In May 2017, Volkswagen (VW) brand CEO Herbert Diess claimed that VW will surpass Tesla to be the world leader in electric mobility by 2025 – an aggressive target, but coming from a company with the resources to achieve it. At the International Motor Show in Frankfurt, Germany, VW CEO Matthias Müller announced Volkswagen’s Roadmap E, committing those resources to a strategy that aims to transform one of the world’s largest OEMs. This roadmap is made up of several key initiatives: Continue reading
The idea of a solar-powered car has drawn another attempt from an optimistic manufacturer. Toyota has announced an optional 180 W Panasonic HIT (heterojunction with intrinsic thin layer) module for the roof of its plug-in hybrid electric vehicle (PHEV), the 2017 Prius Prime. This comes as Toyota’s second attempt; the 2010 Prius infamously could not connect its rooftop panels to the drive battery without strangely broadcasting radio signals, so the 50W panel only powered a fan to cool the interior. With more than triple the original wattage and new optimism from Toyota, the new module is intended to charge the drive battery and power unspecified car accessories. Toyota estimates that the module will add about 3.7 miles daily to the PHEV’s current range (25 miles electric, 615 miles gasoline). Continue reading
Last month, Tesla Motors (client registration required), confirmed earlier reports that it will purchase LG Chem cells for a battery pack upgrade to its Roadster. The Roadster was Tesla’s first model offering, with around 2,500 vehicles sold between 2008 and 2011. However, only some Roadsters (the so-called versions 2.0 and 2.5) are eligible for the upgrade, limiting the total available upgrades to about 2,000 vehicles. In addition to a larger capacity battery pack at around 70 kWh, the upgrade also includes an improved aerodynamic package and low rolling resistance tires which will reduce drag and increase efficiency. All of these upgrades, as well as labor and transport to a service center, will cost the customer $29,000.
One key factor about the supply agreement is the cell format that Tesla will be using for the upgraded Roadster. Tesla has famously lauded cylindrical cells, and both its CEO and CTO confirmed that future cylindrical cells may increase about 10% in height and width from the existing 18650 format. On the other hand, LG Chem has exclusively supplied large format pouch cells like those found in the Chevrolet Volt for electric vehicles, although the company offers cylindrical and prismatic cells, as well. While the format remains unconfirmed, in the likely case Tesla will use LG Chem’s cylindrical 18650 cells, but Tesla has recently shaken up conventional wisdom about its battery technology switching to NMC cathodes for most of its stationary products (client registration required) and making use of silicon anodes in its premium vehicles (client registration required).
Overall, this is a relatively small supply agreement for both Tesla and LG Chem. Even assuming that all 2,000 eligible Roadster’s receive an upgrade, the battery upgrades would represent just a $60 million total opportunity for LG Chem. Tesla in comparison is aiming to sell 50,000 Model S and Model X vehicles per year representing around 3.9 GWh and $1 billion in Li-ion battery packs. To date, Panasonic has been the sole supplier of Tesla’s Li-ion cells, and has committed to investing around 30% to 40% of the Gigafactory construction costs in a pay-to-play model (client registration required).
Panasonic will likely continue to be the leading supplier for Tesla’s vehicles with cells produced from the Gigafactory, but this deal represents a low risk opportunity for Tesla to test cells from other suppliers looking beyond the Gigafactory. It is worth noting that other OEMs too are going towards multiple suppliers for their cells, like Audi with its upcoming SUV (client registration required). Although Tesla and Panasonic are committed to the U.S.-based Gigafactory, Tesla believes multiple Gigafactories will be needed globally, and could ultimately choose to go with another cell supplier for those factories. However, this is a much longer term vision as Tesla will have excess capacity at the Gigafactory in Nevada for at least the next five years.Meanwhile for LG Chem, although the dollar amount of the deal is relatively small, the company has been making inroads with major OEMs across the board, giving it a realistic shot at taking the top spot in electric vehicle market share (client registration required). Also important to watch in the future will be if more popular Tesla cars – like potentially more than a hundred thousand Model S sedans – will eventually receive their own battery pack upgrades, and who would supply that much larger opportunity.
Researchers from the Hyundai Motor Company recently published a study about lithium-sulfur (Li-S) batteries, a promising next-generation energy storage technology. They focused on the effect that electrolyte choice has on Li-S battery performance, by replacing conventional ether-based mixtures with one that was sulfone-based. The Hyundai researchers claimed that this sulfone-based electrolyte improved Li-S battery capacity by more than 50%, reaching 715 mAh/g, and improved reversible capacity retention by more than 60%. This line of research is important, because performance degradation over extended cycling is one of the key problems that Li-S developers must overcome (see the report “Beyond Lithium-Ion: A Roadmap for Next-Generation Batteries” — client registration required).
