EV’s! The Eco System Disruptions!

Are we prepared for major disruptions in many Eco System due to advent of EV’s?

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Below is an article which informs us about governments seriousness regarding introduction of EV’s in India. It is hoped that at least 30% of all new new vehicles by 2030 will be EV’s. Last year, government ordered 10000 EV’s and there is a plan to order the same quantity this year too! Government is also encouraging bus fleets to buy Electric buses. Himachal Pradesh has ordered 25 such buses and are being run in hilly areas. I saw a few of them plying, during my recent holiday in Manali.

http://www.downtoearth.org.in/news/centre-launches-national-e-mobility-programme-10-000-more-e-vehicles-to-be-procured-59845

What EV’s are going to do to various Eco Systems? When we discuss EV’s, discussion is about pollution, how long petroleum products will last etc. There is also a discussion about petroleum cartel holding human race to ransom. But there are many more disruptions that need to be considered. These are not only for individuals but for various agencies like government, businesses and many other systems. These need to adapt, change and modify to suit new environment created by the EV’s.

Take the case of governments tax collection. Tax collected on petroleum products are so huge that these are almost 100% of the price of the petroleum products. At every stage tax is collected. From refining, to distribution to sell. Both central and state governments will start losing this revenue when critical mass of new EV’s is reached. 2030 as indicated in the above mentioned article, may be that year. Government needs to find methods to make up for this revenue loss. Not all revenue will be lost but there will be a loss of big chunk. Another issue is the “fuel” that will replace petroleum products will be electricity which traditionally is being manufactured in Public sector. This fuel cannot be taxed very heavily,  as its usage will be multi-purpose, vehicles, industrial and domestic usage.

Another major change that has to happen is the growth in production of electricity. If this continues to happen using petroleum products, then pollution will come out of chimneys instead of car exhaust systems. Main thrust appears to be on solar systems but they will also have their own issues which need to be tackled in parallel with increase in production. Another method that is being undertaken is nuclear power. This will also help the ecosystem to achieve the same goals.

Why would people switch over to EV’s? In case of buses, since it is a public transport this can happen faster if funds are made available. These organizations are anyway public sector. Of course, cost of the vehicles needs to come down. From present knowledge, it appears that maintenance cost will be lower. With decrease in Electricity price, battery replacement costs may also become quite manageable over a period of time, due to mass production.

But the real numbers will be coming in cars. Why will people change over to EV’s, the cars? Cost of ownership is the going to be the answer. This is made up of Price of the Vehicle, Cost of servicing, cost of repairs, resale value and ease of use. To me the last factor is also very important though it is not a tangible factor. All other factors have been there in IC engine cars too! But this is a new factor that has come up. We are all used to just using the key to go where ever we want; if required, we go to the petrol pumps and fill it up! With EV’s it may not be as simple, to start with. We need to plan, we need to have cars that will give more mileage per charge. The current charging technology available takes about 30 to 40 minutes minimum, to fully recharge. How fast this technology will improve? Will the charging time reduce to 5 minutes or some such time? Only time can tell. This brings us to charging stations, which is going to be a factor by itself!

EV’s will need charging stations, bus operations will have their own stations. But cars will need a huge number of charging stations. In India, we should not forget two Wheelers. Two-wheeler companies are also thinking big in terms EV’s and those numbers could be large. First and foremost is going to be the charging time! Unless this reduces drastically, number of charging stations needed will be a big challenge! So, to me this improvement to around 5 minutes or less is almost mandatory! I am sure the improvement in battery technology will increase the capacity of batteries which in turn will increase per charge running of vehicles. Who should invest in charging stations? Who will invest in charging station? Current Oil companies can take up onus of this, being public sector companies. Chicken and egg situation will prevail in initial phase. Charging stations first or EV’s first will be the dilemma! ROI on charging stations will be tricky and priorities is going to be an issue. Till IC engine vehicles are manufactured, they will keep on having the pressure of exhaust pollution control. By 2030, something equivalent of Euro 8 or 9 standards will be prevalent.  Car companies and Oil companies both will have to invest a lot on pollution control during this phase, along with investments in EV’s. This is tricky because nobody can predict the speed at which proliferation of EV’s will take place. Lest we forget, EV’s are Zero pollution vehicles!

