As the automotive industry evolves, two major innovations have emerged almost in parallel – increased electrification, peaking in fully electric vehicles (EVs), and increased driver assist features, peaking in the (not yet achieved) idea of self-driving cars (client registration required for both). A common question we receive is whether these two must be combined: Must self-driving cars be electric? The short answer is no – or, more accurately, not yet. It will be possible to make a competent self-driving car using older internal combustion engine (ICE) technology as the power source that drives the wheels. However, there are six good reasons why it is most likely that self-driving cars will be overwhelmingly electric – that is, six reasons why the two technologies will “merge”: Continue reading
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
GM’s recent troubles continue, as it has recently recalled an additional 8.45 million vehicles due to faulty ignition switches, which so far have been linked to at least 13 deaths. The full tally of recalled vehicles stands at approximately 29 million in North America just this year. This equates to more vehicles recalled than new vehicles GM has sold over the past three years. Before this recent announcement, GM had already reported a loss of $1.3 billion due to recalls, which will grow based on this new batch of recalls along with a high likelihood of litigation from victims of the defective parts.
While recalls are often built in to planning as the cost of doing business, it is an entirely different matter when the consequence is the death of your customers. Some of the fallout here is obvious: a CEO under a pressure, a brand at risk, and rightfully angry victims likely to litigate. This is the lens of media coverage surrounding the recalls today, but this scenario can and should inform the issues surrounding emerging automotive technologies, and particularly those that are critical to operation of the car as in the push towards autonomous vehicles. While the culprit in GM’s case was a simple ignition switch, increased automation in vehicles will drive growth in numerous components, from sensors to software, whose failure could have devastating results for a driver.
It is clear that the entire value chain needs to take a step back from the hype around autonomous vehicles. Automation of vehicles will surely increase – but truly autonomous, driverless vehicles are a long way off, and may not ever be possible in all conditions (see the report “Set Autopilot for Profits: Capitalizing on the $87 Billion Self-Driving Car Opportunity” — client registration required.) Still, even incremental advances in driver assist can have a massive safety impact (client registration required), and many of the features offered today have proven to be less effective than advertised (client registration required). As the industry moves towards even more automation, including removing the driver (client registration required) from the equation at least part of the time, the liability on the automakers and components makers will become a huge – and potentially costly – issue. As a result, clients at all parts of the value chain looking to profit from the growth of automation in cars should continue to pursue this massive opportunity but beware that adoption of these technologies will be sensitive to safety issues and recalls. The uncertainty over the state of technology today and going forward makes the pessimistic scenario in Lux’s projections a very real possibility if the technology rolls out before it is truly ready.
Envia Systems, a high profile lithium-ion battery start-up, has become embroiled in a bitter and revealing set of lawsuits. The Superior Court of California published court documents detailing a wide range of accusations, which GigaOm summarized. Additional primary and secondary research by Lux Research – including interviews with Envia’s leadership and analysis of third party test data – paints a more nuanced picture of this start-up’s technology, IP strength, partnerships, and challenges:
Lawsuit claim: Envia is using stolen cathode IP from another start-up called NanoeXa Corporation.
What we think:
Envia’s technology is based on a high-voltage cathode material licensed from Argonne National Laboratory (ANL), which NanoeXa also briefly had rights to. ANL then terminated NanoeXa’s license after a legal fight that NanoeXa started and lost. Both NanoeXa and Envia had tried to improve upon ANL’s technology, but only Envia successfully patented this work. The courts will have to determine whether any stolen IP played into these developments, but it’s certainly not a given that NanoeXa’s claims are true.
Lawsuit claim: Envia confidentially bought anode technology from Shin-Etsu and passed it off as its own IP.
What we think:
Envia acknowledges it bought some raw material from Shin-Etsu that it made into its own silicon-based anode formulation; there is some IP in the raw material, and some in the anode formulation. Whether Envia misrepresented the source of the raw material to any of its partners is still a disputed allegation, but it’s not as relevant to its commercial prospects. Its work on silicon anodes is more of a side project, which the company admitted is not a differentiator – Envia will rise or fall based on its cathode technology.
Lawsuit claim: Envia could not replicate its key 400 Wh/kg technology and turn it into a product.
