In Lux’s recent overviews of the landscape of carbon fiber recycling technology and of the outlook for carbon fiber in emerging rail and marine applications, we highlighted the need for scalable composite repair technology as a key limiting factor in future growth in continuous fiber composite adoption. Repair has also been a consistent concern for automotive carbon fiber. Continue reading
Innovations aimed at reducing carbon fiber cost and improving composite processing efficiency (see the report “Carbon Fiber Composites Market Update” [client registration required]), combined with continued global scale-up (see the report “Carbon Fiber Update 2016 Edition”[client registration required]), are driving increased adoption of carbon fiber reinforced plastics (CFRPs). As higher volumes enter the market, CFRP recycling is increasingly important not only for environmental and economic benefit, but also to avoid upfront landfill costs and to meet stringent automotive regulations in recyclability. In 2016, the global CFRP market was greater than 60,000 MT and is expected to grow to 183,000 MT or $35 billion in 2020. However, only a small amount of scrap produced per year is recycled and more than $400 million of CFRP ended up in landfills in 2015. Continue reading
Driven by global EV adoption, Li-ion battery manufacturing is expected to expand significantly in the next three years. A Lux analysis of the larger Li-ion battery manufacturers’ capacity and expansion plans found that current Li-ion manufacturing capacity may triple by 2020, from 73 GWh to 238 GWh globally. Major growth is planned in China by BYD and notably CATL; however, it’s worth taking these projections with more than a grain of salt, as the markets of Li-ion batteries are changing significantly.
Last week ended with Apple announcing a $1 billion investment in the Chinese ride-sharing company Didi Chuxing. Didi Chuxing is Uber’s biggest competitor in the Chinese market. Apple’s investment is meant to act as a chance for Apple to learn more about Chinese market segments. The investment would also be a key component in Apple’s rumored self-driving vehicle project.
With each new partnership or investment announcement, an ecosystem within the autonomous vehicle space is developing that consists of three key components: autonomous vehicle technology development, the emergence of new business models, and manufacturing of vehicles. To survive in this evolving ecosystem, companies must be able to touch all three of these points. It isn’t feasible for any one company to hit all three of these by itself, though; companies operating in this space are looking for relationships with other companies to be able to fill any gaps. A recent example of this is the automaker GM, investing in the ride-sharing company Lyft, and in the process of acquiring the autonomous vehicle technology developer Cruise (client registration requred). Lux recently wrote a report (client registration required) comparing automotive OEMs and the companies that were lagging behind were the ones that chose to ignore one of these components, like Audi and its conservative approach to technology implementation or Renault Nissan and its lack of self-driving vehicle technology.
Apple’s recent investment shows that it is taking the autonomous vehicle space very seriously, even if it hasn’t openly stated that it is working on this technology. But for Apple to consider approaching the rest of the pack, there is still a critical question remaining: who will make its cars? Previously, Daimler and BMW both rebuffed Apple’s advance, likely due to arguments over data ownership and Apple’s notoriously demanding requirements from its partners. Clients can expect tech companies operating in the autonomous vehicle space to look elsewhere for the vehicle manufacturing piece of this new – and still developing – ecosystem. If an automotive OEM isn’t an option, Apple will need to look toward tier-ones with experience manufacturing vehicles.
By: Kyle Landry
During the past half year, oil prices have been falling dramatically, from $115/barrel in June 2014 to less than $50/barrel today. For car buyers, this plummeting oil index means cheaper gas prices when refueling. For example, in the U.S. during that same period, gas prices have fallen from $3.7/gallon to about $2.1/gallon. Historically, cheap oil and gas has meant that more car buyers turn their focus away from fuel efficient vehicles, which sales data of hybrids like the Toyota Prius supports.
