You don't need the availability of batteries to start the revolution. If every EV maker is running a two year backorder due to high demand, low battery prices, and no production, you can be sure the capital to catch up will immediately be made available.
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EV Disruption
- Thread starter tonybelding
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You don't need the availability of batteries to start the revolution. If every EV maker is running a two year backorder due to high demand, low battery prices, and no production, you can be sure the capital to catch up will immediately be made available.
Even if the cap ex is approved (say by around 2020) to build 10-20 giant battery factories immediately, it will take several years to build these plants and ramp up production.
(Again, I don't think this is realistic because battery technology evolution such as solid-state will result in large write-downs on exisiting assets. It would be really risky to "bet" so much money all at once).
20 such giant plants ready by around 2025 could equip 10 million cars (assuming 500k batteries/year from each plant), that's only 10% of the total new car market according to forecasts.
What about the other 90 million cars produced in that year (2025)? 90% of new cars would still be mild hybrids/shorter-range PHEVs and ICE cars in that simple calculation...and that's an entire decade away!
You also have to factor in potentially low oil prices (just as many experts predicted oil @ above $100 "forever" only 1-2 years ago), rising battery commodity/component prices (especially if there's a sudden rise in demand for EV batteries), the used car market (especially during economic downturns, replacement cycles for cars are really long compared to most other goods), competition between hybrids/PHEVs and BEVs (the former obviously need less battery capacity per car, Tesla will only offer BEVs) and a continuing lack of overnight charging infrastructure in many urban areas around the world.
Considering all of this, a period of 1-2 decades looks maybe even optimistic for pure BEVs (not counting PHEVs or hybrids) to gain meaningful double-digit marketshare.
The real long-term disruption imho could be a move towards "Transport as a Service" (TaaS), i.e. many people in urban areas no longer owning or driving a car and instead relying on (near-) autonomous car sharing services, a sort of "robot Uber/Lyft" coming within 1-2 decades.
TaaS could disrupt the car industry much more than a move to electric propulsion in my opinion (since the car industry sells/leases cars, not oil).
Summary: I don't think disruption (at least not as defined in the traditional tech sector use case) is possible in the car sector, market share shifts towards EVs will likely take decades.
(Again, I don't think this is realistic because battery technology evolution such as solid-state will result in large write-downs on exisiting assets. It would be really risky to "bet" so much money all at once).
20 such giant plants ready by around 2025 could equip 10 million cars (assuming 500k batteries/year from each plant), that's only 10% of the total new car market according to forecasts.
What about the other 90 million cars produced in that year (2025)? 90% of new cars would still be mild hybrids/shorter-range PHEVs and ICE cars in that simple calculation...and that's an entire decade away!
You also have to factor in potentially low oil prices (just as many experts predicted oil @ above $100 "forever" only 1-2 years ago), rising battery commodity/component prices (especially if there's a sudden rise in demand for EV batteries), the used car market (especially during economic downturns, replacement cycles for cars are really long compared to most other goods), competition between hybrids/PHEVs and BEVs (the former obviously need less battery capacity per car, Tesla will only offer BEVs) and a continuing lack of overnight charging infrastructure in many urban areas around the world.
Considering all of this, a period of 1-2 decades looks maybe even optimistic for pure BEVs (not counting PHEVs or hybrids) to gain meaningful double-digit marketshare.
The real long-term disruption imho could be a move towards "Transport as a Service" (TaaS), i.e. many people in urban areas no longer owning or driving a car and instead relying on (near-) autonomous car sharing services, a sort of "robot Uber/Lyft" coming within 1-2 decades.
TaaS could disrupt the car industry much more than a move to electric propulsion in my opinion (since the car industry sells/leases cars, not oil).
Summary: I don't think disruption (at least not as defined in the traditional tech sector use case) is possible in the car sector, market share shifts towards EVs will likely take decades.
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voyager
Active Member
Good questions. THE game-changer would be faster recharging, better range, cheaper battery packs. From time to time, people here post the latest developments. I can remember that Stanford U. was one of the latest. Make EVs less of a personal wannahave, how crazy that may sound, I mean accessible for widespread shared use, and it will undoubtedly beat ICE cars. Daimler's Car2Go and BMW are already doing their fair share.
The game changer in the buying public's minds will come many years before the manufacturing capacity is there to provide it. Right now there are about 80 million passenger cars about about 15 million light trucks manufactured. Call it a round 100 million for convenience. The world's entire production of BEVs is about 100,000. That's 0.1% of total passenger vehicle production and it's consuming all the batteries the existing batteries can make. The Gigafactory is going to double the total Li-Ion battery production of the planet and provide capacity for about 600,000 long range BEVs a year. With the rest of world production, that's about 700,000 a year. Not even to 1% of total production yet.
