Demand Load

A slew of electric vehicles that collectively represent billions of dollars in investment are about to hit the market. Yet even with all that firepower, consumers remain lukewarm to the idea of plugging in.
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Nissan IMQ concept

Not long ago, battery-electric vehicles could barely deliver 100 miles of range per charge. But before the end of this year, a slew of new options offering up to 300 miles of range will be available at U.S. dealerships and online, including Tesla’s Model Y, Audi’s e-tron, Jaguar’s I-Pace SUV, Porsche’s Taycan sports car, and Volvo’s Polestar 2 fastback.

In 2020, the rollout will continue to accelerate, with dozens of new alternatives scheduled for production.

Worldwide, automakers from Acura to Zotye are entering the all-electric market, driven by a mix of mileage and emissions regulations. More than a few intend to completely shift to battery-electric models in the years ahead. That includes General Motors Co. in Detroit, whose chairman and CEO, Mary Barra, says the automaker is on “a path to an all-electric future.”

The question is whether consumers are ready to plug in. There are plenty of optimists, including Pasquale Romano, CEO of San Jose-based ChargePoint Inc., the nation’s largest supplier of EV charging systems. “It’s an unstoppable train,” he contends, asserting that once buyers experience the advantages of long-range electric vehicles, they won’t look back.

Not everyone is so confident, though. “It’s tough for the industry, as a whole, to know what the natural demand is,” says Joe Eberhardt, head of North American operations at Jaguar Land Rover. “Some people say it will be 25 percent (of new vehicle sales) by 2025. I don’t think it will be that quick.”

Skeptics only have to point to the slower-than-expected growth of battery-car sales since the Nissan Leaf became the first mass production model back in 2010. Early in his first term, President Obama confidently predicted there would be at least 1.5 million plug-based vehicles on U.S. roads by 2015, a figure including both plug-in hybrids and pure battery-electric vehicles. The market didn’t come close. Even two years later, the figure was barely a quarter-million, with sales of all battery-based models — including conventional hybrids like the Toyota Prius — accounting for 4 percent of total U.S. new-vehicle sales.

Demand surged sharply last year, with sales nearly doubling, but a closer look at the boost is less likely to encourage confidence: The growth was due almost entirely to demand for the Tesla Model 3. As 2019 got underway, there were concerns that even that vehicle might be losing momentum, until the California carmaker announced it would finally roll out the long-awaited $35,000 base version — something it also conceded will put its balance sheet back in the red after two rare, profitable quarters.

Given the choice of scenarios, the auto industry can only hope that ChargePoint’s Romano is right. But that’s far from likely, warns a recent study by AlixPartners, a multifaceted consulting firm in Detroit. The report cautions that the industry is heading for a “pile-up of epic proportions.” That’s all the more concerning when manufacturers worldwide are planning to spend some $200 billion to develop battery-based models by 2025. If the forecast proves accurate, and manufacturers continue to push forward with aggressive rollout plans, they’re at risk of wasting billions, according to AlixPartners.

In turn, high prices for current electric vehicles, driven by sophisticated battery systems that are needed to prevent overheating and overcharging, cost thousands of dollars. Unless something changes, sticker shock will be tough to overcome.

It’s been nearly two decades since the Toyota Prius, the first mass-market vehicle offering an electrified drivetrain, came to market. The car quickly developed a loyal following that included celebrities such as Leonardo DiCaprio. A decade later, Nissan and GM upped the game, with the Japanese automaker debuting its all-electric Leaf and GM introducing its Chevrolet Volt plug-in hybrid.

Both had serious shortcomings, however — namely, high price tags and limited range, as well as the numerous sacrifices customers had to make, including weak performance, slow charging times, a limited public charging infrastructure, and cramped passenger and cargo compartments.

The launch of the original Tesla Model S began to shift the conversation. It was still expensive, with a price tag that could top $100,000, but it could deliver at least 200 miles per charge — 300 with an optional battery back.

Tesla also began setting up a network of “Superchargers,” high-speed charging stations strategically placed all across North America that would enable long-distance trips — New York to Washington, or Los Angeles to San Francisco.

That began to change once Tesla resolved what Musk called “production hell” at the company’s Fremont, Calif., assembly plant last year. From there, the Model 3 quickly became the world’s best-selling battery-electric vehicle.

By the end of 2018, it was the only battery-based model of any form generating more than 10,000 sales per month. And of the 94 “electrified” vehicles on the U.S. market, including conventional hybrids, plug-ins, and pure battery-electric vehicles, the Model 3 was one of only six topping 2,000 sales a month.

At the same time, both the pioneering Nissan Leaf and Prius have suffered sharp sales downturns over the past two years. The steep decline led a skeptical Jim Lentz, CEO of Toyota North America, to warn: “It’s going to be a battle” in the marketplace. For everyone other than Tesla, he said during a speech in Detroit this past January, “There’s not much growth.”