For example, during the 2008 oil crash, when U.S. gas prices dropped by 58% in half a year, Toyota Prius sales in the U.S. fell by 47% (see figure). More recently, during the latter half of 2014 gas prices dropped by 31%, and Toyota Prius sales fell by 22%. The data is admittedly noisy, influenced by shoppers’ preferences to buy on certain months, and affected by random external factors like Toyota Prius production slowdowns because of the 2011 Tōhoku earthquake and tsunami. Nonetheless, the fact remains that consumers are influenced by gas prices when choosing what vehicle to buy. In preparation, automakers like BMW are already warning of lower sales of plug-in vehicles.
To investigate the long-term effect of this cheap oil trend on alternative drivetrains, Lux Research used its forecasting models to analyze how the oil price will affect plug-in vehicles for the rest of the decade. First, it is important to note that today’s low oil prices are not here to stay: They are partly the result of a war for market share between different oil suppliers, leading an relatively unsustainable situation that will eventually correct itself. Eventually some oil producers will find they can no longer compete (client registration required), meaning oil prices will eventually creep back up.
We find that in the likely case of only a gradual return to previous prices – which we call the “cheap oil” scenario in the figure below – then electric vehicle (EV) sales will dip by 20% for a number of years, while plug-in hybrid (PHEV) sales will dip by about 14% during that same period. This percentage is relative to the other forecasted scenario, where oil prices rebound much more quickly – the “stable oil” scenario. The reason for this partial but not dramatic drop is that the consumer base for EVs and PHEVs remains relatively insensitive to oil price: These early adopters are driven more by environmentalist concerns or technical differentiation rather than oil price. To take an example, the Tesla buyer that can afford to pay almost $100,000 for an EV is not swayed too much by the economics of the gas pump. Not all EV buyers are rich, of course, but many buyers of even cheaper EVs like the Nissan Leaf are early adopters driven more by environmental concerns and plug-in vehicle perks rather than gas prices.
Nonetheless, the loss of 14% to 20% in sales depending on drivetrain will be an unwanted surprise for makers of plug-in vehicles. In addition to these plug-in vehicles, we expect hybrid sales will be the hardest-hit, with volumes dropping by as much as 33%, since a significant portion of their buyers do look carefully at gas prices and payback period. The situation will gradually correct itself as oil prices return to normalcy by the end of the decade. In the meantime, clients should view low oil prices as a bump in the road for increasing plug-in vehicle adoption, and not something more serious. That being said, a return to normal oil prices is not totally guaranteed by the end of the decade, adding an extra risk for automakers like Tesla that hope to sell 500,000 EVs around that time – for which they will need a mass market tired of costly gas.
Source: Lux Research Insight “Just a speed bump: Despite cheap oil, niche plug-in vehicle sales will be resilient” — client registration required.
What They Said
In a recent interview with CNN, Tesla’s CEO Elon Musk stated, “The Tesla car next year will be, probably be 90% capable of autopilot.” He continued that highway driving would obviously be automated by 2015. When asked by the interviewer how this would happen, Elon replied, “With a combination of various sensors. Cameras plus image recognition, radar, and long-range ultrasonics, that should do it.” The interview ended with few concrete facts, but Elon asserted, “Tesla is a Silicon Valley company; if we’re not the leader, then shame on us” – thereby asserting Tesla’s supposed dominance of the emerging autonomous vehicle market.
What We Think
If Elon Musk’s comments seems far-fetched and vague, it’s because they are. In its latest release, Tesla has effectively caught up with competing car companies, but certainly hasn’t passed them. Manufacturers like Daimler, Audi, BMW, and Ford, alongside many others, are all incorporating advanced driver assist systems (ADAS) into their cars. Tesla’s new release highlights two major ADAS features: automatic lane change and the ability for the car to read speed-limit signs and adjust speed accordingly. While an advancement for Tesla, neither feature is all that new – in 2013, there were 19 automakers with adaptive cruise control systems on the market, most of which offer the ability to read and react to speed limit signs, and others have automatic lane-change prototypes on the road.