About charging stations, will the government agencies build them or private agencies build them? Private companies have an option of not building them. There will be  individuals who may have proper parking space in office or at their home. They will build their own station but that number is going to be small, at least to start with. But looking at vehicles parked on roads even at night in cities, common charging stations, like petrol pumps, looks to be the only way. Can there be a “Charging Station Cess” on all new vehicles sold? Will it be acceptable to burden IC’s engine car buyers to benefit EV buyers? Can local governments take part in this, in cities where EV’s will be sold in large numbers? When will they know the trend? When will they decide to do it? All these questions do not have easy answers, but these issues need to be resolved.

The drive train in IC engine cars, starting from Radiator and ending with Exhaust pipe, will be replaced by about 18 parts, maximum. Out of these, the motors and gear are the only so called moving parts! When there are less moving parts, there will be less repairs needed! In fact, Tesla is offering life-long warranty for their cars. So, the car service industry will be the first victim of EV introduction. Today major chunk of repairs after warranty period is over, are the drive train parts. When these repairs are simply not needed, will the service industry be viable at all? Will manufacturers offer the paid service life long, through owned outlets. This is already happening in spare parts business, where component manufacturers find it difficult to compete with the vehicle manufacturers.

Another major disruption will be component industry and their basic vendors like casting, forging industries and their allied industry. These industries today, employ millions of people. Since there will a major disruption in this eco system, things are going to be tough. If a certain business simply ceases to exist, what do you do in life? Not everyone plans 10/15 years in advance. By the time they realize this, it could be too late! This group of business men will have business knowledge but may not have where withal to completely switch over to something new! How many will be smart enough to change to a totally new and/or unconnected business?

Friends, I have seen my city Pune change from use of carriage pulled by horses (called tanga), to auto rikshas, to Ubers and Olas. Tangas simply don’t exist now! I have observed that riksha business will also taper off over a period of time. Riksha is not an elegant mode of transport and it appears that young generation does not want to come in this business, as it is NOT COOL! The advent of Metros in the city in next three years will push Rikshas and even Uber/Ola! I will definitely use a Metro, if possible! When I talked of major disruptions, I was talking of obsolescence too! History has been harsh, and there is no replacement or option for obsolescence. If a system has to go, it has to go whether it likes it or not! It is like death, one has to accept it. Welcome to the brave new world of EV’s.

Game Changer or Disruption!

EV is going to be new beast compared to todays cars!

Cartesla-eckh-01

 

I have been writing about Electric Vehicles; for updates I keep on talking to people in the industry, read on the net and am lucky enough to have someone in Tesla to update my understanding of EV’s. I am no technical expert in this field but I can feel that something big is definitely happening. Hope I am able to see some of these major changes in my lifetime. I was lucky to be part of two such events, Internet and Cell phone. These two disruptions have  changed the way our world has been operating! When Jaya was in the US for her MS, 1980-8;  talking to each other on phone, needed a lot of coordination. We did not have phone at home. So, she would write to me the timing when she would call, that too at someone else’s place. If we were lucky she could get through after ½ hour delay! By next year, I am told that cell phones can be used during the flights too!  That is game changer!

In IC engine cars, the Engine has been the heart for more than 100 years, and car performances have been defined by the quality of the engine! Then the quality of the overall car is said to be better when the exhaust system and engine jointly released least amount of pollutants. Of course, now exhaust parameters are mandatory world over. By 2023 these parameters will be so tough that company like Volvo has already declared that they have decided not to develop any new diesel engines post 2023, as development of the same will not be cost effective! Plus, cities and countries are slowly banning diesel cars to be driven within their boundaries.

The drive train today, is placed physically in between tyres, from front bumper to rear exhaust system! This whole drive train is being replaced in EV’s, (as shown in pictures above) so what will decide the quality of EV’s? What is the Engine for EV’s? The Motors, the electronic controllers, battery pack, inverter and  gear. So, the car which travels more distance per charge, which accelerates faster will be a better car, all are zero emission cars anyway! No, it is not that simple! This is just the beginning of the car revolution! The batteries will have better charge storage per unit area, they may cost lesser and lesser over a period of time but this becomes  commercial aspect. To me battery packs are petrol tanks! Better battery only increases the capacity of the “new petrol tank” and distance traveled per charge!

Major parts in the new drive train for cars are going to be the software and the sensors that are going to be there in a car, besides the battery pack, motors and ECU’s. Around 2010, some vehicles had software with about 10 million lines of codes! In 2016 it is supposed to have increased by 15 times to about 150 million lines of code! The software is related to car autonomy, safety and infotainment related codes. But this is going to change even more drastically over period. The whole system might become  a computer in the car! The car recalls will not be because of faulty clutch or a gear box it will be because of software glitches and sensors!

