‘Perfect’ Comments in Context

— December 22, 2016

EV RefuelingThe potential softening of US Corporate Average Fuel Economy (CAFE) standards that has been discussed of late has reignited the debate about consumer acceptance of electric vehicles (EVs). Under current regulation, EVs are crucial to automaker compliance strategies, but not all EVs are the same, nor are they treated similarly under the regulations. It’s an important aspect to clarify here as the debate about CAFE standards questions whether there is enough consumer demand for EVs to enable automakers to meet the standard’s targets. The administrators of CAFE, the Environmental Protection Agency (EPA), suppose it does, but some in the automotive industry disagree.

The most recent commentary provided to the debate was by Ford CEO Mark Fields, which Business Insider claimed “just perfectly summarized the biggest problem for electric cars.” Fields, in arguing there is not enough EV demand stated: “In 2008, there were 12 electrified vehicles offered in the U.S. market and it represented 2.3 percent of the industry … fast forward to 2016, there’s 55 models, and year to date it’s 2.8 percent.”

Hybrids and Plug-Ins

Fields’ data point deserves some deeper analysis. In the automotive industry, the term EV or electric car encompasses hybrids, plug-in hybrids (PHEVs), and battery electric vehicles (BEVs) because all these vehicles use electricity either harvested from vehicle braking and/or from the grid for traction. Within the design of current regulations, PHEVs and BEVs are heavily incentivized and provide far more benefit to automaker CAFE compliance strategies than do hybrids (though hybrids are an important component).

Fields’ statement is accurate when considering the entire pool including hybrids, but it does not address the demand of plug-in vehicles specifically, around which most of the debate has centered. To start, the laggardly market growth for EVs over this time period is specific to hybrids, which have contracted from the 2008 2.3% figure to 2% year to date. Of note, a vast majority of sales come from one automaker (Toyota). Meanwhile, plug-in (BEV and PHEV) sales started in 2011 and now have over 0.8% of the market year to date, and there is no one consistent or dominant market leader. Lumping all EVs together in regards to CAFE compliance is inexact when automakers are generally complaining about the requirements for plug-in EVs, which are in reality gaining market share and increasingly common among automaker portfolios, and are the vehicles which are most critical to automaker compliance.

Reasons for Decline

Given that, there are many reasons hybrid share may be in decline. One that usually gets a lot of attention is oil prices, which not only historically reduces sales of hybrids, but also has prompted a growing percentage of new vehicle sales to be SUVs and trucks (a market nearly devoid of hybrids) and fewer passenger cars. Another factor is the increasingly more fuel efficient non-EVs (due to CAFE standards), but the last and more critical reason is competition from the plug-ins themselves. Before the plug-ins arrived, hybrids were the energy efficiency leaders. Since plug-ins arrived, sales have arguably taken away from hybrids, and the impact to the overall hybrid-inclusive EV market has been relatively marginal in growing sales, which fuels the arguments for those who are critical of consumer demand for EVs.

Ultimately though, the feasibility of automaker compliance with current regulation hinges on consumer acceptance of plug-ins, not hybrids. To that effect, Fields’ data in relation to consumer demand and CAFE compliance is not perfect. Hybrids and other fuel efficiency technologies are certainly helpful but cannot be relied upon in isolation. Consumer response to battery cost and energy density improvements teased by the Tesla Model 3 and represented in the near-term BEV rollout of the Chevrolet Bolt will provide greater clarity here. However, regardless of the success these models may realize or have already realized, it is unlikely to have a significant impact on whether CAFE standards will be softened or not.

 

Preparations Continue for Tesla Model 3 Launch

— November 21, 2016

Electric Vehicle 2For the hundreds of thousands who put down a deposit on the upcoming Tesla Model 3, the future can’t come soon enough. The much anticipated EV, which is scheduled to start shipping sometime between the end of 2017 and the beginning of 2018, is one of several vehicles due out in the next 18 months that are expected to push plug-in EVs (PEVs) into the mainstream.

A new book, Getting Ready for Model 3: A Guide for Future Tesla Model 3 Owners by Roger Pressman, details many of the expected technical details about the car’s performance as well as considerations for keeping it charged. For those who like the minutiae of how cars function, the chapters on performance and autonomous vehicles give digestible overviews of how EV and assisted driving technologies work in general, as well as Tesla’s likely implementation.