Claims that autonomy for Tesla’s cars will be a simple matter of firmware and software updates are unrealistic. The 12 sensors that Tesla has installed onto its new car are a mix of cameras, radar, and ultrasonic sensors. While we don’t doubt that all of these sensors will be important in the progression towards autonomy, we disagree with the view that the hardware to enable autonomy is already fixed and that future cars will only require software upgrades to become autonomous. Google has been testing its autonomous vehicle, outfitted with significantly more sensors than Tesla’s, and they continue to struggle in poor visibility weather conditions. We agree that advances in machine vision, and subsequent software updates will add a lot of capability to ADAS features; however, the hardware is far from fixed. Tesla may soon find that as vision algorithms improve they will require dedicated processors like CogniVue’s (client registration required) to efficiently run the required computation in real-time. Furthermore, by fixing its hardware and relying on future software and firmware updates Tesla may miss out on emerging imaging solutions like Fastree3d‘s (client registration required) imagers that can offer advances in terms of speed, accuracy, and cost over currently used sensors.
Even if the technology to make a fully autonomous car is available in the next five to six years, as Elon suggests, it will be many years of prototyping and testing before that technology hits the road in commercially available vehicles. The first adaptive cruise-control-equipped vehicles came onto the market in 1995, and it’s taken the technology nearly 10 years to reach its currently limited market share. If a prototype of a fully autonomous vehicle is possible in five years, it will be at least another decade after that before buyers start enjoying hands-off driving.
Given the bold claims, it is likely that in 2015 Tesla will be backpedaling from its CEO’s comments. Perhaps Tesla has a partnership in the works and its ADAS features are being developed by outside developers, but nonetheless, Tesla has notoriously been delayed in product deployments. Still, marketing and PR are a true strength of Tesla, and conversations in our automotive network indicate frustration that Tesla is viewed as so advanced while in reality numerous OEMS have technologies equal to or more advanced than what Tesla is claiming. Clients should expect Tesla to continue to drive the conversation, but expect the rapid innovation in ADAS and autonomous vehicles to progress quickly – and much of it outside of Tesla’s walls.
China has announced two major policies that will boost sales of what it terms “new-energy vehicles” in the country, which primarily refer to electric vehicles (EVs), plug-in hybrids (PHEVs), and fuel cell vehicles (FCVs). Starting in September 2014, a 10% sales tax on new-energy vehicles will be waived through the end of 2017. The 10% tax waiver will apply to both foreign and domestic automotive manufacturers, but foreign manufacturers will still face significant import taxes (client registration required). Separately, China has issued a procurement mandate that 30% of all central government vehicles purchased by the end of 2016 will be new-energy vehicles. After 2016, provincial governments will also be required to meet the 30% vehicle procurement target. The government said that new sedan purchases shouldn’t cost more than 180,000 yuan, or around $29,000.
The country’s pace has thus far fallen short of its 500,000 vehicle target by the end of 2015 and 5 million vehicles by 2020, as there have been fewer than 44,000 PHEVs and EVs sold since 2011 according to the Lux Research Automotive Battery Tracker (client registration required). While the announced policies support FCVs, we expect that the vast majority of vehicles will actually be PHEVs or EVs (client registration required). However, if the purchase price of a sedan is capped at 180,000 yuan, few models of EVs will benefit. Among those left out will be pricey foreign EVs, such as the Tesla Model S and BMW i3, which do not benefit from subsidies and sell well above 180,000 yuan. Domestic EV manufacturers, such as BYD (client registration required), will directly benefit from this policy through its e6 and Qin vehicles, as will OEMs that have set up Chinese joint ventures, such as Renault-Nissan Dongfeng, which will begin selling the Chinese version of the Nissan Leaf under the brand Venucia in September.