The Model 3 could possibly set the public's imagination alight and demand could be very high. There are a number of BEVs on the drawing board out there, but with the current capacity of battery production, all of those vehicles will be limited production, even if there is a big demand for them. There is no evidence anybody is building another Gigafactory which would be needed to mass produce more EVs.
Tesla is fast tracking the Gigafactory and doing things in their own fast and flexible way. GM or Toyota couldn't build a Gigafactory and get it going fast enough and neither could their suppliers. Big, well established companies have procedures laid in stone that slow down any major capital expenditures. If it's between an automaker and a supplier, the lawyers are going to spend a year arguing the fine details on the supply contract. The supplier doesn't want the car company to pull out and the car company doesn't want the supplier to flake out on them and not supply them with their parts.
If the Model 3 takes off, Tesla might start work on a second Gigafactory right away, but realistically the capacity to get enough batteries to get over 1% of car production is at least 5 years out. And that's just the second factory. The world would need about 200 Gigafactories to completely convert car production to EVs. That doesn't count the infrastructure changes needed to support EVs. Most people with EVs charge at home now, but close to half the world's car owners don't have that ability because they don't have a garage, live in an apartment, or their house doesn't have the wiring to support it. Power utilities need the extra capacity for charging, and every company building EVs needs something to support long distance travel.
I think the likely technology that will serve as a stopgap will be biofuels. In the US, most vehicle ethanol is made from the byproduct of making animal feed from corn. It was just thrown away before the idea of biofuel came along. And there are a lot of other waste products that could be turned into biofuels. Most cars made in the last 20 years can be easily made to support flex fuels (almost all have it built into the firmware, most car companies just disable it outside of Brazil where it's mandatory) and biofuels can be sold at the same stations that sell gas now.
EVs are the long term solution, but the infrastructure to build and support them won't be complete for decades. It's a massive switch over that requires massive capital investment to get all car production converted.
With new technologies there is always the question of scalability. Some scale easily, some won't scale at all, and some will scale, but it will take a massive effort. EVs will scale, but it's in the massive effort category. Something like smart phones scaled very easily because they could start out working with the existing cellular networks and really didn't require major factory retooling, major changes to supply chains, or major changes to the support network.
The Model 3 could possibly set the public's imagination alight and demand could be very high. There are a number of BEVs on the drawing board out there, but with the current capacity of battery production, all of those vehicles will be limited production, even if there is a big demand for them. There is no evidence anybody is building another Gigafactory which would be needed to mass produce more EVs.
Tesla is fast tracking the Gigafactory and doing things in their own fast and flexible way. GM or Toyota couldn't build a Gigafactory and get it going fast enough and neither could their suppliers. Big, well established companies have procedures laid in stone that slow down any major capital expenditures. If it's between an automaker and a supplier, the lawyers are going to spend a year arguing the fine details on the supply contract. The supplier doesn't want the car company to pull out and the car company doesn't want the supplier to flake out on them and not supply them with their parts.
If the Model 3 takes off, Tesla might start work on a second Gigafactory right away, but realistically the capacity to get enough batteries to get over 1% of car production is at least 5 years out. And that's just the second factory. The world would need about 200 Gigafactories to completely convert car production to EVs. That doesn't count the infrastructure changes needed to support EVs. Most people with EVs charge at home now, but close to half the world's car owners don't have that ability because they don't have a garage, live in an apartment, or their house doesn't have the wiring to support it. Power utilities need the extra capacity for charging, and every company building EVs needs something to support long distance travel.
I think the likely technology that will serve as a stopgap will be biofuels. In the US, most vehicle ethanol is made from the byproduct of making animal feed from corn. It was just thrown away before the idea of biofuel came along. And there are a lot of other waste products that could be turned into biofuels. Most cars made in the last 20 years can be easily made to support flex fuels (almost all have it built into the firmware, most car companies just disable it outside of Brazil where it's mandatory) and biofuels can be sold at the same stations that sell gas now.
EVs are the long term solution, but the infrastructure to build and support them won't be complete for decades. It's a massive switch over that requires massive capital investment to get all car production converted.
With new technologies there is always the question of scalability. Some scale easily, some won't scale at all, and some will scale, but it will take a massive effort. EVs will scale, but it's in the massive effort category. Something like smart phones scaled very easily because they could start out working with the existing cellular networks and really didn't require major factory retooling, major changes to supply chains, or major changes to the support network.
