5 Predictions For The Electric Vehicle Market From Morgan Stanley
Originally published on RenewEconomy.
By Sophie Vorrath
They might not be driving them yet, but electric vehicles are definitely on the radar of some of the world’s top investment and market analysts. Last week, US-based global investment bank Morgan Stanley named “alternative fuel vehicles” as one of seven key market and technology options it sees as well positioned to mitigate or adapt to climate change.
The call was made in Morgan Stanley’s latest research report examining the most relevant climate change mitigation and adaptation options, policy developments, and investment implications.
The report, Addressing Climate Change and the Investment Implications – A Primer on Climate Change, notes that key technological solutions like EVs may see more investment and deployment driven by technology maturity, mitigation potential, economic feasibility, and political support.
This is nothing we don’t already know, but further on in the report, Morgan Stanley has a closer look at the current state of the “alternative fuel vehicles” market and comes up with some interesting predictions and information tidbits:
1. Battery cost is expected to drop significantly And by significantly, Morgan Stanley means by a good deal more than half. The report points to Tesla, which aims to produce a battery that costs only $US100/kWh – currently, the average EV battery costs between $US250-400/kWh – from its under-construction Gigafactory.
2. Apple will likely launch into electric cars This is something many have been predicting, since the tech giant hired former Chrysler executive Doug Betts, who has auto industry experience spanning 30 years. And if they do join the EV game, Morgan Stanley says it would “change the industry landscape considering Apple’s scale, innovation and integration capability.”
Recently, Morgan Stanley US auto analyst Adam Jonas argued that technology companies, including Google, Samsung, Uber, etc. were better suited to bringing successful EV products to the mass market, pairing them with a sharing-economy model to increase utilisation and shorten pay-back periods.
3. Progress will be made around range/charging issues Another of the key barriers to EV mass uptake – after cost of batteries and infrastructure – electric vehicle range has been restricted to around 100 miles (160km) pretty much since the first EV was driven. But according to Morgan Stanley, GM and Tesla plan to launch models with driving ranges greater than 200 miles (320km).
In the meantime, policies to develop better recharging networks in major cities and along major travel routes are expected to help counter range anxiety. Morgan Stanley points to a policy unveiled by Beijing Municipal in February to provide investment subsidy of 30 per cent for building public charging stations.
4. New black cabs in London will be EVs with zero emissions from 2018 And these new-age London icons will be built by Chinese manufacturer Geely, according to Morgan Stanley, which has already invested £250 million in production facilities.
Of course, London, under the leadership of Mayor Boris Johnson, has been a leader in policy to drive the uptake of low-emissions vehicles. Most recently, the City of London introduced further lowered the congestion charge for ultra low-emission vehicles, and proposed giving decommissioning grants to taxis that are were than 10 years old – to encourage drivers to switch to electric cars. The policy update also proposes increasing the number of electric vehicle charging points, and could even lead to the introduction of preferential access and lower parking charges for electric vehicles in some parts of London.
5. There’s not much competition from hydrogen fuel models in the market The fact that hydrogen cars – the first example of which arrived on Australian soil in April – have been one of the few low-carbon technologies to attract the attention of federal industry minister Ian Macfarlane, might serve as a warning to some investors. But they get a mention in the Morgan Stanley report, if only to note that the Hyundai Tucson hydrogen model (the same that Macfarlane welcomed), launched in 2013 with a sales goal of 1,000 models by end of 2015, had only achieved around 25 percent of this goal as of June.
Reprinted with permission.
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Knowing Apple, they’ll want to come in with their own charging standard and change the shape of the plug every other year so you have to buy a new cord or even a new car every time! Oh, and the iCar will be 30% more expensive than other cars with the same range…but it’ll look pretty! Just an educated guess…
Let’s hope the people who build these cars don’t end up throwing themselves off a roof.
A mere 30%? Apple’s gross profit margin is 40%, much higher on its key moneymaking lines of iPhones and iPads. This is what is holding it back: such margins are unattainable in cars, even premium ones.
Surely it will be sold by bundling with other services. iPhones got sold by bundling contract with major carriers. So no matter the price, it would be just another bundled device, their cars would be. Think about it. That’s where their marketing genius kicks in. Later on, we will subscribe to commuting services with Apple’s or Google’s robo cars, just like we subscribe for internet, netflix or cable services. Taking out our time spent in driving would be enormous boost in productivity and increased safety. Bundles of services equals bundles of money for Apple.
