Navigant Research Blog

2018: When EVs Will Change Everything

— February 11, 2015

Disruptive technologies don’t appear overnight. They come in gradual iterations until refinements and related technologies evolve to a point when they become so overwhelmingly useful that they are viewed as a necessary replacement for what came before.

While plug-in electric vehicles (PEVs) have come a long way since their introduction in the 1990s, they are not viewed by the general public as must-haves today, due to their higher prices and driving range limitations.  However, the next generation of PEVs, due to arrive in 3 years, will likely have a combination of features and prices that will convince most car buyers that driving a car with an internal combustion engine is a habit worth breaking.

Compare the development of PEVs to that of the smartphone. GM’s EV1 was the first significant PEV available in the 1990s, and its limitations in driving range and overall comfort prevented it and other PEVs of that era from catching on with consumers.

The evolution of smartphones can also be traced back to the early 1990s, when handheld personal digital assistants included an operating system with personal productivity features, and the first mobile phones that enabled talking (almost) anywhere became available. While these innovations quickly became popular with geeks and aficionados, they didn’t exactly capture a mass market.

10 Years After

Flash forward to 2009, and along came the Nissan LEAF and Chevrolet Volt, which took advantage of advances in battery technology, electric drive, display screens, navigation, and faster wireless communications to provide a driving experience that in most respects is superior to your father’s gas car. Most people have at least heard of a PEV by now, though PEV sales in the United States in 2014 were still less than 1% of all new light duty vehicles.

It similarly took more than a decade for personal digital assistants and mobile phones to converge, and for the then rudimentary technologies to be enhanced with better display screens and wireless connectivity, and new applications including texting, navigation, data sharing, and voice commands. For smart phones, the Blackberry, Windows smart phones, and then the iPhone became must-have devices that initially came with a high premium, but within a few years other manufacturers prompted competition that put this combination of features within reach of most consumers.

Tipping Point

That hasn’t happened yet with PEVs. But by 2018 we’ll have the Tesla Model 3 and the Chevrolet Bolt, which will package new technologies and driving enhancements to further separate PEVs from the pack. Anticipation for the Model 3’s extended range and Model S-like performance has been building since it was first announced, in 2013. The Chevrolet Bolt concept, which was announced at the International Consumer Electronics Show (CES) in January 2015, promises similar or better range for a lower price.

GM has said that owners will be able to start the Bolt with a smartphone application, and that ride-sharing and self-parking features will be included with the vehicles. Some of these features may be available in conventional cars by that time, but with the Bolt (and likely other PEVs), you’ll get them all under one roof for around $30,000, along with  superior electric drive performance and the savings and convenience of driving on electricity.

As with Apple and Samsung in the mobile device sector, Tesla and GM aspire to be the agents of change, and for now we can only guess at the electric alternatives that Nissan, Ford, Volkswagen/Audi, BMW, and Daimler will have at dealerships in 2018. Like smartphones, PEVs have certainly had their shares of missteps in their march toward ubiquity, but as Albert Einstein said, “Failure is success in progress.”

 

Tesla Breaks into Japan

— September 25, 2014

Last week Tesla opened its Japan sales operation with Elon Musk handing over nine keys to the first Model S owners in the country.  The event is significant because foreign automakers, especially U.S. ones, sell very few vehicles in Japan.  Although the country’s vehicle market officially opened to limited foreign participation in the 1970s, despite extensive automotive trade negotiations between the United States and Japan, the country has effectively remained closed.  Nearly 96% of all vehicle sales in the country come from Japanese companies, while the remaining 4% come from German automakers, with a barely visible blip of around 1,000 vehicles coming from GM.  This has been frustrating for foreign automakers – but it’s also hindering Japan’s plug-in electric vehicle (PEV) market.

As of 2013, Japan is the third-largest vehicle market and the second-largest PEV market in the world.  PEV sales were initially strong, thanks to infrastructure developments and vehicle deployments by Nissan, Mitsubishi, and, to a lesser extent, Toyota.  However, Toyota and Honda have since scrapped most of their PEV development programs, and no new PEVs were introduced in 2014, until Tesla did so last week.  To provide some context, there have been 24 different PEV models sold in Norway in 2014, while only 7 (including Tesla and three variations of the Mitsubishi i-MiEV) have sold in Japan.

Flat through ‘14

As a result, despite significant growth in every other PEV market, PEV sales in Japan will likely remain flat in 2014, at around 30,000 units.  This means that the country’s market will fall to third behind China; it may also lose ground to Germany, France, Norway, and the Netherlands, winding up in seventh in 2014.  Given Japan’s significant foreign energy dependence issues (Japan essentially imports 100% of its oil), this is a problem.

PEVs have substantial energy efficiency improvements over conventional vehicle platforms that, if adopted en masse, could do a lot to reduce Japan’s dependency issues.  Additionally, the country’s subsidy program, large vehicle market, significant price differential between electricity and gasoline on a per mile basis, and well-developed public charging infrastructure present the optimum conditions for the PEV market.  Unfortunately, Japan’s traditionally isolationist national automotive policy is inhibiting its own national energy security and greenhouse gas (GHG) reduction goals.

