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EV Disruption

Discussion in 'Electric Vehicles' started by tonybelding, Oct 8, 2015.

  1. tonybelding

    tonybelding Active Member

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    I've been thinking about whether electric cars (and I do mean BEVs) can reach a tipping point and suddenly explode in popularity. Can they be a "disruptive technology?" And just to be clear: My definition of a disruptive technology is that its sudden popularity not only supplants a previously established technology, but also puts established companies out of business because they cannot adapt quickly enough.

    If this is going to happen, electric cars have to be clearly more desirable than gasoline cars. I think this is possible. Right now the main obstacles are either price (for Tesla) or range (for most others). Bring the cost to par with gas cars while still achieving a solid 200 miles range, and then I think many people will choose the electric car -- for its greater convenience, better driving experience and lower cost of operation.

    The best comparison I can think of is the shift from film cameras to digital cameras. The first digital cameras found a niche, even though they weren't yet a viable, direct replacement for film cameras, and they sold in modest numbers. As technology improved, we came to a tipping point where the masses preferred digital. Digital cameras operate similarly to film cameras, and they perform the same tasks, but they just do it with much lower cost of operation and greater convenience.

    How it won't happen... I've read a scenario that electric cars will soon start putting gasoline stations out of business. That will make gasoline cars even less convenient to own, and things will spiral from there. I don't buy this theory, though. It's true that gas stations already don't make much profit, but that's because of the high level of competition. If a few of them go out of business, that will concentrate the remaining sales among the remaining stations. For example: In my small town we have six gas stations (all of which are basically convenience stores rather than service stations as such). If demand for gas falls, some of those stores may stop selling gasoline. Every time that happens, the customers who were still using that store will migrate to the remaining stores and help keep them afloat. We would have to get down to one or two stores before this begins to become a significant inconvenience to gas car owners.

    Very few people switched to a digital camera because they were having trouble getting film or processing anymore. To the extent that this did happen, it was long after the tidal wave of digital had already washed through.

    However, the market for film cameras imploded very quickly. Cameras are durable goods, and new cameras always have to compete with used cameras. When people started shifting to digital, they began dumping their old -- but still perfectly serviceable -- film cameras at the flea market, the resale shop, the pawn shop, the garage sale, eBay, etc. Very soon anybody who did still want a film camera had screaming bargains to choose from in used models, and not a lot of compelling reason to shell out for a new one. For companies making only film cameras, this was a nightmare.

    The same thing can happen to gasoline cars. However... The analogy isn't perfect. Cars are far more expensive items than cameras, the scale of the car industry is vastly larger, and product cycles are much longer. It takes a long time to turn over the automotive fleet. Changing the auto industry is like trying to steer the Titanic.

    So, how are car companies going to fare? Can they adapt? Will the "big three" US car makers of 2025 be Tesla, Google and Apple?

    I do think that many established car makers are going to have great difficulty making this transition, for reasons that are not outwardly obvious to most people. A few seem to be on the path... GM and Nissan are both on track with BEVs. Toyota is not, but they have the resources to pivot to BEVs when it finally becomes obvious that they need to. BMW and Kia have had some success with their quirky little electric cars, so maybe they'll use those as a springboard. We'll see.

    Still, there's a long list of car companies around the world that have got nothing. When the tipping point comes, these companies are going to find themselves without the financial and engineering resources to catch up. Their only chance will be to outsource their powertrains, just as many camera makers outsource their digital sensors from just a few producers. Whether that approach will be viable in the car business is hard to predict.
     
  2. dhrivnak

    dhrivnak Active Member

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    Tonybelding I do believe you are spot on. I have been using this analogy for a few years now and it hits close to home as I hired on with Kodak. It was so sad to see the once great company implode. It was 2002 when things tipped and it was not pleasant at Kodak. So yes in a few years we will see a real disruption.
     