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They will have a non-replaceable battery since it will allow the car to be thinner. And the material around the windshield glass will become a point of focus and known as the bezel. Apple will advertise that they have the smallest bezel.
Apple designs, but doesn’t build. Tesla is a decade ahead of Apple in knowing how to manufacture a car. It’s not rocket science, but Elon has that behind him as well.
Pretty sure Tesla already has the market cornered on proprietary charging standards that do not play well with others.
Tesla has offered to share.
Tesla pretty much had to create a new standard as they needed a fatter pipe than other options provided.
It may take a few years to sort out the rapid charger stuff. We’re awfully early in the game but eventually a single standard makes the most sense. It won’t matter as much along the heaviest used routes, but off the in boonies it would be terrible if we needed a separate charger for each brand.
Wait. Tesla is doing all that already, isn’t it?
Seriously?
No other EV currently in production comes close to having the Model S range or tech, although others with less range such as the Cadillac and BMW approach it in price – and those competitors don’t offer the long-term software upgrades or free road trip charging like Tesla. Currently, Tesla is simply unique in the market – even us Leaf owners know that!
And Telsa’s distinct U.S. connector hasn’t changed since the Model S was introduced in 2012, supporting 125 kW to CHAdeMO’s 62.5 kW with a much smaller and more convenient cable. Even so, a CHAdeMO adapter is readily available (a J1772 adapter for home charging is included with the car). With the rollout of their nationwide supercharger network to complete next year, their connector is unlikely to change before 2020, and they’ve even released the patents so other companies can adopt it – and I wish they would!
In Europe, of course, they simply use the standard Mennekes socket, which isn’t likely to change, either.
I realize you’re just trying to be snarky, but snark isn’t funny without a grain of truth behind it. I just can’t find the grain in your snark. 😉
Yes. You are right. Basically, I was saying Tesla makes good looking cars, that are world class. Thats what I meant like Apple. Not the charging. Tesla doesn’t change standards often at all, and they support every standard imaginable. Thats not like Apple.
I strongly suspect that had we not had Tesla start up in Silicon Valley and ultimately run by a guy who made his fortune from web-based software, we would not be hearing about a car from Apple and/or Google. Tesla shot down the idea of “what do we know about building cars?”
Don’t refer to the city of London as the City of London, the mediaeval relic that runs the few blocks round St. Paul’s and the Bank of England. Boris Johnson is Mayor of London, rides a bike, fills scandal sheets with his love-life, and leads the Greater London Authority, providing services to 7.74 million people with a budget of 11.3 billion GBP. The City of London has a resident population of 7,000 (though a working one of 300,000) and a budget of 363 million GBP. The Lord Mayor – Dick Whittington’s successor, a banker called Alan Yarrow – gets to wear a funny hat and be Admiral of the Port of London. I don’t know anything about his love-life or cat.
Does anyone know if Tesla is continuing with the 18650 battery architecture for the Gigafactory? Here’s an interesting musing from an SAE dude:
http://articles.sae.org/12833/
And an interesting powerpoint on battery industry group called Advanced Automotive Batteries. The good stuff in this presentation is blocked out. To unblock it one would have to pay for the research. Hint. Hint.
https://www.advancedautobat.com/industry-reports/2014-Tesla-report/Extract-from-the-Tesla-battery-report.pdf
Didbits from the presentation copy/pasted below:
Current high-energy 18650 cells deliver 50% higher energy per unit weight than current large cells. In the future, the main opportunity for energy density enhancement and cost reduction in 18650 cell construction is in the implementation of materials with higher capacity and/or lower cost;
there would also be some benefit in moving to slightly larger cells (20700 or so)
We assume similar chemistries will be developed for both large cells and 18650 cells before the end of the decade
We project that by 2018, the 18650 approach will only offer 15-20% better energy per unit volume and similar cost to that of the large-cell pack.
The manufacturing super simplified pre-pre conceptual Gigafactory manufacturing process flow diagram below:
http://www.teslamotors.com/sites/default/files/blog_attachments/gigafactory.pdf
Zack or one of the commenters should run over to Tesla’s facilities engineering department and get the most up-to-date manufacturing PFDs for us. Thanks.