What we think:
Envia made a strategic mistake in aggressively marketing a technology development that is far from commercialization. The 400 Wh/kg cell was really only ever a lab demonstration – though Envia would hardly be the first start-up to overhype an early-stage technology. Its actual production-suitable cells only reach 215 Wh/kg, but even this lower figure would represent an impressive 43% improvement over current EV cells – though it’s still far from clear if Envia will be able to produce such cells economically.
Lawsuit claim: Envia lost its GM deal, under which the OEM would have licensed Envia’s technology and paid royalties.
What we think:
Envia claims that despite the lawsuits it still has a working relationship with GM, involving commercial terms. However, LG Chem, Toda Kogyo, BASF, and GM itself have also licensed the same cathode technology from ANL, so in any case Envia’s position as a GM partner is hardly secure.
Lawsuit claim: Samsung, LG and Asahi Kasei declined to buy Envia because they found problems with its technology.
What we think:
Though Envia is six years old and has spent about $30 million, there is still technology and process development work to do before its batteries reach mass production. It’s not necessarily surprising that leading players found a reason to pass on an acquisition for now, but Envia will need to find Li-ion giants as partners or licensees, if not acquirers, as it’s unlikely to make it to market on its own.
In summary, the allegations in the NanoeXa lawsuit, particularly around IP, will be damaging to Envia if true, though it would be a mistake to write off the firm this early. Potentially valuable technology still sits within Envia’s walls, so interested parties should take press sensationalism with a grain of salt, and engage the principal players directly to thoroughly evaluate the high-voltage cathode material’s cost, performance, and IP lineage. However, the lawsuits clearly add to Envia’s risks, and even if most or all of the lawsuits’ allegations are false, it faces a challenging road ahead, so Lux Research is downgrading its take on the firm.
The U.S. government has announced much stricter fuel efficiency standards for the future, requiring a 54.5 mpg average for cars and light-duty trucks by 2025. This would nearly double the fuel efficiency that vehicles must currently achieve by law. The standards will scale according to vehicle footprint: 61.1 mpg will be required of an average compact car by 2025, while large pickup trucks will be allowed 33.0 mpg. The announcement also includes special provisions for large hybrids, and for vehicles powered by electricity, natural gas, and fuel cells. Among these is the ability of alternative-fuel car-makers to sell credits earned by exceeding the standards. Major carmakers were involved in discussions with the government prior to its decision, and mostly support the 54.5 mpg target. However, in order to boost fuel efficiency, they will incur significant research and production costs, which will be passed on to car buyers.
There are multiple reasons why battery electric vehicles (BEVs) will not benefit significantly from the mandate. First, 54.5 mpg will be achievable even with the smaller batteries of micro-hybrids, mild hybrids, full hybrids (HEVs), and plug-in hybrids (PHEVs),
especially when coupled with the use of lightweighting technologies (client registration required). The shift to BEVs is driven more by strict policies like California’s zero-emission vehicle standard, however strict regulations such as that remain few and far between. Secondly, the ability of BEV companies like Tesla to sell credits to others is not a business model: credits can boost revenues modestly, but will not save a company or make a vehicle line profitable. Furthermore, the final version of the standard allows competing natural gas vehicles to qualify for the credit, as well. Finally, as the incumbent internal combustion engine powered vehicle approaches 54.5 mpg, it will erode two key selling points of the electric car – lower fueling costs and lower total cost of ownership.
Therefore, clients looking for winners from the new standards should track three other spaces. The first are incremental improvements to today’s vehicles, including turbochargers, efficient transmissions, and lightweight materials. Next, in the hybrid space,
manufacturers of small and medium-size lithium-ion packs will see increased volumes due to growing adoption of HEVs, PHEVs, and potentially micro- and mild hybrids (see the report “Every Last Drop: Micro- And Mild Hybrids Drive a Huge Market for Fuel-Efficient Vehicles” — client registration required). Finally, leaders in natural gas and fuel cells stand to benefit: in the U.S., Honda is the only carmaker offering a commercially-available compressed natural gas passenger vehicle. The company is also a frontrunner in fuel cell development, along with Toyota, GM, Daimler, and Hyundai.