Navigant Research Blog

Do Motors Define a Brand?

— November 30, 2010

I recently attended the German American Chamber of Commerce of the Midwest’s e-Mobility conference. The conference overall was very interesting and featured some great topics, but one thing at the very end of the conference really caught my attention. The panel was discussing international cooperation and featured Roland Matthe, Manager of Volt Battery Development, GM, Dr. Samit Ghosh, CEO of P3 North America, and Dr. Joachim Wolschendorf, CTO of FEV. The final question was: Are BEVs a better opportunity for global cooperation than internal combustion engine (ICE) vehicles because the vehicles won’t be as branded by their engines?

When one thinks about current cars or trucks, they often have a branded (or pseudo-branded) engines, such as Hemi in Chyrslers, Ecoboost in Fords, Vortec in Chevrolet trucks, VTEC in Hondas, etc. Even those that don’t have a specific brand name for their engines will often have a strong reputation based on their engines. One could make a solid case that BMW would not have the reputation it does without the performance and reliability characteristics of BMW engines (same could be said for most manufacturers), and then there is the reputation built from unusual designs such as the boxer engines in Subarus, Mazda’s rotary engines, or the whopping 16 cylinder Bugatti motor.

With BEVs, these key components are no longer a part of the equation. What becomes that part of the brand in their place?

There are actually three main components that the panelists centered on during the discussion: the electric motors, the battery pack, and the overall driving experience. Obviously, the last one will ultimately be a key brand trait (BMW, the “Ultimate Driving Machine”, is an expression of this). I would also argue that many BEV and PHEV manufacturers are setting the stage to claim that their battery packs are a defining feature:

• GM has developed their Voltec battery to use only about 50% of its total charge, while the Nissan Leaf uses closer to 90%.

• BMW, GM and Tesla believe battery packs have to have liquid temperature control to maintain quality, while Nissan stands behind their air cooled batteries.

These technical differences are what typically end up being marketing messages and part of the brand building (note that GM’s drivetrain even has a name already).

Conversely, there is little talk about the electric motors, probably because they are moving towards commodity status. The motors are already highly efficient (I’ve heard from multiple companies that BEV motors are over 90% efficient regardless of who builds them, and many already outsource their electric motors for traditional hybrids). Additionally, electric motors don’t require routine maintenance, are quiet, and buried within the chassis. So, the ownership experience with regards to the electric motor itself will be largely invisible to the end user.

Following the discussion, I asked Hans Hohenner, Development Drivetrain Product Manager for BMW, what he thought the answer to this branding question is. He said he didn’t have an answer, but then pointed out that BMW currently outsources their transmissions to ZF in their ICE vehicles, and clearly that is a critical component to the drivetrain.

So, coming back to the original question: Do BEVs offer better opportunity for international collaboration? Perhaps the answer isn’t that BEVs offer a better opportunity, but that today’s automotive market offers better opportunities overall.


Selling the Forklift, Not the Fuel Cell

— November 23, 2010

This is my first blog post as a Pike analyst. As I haven’t completed a report yet, the choice of potential topics is unlimited. So naturally I am going to write about… forklifts.

Ok, so not the sexiest of topics. But forklifts are being touted as one of the early markets for fuel cells, and shipments have taken off dramatically since 2008. This is likely to continue in 2011. Certainly the market has received a major jolt from 2009 Recovery Act funding, which is supporting shipments of hundreds of forklifts in North America. But demand is not only coming from government supported projects, and large scale fleet conversions or hydrogen-only Greenfield sites show that buyers see these as real products, not demonstration units. If the initial fleets at companies like Walmart, Coca Cola, and Wegmans bring the anticipated return on investment (ROI), there could be a dramatic uptick in demand in the next few years.

This is not a glamorous application. There will be no glossy magazine ads or flashy press unveilings. And, perhaps, no extravagant promises that will be difficult to keep (one can hope). But forklifts show the fuel cell industry moving away from trying to sell fuel cells as a technology and toward selling a product. By and large, customers do not want to buy technology. They want to buy a useful or desirable product. Forklifts are a step in the right direction, and fuel cells are also being packaged into other products with early market demand such as APUs for RVs and yachts, thousands of which are sold every year, or backup power for the telecom industry or combined heat and power systems. These are not the showy applications like cars and tend to be happening with little notice or fanfare.

That said, it is still early going for fuel cell forklifts. Some key market factors that will affect the success of this sector are:

• the limited market segments where fuel cells provide a good return on investment (2 and 3 shift warehouse operations, indoors, with a minimum fleet size of around 40 vehicles);

• competitor technologies such as advanced batteries or fast charging;

• the very small number of fuel cell companies in this sector (if one fails, the market could really stumble)

The fuel cell forklift market still depends on the federal tax incentive for fuel cells to make the ROI case, so fuel cells need show they are competitive at least before this tax credit expires in 2017, but really long before then. (Indeed it could be counterproductive if companies continue to rely on this tax incentive for too long.) Over the next few years, it will be important to watch if more orders from the big fleet customers are booked and if costs come down.