A cool paper on the life-cycle engineering of lithium ion batteries from Argonne National Labs.
http://www.transportation.anl.gov/pdfs/B/855.PDF
And a more detailed simplified pre-pre conceptual PFD on Lithium ion battery manufacturing process attached below. If it’s not obvious, I want a plant trip of the Gigafactory. Again, thanks.
Here’s an article predicting a move from 18650s to a larger format cell, the 20700.
http://seekingalpha.com/article/2966026-tesla-gigafactory-tipping-point
Your first link –
” Battery supplier sources who spoke anonymously estimate Tesla’s cell cost per kW·h to be less than $160.”
How sweet would that be?
As for other battery shapes/sizes, Tesla is going to be out front and running with whatever they manufacture in their Gigafactory. Other forms might be cheaper but due to lower manufacturing levels could take a long time to catch up pricewise.
Powerwall Mk2 out before we get powerwall Mk1 (due in the UK in 2016) ?
There’s a lot of battery mechanics and chemistry at the basic science level. A slight tweak here and a twitch there will add to performance. Especially when there’s around 7,000 cells per Model S. This is the science that is best done at research universities and national labs. For example, a grad student can focus for 18 months on one thing at $3,000 month stipend a lot cheaper than a full time employee at Tesla or Panasonic. The more robust or flexible the manufacturing process flow can be the better – as insight and optimization becomes available. Anyway, interesting times.
Your second link – the one with a lot of good stuff hidden – claims $221/kWh by 2018 for Tesla packs. I question that.
We’ve had prices of $160/kWh (your first link) and $180/kWh (Navigant Research about a year ago) for cells. And I read that assembling cells into packs adds about 30%. That would make battery pack prices $210 to $234 now.
Perhaps the 30% number is dependent on the new Gigafactory efficiency so current prices should be higher. But with the GF up and running before 2018 I don’t see $221/kWh as being accurate.
$130/kWh + 30% = $170/kWh pack price.
Tesla CTO JB Straubel has said he’d be disappointed if they weren’t hitting $100/kWh at the cell level by 2020. I can’t remember where he said it though – it was a conference where he and Elon were part of a panel.
He
JB said at a Californian University last year that a 50% reduction was more likely.
And
Q3 2014 Conference cal excerpts -TeslaMondo
“COST REDUCTION: We felt comfortable with at least a 30 percent reduction in cost just based on the location and economies of scale. That’s without taking any technology improvement into account, and we’ll certainly do technology improvement. If we can’t get to 30 percent without technology improvements, someone should shoot us, because that would be in complete defiance of economies of scale and obvious cost savings” – Elon Musk
Tesla’s CEO and CTO are routinely overly optimistic, but suppose they only hit $150/kWh sale price (they do need a profit margin). That’s generally thought to be massively disruptive to the market, all by itself.
It will be $100/kWr or less with the GF.
Thats about right. No way Tesla could make PowerPacks for $250/kwhr to utilities without being able to do similar for vehicle packs. Vehicle packs are in the 100kwhr range, too, close to PowerPack size. Both have packaging cooling system, and BMS.
There must be some margin. So costs are lower.
Thats now. That should drop post GigaFactory production.
We are playing poker with the right numbers, because no way Tesla is going to show their cards.
I expect Tesla to sharply cut the cost of assembling cells into packs. Heck, they’ll probably cut the cost of assembling cells from parts.
It’ll be harder to cut the cost of raw materials for cells, or the cost of making the anode or cathode, so I expect the assembly to be where the cost savings comes.
I read they are going 20700. Some of the cost reductions are expected from that alone.
One of the big issues would be the price of electricity per kWh from the public charging networks. Price it uncompetitively with the special EV rates or TOU from your utility, it would become a hindrance to the rapid and wider acceptability of switching over to EV. This could be a major problem. I wouldn’t go cross country on an EV, save the Volt, if the ubiquitous chargers all over America would be charging me $1.00/kWh for the sake of convenience.
you don’t need to go cross country Marion and most of the EV’s up to 50Million worldwide will be used in urban centers for daily commutes anyway. Relax.
The charger companies can profit handsomely if they charge the same rate as it does to pump gas.
Yeah, but I’ll let them charge up at my place for free if they ask nicely. (Just bring an extension cord.)