In 2013, nearly 22 million vehicles were sold in China. We estimate that the central government vehicles comprised 3% of total vehicle sales, or 660,000, in that year. If 30% of all central government vehicles will be either PHEVs or EVs, then nearly 250,000 vehicles will be procured by the end of 2015. However, this still leaves a 200,000-vehicle deficit from the target of 500,000 new-energy vehicles by the end of 2015, and it is unlikely consumer demand will grow rapidly enough to hit the target. The 10% tax exemption will boost consumer demand, but there are still critical concerns surrounding electric vehicle charging infrastructure (client registration required). Some parts of China are making noteworthy progress, such as Beijing announcing its plan for 10,000 charging stations, but the majority of those will be at centralized locations, as opposed to residential areas that are critical to consumer adoption. Furthermore, early EV adopters have formed a grassroots campaign to build a charging network from Beijing to Guangzhou. Despite infrastructure concerns, the announced policies should significantly boost electric vehicle sales in China; however, China will still fall well short of its target of 500,000 vehicles by the end of 2015.
Tesla Motors is riding a wave of strong momentum ahead of an earnings report due for release on February 19th. As shares soar, Tesla’s market capitalization is approaching $25 billion and in particular there is positive buzz around its plans to conquer the Chinese market. Early results are positive, as Tesla has announced a backlog of a couple of hundred orders already. Beyond these early adopters, however, there remain significant obstacles in duplicating its early success in the U.S. in China.
Tesla has been aggressively exploring the Chinese market. At the end of 2013, the company’s largest sales operation opened in Beijing. According to Veronica Wu, Tesla’s Vice President of China operations, sales spaces in 10 to 12 cities are planned by the end of 2014. Additionally, Tesla is trying to translate its Supercharger plan from the U.S. to China, and to build on-route charging stations between large cities like Beijing and Shanghai.
Tesla has been very clear that its vehicles are not eligible for China’s aggressive electric vehicle (EV) subsidies, but curiously, the mere existence of China’s subsidy plan is enough to boost Tesla’s rating. Contrary to this take, research out of Lux Research’s China Innovation team indicates that the Chinese central government’s clear goal is to protect and grow Chinese companies.
Additionally, numerous statements, both public and in our network, indicate roadblocks for Tesla in China.
Following the first Tesla Model S sale in China mainland in October 2013, representatives from both BYD and the China Association of Automobile Manufacturers (CAAM) publicly stated that Tesla’s business development in China may not be successful.
BYD is a Chinese electric vehicle market leader, and CAAM is the most important Chinese government-backed association in the automotive industry. These statements reflect a common theme: Neither Chinese OEMs nor the Chinese government are receptive to imported electric vehicles and willing to let them grab a share of China’s currently small electric vehicle space.
Tesla is facing three major obstacles to success in the Chinese market. Tesla’s retail price in China starts at RMB 734,000 (~$121,000). At this price level, Tesla will obviously target China’s high-end market. However, it is common in Chinese culture that high-end consumers would choose deeply recognized brands, like Audi, Mercedes-Benz, and BMW, due to the prestige associated with those brands. Even though Tesla so far has successfully penetrated the U.S.’s high-end market because of its performance and unique concepts, it is questionable whether Tesla is able to overturn Chinese people’s brand perception and preference beyond early adopters. Secondly, China’s high-end market is concentrated in large cities, and three out of four tier one cities (Beijing, Shanghai, and Guangzhou) in the country are suffering from a license plate restriction policy, which means the new motor vehicle market is limited. Finally, infrastructure is still one of the biggest obstacles for the Chinese electric vehicle market, and Tesla’s charging station plan appears almost impossible in China. According to a Lux Research connection at State Grid, a state owned giant that leads the build out of EV infrastructure across China, acquiring land to build charging stations is challenging for the government-backed State Grid, let alone Tesla, a foreign company without any Chinese government connections.