Aside from the technical developments, which remain early stage (coin cells in this research from Hyundai), the work is important for three other reasons. Firstly, because Li-S batteries are so far from market, this work signals a long-term interest from Hyundai and Kia in plug-in vehicles and hybrids, areas where thus far they have not made much of an impact (see figure below). Secondly, it puts more automotive clout behind Li-S technology, a welcome change in an emerging landscape that has been start-up dominated to date, by the likes of Oxis Energy (client registration required) and NOHMs Technology (client registration required). Indeed, Hyundai has been working on Li-S for years, but it is not the only automaker active here: General Motors has been researching the technology, as well. Third, it adds another OEM to the list of players looking to go beyond lithium-ion batteries, joining the likes of Toyota (working on magnesium-ion batteries and solid-state designs) and Volkswagen (which is experimenting with lithium-air batteries).
The big question associated with this Li-S study is whether Hyundai Motors will put its money where its researchers’ mouths are: Bringing a fundamentally new battery chemistry to market will likely require not only billions of dollars in investment along the value chain, but also the singular vision of an automaker willing to commit to making a car around Li-S technology. For now, Hyundai is focusing more on fuel cell (client registration required) vehicle development and deployment. Nonetheless, clients with any interest or activity in Li-S batteries should consider Hyundai as a potential partner in this next-generation energy storage chemistry.
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.
Panasonic’s lithium-ion (Li-ion) battery division is resurgent: In Q2 2013, it
made about $40 million in profits, a turnaround from one year before, when it lost $20 million in Q2 2012. As a result, Panasonic will invest $200 million over the next year to expand its Li-ion production lines in Osaka and Kasai, making batteries destined for automotive applications.
The company’s improved Li-ion fortunes coincide with its customer Tesla Motors beginning to ship the Model S, an electric vehicle (EV) that packs a massive 60 kWh to 85 kWh worth of batteries. About 16,000 Model S units have been sold thus far, accounting for more than $400 million in revenues for Panasonic. Moreover, Panasonic has become the leading battery supplier for plug-ins and hybrids sold in the U.S. Its market share by capacity sold has increased to 54% during the last year, overtaking LG Chem and Nissan’s AESC in the process. This breakthrough has been four years in the making and involved Panasonic investing $30 million in Tesla in 2010.
Remarkably, the upstart Tesla now drives more of Panasonic’s battery revenues in the U.S. than the world’s largest automakers, like Toyota and Volkswagen. A mere 20,000 Tesla Model S units use three times more battery capacity than the U.S. sales of Toyota’s popular Prius hybrid family (which moved about 230,000 units during the past year). Tesla’s battery demand now outweighs all other OEMs in the U.S., taking 49% of the market share for battery capacity shipped in the U.S. plug-in and hybrid market in Q2 2013. Others are taking notice of Tesla’s increased clout: Samsung SDI, BYD, and LG Chem have reportedly been in talks with the automaker, seeking to supplement or displace
Panasonic. However, they may have to wait for Tesla’s next model, because Tesla could find it difficult to mix cells from different suppliers, due to battery management system considerations, and because the Panasonic-Tesla contract stipulates supplying 80,000 vehicles by 2015. Interested parties should now expect increased development and more pricing pressure for the Panasonic-Tesla battery solution, including more research on 18650 automotive cells and a strengthening nickel cobalt aluminum (NCA) cathode value chain.
Earlier this week, technology billionaire Elon Musk revealed his ideas for “hyperloop,” a speculative new mode of high-speed transportation. The system would propel car-sized compartments through low-pressure tubes (like pneumatic tubes once used to move mail through office buildings) at 1,000 km/h. Musk says that connecting San Francisco and Los Angeles (through a proposed $20-fare, 35-minute ride) with the system would cost about $7 billion, or a tenth of the projected cost of California’s beleaguered high-speed rail system meant to connect those cities – and could be built in less than a decade.
