Electric cars, are they round the corner?

Definition of inflection point: a point on a curve that separates an arc concave upward from one concave downward and vice versa. The term inflection point was first used by Andy Grove in his book “Only the Paranoids Survive”. Inflection point can be there in anybody’s life on in business cycle of industry. It indicates the total change in scenario or make and break situation. The diagram showing point of inflexion.

 Inflexion point

I visualize a major point of inflexion in automobile industry in near future. There are different views floating regarding when the Electric Cars will be mass produced. The year mentioned fairly regularly is 2030! That’s not really far! Why this is going to happen and whether it will happen at all will be based on many factors. Currently volume of Electric cars manufactured world over is not significant. But Nissan, BMW, Ford, GM, Mahindra in a small way and of course Tesla are already making electric cars. I have heard that Toyota plans to come up with a full electric car by 2019.

 2016electric cars predictiongraph

This is the forecast sale of electric cars as percentage of total car sales, for the year 2016 but I could not get the real figures. Japan at 9.7% is highest in the number of total cars produced and China at 0.9% is the lowest %. France, Great Britain, Germany, USA, South Korea, Spain are there in between.

 What will give the boost? What factors are going to push this production? When will the momentum gather for switch to mass production? When will the point of inflexion be reached? Main factors considered in usage of automobiles are its price, fuel cost, car driving  range, parts cost and main is the cost of ownership. Besides this battery charging infrastructure is going to be the most important aspect that will make or break this change.

 Price factor for electric cars appears to be in reasonable control even without mass production. In the cost of electric cars “Engine & drive train” needs be brought down; all other things remain same. When Tesla started producing cars, people looked at it as Elon Musk’s fancy! Tesla is working like a start-up but it is somehow managing to survive financially. Now they are also coming up with an affordable sedan. Slowly big giants like BMW, GM and others have woken up. Initial experiment started with Toyota’s Prius hybrid. Thinking was to just increase the fuel efficiency of existing car system and Prius hybrid was the first successful attempt. But it was definitely a minor change in thinking and not the game changer like fully Electric car. As per current thinking even  in India, Government has increased the Tax on hybrids. When asked, the minister said, “When Electric cars is the future why bother about hybrids!” Electric cars will of course need Government support by way of lower taxes to make them attractive for buyers. Government support will also be needed for battery charging infrastructure.

 Second factor is the cost of fuel. With many shocks offered by Petroleum politics, world has been looking to go away from fossil fuels. Plus the world has woken up to climate change and is aggressively looking to control pollution. Cars are known to be major pollutants. Stringent control is being sought on exhausts from cars. But this will happen only in newer cars, old polluting cars cannot be wished away. Volvo has made a statement that the cost of manufacturing car systems to match pollution norms in 2022/23 will be so high that they will stop making diesel engines. To overcome pollution issue, Germany has declared that by 2030 only electric cars will be manufactured in Germany. To achieve this target they will really have to work hard but German car makers have the technology, financial clout, will and wherewithal  to achieve this target; they are working very aggressively. Best non-polluting fuel obviously is electricity. But cost of producing electricity was a major factor hindering its usage in cars using battery banks and of course the cost of batteries. Solar and wind energy seem to be galloping ahead of other sources to make electricity cheap. Classic example is Germany. On a day in 2016, 85% of electricity produced in Germany, was from non-conventional methods.

https://energytransition.org/2016/05/germany-nearly-reached-100-percent-renewable-power-on-sunday/

With abundance of cheap electricity, on that day the rates of electricity went in negative in tendering process! Recently, California produced 67% of electricity, on a particular day,  by non-conventional methods causing serious disruption in electricity pricing mechanism! World over including India, Solar and other non-conventional methods are very aggressively pursued. By 2030 it looks like world will easily achieve the goal of cheap fuel in the form of electricity!

Currently when we travel by car, we do not think how much distance we are going to travel. This is because fuel infrastructure is fully established world over. Whenever needed, we just refuel and move ahead. This is not going to be so easy, at least today, in electric cars. There are two major points. First is charging stations and second is charging time. Both need to be vastly improved. Charging time is evolution of technology, in cell phones rapid charging technology is already available so maybe it’s a matter of time when we get this in car battery charging. Charging infra of course has to come up but when number of electric cars increase, the infra will come up. The range per charge is also the matter of technology so hopefully it will rapidly increase. Similar to what we do today, while driving long distance, we should be able to stop for coffee and wash room break and get batteries recharged. Lo we are on the way! 2030 very much possible. But my take is that this will happen faster in Europe, Japan & Korea because such things are national policies and are easier to implement  in these areas because of the smaller size of the nations plus most of European nations are developed nations.  In geographically large countries like US, Canada and China plus India, this change may happen region wise or state wise starting with highways. City limits will adopt faster as people can charge their cars in their own homes. 

 Replacement parts and cost of ownership are combination factors. In the electric cars, drive train, exhaust systems as we know them today, will simply be not there being replaced by battery packs, motors & drives. Less number of mechanical parts is going to definitely reduce the repairs and servicing cost. This factor has nothing to do with 2030. As the cost of ownership comes down, more people will be interested in driving electric cars.

 Another major change is going to be the nature automotive components industry. When major systems like drive trains & exhaust system are not needed, current manufacturers will find in a drastic reduction in parts needed by industry; over a period these will be only needed in old cars. With a mandate to supply parts for ten years, 2040 will be the last straw on the back of the Camel for this industry assuming by 2030 electric cars will be used in large numbers. How will current component manufacturers of these components handle change? Will they start making parts needed for electric cars? Do they have the technology? Only time can tell? How will Bosch’s, Conti’s, Denso’s and Valeo’s of this world handle the situation only time can tell. I am sharing one important information about change that has already happened. Nvidia Graphics, www.nvidia.com  producing chips and cards with their GPU technology are already vendors for Toyota, Mercedes, Audi, Honda, BMW, Volvo. This is because of rapid increase in usage of onboard computers to perform various functions including self-driving cars. Five years back, I am not sure if Nvidia name was much known in automotive world! Point of inflection? Yes my friends this is the point of inflection and in this business jungle, snipers in the form of technology are hiding! You never know when you will get your bullet! Yes, my conclusion,” ELECTRIC CARS ARE COMING IN A BIG WAY BY 2030”!