  3. Bangor Bob

    Bangor Bob Member

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    GM recently included this slide in one of their global business presentations.

    bolt batteries.PNG

    Regardless of what you think of GM, their vehicles, or their commitment to electrification, at $100/kWh, they'll have the ability to put out vehicles in every segment which are price-equivalent and perform better than the ICE versions by 2022-ish. It'll be interesting to see what investments they make in engine plants over the next few years. It's not unusual for them to drop the better chunk of a billion into an engine plant to retool for a new powerplant, and watching that will show where they're going.

    Diesel is dead for passenger vehicles thanks to VW (in North America, anyway, and pressure is growing from city governments in Europe), and gasoline/petrol isn't far behind thanks to Tesla, Panasonic, LG, Nissan and GM...

    Bring it!
     
  4. Peter_M

    Peter_M Member

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    I agree 100%, Tony. It's just a question of when the conditions will be right for the runaway transition to happen. When I got my car in late 2013, I said the "big shift" was 5 years off, so 3 years away now. And I also think that the majority of today's car companies will go out of business within 20 years because they didn't get on the EV bandwagon early enough. It's the Innovator's Dilemma. It will be interesting to watch all this unfold!
     
  5. FreeOfPge

    FreeOfPge Member

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    Completely agree here. A shift that you did not mention is the used EV market, we are beginning to see previously owned EVs around town more and more. The speed of disruption will increase as our first generation vehicles make their way through society.
     
  6. eloder

    eloder Member

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    My guess is about 2021, when significant Model 3 numbers start pouring off of leases.

    My own city has seen a huge boom in certain EVs lately (mostly chevy volts) due to this.

    I feel that first-adopter M3 owners will make a significantly cultural impact in urban areas. They will be everywhere. Friends and family will all know someone driving a Model 3. The destination program will be all over the place and superchargers will be ramping up, too. Coworkers will be giving people rides in EVs, Uber drivers using EVs will explode in popularity due to operating costs and ROI. People will start to notice and I think this has the potential to disrupt in the same manner smartphones did even given the increased cycle time and cost of cars.

    The difference with cars is that they have monthly operating costs. A $2k used car isn't a good investment because it costs so much in upkeep. People will run into situations, especially in the used market world, where they can immediately begin seeing savings hundreds a month on operating costs--people will pay attention. (Smartphones, on the other hand, drastically increased operating costs of a phone but they still have taken over. EVs are both superior and lower cost).
     
  7. mknox

    mknox Well-Known Member

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    I believe it comes down to selection. When I talk to people about EVs, quite often I'll hear that they just don't like any of the current offerings. There are thousands of new and used choices when it comes to ICE cars, but you can count the selection of EVs on one hand. If none of those tickle your fancy, you likely won't buy an EV. We need significant choice to make this happen.
     
  8. Kandiru

    Kandiru Member

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    #8 Kandiru, Oct 9, 2015
    Last edited: Oct 9, 2015
    Two of my neighbors already have Model S's, I can imagine that once about five more of us get on board the rusty
    neighborhood transformer gracing a pole behind my house will go out in a beautiful pyrotechnic display:)

    Back to figs and fur trapping for some nations.

    My biggest fear is that Big Oil and the ICErs will end up using their pull with the industrial-military complex and the D.C. ho's that parasitise off their kickbacks to instigate some major conflagration once they sense their demise is near.
     
  9. Uncle Paul

    Uncle Paul Member

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    #9 Uncle Paul, Oct 9, 2015
    Last edited: Oct 9, 2015
    Once the economics of driving an electric car get below the costs of an ICE, that will be the tipping point.

    Who in their right mind would pay more to drive a gas vehicle?

    When the consumption of gas dropps off, most gas stations will feel compelled to add a fast charging station to their facilities.

    Doom will come to the ICE manufacturers. Slowly....then all at once.

    The military is already looking to convert their weapons and vehicles to electric. Getting fuel to the battlefield is one of their greatest restrictions to waging war.