Naturally, such a bold idea immediately attracted criticism, such as a USA Today article listing mundane reasons it won’t work like “you’d have to slow down for turns” and “the towers would have to be made safe.” Of course, others fell over themselves praising the plan, reasoning that Musk’s vision is so awesome that even if it doesn’t quite turn out as planned, it would still be great, anyway. While it’s easy to get overly excited or overly skeptical about the concept, a dose of datapoints is useful:
- If Musk hadn’t proposed it, it wouldn’t be worth attention. Musk is a singularly successful entrepreneur, having quickly turned equally-futuristic ideas into successful businesses several times: electronic money (PayPal moves $150 billion a year), electric vehicles (Tesla is profitable (client registration required) and the cars, though expensive, are critically acclaimed), solar energy (SolarCity gets Lux’s much-coveted “Strong Positive” — client registration required), spaceflight (SpaceX, which developed a national-grade space program in seven years and makes a profit). Musk’s solid record lends credibility to an otherwise fanciful idea (client registration required).
- The system requires no exotic new materials, properties of matter, or unproven technologies. Musk’s 57-page detailed explanation of the idea explains how the system might work using relatively off-the-shelf technologies. It acknowledges that there are many engineering problems to be solved, and offers the concept as an open-source blueprint – a starting point for something actually workable. As such, the many solid criticisms of the plan actually move it forward.
- Musk’s announcement should be seen as political commentary wrapped in an engineering design. The white paper opens not with a visionary problem statement, but by stating, “When the California ‘high speed’ rail was approved, I was quite disappointed, as I know many others were too. How could it be that the home of Silicon Valley and (NASA’s Jet Propulsion Laboratory) – doing incredible things like indexing all the world’s knowledge and putting rovers on Mars – would build a bullet train that is both one of the most expensive per mile and one of the slowest in the world?” Like many California taxpayers, Musk is frustrated by the cost overruns, delays, and mediocre performance of the state’s high-speed rail program, and the political problem is arguably the one Musk aims to solve.
Of course, a tech entrepreneur’s political commentary isn’t newsworthy either, and there has been rampant speculation as to whether Musk – or anyone – could successfully build the contraption. Pneumatic transportation is not novel, and similar – if much slower – versions of pneumatically-propelled people pushers have been envisioned, and even deployed, long ago. Paris and New York had air-powered public transit in the 1870s. The vacuum-tube variation Musk is currently proposing has recently been explored in China and in Switzerland. So how does the concept stand up to technical scrutiny?
- Hyperloop’s cost-per-kilometer would be as revolutionary as its speed. California high-speed rail’s high cost per kilometer is as much a consequence of political and environmental issues as the technology, and those concerns would likely dog Hyperloop, too. Musk proposes an elevated, high-technology solution that would indeed address issues like land use, but such systems are if anything even more expensive: the Shanghai Pudong monorail cost $1.3 billion to build and is 30 km long ($40 million/km), while the Airtrain monorail in NYC cost $1.2 billion for just 12 km of track ($100 million/km). One way to defray the cost might be co-locating the route with other state-spanning infrastructure. Using the same right-of-way for a natural gas pipeline or energy transmission lines with PG&E, fiber-optic cable (which are routinely co-located inside city sewers) or water could be part of the calculus (client registration required).
- The passenger pod’s cousin, Tesla, could supply on-board power technology. On-board batteries are not a technological hurdle, because the initial acceleration (and subsequent boosts) needs would be met by external, stationary linear electric motors and their energy sources (client registration required). The on-board batteries would then be used primarily for powering a large electric compressor fan at the front of the Hyperloop. The resulting battery would likely be on the order of 200 kWh – about three Tesla Model S’s worth of energy storage capacity, which can be engineered using today’s battery technology. Moreover, these batteries would contribute only a sliver – less than 0.1% – to the overall cost of the Hyperloop, being dwarfed by infrastructure like pylon construction and land permits.
- Even in sunny California, the solar-powered system would need backup storage. While Musk’s plan assumes the energy requirements of the system could be met by solar energy – perhaps he is hoping that SolarCity will get the installation contract – solar panels would need grid storage to operate at the expected utilization rate. So while solar power will help, the larger energy storage opportunity would be in the stationary batteries required to operate the Hyperloop’s linear electric motors at night or in poor weather.
- The open-source model is an open invitation to rail system manufacturers like Bombardier, Siemens, and ABB. Siemens test-drove crowdsourcing by opening up its engineering software to the Local Motors crowd, with the now-available Rally Fighter vehicle a testimony to its success. As with other “big innovations,” the spinoffs of R&D on Hyperloop would benefit adjacent technologies, and advance the process of collaborative design. Manufacturers of other high-performance transport vehicles, such as automotive, aircraft, and spacecraft – like Musk’s SpaceX or the NewSpace community (client registration required) – should join the Hyperloop crowd.