It is hard to see how BEVs can blow out the competition like digital cameras did, due to the difficulties described here for infrastructure ramping. I wish they would, but wishful thinking...
I think the corollary to this is that even the stodgy and entrenched ICE OEMs will have a window to go BEV once it is 100% obvious that the public wants to buy them exclusively. I take this as a positive. It will not require all of the legacy makers to go whole hog BEV for everything to change rapidly. If two or three of them were to pour money into the 'new' technology then the changes we want and hope for and require really could occur overnight. The laggards then would be at risk of obsolescence and deletion. At that point conversion may reasonably be described as a 10 year process. I think this is Elon's objective. Allies are a must in the battle against the Axis. They always are. Now at what point can we reasonably say we are at the dawn of the 10 year process? We need to see capitulations from legacy OEMs. When does that happen? Will it happen?
I think the corollary to this is that even the stodgy and entrenched ICE OEMs will have a window to go BEV once it is 100% obvious that the public wants to buy them exclusively. I take this as a positive. It will not require all of the legacy makers to go whole hog BEV for everything to change rapidly. If two or three of them were to pour money into the 'new' technology then the changes we want and hope for and require really could occur overnight. The laggards then would be at risk of obsolescence and deletion. At that point conversion may reasonably be described as a 10 year process. I think this is Elon's objective. Allies are a must in the battle against the Axis. They always are. Now at what point can we reasonably say we are at the dawn of the 10 year process? We need to see capitulations from legacy OEMs. When does that happen? Will it happen?
Exactly, even a capacity of "only" 10-20 Gigafactories (each GF takes about 3-4 years to get to full output once construction has started) to supply 5-10% of all new cars as long-range EVs will take a very long time to build out as I outlined in my comments above.
People who think the car sector can be "disrupted" as any other tech sector (smartphones is the most common example used) should look at the time scale again. Decades, not years or months, is the only realistic time scale imho.
There's simply no magic wand to create 100 or 200 giant battery factories faster - even assuming demand for EVs is virtually unlimited and battery technology vs ROI would suddenly make these investments highly profitable.
The latter is not realistic, even if battery technology gets more mature one day (fewer technology gaps and easier/more stable ROI calculations assumed):
With dozens of GFs under construction worldwide there would/will be spikes in commodity input pricing coupled with lower oil prices, i.e. less demand for oil used for transportation, also because of buyers of PHEVs and hybrids using less oil (who are not switching over to pure BEVs).
TaaS would solve a lot of the charging issues: If autonomous vehicles one day charge themselves before driving to their next assignment(s) there would be less charging stations needed. But again, this will take decades...
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voyager
Active Member
Rest assured, in the country that practically invented motoring, England, 53% of new car buyers are considering a hybrid or electric car as their next vehicle. New electric and plug-in hybrid electric vehicle (PHEV) buyers are eligible for the £5,000 Plug-in Car Grant under the Government’s incentive scheme to promote uptake.
Over half of UK motorists are considering an electric car or hybrid | Auto Express
Over half of UK motorists are considering an electric car or hybrid | Auto Express
Shai Agassi was of the opinion that once the lease cost of new EV (+ electricity) was less than the lease cost of a 3 year old ICE (+fuel), then the financial institutions would stop financing new ICE lease.
I expect that first we will see the lease cost of a new PHEV (+ electricity & petrol) become less than the lease cost of a new diesel (+fuel), which gains the industry's attention.
then later we will see the the lease cost of a new PHEV (+ electricity & petrol) become less than the lease cost of a 3 year old diesel (+fuel), which closes the curtain on diesel.
and its starting to happen now, with Mitsubishi Outlander PHEV, and VWs PHEVs vs diesel
we can watch it already, not just some future imagination
New article on this very subject. . .
Have Tesla and Apple disrupted the auto industry past the point of no return? - Quartz
Once you get past the sensationalist clickbait headline, it actually lays out the argument for disruption -- and for the failure of traditional car makers -- better than I was able to.
Have Tesla and Apple disrupted the auto industry past the point of no return? - Quartz
Once you get past the sensationalist clickbait headline, it actually lays out the argument for disruption -- and for the failure of traditional car makers -- better than I was able to.
This thread has been discussing it since yesterday:
http://www.teslamotorsclub.com/show...the-auto-industry-past-the-point-of-no-return
voyager
Active Member
Great article. Still, from the perspective of most conventional car users and ICE diehard fans it could be seen as wishful thinking. It is just because of the multi-billions of de-investing that needs to be done that car makers will only gradually change strategies, in order not to endanger their very existence. How much hold the auto industry has, was proven by the VW diesel affair. The EU already decided to delay implementing the stricter regulations! And we're talking the most polluting ICE here. Secondly, low oil prices will facilitate the slow change.