The cost of software currently in large cars can be about 10% of the Bill of Materials but is likely go up in next 10/12 years to 30%! So, this is going to be the first game changer. What happens to current vendors of engine parts? As the population of EV’s starts increasing, the population of new IC engine cars is going to come down! Instead of one set of vendors, who make drive train parts, new set of vendors from IT industry and electronic industry will take over! So, need for physical RM will start getting replaced by “products” which cannot be seen by naked eye! Players who are currently tier 2 or tier 3 vendors may start becoming tier 1 vendors. At the same time car manufacturers may stand on the toes of Operating system vendors so that they can control the distinct facilities they can offer. This cannibalization is already being observed in case of battery manufacture! Vehicle manufacturers themselves are producing battery packs now. In IC engine cars, batteries have a small functional role whereas in EV’s it is going to be the new “Petrol”! OPEC, I am sure is already having sleepless nights or nightmares!

It looks like software will follow the path of infotainment innovations, autonomous driving capabilities, intelligent safety devices which will be able to work even if some part of software fails! The software will integrate with hardware in the form of sensors! This my friends, is going to be future drive train! The whole system over a period will be of increasing complexity which will need newer and newer algorithms and will generate such a huge data that all the data generated from these cars will have to be stored to cloud! One important aspect of new drive train is temperatures; these are almost at room temperature compared to IC engine cars where exhaust temperatures can go upto 600 deg c! This normal temperature in “New Engine” will allow usage of lot of electronics, sensors, software and ECU’s.

What do we foresee? Basic car with body, trim, seats etc which will keep on changing as is happening now. But it is the “New Engine” in the form of sensors, software, ECU’s and cloud computing that will change the car and make it a different beast than what we see today!

First and foremost will be the infotainment area which will have full connectivity with our single “communicator” which is currently our cell phone! It will have all these functions plus, music, internet hookup, reverse drive screen, automatic parking capabilities. This will use cameras in place of mirrors and it will also be the GPS display screen! What new functionalities will be added is anybody’s guess! Next consolidation will be ECU’s. Currently, there are 8 to 10 of them per car. These will be consolidated over a period, to one or two ECU’s which will handle all functionalities . The “real engine” will be controlled through these ECU’s along with other systems like wipers, window regulators, AC’s and so on. Next important aspect is, each vehicle will generate so much data that storing the same can be an issue. So, all this data will be transferred to cloud. This data can be used for analysis, diagnostics, on improving performance of the vehicle. This will be real life data and give the car makers real life continuous flow of information; product improvement cycles will be much shorter! In most cases in future, product errors will be related more to sensors and software. Software errors can be updated easily by releasing patches to all concerned cars as these cars will always be connected!

Another game changer will be what is going to happen to car service industry! Cars will go to workshops only for sheet metal work! Or small odd jobs! This will also affect vehicle manufacturer’s spare part sales; we know that drive train component manufacturers, will go down over a period! These components will exist only for old cars as no new cars will not need their products!

Another new area that will come up is third party software products! We really don’t know what these products are going to be! Most of the products will be available for passengers, as the driver naturally cannot use them while driving. Oh, I forgot we will have driverless cars at some stage, then all are going to be passengers. So, possibilities are simply unlimited!

I could write on and on and on! Let us wait and watch; there have been car racing games for computers. But now you will be having computers which drive real life cars on real roads! That too on their own! As a game changer or major disruptor of business, it’s a great thing for humanity. But for those who are in business of making current drive train components, it’s going to be a nightmare. As my friend had rightly said during a discussion, “I am ok with this change because it is for my next generation to handle this and not me because real inflexion point could be 2030, by that time I will retire!”

 

Auto Industry 2040?

Auto Industry Circa 2040. where will it be?

WOW! MMG! DISCO! These could be names of some of the leading auto component industries in the year 2040! Why have I selected the year 2040? Simply because everyone is talking of this year for introduction of electric cars in a big way; from this year onwards, the real downward trend in manufacture and use of IC engines in the cars, as we know them today, will begin. I am simply assuming that the cars will be available, similar to the cars of today. Masses of cars will be driven by humans, they will have a steering wheel and a power plant/train to give them. They will have some form of braking, electrical system handling various functions, wheels and body with fuel storage area, air conditioning and so on! Things inside could be fancier with more and more entertainment, superior navigation abilities, drivers may become more stress free as cars systems will be able to understand many things and may take over some functions from humans. Internet of things (IOT) will allow things that are not even thought of today.

