What I would do if I was BMW/Audi/Mercedes on EVs

[gubes]

One word: Supercharger network alliance. A big part of the attraction of owning a Tesla relative to other EVs is the ability to recharge at high speed in a relatively extensive network for free.

Tesla didn't wait for governments to roll out high speed chargers and went ahead and did it themselves. On one of the investor calls, I discovered that the average capital cost is US$1,500 per supercharger (not sure how many bays). The capital cost is not prohibitive.

The auto companies could/should start a form of alliance - a bit like an airline alliance. So for instance, if BMW/Merc/VW got together and said, lets start up a fund that builds supercharging stations in accordance with a standardized charging standard/speed. Each pure EV that is sold by any one of those companies donates a notional amount to the fund. That could see their network eclipse Tesla's pretty quickly once they start producing EVs in scale. So the owners of EVs produced by these companies can recharge at these networks either for free or for a heavily discounted rate to encourage ownership. The whole thing would feed off itself. The more companies join the alliance, the more superchargers get built, which encourages more people to purchase their EVs and so on. Each company would think of it as some sort of marketing expense in order to sell more EVs.

 

[Cebe]

That's what they should do. What they're going to do, is whine and complain until the government does it for them.

 

[CHG-ON]

I believe that BMW and Nissan are trying to do this. The problem is that their cars have no realistically usable range and I believe that this partnership has stumbled from the beginning. My hope is that Tesla keeps Superchargers exclusive to us for as long as possible. But I expect that they will need to enter into an alliance at some point. Lord help us with the crowds that will ensue!

Seriously though, if we can move to electric "gas" stations that can charge us in 15-30 min in order for us to move on, we will have a successful model.

 

[AppleFan]

Elon Musk has said before that he is open to allowing other manufacturers use Tesla's supercharger network as long as the other manufacturers are willing to share in the capital costs.

Elon won't make things "exclusive". Or else why would he open source his patents??

 

[ediot]

Whilst the sharing of "destination chargers" or "superchargers" would initially seem advantageous to the big car manufacturers e.g. audi/toyota/mercedes/bmw etc, there are a number of reasons why i, to much dismay, don't see it happening. at least till 2018 or so:

1. This is the key point: the competitive advantage of current big car manufacturers e.g. toyota/audi/BMW/mercedes are ALL in the drivetrain. Their absolutely most valuable tech knowledge and production abilities are focused on the engine and the tranmission box. THAT'S IT. Not the suspensions, not the safety features, not the interior. JUST THE ENGINE AND THE TRANSMISSION!! most other components have much less tech requirement to produce, and are often sourced from 3rd parties whilst the engine and transmission remain absolutely crucial to them*. this explains the strong aversion against developing EVs up until recent years when tesla (and partly nissan/chevy etc) really changed up the game. Big manufacturers producing EVs mean a relatively simple motor (which can't let them make themselves stand out amongst others), and battery tech (which they're a very much behind). Asking a company to give up its current leading "tech", their core competitiveness in internal combustion engine + transmission, in order to pursuit something they're secondary in and/or see no way of producing a strong competitive advantage even in the future... what company would actively invest/encourage something that puts them in an overall disadvantage? it is mostly becuase of tesla that the notion of producing EVs has gone from "lol" to "reluctant but cannot be dismissed". BMW obviously has done quite a bit more with their i3, but look at its funcationality on a day-to-day basis compared to what you can get at similar price point.

*TESLA's supply chain production model has been shunned by the big makers a lot while back, realising they could save costs and have better focus to only concentrate on the engine and trans whilst outsourcing the rest, mostly.

2. whilst EV production numbers overall are ramping up from "negligible" to "almost noticable", currently they barely scratch the surface in the total number of vehicles sold by the big makers. An alliance in charging network at this moment is just commiting resource to something they aren't good at/profitable from at this moment, whilst the biggest winner out of having this alliance at this moment, is just tesla, who will directly benefit from it IMMEDIATELY.

3. This alliance would also paint a clearer roadmap for tesla's future, i.e. much more bargaining power they'll have with shopping malls/ building management/ carparks to install more chargers everywhere, directly improving one of the major bottleneck of their sales number in places like HK. audi/BMW's executives are gonna have fun justifying putting resources into their direct competitor (in the luxury sedan market no less) pockets at their next shareholders meeting if they do.

4. in most other places outside HK, people are expected to install chargers without jumping thru hoops that we do here dealing with management companies being pricks, which means chargers are mostly installed at home, and "destination chargers" and superchargers are largely complimentary rather than being the chief method of recharging. so this proposed alliance would may only be possible/conceivable in localities that face the preculiar issues that HK EV owners face.

imagine the difficulty of audi/BMW's hong kong branch pitching this idea of an alliance to their global HQ, and being strategically out of sync with the rest of the entire company? work WITH them!? they're our competitors!! the top level executives always make decisions that impact the entire company, and they're rather unlikely to put a small exceptional clause (of allowing a HK charging alliance) in the grand scheme of things.

5. further more, how you're going to develop your EV now as a big car maker is crucial. what battery tech are you going to go with? tesla battery tech are the most "tested and proven", and it has an open patent, so you're going to go with that? and give up all your negotiating power in the process by relying on tesla/panasonic to produce the MOST crucial component for your EVs? or would you rather play catch up, and pour resources into developing your own battery tech? lets say, out of 6 big makers, one went with the tesla/panasonic tech and the others successfully produced their own batteries for their EVs. you can't assume ALL the different batteries receive charge the same way to keep them at optimal performance/ life right? some may prefer a <70% SoC at all times, some may NEED a super high voltage charge to keep them healthy, whilst some may need a low voltage crazy high amperage charge, such that the hardware of tesla's chargers just aren't compatible with its optimal way of charge. so why would you join alliance with tesla when your own EV can't perform at its best when using these chargers? because tesla sure as hell aint revamping their hardware specs for you.