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How can traditional car makers fail over the coming years (excluding a severe recession in Asia/China or other external event)?
Let's assume Tesla indeed makes it to an output of 500k cars by 2020 (not even many bulls believe in this lofty number any longer!) and Apple (even more incredible, no details are known yet) somehow (outsourced manufacturing !?) makes its first 250k cars by 2019 or 2020.
That's 750k cars while 100 million cars are sold per year. Marketshare for these two "disrupters" would therefore be a meager 0.75% by 2020. Not even 1%. How is that "disruptive"?
Where will the other 99.25 million cars come from in 2020? Certainly not from Apple and Tesla. And most of these 99 million cars will still be ICE or mild hybrids in 2020.
Investors coming from other industries/sectors once again seem to overestimate the rate of change in the car industry.
This sensationalist article somehow insinuates that all ICE R&D has to be written down on day X. This is completely wrong in my opinion.
First, there are interim technologies (serial or parallel PHEVs) requiring ICE technology, see eg. the continued success of cars like the Outlander PHEV* and secondly the shift to pure EVs (combined with a shift to more autonomous driving) achieving high double-digit car market share will take decades, not years.
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*Mitsubishi is one of the best examples of an ICE car company gradually shifting over more resources towards PHEVs/EVs.
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I concur.
Tesla (and maybe someday Apple) has the potential to be a major disrupter and Tesla is on track to be a major disruptive force, but right now it isn't a disrupter. If the Model 3 is a hit and demand vastly outstrips Tesla's ability to deliver, which I would give good odds may happen, the Model 3 might be the disruptive force that shifts everything, but even then it will be many years before the market will have the capacity to deliver on that demand. The capacity to build the batteries just isn't there and I strongly doubt it will be there for many years after 2020. Tesla moves faster than other car companies and it's looking at a 6 year ramp up at the Gigafactory from breaking ground in 2014 to full capacity in 2020.
RobStark
Well-Known Member
Automobiles, even BEVs, are very capital intensive. So market changes happen much more slowly than electronics.
30% of global automotive profits come from luxury cars (i.e. Germans) ~ 7.5M units.
30% of global automotive profits come from full size trucks (i.e. Detroit) ~2.5M units.
All other types of vehicles combine for 40% of global automotive profits.
The global auto industry has high fixed cost from factories, union contracts with pensions and healthcare(this one is an American issue).
But take a significant portion of those luxury and full size truck sales and the economics of automakers comes crashing down.
On the one hand most Japanese auto revenue comes down market and a bit better isolated from the Tesla and Apple threat but not completely.
Toyota,on the other hand, has significant US exposure and significant revenue from Lexus,Landcruiser, Titan,Tundra,and Sequoia.
Companies like Suzuki can hide in Asia for a while making cheap tiny ICEv with cheap tiny fuel efficient ICEs.
Apple and/or some of the other tech/electronics companies entering the auto industry will fail. But not all of them.
30% of global automotive profits come from luxury cars (i.e. Germans) ~ 7.5M units.
30% of global automotive profits come from full size trucks (i.e. Detroit) ~2.5M units.
All other types of vehicles combine for 40% of global automotive profits.
The global auto industry has high fixed cost from factories, union contracts with pensions and healthcare(this one is an American issue).
But take a significant portion of those luxury and full size truck sales and the economics of automakers comes crashing down.
On the one hand most Japanese auto revenue comes down market and a bit better isolated from the Tesla and Apple threat but not completely.
Toyota,on the other hand, has significant US exposure and significant revenue from Lexus,Landcruiser, Titan,Tundra,and Sequoia.
Companies like Suzuki can hide in Asia for a while making cheap tiny ICEv with cheap tiny fuel efficient ICEs.
Apple and/or some of the other tech/electronics companies entering the auto industry will fail. But not all of them.
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That is a telling set of numbers. 60% of the profits come from 11 M vehicles and only 40% from the remaining 89 M. Of the tech companies flirting with the auto industry, I would bet Apple will be among the companies to succeed in the long run, but not if they didn't have the huge pile of cash. That is a huge advantage getting into a new market, they can afford to make a lot of mistakes before getting it right. There is always the chance that the board will pull the plug on the Apple car if they have some major stumbles out of the gate, but if the company stays determined to get into the car market, I think they will make it.
