11 February 2019

EVs - extraordinary vehicles or expensive ventures?

With the news that the global market for electric vehicle batteries expanded by almost 47% to 7.38 gigawatt-hours (GWh) in 2018, up from 5.03 in 2017, one might be forgiven for thinking that everything is rosy in the EV garden but other news in the last week might dispel this presumption.

Tesla has a couple of challenges that are of concern for EV evangelists and also the supply chain; when it launched its compact Model 3 in July 2017, promoting it as an affordable premium EV - with a price promised to come down to $35,000, Elon Musk said more than half a million buyers had put down deposits on the new car. Tesla shares went up almost 15% over the following six weeks but the carmaker delivered just 145,610 Model 3s in 2018, and all of them at priced at well over $35,000. Musk said last week a $35,000 version was under development but was at least six months away.The cheapest Model 3 is still $42,900, evidence of either a novel and exciting new way of selling cars - lowering the price after launching the vehicle - or further evidence of Musk’s maverick and some would say bizarre business practices. He has been quoted as saying that demand for the Model 3 is ‘insanely high’ but after his television appearance a few months ago when he appeared to be somewhat tired and emotional or indeed insanely high, some might say that he does not appear to always have a fully charged mental battery on board.

Tesla is a business case that will surely become a standard business degree or MBA thesis subject, and is a company that might well not have survived if it was a standard model carmaker with shareholders expecting a conventional share/dividend ratio and good returns on investment.

Don Walker, CEO of Magna International, made what could well become a very telling comment at a conference last week, citing the massive jump in supplier investment in CASE technology - from an estimated $90 billion in 2018 to a forecast $300 billion in the coming year. Walker was obviously alluding to the way that suppliers better known for powertrain componentry and even sheet metal products have scrambled to buy into electronics hardware and software companies, and to bankroll startups who may or may not have brilliant concepts for future mobility. He said that a better way forward is to forge more partnerships, a notion evidenced by the recent news that Volkswagen and Ford will work together on light commercials and pickups and the joint development of electric and self-driving technology. As at the time of the birth of the automobile, when a customer bought a rolling chassis from a carmaker and had it bodied by a coachbuilder, the sea change of switching to electric motive power will need intelligent collaboration between OEMs and between suppliers, combined with less emphasis on brand individuality in the driveline of the vehicle. As Don Walker said, talking about autonomous vehicles as well as EVs: 'This is a very expensive endeavour with lots of people working on it, I think we need to have more cooperation.'

Simon Duval Smith

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