    Having the enemy cut your fuel supply lines grinds your capability to a halt.

    Most of the Navy ships are converting their guns to electric rail guns to avoid carrying all those high explosive charges to propel the shells. You get hit on an electric gun, and little happens. Get hit in the magazine bunker and the whole ship and all aboard are done for.
     
  10. mknox

    mknox Well-Known Member

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    If you base the analysis on comparable models, I think we are already there. My TCO on the Model S is a bit less than the Cadillac CTS it replaced, and the Model S may better be compared to an even more expensive car like a BMW M5. You can't compare a Model S against a Honda Civic any more than you would cross shop the Civic with an M5. Of course a lot of this depends on how much you drive. In my case, I do about 20,000 miles/year.
     
  11. RobStark

    RobStark Active Member

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    GM is not manufacturing cells at $145/kWh but buying them from LG Chem.

    Any OEM willing to sign a contract with the same terms as GM can get that price with the same performance specs.

    GM says they will buy enough cells to roughly produce 30k Volts and 30k Bolt EVs per year versus the ~10M ICEv GM produces every year.

    If GM is not prepared to sign contracts to dramatically increase cell purchases BEFORE the DISRUPTION happens they will be caught just as flat footed as Toyota. At this point everyone will be trying to buy cells from LG Chem , Samsung SDI, the Chinese etc but supply will be temporarily fixed until new battery plants are built.


    My guess is San Francisco will be the first city to BAN GASOLINE STATIONS but others will follow. That will create range anxiety for ICEv owners before the market actually compounds the problem by squeezing gasoline station profits. Causing the least profitable ones to close. Then multiplying the effect.
     
  12. Johan

    Johan Took a TSLA bear test. Came back negative.

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    This is actually very perceptive of you. We will see something similar in the car industry, only a bit more prolonged, due to the high capital cost of cars and long life span. The slowness of the process will be tricky for the incuments; the Boiling frog - Wikipedia, the free encyclopedia metaphor comes in to play and many of the large ICE manufacturers may fall for this very reason: when they realize what's happening it's too late to change course.
     
  13. tftf

    tftf Member

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    #13 tftf, Oct 9, 2015
    Last edited: Oct 9, 2015
    I happen to have written a blog post about this very topic recently. Here we go:

    Let's compare a well-known disrupter in the tech sector (often used as a role model for others because of its success in the past decade), Apple, to Tesla:

    You Can't Disrupt The Car Market (Unless 'Decades' Count As A Timescale) - Tales From The Future


    Both Apple (iPhone 6s family) and Tesla (Model X SUV) each started "shipping" important new products within the past days.

    I put shipping in parenthesis on purpose since the difference between the two companies is stark:

    While Apple shipped millions of iPhones on day one, Tesla so far delivered only 6 cars to insiders and friends of the CEO:

    How many again? S-I-X cars. (And that's for a car model that was once supposed to ship in late 2013. The initial unveiling of the Model X already took place in February of 2012!).


    Imagine Apple only being able to produce 60k or 600k new iPhone 6s units by launch day instead of 6 or 16 million. The stock would tank hard the next day - and rightly so.

    Ramping up is very cap-ex intensive in the car industry. Market share shifts beyond single digits take DECADES, not years or months, in the car sector.

    At the same time, battery technology will evolve a lot - resulting in likely write-downs of current equipment (Exhibit 1: Tesla's Gigafactory battery plant).

    That's the main issue for Tesla as large incumbent competitors prepare many PHEV and pure EV models for 2018-2020.


    The market will be very crowded soon while Tesla has issues ramping up against the giants and bets billions on current battery tech.


    Summary
    :
    One simply can't disrupt the car sector within a few months or even years (as is common in tech sectors, e.g. in smartphones, to use a popular recent category example). The car sector is fundamentally different on a timeline scale and in terms of required cap-ex.

    It will take TSLA another decade to just reach a market share of about 1% in the passenger car sector - and that's assuming an absolute best-case scenario for TSLA and EVs in general.
     