An interesting project out of MIT on battery manufacturing:
“New manufacturing approach slices lithium-ion battery cost in half”
http://newsoffice.mit.edu/2015/manufacturing-lithium-ion-battery-half-cost-0623
copy/pasted from the article:
“An advanced manufacturing approach for lithium-ion batteries, developed by researchers at MIT and at a spinoff company called 24M, promises to significantly slash the cost of the most widely used type of rechargeable batteries while also improving their performance and making them easier to recycle.
“We’ve reinvented the process,” says Yet-Ming Chiang, the Kyocera Professor of Ceramics at MIT and a co-founder of 24M (and previously a co-founder of battery company A123). The existing process for manufacturing lithium-ion batteries, he says, has hardly changed in the two decades since the technology was invented, and is inefficient, with more steps and components than are really needed.”
…end of copy/paste
Process engineering cost estimating is based on capital cost as a percentage of major purchased equipment (stuff to make the batteries) and operations and maintenance (O&M). O&M is highly dependent upon raw material, utilities, labor and cost of capital mentioned above. The Gigafactory capital cost was heavily subsidized through essentially free land, Nevada state help and low interest rates.
The thing isn’t the building being built. That thing apparently costs $5 billion. I’ll assume there’s a 15 to 30 percent cost contingency on that number. The Gigafactory is just a cost item to house the process and something to keep out the weather. Battery manufacturing could be done out of a pole barn if weather permits. It’s the process to make the thing that goes out into the market that’s critical. If the market is competitive, the thing to realize a profit has to count on image, i.e. Apple products. If the process is inflexible, the company is stuck with a thing that doesn’t sell. Batteries are essentially the fuel tank and gasoline. Both neither the selling point for a car. Some day batteries will be as equally sexy. Right now most of the value of Tesla is in Tesla(TM). Tesla is kind of doing two things with the Gigafactory: marketing (image) and market control. Control is similar to something like Microsoft Windows circa 2000 of Facebook now.
Since Tesla is keeping the cards close to its vest on process engineering and product specification, it’s hard to figure out how the Gigafactory adds up, beyond being a hugely costly Silicon Valley totem. A totem also where the risk of a return on capital cost is borne chiefly on the public of this public/private partnership. Like many large infrastructure project, once a lot of capital is sunk – folks like politicians, and bankers will do anything to keep it going. Big projects tend to need momentum to get going. And once they get going there’s too much momentum (money) to stop it.
My point is process flexibility. Will Tesla be stuck with an extremely expensive process to make a battery pack that is less effective than the competitor? Or will it be able to change process flow rapidly to make another battery?
Here’s a really cool discussion on lithium ion battery economic evaluation and decision making from Argonne Labs. It’s the items going in and the process around making the batteries – not the 2009 dollars that’s important.
“Factors Determining the Manufacturing Costs of Lithium Ion Batteries for PHEVs”
http://www.cars21.com/web/assets/link/EVS-24-3550250%20santini.pdf
Here’s the economic evaluation of the industry for baseline batteries:
Materials: 46%
Purchased items (utilities, hand soap, Tyvek suits, etc): 17%
Direct Labor: 6%
Variable Overhead: 4%
General, Sales, & Admin: 5%
R&D: 5%
Dep: 10%
Profit: 7%
Materials sourcing and cost is key. Another new day for mining.
“Will Tesla be stuck with an extremely expensive process to make a battery pack that is less effective than the competitor? Or will it be able to change process flow rapidly to make another battery?”
Tesla said they can switch their Gigafactory to a new battery type pretty easily.
I’d like to learn more about “pretty easily.” Like how dedicated major purchase equipment is to a specific process geared towards a specific battery chemistry and architecture.
I do, too. But unless you can make Elon talk, were probably not in luck.
But ypu can be certain they are thinking about stuff like that and are prepared if some new battery comes around.
They’ve said repeatedly that they’re not tied to any particular chemistry.
They probably are tied to the whole “chemical battery cell” concept, but that’s still a lot of flexibility.
Worth noting that Tesla already makes a model with a 270 mile range, although it’s expensive.
In article: “Recently, Morgan Stanley US auto analyst Adam Jonas argued that
technology companies, including Google, Samsung, Uber, etc. were better
suited to bringing successful EV products to the mass market”
Samsung already does that, together with Renault. The model SM3 ZE is based on the electric Renault Fluence. What Samsung needs to do is sell in more markets.
https://en.wikipedia.org/wiki/Renault_Samsung_Motors