Perhaps not, but the onslaught of new products, including a wave of extended-range electric vehicles, is accelerating. That was obvious to anyone who attended a recent auto show.

The Geneva show brought the debut of 20 battery-based vehicles targeting every segment. The offerings include:

• The new Mazda CX30, which uses a small lithium-ion battery-powered motor to give a boost to a breakthrough gas engine dubbed SkyActiv-X that would otherwise be too sluggish for most motorists.

• The Honda e, a prototype of a small, all-electric urban runabout, which is targeted at city dwellers who don’t have far to travel. Production is scheduled for later this year.

• Kia and Nissan each unveiled concept vehicles — the Imagine and IMQ, respectively — that give a strong hint of what the battery-electric models they’ll soon be selling worldwide will look like.

• The Alfa Romeo Tonale will go into production over the next year and will offer an optional plug-in hybrid drive system that will let it travel dozens of miles in all-electric mode, with a gas engine firing up when the battery is drained so it can keep going.

• The Pininfarina Battista would push the limits no matter what’s under the hood — in this case, its four electric motors draw power from a 120-kilowatt-hour lithium-ion battery pack and can produce 190 horsepower, enough to propel it to nearly 220 mph.

The Tonale and Battista underscore the strategy some premium car brands plan to execute over the near- to mid-term. While there are more and more “affordable” hybrids, plug-ins, and long-range BEVs (battery electric vehicles) pushing ever downward in price, analysts expect sales growth in mainstream segments will be modest, at best, through at least the middle of the coming decade. Perhaps counterintuitively, they’re looking for bigger growth opportunities in more premium niches.

That makes sense, as luxury and performance buyers are less price-sensitive. So even if saving money on fuel isn’t a key motivator, there are other benefits of electrification. Significantly, electric motors generate maximum torque the moment they start spinning, unlike internal combustion engines that have to rev up. That can be translated into neck-snapping performance. The big Tesla Model S P100D, with its optional Ludicrous Mode, can hit 60 mph in a mere 2.3 seconds.

With that in mind, even traditional supercar brands like Ferrari, Lamborghini, and McLaren are racing to develop new hybrids, plug-ins, and BEVs. And the majority of the luxury and performance models that debuted in Geneva featured some form of battery drive technology.

The challenge going forward is to build demand among mainstream car-buyers. That’s where the industry faces the biggest challenge, as the AlixPartners study warns.

But that isn’t slowing things down. Consider Volkswagen AG, which plans to invest $800 million at its Chattanooga, Tenn., assembly plant to produce some of the more than 50 all-electric models it plans to roll out in the next four years.

Then there’s GM, which expects to debut more than 20 new BEVs over the same period, starting with an all-electric Cadillac crossover in 2020. Nissan has at least eight all-electric models coming over the next several years and Ford also has a major electrification program in place, while FCA US, with its North American headquarters in Auburn Hills, recently announced that its Jeep brand soon will have four plug-in electric hybrids and may add some all-electric models, as well.

Among high-volume luxury brands, BMW soon will offer electrified versions of every model in its lineup, as will Mercedes-Benz — the Stuttgart-based brand is going so far as to launch a unique sub-brand, Mercedes-EQ, which will offer only all-electric models.

Beyond the cost for purchasing parts, the AlixPartners study estimates that “by 2023 a whopping $255 billion in R&D and capital expenditures (will be) spent globally on electric vehicles, and some 207 electric models are set to hit the market by 2022.” The problem, a summary of the report concludes, is that “many of them are destined to be unprofitable due to currently high systems costs, low volumes, and intense competition.”

2016 Chevrolet Volt Voltec Electric Motor
The electric drive of the 2016 Chevy Volt produced 111 kWh, 149 hp, and 294 lb.-ft. of torque.

It’s a warning some in the industry are taking seriously. “We have to reduce the amount of money everybody’s pouring in,” Don Walker, CEO of Canadian-based mega-supplier Magna International, said during a mid-January speech to the Automotive News World Congress in Detroit.

For EV proponents, the good news is that sales of plug-in-based models around the world nearly doubled last year to 361,307, from 199,818 in 2017, according to InsideEVs.com. In China, where “New Energy Vehicle” rules are meant to foster demand for zero-emissions vehicles, demand grew even faster than in the U.S., making it the world’s largest market for plug-based vehicles.

Even so, plug-ins and pure electrics accounted for barely 4 percent of Chinese demand, and 2 percent of the American market. EVs “aren’t ready to take over the world,” Toyota’s Lentz says.

Could the pessimists be proven wrong? ChargePoint CEO Romano is convinced that once potential buyers experience the best attributes of the latest EVs — including roomy cabins, solid acceleration, and a quiet ride — they’ll be hooked.

Jaguar Land Rover’s Joe Eberhardt is a bit more cautious. “Electrification could become consumer-driven,” he says. “What it needs is for the industry (to) address customer pain points: range, charge times, and costs.”