Toyota has triggered electric vehicle alarmism by announcing it will lower sales targets of its iQ EV hatchback to just 100 units of this all-electric vehicle (EV). The news came accompanied by some damning quotes, with Toyota head of vehicle development Takeshi Uchiyamada opining that the “capabilities of electric vehicles do not meet society’s needs.” Many have been quick to misinterpret this as a new development – an unexpected vote of no confidence in EVs.
However, the reality is that Toyota has never pursued all-electric vehicles in earnest. While competitors were developing cars like the Nissan Leaf EV and Chevrolet Volt heavy plug-in hybrid (PHEV), Toyota instead opted to focus on more incremental hybrid electric vehicles (HEVs) and development of a light PHEV. It worked – the company hit a 2-million-unit home run with its Prius line of hybrids that now includes a light PHEV. In this context, Toyota’s hardly backing off its commitment to electrification generally – indeed, by 2015 it will offer 21 hybrids, tripling its current count.
Lux Research predicted this EV disappointment three years ago (see the report “Unplugging the Hype Around Electric Vehicles” — client registration required) and reinforced that take last year (see “Small Batteries, Big Sales: The Unlikely Winners in the Electric Vehicle Market” — client registration required).” The reality is that HEVs and light PHEVs are simply far more economical now, given high battery costs, and will remain so for years to come. As a result, in 2020 sales of HEVs and light PHEVs with be 16 times greater than those of heavy PHEVs and EVs.
The announcement has several key implications. First, it reinforces the divide: Toyota’s hybrids and light PHEVs on one side, against Nissan’s EV (and Chevrolet’s heavy PHEV) on the other. Nissan has bet billions, and could be dealt a huge loss. Secondly, it means the world’s largest carmaker’s clearly defined strategy is an implicit rebuke to the investment by the U.S. and other governments in EVs and subsidies. The political fallout could be severe, especially following flops like Solyndra. Third, it paints the agreement with Tesla (jointly developing the RAV4 EV) as a hedge by Toyota rather than core to its strategy.
However, there are opportunities abound in the EV market, and Toyota is aware of this. Contrary to claims in the press of “misreading demand and battery technology“, this EV downsizing fits into a consistent long-term plan for Toyota: the Prius as a high-volume hybrid, the iQ and RAV4 EVs as “compliance vehicles”, and fuel cell vehicles a long-term goal. Other carmakers should follow suit: There is a solid opportunity for hybrids and light PHEVs and an excellent one for 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).
Recently, the auto industry has been abuzz over the partnership formed between Toyota and Tesla Motors to develop a passenger all-electric vehicle (EV) for less than $30,000. Additionally, Toyota has committed to purchasing $50 million worth of common stock immediately following the closure of Tesla’s IPO, on the condition that Tesla completes the IPO by December 31, 2010. The unnamed vehicle will consist of Tesla’s powertrain technology, with the rest of the car comprising traditional Toyota hardware and design. This move is a change in course for Toyota, since the automaker has stated in the past that it is unsure of the market potential for EVs, citing that the cost of the battery packs make the vehicles economically unfavorable. It’s possible Toyota feels its title as the greenest car company is being usurped by Nissan Motor with the early sales and hype of its EV, the Leaf. With the Mitsubishi Motors i-MiEV planned for pricing above $30,000, it is likely that the early EV market in the United States, such as it is (see the report “Unplugging the Hype around Electric Vehicles” – client registration required) will be dominated by Nissan and Toyota, as they will have the cheapest EVs on the market for the foreseeable future.
This transaction with Tesla provides a fast, low-cost, low-risk option for Toyota to enter the EV market. For the small price tag of $50 million, Toyota can lean on Tesla’s experience and avoid much of the R&D expense of developing an EV on its own. This is a bargain for Toyota, considering that General Motors advertised that it spent upwards of $1 billion developing the Volt. In exchange, Tesla is receiving validation from the Toyota name, along with the manufacturing and marketing support that Toyota is likely to provide. Perhaps most valuable to Tesla, the jointly developed vehicle will most likely be sold through Toyota dealerships, allowing it significantly greater penetration into the market. Meanwhile, Panasonic, which provides batteries both for Tesla and for Toyota’s Prius (see the October 21, 2009 LRPJ – client registration required), will strengthen its position in the vehicle battery market. The announcement is a clear win for all three parties involved. However, this news by no means implies that the Toyota EV will sell, since like all EVs it still faces many economic and behavioral hurdles to mass adoption (see the February 3, 2010 LRPJ – client registration required).