End of the road for Diesel cars!

Maruti Suzuki declared today that they would not manufacture cars with diesel engines starting from 1st April 2020! That is the day on which BS 6 norms for pollution will be implemented in India. This time the government is very stringent, and it is declared that from this date, only the cars BS 6 norms will be registered. Forget the selling; there will be no registration of cars other than BS 6! It is a great thing that the government means business, now!

Engine1

But is this the beginning of the tumultuous scenario in the automobile domain? Is it a mini tsunami? Has this statement started indicating the way things would happen in the auto industry? All these years life was much more straightforward; introduce a new model, play around a bit with the price and periodically change pollution norms when government forces you. The smooth ride was the norm! But a statement by Maruti says that the cost of development of BS 6 compliant diesel engine and the cost of making the BS 6 engine will be so high that in the small car segment, customers may not be able to afford them. Currently, the price difference between petrol and diesel model of a car is around Rs. One Lac. They feel that this difference could be Rs.2/ lacs for BS 6 cars ( ten lacs is a Million). On a vehicle costing Rs. 5 to 6 lacs, difference of two lacs will be too much, and customers may not be able to afford these cars. For cars/SUV’s costing Rs.10/ lacs and above, though the difference will be similar, % increase would not be high. How this sector will perform from next financial year needs to be watched. For SUV (both mini/standard) good news is Maruti Brezza will not be sold; hence manufacturers will rush to pick up the market share up for grabs. Maruti, however, has left the option open for 1.5 L diesel engine cars, used in Brezza.

Diesel engine cost issue due to BS 6, was expected. Volvo has already declared that they will stop making diesel cars when the norms change from Euro 6 to Euro 7, because of the cost of development and the price of the vehicle. Compared to trucks, the number of cars sold is much higher hence a smaller number of diesel cars will be better from the pollution angle.

Why did people use small cars with diesel engines? The lower price of diesel was the main reason. These cars cost approximately Rs. One lacs, plus plus, more than petrol cars. If the usage of vehicles was not enough, then owning such a car was not cost effective. On top of this, diesel engines have periodic mandatory maintenance cost which petrol cars don’t have. In many cases, it was not viable to own a diesel engine car.

With the imminent entry of Electric Vehicles in large numbers, the market is expected to be shaken further. In the late ’90s of the last century, Toyota came up with Prius, their first Hybrid car. (For those new to this subject, a hybrid car is one which runs on petrol and battery combination; each manufacturer has its own combination of the technology) It was expected that Hybrid would be the future and Toyota was expected to be the leaders. Yes, they are still the leaders in Hybrids. But a maverick called Elon Musk decided to plunge into EV’s. General Motors had manufactured around 500 EV’s at the beginning of this century, but then what happened? Petroleum lobby made sure that this initiative was killed. A few years later GM scrapped the vehicles.

Engine2

Combination of Tesla’s efforts, cheaper battery sets (hopefully!) at some stage, fast charging technology are pushing humans towards EV’s. Range per charge still remains the primary concern. Add to this reduction in the price of solar systems is making cheaper fuel for the EV, the Electricity. Now, what is adding to making it more difficult for petroleum products further, are the pollution norms for diesel cars?

What will be the future of diesel engines in the car segment? In India, the overall car segment is under pressure. In the last financial year, four lac more old cars were sold than the number of new cars that were sold. It looks like more small vehicles are being sold in II and III tier cities. Will Maruti’s prediction about diesel engine cars affect thinking by other car manufacturers? Will they also go away from diesel engine cars? Only time will tell.

The current financial year is going to be very tricky for car manufacturers. Let me explain what is involved, as the last date on which the BS IV car will be allowed to be registered. That date is 31/3/2020. To achieve this target, they will have to attempt and sell BS VI models from 1/1/2020. To meet this date, they will be required to push in BS VI vehicles from 1/10/2019. During this transition period, there will be tricky scenarios. BS IV cars will be produced less and less, but customers may want to buy them, as these will be cheaper than BS VI models. There is a possibility that in certain areas there will be customers and no cars; in other areas, there will be cars but no customers. All unsold BS IV cars will have to be sent back to manufacturers for conversion to BS VI at a considerable cost. Predicting requirement from 1/10/2019 to 31/3/2020 is going to be a nightmare for sales teams and along with them the dealers. The trend of lower sales is going to add to the difficulties further.