 

 

 

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Low Aim is a Crime!

This is take on being satisfied with Money earned rather than going up the value chain!

India got its independence in 1947. India missed the industrialization bus by a century because British allowed only a few benefits of industrialization to percolate to India.  Before independence educated Indians were interested in working for British, whatever work they could get, mostly they got clerical jobs; those were the only real jobs available anyway! British chose the people for senior admin positions and made them brown sahebs. These proxy Britishers were more British than the Britishers themselves.

This scenario put India under the gloom of disease of getting satisfied on achieving small things and doing mundane things. This led to metastatic mentality of under achievers; those who were trying to do something different were looked down upon and discouraged from doing anything different. Some of us from our generation were able to improve on this thought process and later generation became even more active and started taking risks.

IT sector was the first sector where India did pretty well, financially. Y2K issue was the one that gave impetus to Indian IT sector; middle class started growing faster than ever and large Indian populace started having money, living in foreign countries for work and started buying their own homes in a big way. This of course combined with official opening of Indian economy in 90’s. Effect of higher salaries in IT sector was seen in other sectors like engineering, pharma, finance and so on. But this success hid one thing from general populace and even from IT sector that the “great” work that we were doing was actually mundane work done for others as a service. This model kept on working well till about a couple of years back. Then the signals started coming that the mundane work that was outsourced to India can be automated so….

Circa 2017! Large Indian IT companies are sitting on big pile of US Dollars. This indicates their past success, financially. But it appears that these large “successful” companies were run more by accountants than by entrepreneurs! So they have made big money, hundreds of thousands of millions, many of them in dollar terms. But since the scenario started changing a couple of years back, it is obvious that if you don’t move up the value chain, you are going to come down as fast as you have gone up! The fact that these companies are sitting on a big pile of dollars shows that our mentality of mundane “services” type of work has not changed. This pile of money should not have been there; it should have been invested in going up the value chain! But even today this money is being used to buy back shares! The big bosses have not thought in terms of creating own IPR’s or products in any field, IT or Engineering or Pharma! When “services” are generating money why bother.

To give an example of how things are changing, when you “talk” to say Amazon on chat about some issues, the “Ravindra” or “Asha” who is taking to you may be a “BOT”. What is a BOT? An Internet Bot, also known as web robot, WWW robot or simply bot, is a software application that runs automated tasks (scripts) over the Internet. Typically, bots perform tasks that are both simple and structurally repetitive, at a much higher rate than would be possible for a human alone. The largest use of bots is in web spidering (web crawler), in which an automated script fetches, analyzes and files information from web servers at many times the speed of a human. More than half of all web traffic is made up of bots. (This is Wikipedia definition of BOT)

How this is typically done is very similar to self-check-out counters in big departmental stores. At these check-out stations, for a group of ten such stations there is one supervisor helping, if you need any help. So what this system does is, instead ten people manning ten checkout stations, one person is sufficient. These BOTS also do the same thing. Now do you understand how the nature of business is changing? If your business is dependent on someone else’s way of working, you are in trouble if automation comes into picture.

What is the way out? Going up the value chain; but if you are a company with 100 to 150 thousand employees with “service” level skills you have tough task on hand. Basically it’s a tough call for the senior management to change its own ways from accountant based running module to technologist based running module. Who runs highly successful companies? Apple, Facebook, Microsoft, Google, Nvidia, you just list such companies and will see that these are technology driven companies. Yes, finances are very important but if the company is run by accountants they will never take risks! But when you don’t take risks and try and don’t keep abreast with new technologies or create new technologies, you will never know what hit you! How many of us know that Google and Apple are spending big money on Car technology, and they are creating newer technology in cars which was never even thought of. Nvidia is already a big auto system vendor to VW’s, Audis and Mercs of this world. They have invented technologies which are forcing these Auto giants to use new technologies to remain competitive in business. Elon Musk of Tesla had the audacity to start making Electric Cars and even start making space vehicles using venture capital.

Of course there is silver lining to each dark cloud! The surprise is that the silver lining is coming not from private sector but Government sector. ISRO, Metro projects implementation, Solar Energy project implementations, highways all over India are sign of we Indians have started getting hang of the situation. On IT side one of the success stories of product selling is Tally ERP. Yes it has sold hundreds of thousands of copies and is unquestionably India’s “Numero Uno” product on IT side! If Tally is doable why can’t others do it? India is the largest democracy and is the only country in the world where all elections use EVM’s- electronic voting machines! Paper ballots are Passe’ in India! The EVM’s were developed by C-DAC! Aadhar card is one such initiative that has become pride of the nation! All these projects indicate that we are slowly coming out of the Chalta Hai mentality! Chalta Hai is a phrase indicating Small achievement is good enough! We should have Sachin Tendulkar’s in each field then only we as a nation can start achieving things!

So friends we started with discussion about Indian mentality of being happy with whatever little is achieved! Will our giants survive the onslaught of market changes? They have the money but do they have the wherewithal other than money? Do they have the mind set? Do they have the technological willpower to go up the value chain? Going up value chain is real hard and smart work. I hope these giants do it, but we are still discussing US H1B visa rules, which is the backbone of current business model of sending people on site to provide services! I hope our current young generation and future generation are as audacious as Elon Musk!