The unbelievable momentum behind Tesla’s stock could very well continue, especially in light of recent hype over rumors that Apple may have considered acquiring the EV maker. Beyond the hype, Tesla has impressed by overcoming difficult odds and reaching its current level of adoption, but it must be careful in assuming China will welcome it with open arms. There is no doubt that the Chinese EV opportunity is big, and will eventually be the largest EV market in the world, but penetrating that market requires deep understanding of the politics underlying adoption. In a country where many of its competitors will have ties to the central government, Tesla should not underestimate the barriers in its way, nor for that matter, should investors.
Samsung SDI is going to invest $600 million in China’s Shaanxi province to build China’s largest manufacturing base of lithium-ion batteries for electric vehicles (EVs). Two Chinese joint venture (JV) partners are involved: the government of Shaanxi Province and Anqing Ring New Group. Anqing is one of China’s leading auto parts suppliers, and the company has China’s biggest market share of piston rings and cylinder sleeves. Samsung plans to start construction of the plant in April 2014, and the plant is projected to start production at the end of 2014.
The two partners are strategic for Samsung SDI. Partnering with the Chinese government will no doubt help accelerate establishment of the project, and partnering with a leading Chinese auto-part supplier enables Samsung SDI to leverage the partner’s massive OEM customer connections, making penetration into the Chinese market easier.
By hiring lower-cost local Chinese employees and possibly procuring less expensive Chinese-made battery materials, Chinese-made Samsung SDI batteries are projected to be less costly than Korean-made products. The company’s China plant is not only able to keep supplying to existing foreign-made EVs like Chrysler F500e and BMW i3, but it helps the company to enter into what Lux forecasts will be the world’s largest EV market (see the report “Seizing the Shifting Opportunity in the $41 Billion Mobile Energy Storage Market” — client registration required). Though at this point it is hard for foreign-branded batteries to find a strong position in China’s EV space, the Chinese government’s protectionism over domestic products is projected to be weakened as the EV industry matures.
Already, BAIC – China’s top state-owned EV OEM – has started to adopt Toshiba’s lithium-titanate (LTO) battery cells. Secondly, the trend has begun of international EV leaders manufacturing their EV models in China’s joint venture automotive OEMs. The Nissan Leaf has already been produced in China’s Dongfeng-Nissan plant, and dozens of Leafs have already been demonstrated in the cities of Guangzhou, Dalian, and Xiangyang. Chinese-made, foreign-branded EVs is the additional targeted market for Samsung SDI’s China plant, and most of the company’s existing customers like Chrysler and BMW already have JV plants in China.
Samsung SDI’s construction of a China plant will no doubt boost the innovation of leading Chinese battery manufacturers, in reaction to the aggressive move from a strong Korean competitor. As a result, clients with leading battery materials may be sought after by Chinese leading battery suppliers.
Osram Opto Semiconductors introduced a new light-emitting diode
(LED) product called the “Oslon Black Flat” for automotive front lighting systems; it boasts LED packaging technology that allows the headlight to function without a lens. Osram claimed that this product offers good light output of about 200 lm at 25 °C and 700 mA operation (compared to a standard headlight that outputs between 150 lm and 190 lm); if operated at 1.2 A it can achieve 270 lm. It’s projected that an efficient headlight can extend the range of an electric vehicle by nearly six miles.
Leading auto OEMs such as BMW and Audi are investing in LEDs for front lighting in their cars to achieve energy and emission savings (and LED aesthetics as an added incentive); as a result; expect to see specific product releases for the automotive lighting segment from major LED makers like Philips and GE as well. However, just as in the general illumination and back-lighting segments the automotive space could provide for a testy IP environment for LEDs. In fact, LG Electronics and Osram Opto engaged in a IP infringement battle over LED patents for automotive headlights in Korea. With heavyweights wielding massive patent portfolios, this space will be as hostile to start-ups trying to enter as any other LED market. However, this challenge also presents an opportunity for developers of balance of systems such as drivers and thermal management technologies that are in need of more efficient solutions – the unique needs of automobile applications could provide opportunities for companies that want a new play in the LED space.