EVs a Portal to Distributed Storage

— November 19, 2010

Electric vehicle sales will be largely influenced by advances in battery technology and the rollout of charging infrastructure. But these technologies will become even more intertwined going forward as the proliferation of electric vehicles may foster demand for batteries as local energy storage.

Many consumers who park a Volt, Leaf or other plug-in EV in their garage will notice a bump in their overall electricity cost because EVs can increase monthly consumption by 50% to 100%. This will lead many consumers to closely scrutinize their utility bills and look for ways to reduce their cost per kWh. Several utilities are launching EV-specific time of use rates to encourage consumers to charge off-peak.

Also drawing consumers’ attention to energy use will be the new applications from EV charging station vendors that enable consumers to track consumption, cost and carbon emissions reductions either online or via their mobile phones. As consumers realize that they can save money by charging off peak and get comfortable with lithium batteries, they will be primed to consider purchasing energy storage in the home.

Two charging equipment companies, AeroVironment and Eaton, are developing products that incorporate energy storage. In some areas with high energy rates and time of use pricing (such as California), electricity can cost 80% less overnight than at peak times. With even a small battery pack (say 1-2 kWh), consumers in these areas can greatly reduce their peak energy costs for their households.

Putting storage into the charger rather than using the vehicle for power to the home will preserve the life of the EV’s batteries and can capture cheaper energy even if the vehicle is not plugged in. (EV manufacturers have so far largely frowned upon V2G applications because of the potential impact on battery life.) Also, any surplus in solar power generated at home could also be captured. Storage batteries could be lithium ion (in the future from the vehicles after their useful life), as well as less costly nickel metal hydride or advanced lead acid batteries.

For commercial fast DC chargers, incorporating battery storage could be a way around impacting peak demand. In addition to also storing excess solar power, commercial customers could use the charger/storage system as emergency power and to similarly purchase energy when it is the cheapest and quick charge their fleets on demand without worrying about cost or impact on the grid.

Charging just one vehicle at this rate is equal to approximately 43 vehicles being charged via Level 1 (aka standard household current) or 9-18 vehicles at Level 2 using charging equipment. Complicating matters is that DC charging is by necessity immediate – delaying a 15-30 charge defeats the entire purpose. Plus, these charge locations are likely to be at truck stops, gas stations, or mini-marts, which aren’t places that most folks plan on spending a lot of time.


Hybrid Locomotives Success Highly Political

— November 18, 2010

In our recent publication on Hybrid Locomotives, I helped develop baseline forecasts for 20 hybrid locomotives in North America by 2020. With the elections in the United States, it has come to my attention though that these numbers are assuming a very critical component to the forecast that may fluctuate more than we like think.

Railroads are one of the most regulated industries in North America. As a result, one of the key drivers of innovation in the locomotive market is regulation. Emissions regulations force railroad companies to examine potential alternative fuels and exhaust treatments. These regulations are currently driving any hybrid and battery locomotive work being done. However, railroad safety regulations are justifiably onerous and trump emissions when it comes to fuel and battery safety issues.

All of this makes sense, but I have heard rumors about a loophole which could be the undoing of the hybrid locomotive. In North America, the emissions from locomotives are required to be reduced to 1g/kWh of NOx and 0.015g/kWh of particulate matter in 2015. These requirements are going to require that diesel engines on locomotives have exhaust after treatments similar to diesel on-road trucks. Or maybe not.

The challenge that I’ve heard from multiple sources is that if locomotives and railroads cannot meet emission requirements, then they can push back against the regulations (or as bluntly stated in one conversation, railroads “can just ignore them, if they don’t like them”). The EPA, of course, does not subscribe to that line of thinking, but does admit that the railroads are very involved in the regulatory process to make sure the rules can be met. While this may sound like leaving a fox in the henhouse, it actually makes sense due to the many layers of regulations that railroads are subjected to. There is no point in making regulations if they cannot to be met.

These new coming regulations can likely be met for a cost and herein lies the politics. The generally conservative railroads are typically unlikely to experiment with expensive capital costs, if they can be avoided. Within North America, where carbon costs seem even less likely after this last election, hybrid locomotives will lose some of their appeal if traditional diesel locomotives do not have to meet the challenging emissions requirements.

I remain optimistic that the market is likely to beat our baseline forecast, and the emission regulations will help push new innovation towards hybrid locomotives. The momentum towards greener locomotives has been growing and some railroad companies (Norfolk Southern in particular) are showing signs that their boards are willing to commit resources to develop new technology to meet these emissions rules.


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