Navigant Research Blog

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)

 

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.

 

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