Let’s start with a chart from my last post. I’ve relabelled it to read ‘sales capacity’ adds rather than ‘production capacity’ adds just because we can then tack the time series on to the existing EV sales numbers we have for the last few years as reported by EVvolumes.com. In reality, there is a lag between leaving the factory and delivery to the customer, but given this is less than a year, I think it can be safely ignored.
In the chart below I add a bit of texture so you can see some numbers (rounded to the nearest 100k) for total sales and sales additions both historically and projected into the future based upon my Tony Seba central scenario S curve:
I’ve gone only as far as 2023 since we should be able to see evidence of action being taken now in order to obtain outcomes then.
To give you a sense of the development process, below is a fascinating presentation by Alex Patterson of Nissan showing you how to get from sketch to production for a new version of the Qashqai. What jumps out at me from this video is that the whole complex process only took three and a half years!
Now let’s do some bottom-up work. I’m going to do this by looking at the EV strategic intentions with respect to two main categories of auto maker:
- The major motor manufacturers (VW, GM, Toyota, Hyundai, etc)
- The disruptors (Tesla, BYD, SAIC, Geely, etc)
The Major Motor Manufacturers
A good starting point to this analysis is to take a look at the latest global market share of auto sales by maker to identify the big guys. The International Organisation of Motor Vehicle Manufacturers (OICA) publishes just such data, albeit with a lag. The latest release is for market share as of 2016 as can be seen here (2017 numbers are not out yet):
And because we are also interested in how many cars were actually sold, here is the same chart looking at those unit numbers.
So from my top charts, we were looking for 14 million EV sales in 2023 for Tony’s S curve, which also translates into 5 million units in additional capacity that year. Those numbers compare with Big 6 sales of between 5 and 10 million units per annum.
Next, let’s look at the declared intentions of the top six global auto manufacturers.
Toyota has been sparring with Volkswagen for the title as world’s number one motor manufacturer for the past few years. When it comes to sustainability, it is well know for its investment in hybrid technology via the Prius and also for pioneering hydrogen fuel cells through the Mirai, but the company has been a laggard when it comes to pure battery electric vehicles (BEVs). Indeed, the company previously pushed the benefits of hybrids far more than pure EVs.
On 18 December 2018, however, the company announced a dramatic change of direction (press release here) when it stated that it was targeting 5.5 million EV sales by 2030, of which 1 million would be pure BEVs (not hybrids).
The shift away from ICE to EVs was made stark by this statement:
“Additionally, by around 2025, every model in the Toyota and Lexus line-up around the world will be available either as a dedicated electrified model or have an electrified option. This will be achieved by increasing the number of dedicated HEV, PHEV, BEV, and FCEV models and by generalizing the availability of HEV, PHEV and/or BEV options to all its models.
As a result, the number of models developed without an electrified version will be zero.”
And the R&D commitment to battery technology was unequivocal:
“Batteries are a core technology of electrified vehicles and generally present limitations relating to energy density, weight/packaging, and cost. Toyota has been actively developing next-generation solid-state batteries and aims to commercialize the technology by the early 2020s. In addition, Toyota and Panasonic will start a feasibility study on a joint automotive prismatic battery business in order to achieve the best automotive prismatic battery in the industry and to ultimately contribute to the popularization of Toyota’s and other automakers’ electrified vehicles.”
The commitments by Toyota don’t get us anywhere close to Tony Seba’s 95% EV penetration target in 2030, nor do they accelerate us up the S curve near term. But the central core of Seba’s analysis is that incumbents find it exceedingly difficult to counter disruptive technology since they are loath to junk past sunk costs in the old technology (in Toyota’s case also a bridge technology in hybrids). Indeed, every single one of Tony’s presentations has Kodak’s death at the hands of digital photography at the front of the slide deck pushing this point.
In this light, Toyota’s press release can perhaps be seen as reactive rather than proactive. And while Toyota has admitted that there exists a threat from pure EV, their response is measured when compared with arch-rival Volkswagen.
Wind back two months from Toyota’s press release and you come to Volkswagen’s unveiling of “Roadmap E” on 17 September 2017 (press release here). It leads off with this:
“The Volkswagen Group is launching the most comprehensive electrification initiative in the global automotive industry with its “Roadmap E”: Volkswagen will have electrified its entire model portfolio by 2030 at the latest. This means that, by then, there will be at least one electrified version of each of the 300 or so Group models across all brands and markets.”
And this was written by Matthias Muller, Chairman of the VW Board (not by Tony Seba):
“The transformation in our industry is unstoppable.”
Unlike with Toyota, we have a nice big solid number to stick on Tony’s S curve:
“The Company estimates that around one in four new Group vehicles – up to three million units a year depending on how the market develops – could already be purely battery-powered in 2025.”
In my former industry finance it was always a good idea to follow the money to find incipient trends. In this regard, VW’s press release gives us a lot of money to follow:
- $20 billion in direct investments in industrialisation of e-mobility
- $50 billion of battery procurement tenders
- Setting up of in-house battery production lines
- Gearing up for next generation solid state batteries
It seems VW has decided to go ‘all-in’ with the EV game. Is this an incumbent showing enough flexibility to survive? We shall see.