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TL;DR the ideal of an alliance seems a lot more bleak when the business aspect is involved. i apologise for dumping a wall of text, when most of it isn't even HK focused. just thought i'd share a few opinions that i have. as a token i'm sharing this comic with you, take from it what you may

 

[docherf]

Even if the manufactures could agree, they'd all have to get their fragmented and locally/regionally competitive dealers on board. That would be a tough task.

 

[deonb]

On one of the investor calls, I discovered that the average capital cost is US$1,500 per supercharger (not sure how many bays)..

$1500 = ~1/50th of 1 bay.

The capital cost for a SuperCharger station is $300'000 for 4 bays. Thus... math.

 

[gubes]

Actually I stand corrected on the capital cost of the superchargers.

What I originally suggested will come - I am fairly confident of that. It may take time to materialize. Aside from a few products like the Nissan Leaf, BMW i3 and Chevy Bolt, we won't start seeing the real fruits of the big investments the likes of VW, Mercedes and BMW coming until 2018 at the earliest. Tesla's success together with government subsidies and emissions regulations globally have sparked them into action. Dieselgate would have only accelerated VWs plans now.

What is particularly exciting is what the VW group is saying regarding its minivan concept and its Porsche affiliate regarding Mission E. They both have 1 thing in common. The ability to recharge a large battery to 80% of its capacity in 15 minutes. IF true, this would be a game changer. I suspect if that comes to market, Tesla would have also upgraded the power on much of their supercharger network as well.

A lot of skeptics are talking about the wind coming out of the sails on EVs due to the crash in oil prices. It is important to remember though, over the last 10 years oil prices have halved (yes they are down 80% since the 2008 peak). Over this same time period, the production cost of batteries has gone from probably over US$1,300/kWh to around US$225/kWh - over 80% decline. A lot of the work we have done suggests that this number will end up being around US$120-140/kWh by 2020 and US$70-80/kWh by 2025 or sooner.

So if you look at some back of the envelope numbers. If you need a 60kWh battery to ensure a 200m range in a small to mid size vehicle (like BMW 3 series or Tesla Model 3), the cost of the pack would be US$7,800 by the end of the decade and US$4,500 by 2025. The cost of manufacture for ICE components (Internal Combustion Engine), its drivetrain etc is probably US$3-5k for a mass to premium mass vehicle. In other words, we are extremely close to mass to premium mass EVs having a cost structure competitive with a competing ICE WITHOUT subsidy. The lower running and maintenance costs would just be a bonus rather than relying on them to justify paying a premium.

In the mean time, battery density is improving at a rate of approx 5%pa and charging times are getting quicker.

I am fairly confident that by around 2020, the industry will realize that its economical and profitable to produce EVs on a very large scale. Once reservations regarding range and charging times are addressed (which is happening faster than originally expected), EVs will be proffered to ICEs due to cost, performance, safety, reliability and refinement. At that point the cost of gasoline will become inconsequential and the long term outlook for oil should make the saudis really start to worry (as >60% of oil consumption is related to transportation).

The auto industry has been reluctant up to this point for 3 principal reasons:

1) It is currently unprofitable to build EVs that people would want to buy and it requires substantial re-tooling and capital investment to convert production lines. They don't want to cannibalize profitable sales with unprofitable sales which would piss off their shareholders.
2) Dealer network disincentivized to sell EVs due to current customer confusion and the lack of after sales service revenue compared to ICEs - which is their primary profit driver.
3) As mentioned by another poster, Auto company IP is centered around engine, transmission, and ICE drivetrain. The key engineers are mechanical engineers. The key components of an electric vehicle are the battery (chemistry) and cooling (software), and Electric Motor. The electric motor is hard to improve as it is already 90% efficient compared to 25% efficiency for an ICE. Hence the auto companies turn into "coach builders" as the key point of differentiation from a technological point of view is effectively "outsourced".

However, out of those 3 points, the first one will be addressed in around 5 years and that would ultimately be a strong enough reason for the whole industry to move with the times or get killed.

 

[Rob Pegg]

For the car majors its an opportunity as well as a threat. For those that take best advantage of the changes required then they possibly can look to wipe-out the slower adopters. However those who move too early could lose a fortune. For now the mainstream strategy seems to be invest in full EV R&D, introduce hybrids but largely seek to maintain their profitable ICE lines, whilst letting Tesla and others do the hard yards in developing the market, charging network, overcoming regulatory hurdles etc.
Once the tipping point is reached (300k advance Model 3 orders will no doubt be prompting a few sleepless nights over potential loss of future revenue at BMW) when major manufacturers see that the EV market makes commercial sense they will presumably hope to embark upon a rapid transition stage when they will be seeking to phase in electric models in those markets, whilst maintaining the existing product lines of ICE cars for as long as possible. This is assuming that they have previously secured battery availability/manufacturing capability to make the transition to EV's possible.
During this transition period I do not see how they will be able to sell ICE cars alongside pure EV's when ICE's only selling point will be the perceived advantage of ad-hoc refuelling time and location accessibility, and the fact that EV's will in all other respects offer a direct and superior replacement for the heavy polluting ICE alternative.
The answer for these manufacturers could therefore be to set up a new electric car brand in early-adopter markets, ultimately to replace the original ICE brand. For less advanced/poorer markets with a slower take-up or no charging structure I would expect ICE cars to linger-on for many years.
It will be fascinating to watch this play out over the next decade, and I only wish I had a crystal ball to see what the outcome will be.