One aspect of PEVs that is often overlooked or misunderstood is the efficiency of electric motors in providing more torque at low to medium RPMs than conventional vehicles. Pressman does well in explaining the details about this feature, which alone should have prospective Model 3 owners excited. Tesla’s prior vehicles are admired for their speedy and nimble driving, and bringing that capability to the Model 3 helps explain the long reservation list.

Autonomous Driving

Tesla’s Autopilot feature has gained praise for its role in pushing the edges of driver assistance (as well as a fair amount of notoriety), and Pressman provides an overview of the levels of autonomy and underlying technologies. The Model 3 will include the hardware and software for Tesla’s self-driving technology, though customers of Tesla’s least expensive vehicle to date will have to pay to unlock the feature. A recent survey of Tesla owners indicates that while the vast majority understand the limits of the technology, the minority who believe Tesla cars can fully drive themselves can have serious consequences. With the Model 3 likely to outsell all previous Tesla cars combined, barring an expanded education push, the number of misinformed drivers putting too much faith in Autopilot could skyrocket.

For those who haven’t owned a PEV before, how to keep the 215-mile-range, all-electric car sufficiently charged is worth reading up on. As my colleague Sam Abuelsamid correctly anticipated, Model 3 owners (and all Tesla buyers who purchase a vehicle after January 1, 2017) won’t have unlimited use of the Supercharger network, but will be capped at around 400 kWh worth of free charging, with a pay-as-you-go model kicking in after that.

To supplement the Supercharger network, Tesla has been busy working with partners to build out its Destination Charging network. As pictured below, this network provides slightly above Level 2 (up to 16 kW) charging at hotels, parking garages, restaurants, and other locations across the United States.

Tesla’s Destination Charging Network

DestinationCharging

Source: Tesla Motors

Tesla will also be introducing a new type of glass in the Model 3 as the company continues to expand its research and development efforts to leverage the synergies with recently acquired SolarCity. There is justified enthusiasm surrounding the Model 3 and other more affordable PEVs coming out in the next 18 months. It will be interesting to see to what degree that excitement turns into growing sales.

 

The EU Continues to Lead EV Charging Policy

— November 4, 2016

EV RefuelingThe European Union (EU) continues to be at the forefront of policies to spur plug-in electric vehicle (PEV) charging. Since 2014, EU countries have been under a directive requiring member states to develop a plan to install PEV chargers on a broad scale by December 31, 2020. Public and semi-private charger availability is extremely high in the Netherlands and Norway, with other countries like the United Kingdom, Finland, and Denmark having increasingly high levels of public charging networks. The EU is also leading on interoperability and roaming, which lets drivers easily access public chargers across many networks and multiple countries. This is a key feature if the growth in public charging is to lead to greater PEV sales—which is, after all, the EU’s real goal. This has led to Europe outpacing North America in charger sales in Navigant Research’s Electric Vehicle Charging Services near-term forecasts.

Now the EU looks to be pulling another lever for the charger market: a draft directive requiring new homes to be built with charging infrastructure. The draft directive reportedly says that any new or substantially renovated home will need to be equipped for EV charging beginning in 2019. It also indicates that starting in 2023, buildings must have one out of every ten parking spaces at a building equipped for EV charging.

This directive can help drive PEV sales for several reasons. First, home buyers will be made aware of EVs and EV charging by the presence of infrastructure in new homes. Secondly, having the infrastructure installed removes some of the friction that can hinder interest in PEVs among consumers, such as understanding how home charging occurs, whether it requires an electrical upgrade, and the potential cost of such an upgrade.

Details Yet to Be Determined

However, the devil is in the details, which are yet to come. A few key points:

  • This directive could well create a scrum among charger providers looking to gain some advantage through a mandate-driven market. The directive should avoid specifications that favor certain charging companies, which would effectively hand them the new home EV charger market.
  • It should also ensure that the requirements will allow for meeting the needs of an evolving PEV market. For example, longer range battery EVs will be increasingly prevalent and would benefit from higher power charger capability.
  • Coming innovations in charging should be considered. For example, how will wireless charging be accommodated? By the time this directive goes into effect, several OEMs will be offering wireless charging as an option with their PEVs. Will the directive attempt to encourage smart charging capability, or leave that to the end user? Smart charging will become increasingly important to manage growing EV loads, particularly in the 2023 timeframe when the parking space mandate would go into effect. Indeed, there could be opportunities for building owners to aggregate PEVs for grid services.

Combined with ongoing efforts in Europe to install more public infrastructure and fast charging networks, this directive should make Europe a surging market for EV charging, potentially outpacing North America beyond 2017.

 

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