At the same time, prices are beginning to come down, largely driven by batteries. When GM introduced the original Chevy Volt plug-in hybrid, it was spending nearly $1,000 per kilowatt-hour for its 24 kWh pack. According to Mark Reuss, president of GM, that has dropped to less than $150 for the 60 kWh pack in the long-range Chevrolet Bolt EV. David Cole, chairman emeritus of Ann Arbor’s Center for Automotive Research, says the automaker is targeting a $100/kWh price tag.

Consider it another way: Batteries in the 2019 Chevy Bolt would have cost $60,000 less than a decade ago, but now run about $9,000. That soon could fall to $6,000 — but even at that price, Cole cautions, electric drivetrains still are substantially more expensive than gas-powered alternatives.

A Boston Consulting Group study released a year ago doesn’t see battery drive technology reaching parity until the middle to latter part of the coming decade. To get there, battery prices alone will have to fall again by at least half, and possibly two-thirds.

The range issue also is being addressed. With the exception of city cars like the Honda e, most future BEVs are expected to offer a range of at least 200 miles, with some pushing 400 miles — but that’s under optimum conditions. In cold-weather climates, the equation changes. New studies by both AAA and Consumer Reports caution that when temperatures are around 20 degrees, range can tumble by as much as 50 percent.

Charging times also take longer in extreme cold. The good news is that the next generation of EV “fast-chargers” will be able to add as much as 20 miles more range per minute under ideal conditions, according to Porsche. The challenge will be to find one.

Consider that along the densely populated Woodward Avenue corridor, north of Eight Mile Road, there are just three older — meaning slower — Level 3 fast-chargers within 20 miles. That said, ChargePoint alone plans to install more than 1 million chargers across the U.S. over the next five years. Competitors, such as EVgo and the Volkswagen-funded Electrify America, won’t be far behind.

Most experts predict that the majority of plug-in vehicle owners will be charging up at home overnight, or at work. If that’s true, there won’t be a need for a public infrastructure nearly as ubiquitous as the current network of gasoline service stations.

Those are a lot of  “ifs,” however, and for the industry, it clearly creates a massive amount of risk. Coming up with the necessary cash won’t be easy, either. One reason for GM’s massive restructuring — which will see five plants close and 14,000 jobs cut by the end of the year — is to raise some of the cash the automaker will need to fund both its electrification  and autonomous vehicle efforts.

Will GM and the rest of the industry be throwing that money out the window? Based on sales results so far, it might seem that way. And with the “epic pile-up” of new products on the way, the situation actually could get more dire.

On the positive side, Tesla has shown that it’s possible to make money, even if only a slight profit, on electrified vehicles. The rest of the industry can only hope the old adage of a rising tide lifting all boats proves true.


Rivian Lore

A small, suburban Detroit startup is threatening to challenge not only automotive upstart Tesla, but also more established automakers. In a surprise February announcement, online mega-retailer Amazon announced it was taking the lead in a $700 million round of funding for the privately held Rivian.

Founded in 2009 and based in Plymouth Towbship, Rivian has been one among a slew of wannabe automakers focusing on the battery-electric niche that some expect to radically transform the industry by 2025. It unveiled its first two products — the R1T pickup and R1S sport-utility vehicle — at the Los Angeles Auto Show last November.

Like most others bringing pure battery-electric vehicles to market, Rivian has adopted a skateboard-like “architecture,” with its batteries, electric motors, and other key components tucked into or under the floorboards. That makes it a good fit for Amazon, says a Rivian source, stressing that its goal is to create unique “top hats” for whomever it partners with. (That’s industry-speak for customized bodies.) In the case of Amazon, that would mean an all-electric delivery truck — and, most likely, a self-driving one. The retail giant also has invested in several autonomous vehicle development companies in recent months that could build their technology into a Rivian vehicle.

The Amazon investment joins an announcement in April by Ford Motor Co. in Dearborn that it will invest $500 million in Rivian. In addition, the companies have agreed to work together to develop an all-new, next-generation battery electric vehicle for Ford’s EV portfolio using Rivian’s skateboard platform. 

Ford intends to develop a new vehicle using Rivian’s flexible skateboard platform. This is in addition to Ford’s existing plans to develop a portfolio of battery electric vehicles. As part of its previously announced $11 billion EV investment, Ford already has confirmed two key fully electric vehicles: a Mustang-inspired crossover coming in 2020 and a zero-emissions version of the F-150 pickup.

Of all the possible applications for an all-electric vehicle, few would test the mettle — and motors and batteries — more than a full-size pickup. These trucks have to deliver every day. Rivian’s R1T certainly looks good on paper, with a 180 kilowatt-hour battery pack that’s able to deliver up to a 400-mile range. Combined, Rivian claims, its two electric motors will make “close to 800 horsepower” and around 1,000 lb.-ft. of torque. With that configuration, it could tow up to 11,000 pounds.

There have been plenty of promising contenders in the EV space, but the Amazon and Ford investments suggest that Rivian is a name to which one should be paying attention. 

— Paul Eisenstein

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