A lot of other start ups just aren't capitalized enough to make any mistakes and survive. Tesla got very lucky, there were a couple of places the company could have gone bankrupt or been absorbed by another company.
dhrivnak
Active Member
While I mostly agree with you I see some good growth from Nissan, Chevy, Ford and BMW. All but BMW have outsold Tesla in total plug-in's so far. But even given strong growth from them I have a hard time seeing where plug-ins will be more than 10% of sales.
voyager
Active Member
What would be a disruptor par excellence is a vehicle that can bring together these (seemingly) contradictory aspects:
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I think before we can call Tesla as a disrupter it needs to achieve level of sales that are clearly stealing cars from competitors (in large scale) and perhaps significantly enlarging some markets.
Tesla Model S selling 50k cars / year still isn't a disrupter in the luxury sedan market.
But at 100k cars / year and up, it would begin to make the competitors suffer significantly.
At 200k cars / year it would be in full disruption mode.
If Model S sales continue growing 50% yoy by 2020 Tesla Model S would be disrupting its market.
Model X needs to also reach 100k cars / year to start getting into the disruption qualification.
Even more important would be finding that Tesla Model S is both stealing sales from competitors while increasing the total luxury sedan (same for Model X and its luxury cross over SUV market).
I think when Q2 2016 deliveries number come out at 07/03/2016 we'll have a clear picture (at least 20k deliveries for Q1 2016 and about to break 25k for Q2 2016).
If Tesla can't increase production fast enough or there isn't enough demand to sustain production growth then its failing at that job. But I think it will succeed.
Tesla Model S selling 50k cars / year still isn't a disrupter in the luxury sedan market.
But at 100k cars / year and up, it would begin to make the competitors suffer significantly.
At 200k cars / year it would be in full disruption mode.
If Model S sales continue growing 50% yoy by 2020 Tesla Model S would be disrupting its market.
Model X needs to also reach 100k cars / year to start getting into the disruption qualification.
Even more important would be finding that Tesla Model S is both stealing sales from competitors while increasing the total luxury sedan (same for Model X and its luxury cross over SUV market).
I think when Q2 2016 deliveries number come out at 07/03/2016 we'll have a clear picture (at least 20k deliveries for Q1 2016 and about to break 25k for Q2 2016).
If Tesla can't increase production fast enough or there isn't enough demand to sustain production growth then its failing at that job. But I think it will succeed.
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What about disruptions from EV vehicles to the society/economy at large? Let's say we see market penetration of 50% or more with EV, even 90%. What would happen to our economy and jobs? What would change?
Obvious examples would be gas stations and their convenience stores. How about auto parts stores? Tires should be fine. Car dealerships? Guess that depends on whether they embrace or reject EVs.
How about state taxes and revenues? Gas taxes for roads would fall. Emissions testing revenue. I'm sure this would be offset by some new EV tax.
I'm just wondering how a complete or high level of transition to EVs would affect the average person, and our current economy.
One positive I can think of would be a possible decrease in hospitalization for asthma and respiratory issues from automobile exhaust. Possibly decreased cardiac disease, maybe even birth defects and childhood related illness (for those old enough to remember, childhood lead levels from leaded-gasoline). Maybe even some decrease in cancers, since gasoline and related agents have carcinogenic potential. So we may all be able to live longer and better lives with a transition to EVs.
Since we are all going to get new jobs or find new income sources, what would replace the gas stations? What would replace auto parts stores or would they just evolve?
Any other thoughts?
I am just trying to think of how our world would look as we transition to EVs, and possibly think ahead to how we could smooth out the human impact such a disruption may have on our society.
Obvious examples would be gas stations and their convenience stores. How about auto parts stores? Tires should be fine. Car dealerships? Guess that depends on whether they embrace or reject EVs.
How about state taxes and revenues? Gas taxes for roads would fall. Emissions testing revenue. I'm sure this would be offset by some new EV tax.
I'm just wondering how a complete or high level of transition to EVs would affect the average person, and our current economy.
One positive I can think of would be a possible decrease in hospitalization for asthma and respiratory issues from automobile exhaust. Possibly decreased cardiac disease, maybe even birth defects and childhood related illness (for those old enough to remember, childhood lead levels from leaded-gasoline). Maybe even some decrease in cancers, since gasoline and related agents have carcinogenic potential. So we may all be able to live longer and better lives with a transition to EVs.
Since we are all going to get new jobs or find new income sources, what would replace the gas stations? What would replace auto parts stores or would they just evolve?
Any other thoughts?
I am just trying to think of how our world would look as we transition to EVs, and possibly think ahead to how we could smooth out the human impact such a disruption may have on our society.
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