  14. RobStark

    RobStark Active Member

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    Tesla financial modeling assumes GF equipment will be viable for 10 years.

    Any new slurry chemistry can be manufactured at the GF.

    Solid State batteries would require new machinery.

    Even if superior SS chemistry was lab successful yesterday it will take 10 years of testing before being put in mass market cars.

    Elon's goal for Tesla is not to take 20% global market share of passenger car autos thereby forcing legacy OEMs to change. It is to gobble up the most profitable end of the market: premium sedans, premium utility vehicles and full size trucks. Grab 5% of that market you grab the attention not only of the legacy OEMs but also potential new entrants like Apple,Sony,LeTV etc.
     
  15. tonybelding

    tonybelding Active Member

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    This type of rollout is clearly not going to work for the Model 3. I hope there will be a lesson learned.
     
  16. eloder

    eloder Member

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    We're already past cost disruption. Unless people are driving smart cars, a Leaf lease even in no-incentive states like the Midwest is about as cheap as a Prius C lease.

    Smart electric drives can lease for $139 a month, making them even more disruptive compared to ICE. i-MIEVS pre-tax-incentive are pretty cheap as well.

    The only issue is disruptive at a range people will be comfortable driving with, and with a form factor to suit one's needs.
     
  17. FreeOfPge

    FreeOfPge Member

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    While it has been decades in-the-making, I have to respectfully disagree with the idea that it will take multiple decades from today's date.

    Though battery costs and availability are examples often sited as the reason for slow adoption of EVs overall, they are WAY UNDERESTIMATED. Once the Gigafactory is fully operational and (if) production costs are reduced, and there is a mass market EV available (Model 3) at a reasonable cost -with the very needed battery supply- we could see a sudden change in market demand.

    At that point, battery availability is going to be a problem for a lot of traditional auto manufacturers.
     
  18. RobStark

    RobStark Active Member

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    When people talk about cost they don't mean retail prices for sub performing cars.

    Retail prices are not necessarily tied to production cost. An OEM must sell a fleet of vehicles that meet CAFE and ZEV PZEV obligations. And they price each piece of the fleet to maximize profits while staying in compliance. Many smaller fuel efficient cars become loss leaders in order to sell more profitable guzzlers.

    Disruption truly comes when the cost to manufacture a midsize BEV sedan with 300 miles of range and 0-60 of 8.5 seconds or better is the same cost to manufacture as a Camcord Malfusion 4 cylinder.
     
  19. eloder

    eloder Member

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    Arguably, the Model S can be considered sub-performing based on an individual's needs. It just meets a greater number of individuals' needs.

    An econo-EV is my only car and it works just fine. Unless I wanted to stick to my smart car, it'd be nearly impossible to find a more economical vehicle to lease all things considered. It meets all my needs, I tend to fly if I have to travel further than this little island that is my city in the Midwest.
     
  20. tftf

    tftf Member

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    1-2 decades for meaningful marketshare gains (talking about pure BEVs, not mild hybrids or PHEVs) is my estimate given the lack of infrastructure and battery supply:

    As we all know, the first Gigafactory will be fully operational (max output) in about 4 years only and able to supply about 500k EV batteries per year. That's next to nothing compared to the entire car market output.

    (There's also the open question if Tesla/Panasonic will really build out this factory as planned until 2020, the current construction looks much smaller).

    That's why there can't be disruption in the traditional sense even if other battery suppliers construct a few large battery plants as well until 2020. Each new plant takes about 2-3 years to build and about 1 year to fully ramp up. These plants can't be added overnight.

    To "disrupt" the car market in the traditional sense, Tesla would need to build 10-20 Gigafactories in parallel right now.

    That's of course a purely academic discussion since Tesla lacks the capital and even one single GF has enormous risks attached because battery technology will evolve a lot over the next 1-2 decades.
     

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