Like Honda and Toyota, Hyundai (and it’s subsidiary Kia Motors) has been somewhat lagging on the electrification of its line-up due to an ongoing commitment to hydrogen fuel cell vehicles. Responding to the aggressive plans announced by Toyota and VW, however, Hyundai announced a $22 billion investment in electric cars in January 2018 and that a new line-up of 31 models by 2020 and 38 models by 2025 . There doesn’t appear to be a specific press release related to their “Clean Mobility” strategy plan, but you can find details in one of Hyundai’s investor presentations here.
No EV sales targets have been announced as of this time.
The three emblems of the rebirth of the EV have been Tesla’s Model S, the Nissan Leaf and G.M.’s Chevrolet Volt. Yet until October 2nd, 2017, G.M.’s commitment to the EV space appeared half-hearted due to its meagre model line-up. That all changed with this press release.
“General Motors announced today how it is executing on a major element of its vision of a world with zero crashes, zero emissions and zero congestion, recently announced by GM Chairman and CEO Mary Barra.
“General Motors believes in an all-electric future,” said Mark Reuss, General Motors executive vice president of Product Development, Purchasing and Supply Chain. “Although that future won’t happen overnight, GM is committed to driving increased usage and acceptance of electric vehicles through no-compromise solutions that meet our customers’ needs.”
In the next 18 months, GM will introduce two new all-electric vehicles based off learnings from the Chevrolet Bolt EV. They will be the first of at least 20 new all-electric vehicles that will launch by 2023.”
Like VW, GM appears to have got the EV religion.
In May 2017 Ford got a new CEO Jim Hackett whose brief was to prepare the company for a completely reconfigured marketplace. The incoming CEO’s first strategy announcement in October 2017 was short on detail apart from a commitment to aggressive cost cutting. The forward-looking ideas vaguely centred around a smart car agenda, with the China market playing a key role. The most detail we got on EVs was this:
“The company recently announced a dedicated electrification team within Ford focused exclusively on creating an ecosystem for products and services for electric vehicles and the unique opportunities they provide. “
In January 2018, however, we got more meat when Ford’s Chairman Bill Ford announced the following measures:
- 16 fully electric vehicles to be added to line-up by 2022
- 40 fully or partially electrified vehicles to launch over that time frame
- Investment in EVs to rise from $4.5 billion to $11 billion
In an important move necessary to increase EV penetration, Ford also explained how electrification of existing SUVs and pick-up was to take place, making this comment to Reuters.
“If we want to be successful with electrification, we have to do it with vehicles that are already popular.”
Rather than a standalone company, Nissan can best be thought of as part of the Nissan-Renault-Mitsubishi Motors alliance. As such the group taken together could be viewed as the largest auto maker in the world.
Rather like GM with the Volt, however, Nissan has been somewhat slow to take the technology from its breakout product the Leaf and apply it across its product range. Again I can hear Tony’s voice talking about the lack of ability of incumbents to disrupt their own businesses even when they are leaders in the technology driving the disruption.
But completing our orgy of announcements from the Big 6, Nissan has suddenly decided to aggressively play catch-up with a commitment to sell 1 million EV cars a year by 2022. The March 23rd press release is here and the “M.O.V.E. to 2022 Plan” has these goals:
- Develop eight new pure electric vehicles, building on the success of the new Nissan LEAF
- Launch an electric car offensive in China under different brands
- Introduce an electric “kei” mini-vehicle in Japan
- Offer a global crossover electric vehicle, inspired by the Nissan IMx Concept
- Electrify new INFINITI models from fiscal year 2021
- Equip 20 models in 20 markets with autonomous driving technology
- Reach 100% connectivity for all new Nissan, Infiniti and Datsun cars sold in key markets by the end of the plan
The strategy announcements are different in texture and difficult to to compare, but they have elements in common:
- A broadening of electrification across the product range
- The acceleration of EV model roll outs to the early 2020s
- A tidal wave of money going into the EV space
- A massive recommitment to EV R&D, particularly with respect to batteries
- Not one mention of any new initiative with respect to ICE technology
- Lots of FoMO (fear of missing out)
- And lots of plain FEAR (It seems that VW’s September 2017 strategy announcement has scared the crap out of VW’s competitors, and their strategic ripostes have been tumbling out one after another since then.)
Moreover, if we assume that the battery materials, battery cells and battery modules will be available to make the cars (I’ll come back to those issues in later posts), the Big 6 makers have the intention to try to sell EVs across every model segment. Thus, on the supply side of Tony Seba’s forecast, the big guys intend to play a major part. Of course, just because you can make an EV, it doesn’t mean anyone will buy it. But that is the demand side, which I also want to leave for later.
Rather, for my next post I want to look at the disruptors. How much money can they raise, how many factories can they build, how many EVs can they sell. To date, Tesla sales are really just a rounding error in terms of total global auto sales. Will that change? And, then there are the Chinese.
For those of you coming to this series of posts midway, here is a link to the beginning of the series.