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”!

 

 

 

I am getting a Toyota Prius!

One of the most important aspect of human civilization is that nobody can stop the technological advancements. Technology, the right one, is simply unstoppable. Humans do not change and they most of the time feel that so and so technology cannot become popular. There are very few visionaries who can guess, predict what can happen after a couple of decades. Initially when any technology comes the cost of its implementation as well as usage is always very high. This cost does come down with increased volume.

Let us consider the scenario in solar energy globally. Germany recently on a particular day produced, 85% of its total electricity produced, by Solar. The energy market in Germany runs like a trade market and the rate at which power is bought by distribution companies is based on demand and supply. On that particular day the rate went below zero! California on one day recently produced 67% of its electricity by Solar. US being a very large country will take a long time to reach Germany’s level as a country but it will happen in pockets. India & China are galloping fast towards solar energy in a big way.

If we think about steam engines and trains, initially people were just curious and felt that trains cannot compete with carts pulled by animals. Once the fear in people’s mind reduced, time of travel decreased and more and more people started travelling in trains and rest as they say is history. My first travel to USA was in 1981 and I had paid US $ 1076/ for return journey. Even today we pay hardly more than that in Dollar terms, for return ticket to USA. Why this happened? Because of safer, faster, larger airplanes increased the volume.

Cell phone is another classic example of technology that made it a disruptive device! When I first got my cell in late 90’s the cell phone was quite heavy, almost ugly, and it cost Rs.16/ minute to receive and make calls! In twenty years Cell phones have become sleek, they are much more powerful than computers specs ten years ago! Ten years ago GB was a word very rarely used even in computers. On top of that making calls is now free! Technologically in 20 years cell phones have gone places! Who would have thought of these changes? In the initial phase cell phone was the so called rich person’s toy. The beauty is that land line telephones have been there for more than 100 years doing same basic work that cell phones do, talking to each other. But other than becoming sleeker, land line phones did not change much in technology. Hence the landline phone population is on the wane world over.

Next classic battle that I visualize is between IC engine cars and Electric/Hybrid cars. The usual naysayers are saying that the current car companies are so powerful that they will just not allow this to happen. What are the parameters that will come into picture? Current volume of Electric/Hybrid cars is miniscule and their yearly volumes are nothing to write home about. So what is it that is needed for the picture to reverse, if it does! Fuel costs is one important parameter. Petrol/Diesel costs have come down from highs of US$ 150/ per barrel and have stabilized around US $50/. The original cartel led by Arab countries is finding it difficult to keep high rates due to new people coming in, huge American & Canadian reserves which were not known even ten years back, have suddenly become available. Their cost of production of extracting oil is also coming down. The fear of Petroleum products simply getting exhausted from the world has gone. So fuel cost may not be THE thing that will trouble current cars. But on the other hand, the cost of producing electricity is definitely going down fast. As more and more countries including India go strongly after solar energy, this cost will come down further. The countries which have lot sunlight round the year can become major players in producing next “Petroleum” for cars. Along with this wind energy is also playing a major role. One thing is for sure compared to petroleum products “Sunlight & Wind” are definitely never going to get exhausted. What all this will also do is pollution levels caused by burning Petroleum products will also come down. On top of this when more and more Electric/Hybrid cars get into use pollution levels will further go down.

Largest component of Electric/Hybrid cars is battery pack. Tesla is already building a Giga battery factory in Nevada where they will be able produce battery packs for five hundred thousand cars a year, at naturally very low cost. Already, Tesla is talking of producing cars that will be only slightly more expensive than sedans. Another limitation currently is the distance the car can travel with one charge. In cell phones  already fast charging systems have come, so I am sure it will happen in Electric cars too! So maybe when you have coffee break or wash room break, you can recharge your batteries. Once these cars are reasonably priced people may use such cars the way we use scooters in India, to travel smaller distances. For last hundred years there has been not much improvement in battery storage technology, compared to other fields and same is the case with IC engine cars. I am sure in batteries the break through is just round the corner! If automotive technology had improved as much as electronics, a car would have travelled round the globe in one liter of fuel!

If we summarize this battle, cost of production of fuel (electricity) to charge the electric cars is going down, cost of battery packs is going down ( it is like engine price going down), battery pack capacity will slowly start going up like some Tesla cars go beyond 350 km per charge, pollution improvement is a bonus. On the other side Volvo has already declared that they will not produce diesel cars from 2023 because cost of using technology for pollution compliance will go up exponentially. Volkswagen has already claimed that they will not produce IC engine cars beyond 2030. In India Suzuki & Toyota have joined hands to manufacture hybrid cars for Indian market. Suzuki and Toshiba have joined hands in India to build Lithium Ion battery mega plant. In USA GM and Ford also have big plans for electric cars. BMW i3 model electric car was quite visible when I last travelled to USA. Along with that a lot work is being done by Google and Apple in driverless car. I feel that controlling an electric car with computers will be much easier than IC engine cars! Will humanity be able to stop Electric/Hybrid car technology? Only time will tell. But in the end right technology will win!

So my next car is definitely going to be a Toyota Hybrid Prius! There is small issue of money in the bank but I will generously accept it, if someone wants to gift me a Prius! I will put big donor name sticker on the car! Happy (electric) motoring!