This is part of evolution of human race but this could be culmination of major change that is taking place currently. The “new” car industry is putting its toddler’s steps today. Evolution is nature as everything in this world is always evolving! Basic driver for these changes is computers and computer chips. The car industry will be using different chips and will capture lots of data data generated by various systems. This data will be in endless loop and will allow cars to function more and more efficiently.

What will be the difference in the cars of today and those in 2040? Today’s power plant, the Engine & Drive train will be replaced by Batteries and Motors. Today’s drive train, gear boxes etc will be just be not there. The exhaust system as is known today will be simply not be needed because there will be no IC engine, both Petrol and Diesel. Gear box and the whole system is really not needed because their function can easily be handled by Electric Motors. Even today, in electric cars, there is a single gear which reduces the RPM to what is needed to drive the car at allowed speeds!

There are many companies that are manufacturing the components that are discussed above. These components may become redundant over a period of time due to introduction of electric cars. Bosch, Denso, Continental, Valeo, Aisin Seiki are some of the major players that manufacture the cluster of these components. These companies together manufacture products worth US $200/ billions every year.  These products may comprise of 40% to 70% of their current turnover. The giants must be already studying the questions that have come to my mind. How are they handling these questions? I am sure it’s a tough call to all of them though they have the where withal and deep pockets to handle difficult situations. Some have started making navigation products, some are making parking assist, camera -related systems. But suddenly new names are being heard in these discussions as vendors. CISCO, NVIDIA are some of them. Some are direct vendors to car makers and some are vendors to components manufacturers.  Where is the real scope for new development and business? Battery packs, battery charging technology to increase per charge distance that the cars can travel today! All other developments that are computer related can also happen in IC engine cars too! TESLA is already building a giga factory for their Battery Packs! So will the “new” component business be taken over by Car Manufacturers? Suzuki, Toyota and Toshiba are coming together in India for big battery plant! What happens to smaller manufacturers of these components? Will they survive the major change? Will “WOW! MMG! DISCO!” replace them? Only time can tell.

In car making, after a long time, new name TESLA, started coming into prominence. TESLA came mainly for the new product offering. It appears that technology like fashion goes round! Till first two decades of last century, IC engine based transportation was not very popular. Trains used steam, cars used electric power plants; but battery technology could not catch with the then needs. Hence IC engine cars and trains became popular. From the existing car manufacturers, some are already manufacturing electric cars more than what TESLA is producing. On top of that they have a running profitable business producing IC engine cars. But one thing is for sure they have the humility and know where they lack. Look at what Volkswagen Brand CEO Deiss has to say about TESLA! 

VOLKSWAGEN brand CEO Diess has said that VW which manufactured 5,987,800 cars last year has to catch up with Tesla which produced 83922 cars last year. “Tesla belongs among the competitors which has abilities that we currently do not have,” Diess said in the interview with “Inside”, a publication for VW employees. Around half of Tesla’s engineers are software experts, while at VW’s core brand it is a much lower proportion, Diess said. Tesla has good electric motors, a fast charging network, autonomous driving technology, internet connectivity, and a new approach toward vehicle distribution. “This shows that we need to significantly improve. We can do this. We measure ourselves against Tesla quite deliberately. Our goal: Using our abilities not just to catch up, but even to overtake,” Diess drives an electric VW Golf.

 Current giants have ready infrastructure and eco system to make and sell millions of cars. They of course lack Electric car eco system as mentioned by Diess above. Their main struggle will be recharging stations for electric cars; but TESLA is also going face the same problem! The question arises if TESLA, a loss making company, a start-up, survive? Let’s look at the startups from the Silicon Valley and the west coast, who really made it big in computer industry sunrise era. Google, Facebook, Microsoft, Apple they all became very big with the products/services that never existed before. TESLA is pitted against the giants for making existing products where the main “driver” is only a different technology! That’s a huge disadvantage. Fighting against giants, who have woken up a bit late, like Mercedes, Honda BMW, Toyota, GM, Ford, Fiat, Hyundai is going to be very very tough for TESLA! Some of these giants are also going to suffer or may merge! My take,Continental TESLA may cease to exist  by 2040 or even earlier as it is known today! Takeover? Maybe!