 

Unknowns Narrow for Tesla’s Gigafactory

— July 31, 2014

Tesla Motors announced today that it has started civil engineering work at a site in Nevada for the eventual construction of its Gigafactory – a battery manufacturing plant that will produce 50 GWh of batteries a year.  Broadcast in a shareholder letter that accompanied Tesla’s quarterly earnings results, the announcement confirmed some rumors but was still extremely short on specifics.   A lot of uncertainties remain about how, where, and by when the Gigafactory will be built.

The first issue is site location.  Tesla has said in the past that it will build the factory in one of five states: California, Nevada, Arizona, New Mexico, or Texas.  It has also said that it will begin development work on more than one site, choosing the eventual location from multiple contenders upon which initial civil engineering work has already been done.  Now we know that the Nevada site outside of Reno is one of those finalists.  Where is/are the other/s?  No word from Tesla on that, but it is pretty easy to identify the five top contenders.  That’s because the Gigafactory will need to be on a main rail line that connects with the company’s Fremont, California automobile factory.  It will also need to be near a large population center in one of those five states.  That leaves the following contenders:

  • Central Valley, California
  • Tucson, Arizona
  • Albuquerque, New Mexico
  • El Paso, Texas
  • Austin/San Antonio, Texas

You can expect the second site to be in one of those areas.  There is still one potential curveball that might come  from Tesla – the possibility that the Gigafactory will be composed of multiple sites: maybe a separator factory in one state, an electrolyte factory in another locale, and a final assembly plant in another.

More to Come

The other piece of interesting information still to be determined is exactly how the Gigafactory will be structured.  No blueprint exists for how to design a factory that is owned by multiple parties; it’s a unique concept that has never been tried before.  One day earlier, Tesla said that Panasonic will definitely be the manufacturing partner for the Gigafactory.  Now the questions are: How will the ownership of the site and its equipment be divided, and who will be the other component manufacturing partners? Expect a number of announcements on that end to come out over the next several months.  Among the potential other manufacturing partners that Navigant Research expects to be chosen are a cathode material supplier (such as Nippon Denko or Umicore), a graphite supplier (Northern Graphite or Alabama Graphite), an electrolyte manufacturer (Ube, Sumitomo, or Nichia), and a separator manufacturer (Celgard, Ube, or Toray).  Other materials needed for the batteries, such as lithium carbonate, copper foil, and aluminum casings, will probably be made offsite and delivered by rail.

The final questions are when the Gigafactory will go online and when it will reach full capacity.  Tesla has already said that it hopes that those dates will be 2017 and 2020, respectively, but exactly how the ramp rate works will be interesting to see.  Panasonic has clearly stated that it will invest in the equipment for the factory in a staggered, conservative fashion.  That could lead to a much slower build-up to full capacity than the 3 years that Tesla is claiming.  Regardless of the details of the how, when, and where of the facility, Navigant Research believes strongly that the Gigafactory will be built and will be a successful, potentially revolutionary, manufacturing venture.

 

Tesla’s Patent Giveaway Paves the EV Freeway

— June 26, 2014

Tesla’s move to open up its patent portfolio is undoubtedly risky, and it could erode Tesla’s competitive advantage.  But the potential rewards outweigh the risks.  The thinking behind Elon Musk’s move is that by allowing the major automakers to use Tesla’s technology, it will help lead to Tesla’s ultimate goal: a comprehensive network of cars, batteries, suppliers, components, and charging stations that utilizes electricity for transportation.  In other words, since Tesla is one of the top electric vehicle (EV) players currently in the market, the company stands to benefit from a vastly expanded network of EV infrastructure based on Tesla’s technology.  The more people that are connected to a network of vehicles relying on electricity, the better it is for Tesla.

Rivals and Collaborators

BMW and Nissan have already expressed interest in collaborating with Tesla on their supercharger technology to potentially create global vehicle charging standards.  BMW has also reportedly considered lending its expertise in carbon fiber technology in exchange for powertrain development and supporting infrastructure.  A partnership between BMW and Tesla could prove to be very powerful, bringing together the highly successful Model S with BMW’s electric city car, the i3, and its soon to be released i8 plug-in hybrid supercar.  Currently, Tesla, BMW, and Nissan account for roughly 80% of the world’s plug-in electric vehicle (PEV) sales.

Car charging companies are also looking to benefit from the technology transfer, with Car Charging Group, Inc. announcing its intention to integrate Tesla’s EV charging technology into its Blink EV charging stations.  Car Charging Group is one of the largest owners, operators, and providers of EV charging services in the United States and is also the owner of the Blink Network, one of the most extensive EV charging networks.

On the Sidelines

While the patent release by Tesla will surely increase collaboration with the major car manufacturers already producing EVs, it’s much less clear that open patents will move the dial on the major automakers that have largely steered clear of EVs in the past.  Toyota, GM, and several other major players are hedging their bets on EVs, and Tesla’s patent release is unlikely to change their position.

Navigant Research’s report, Electric Vehicle Charging Equipment forecasts that cumulative global sales of electric vehicle supply equipment (EVSE) will reach 25 million units by 2022.  Increased collaboration between the major EV players could lead to this figure being achieved ahead of schedule.

Cumulative EVSE Unit Sales by Region, World Markets: 2013-2022

(Source: Navigant Research)

 

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