Will everything be hunky dory after 1/4/2020? That is again a very tough question. To achieve better fuel efficiencies and to go away from petroleum products, there will be efforts to introduce hybrid cars. But except Toyota, nobody has real expertise in this area. The predicted numbers for 2030 are 30 % EV’s, 30% Hybrids and balance IC engine cars, mostly petrol and CNG version. Does it mean that it is a death knell to diesel cars?

Another prediction by Maruti is that for small EV’s, where numbers are high in the typical small car segment, the volumes can be tricky as the price could be between 9 to 12 Lacs. This price is based on battery packs being manufacture in India. Larger cars will cost much more, but the high-price segment is less sensitive to the price tag. How the volumes will be achieved in EV’s, will be difficult to predict. I have not even discussed the charging station infrastructure issues! In India, most cars are parked on the roads for the night, so how and when will the charging be done?

At least in India, there is a significant turmoil about where the car market will go? Will Maruti continue to lead the pack? Will others follow Maruti and go away from small diesel engine cars? Only time will tell.

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Electric Vehicle-another revisit!

During a surprise visit by my grandnephew last night, we went for a quick bite of Idli-Dosa. He works for Tesla. We, of course, discussed the merits and demerits of the Idli-Dosa one gets in the bay area. As usual, it was concluded that you can’t beat the “original” stuff you get in India (it need not be from Chennai, even Pune Dosa is better!) The main subject of discussion naturally, was about EV’s. The original EV maker is Tesla! In such a debate, there never is any conclusion. What one does is exchange information and knowledge. So here we go!  

The development and now the production of EV’s is gaining momentum for higher and higher volumes. China is leading the pack, and almost 50% of global EV production is done in China. Technology wise Tesla is way ahead of the competitors. Tesla vehicles smoothly go 300 miles and above per charge. In fast charging technology, Tesla is ahead of others; they can do it in 30 minutes. Looking at our Pune Bombay travel on Expressway, if the 30 min/300 miles combination is achieved by our car manufacturers, then it is easily possible to make a round trip, the way we are doing with IC engine cars today. The same is possible with Nashik, Kolhapur, Aurangabad. But our car manufacturers are still lagging behind Tesla in the above combination.  

How fast can the EV’s come in daily use and what could be the limitations for them? What will affect the quick proliferation of EV’s? Other than Tesla all giants like Toyota, Honda, GM, Ford, Volkswagen, Fiat have the knowhow to make cars in large numbers, In fact, they have decades of experience in this field. But they are behind in Electric drive technologies and batteries needed for EV’s.  Tesla will struggle to reach large numbers like other giants. Elon Musk twitted Tesla achievement of producing 6000 in a week for the first time in the history of Tesla; Ford Europe CEO congratulated him on the twitter, “Elon congratulations on the great achievement! For your information, we achieve these numbers in four hours”!  This shows that replacing IC engine cars by EV’s in a significant way is not going to be so easy, yet. 

Except for Tesla, most companies making EV’s are having joint ventures, different joint ventures in different countries. Toyota has joined hands with Suzuki in India. They have jointly come together in India with Toshiba to make battery packs! It is interesting to note that Suzuki will make EV’s in India for Toyota too! For EV’s, Toyota is providing technology to Suzuki. Toyota has joined hands with Mazda for making EV’s in the US. What Google and Apple will come out with, is anybody’s guess. But there is a big drive going on for driverless cars. It is expected that in the US driverless cars or their variants may come faster than EV’s.  

Other than the points mentioned above, what factors will decide the proliferation of EV’s. If we see country wise, smaller countries might be able to handle this better because of geography. Creating charging infrastructure, changing laws, changing insurance policies will be much easier to incorporate. With the same logic, the EV numbers will go up in large countries, states or regions. Like in the USA, proliferation will be quite swift on the west and east coast but will take time in mid-Americas because of low population density and vast distances; add to that mountainous regions. 

One exciting event took place. A couple of weeks back, Tesla has opened up all its patents to the general public for use. Musk declared, “We are aware that Tesla alone can not achieve the car volumes required to improve the environment. We are opening up all our patents to everybody with a hope that this will improve EV production volumes fast.”

Similarly, in India, this will occur around metros like Delhi-NCR, Mumbai-Pune. Chennai-Bangalore, Surat-Vadodara-Ahmedabad. There are more such areas in India. But India has similar problems with long distances in rural areas with less car usage. But it will take some time of coast to coast driving in the US, and Kashmir to Kanyakumari drives in India to happen regularly.

  EV1

The graph above shows the reserves of Lithium in Metric tons in the year 2017. Lithium could be the next oil, and the top four could form the next Cartel, the Lithium Cartel. The battery pack is going to be the most crucial part that is going to limit the production of EV’s. As per current technology available, Lithium is the raw material for batteries. The four nations above are going to be next Arabs for the auto industry. The auto industry is one of the significant consumers of petroleum-based products. As EV production goes up, Arabs and other cartel members will come together and reduce petroleum prices; using IC engine cars will remain more attractive. This will make it attractive to make IC engine cars. So, what will be the product mix in 2030? That will be decided by many factors. 

The product mix in the year 2030 is predicted to be 35:35:30 of EV’s, Hybrids and IC Engine cars. The combination could vary a bit, but the general proportion will be as above. EV’s will be controlled by how car manufacturers other than Tesla adopt and ramp up with the limiting conditions of per charge mileage, least possible charging time and availability of battery packs.   

Hybrids are a combination of Electric drive and IC Engine drive. Hybrids are forced by the requirements of environmental norms; hybrids have a better carbon footprint compared to IC Engine vehicles. The volume of EV ramp-up will not be sufficient to achieve global improvement of environmental standards; hybrid will provide some relief.  

IC engine cars will contain a predictably higher percentage of Petrol cars. Diesel Engine cars are expected to get a major jolt by the year 2022/23 when Euro 7 norms come into existence. These norms will be extremely challenging for diesel engine manufacturers. The cost of development and manufacture of Euro 7 compliant diesel engines can be prohibitive. Volvo has already decided not to manufacture Euro 7 compliant diesel engines for cars.  

It appears that if Electric buses are made available, they will be quite useful and practical. In Pune, about ten Electric buses have started plying on the roads, about ten days back. On the first day, approximately forty thousand people travelled on these buses. Bus application is going to help the improvement of the environment in a big way. Today most of the buses everywhere are run on diesel. They are very polluting, extremely noisy and many times people travel in them because of the lack of other viable options.  

One interesting aspect I must mention. When EV’s are produced in large numbers, industries like casting, forging, heat treatment, furnaces will move towards extinction. Same will be with the car service industry. But as almost 70 % of cars are expected to have IC engines even in 2030, these industries will have more time to handle the life-threatening change.  

My personal experience with EV’s is minimal. I have visited Tesla showrooms a couple of times during my visits to Seattle. In our condo in Pune, a couple of people own Electric Scooters. I drove one of them for a few minutes. The feel was excellent. I have enjoyed a few rides in the Toyota Prius, the Hybrid, and it was a very pleasing experience. 

I am looking forward to owning an Electric Vehicle.  When? It is anybody’s guess!

 

Electric cars, are they round the corner?

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

 Inflexion point

I visualise a significant point of inflexion in the automobile industry shortly. Different views are 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, the volume of Electric cars manufactured the world over is not significant. But Nissan, BMW, Ford, GM, Mahindra in a small way and of course Tesla is already making electric cars. I have heard that Toyota plans to come up with a fully electric car by 2019.

 2016electric cars predictiongraph

This is the forecast sale of electric cars as a 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 the switch to mass production? When will the point of inflexion be reached? Primary factors considered in the 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 to be brought down; all other things remain the same. When Tesla started producing cars, people looked at it as Elon Musk’s fancy! Tesla is working as 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. The initial experiment started with Toyota’s Prius hybrid. The thinking was to just increase the fuel efficiency of the 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 are 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.

 The second factor is the cost of fuel. With many shocks offered by Petroleum politics, the 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 significant 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 the 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 the 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. The 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 the 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 the 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 the 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 the number of electric cars increases, the infra will come up. The range per charge is also a 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 washroom 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 Uthe S, 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 the 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 the 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 the 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”!