An alternative title to the above was: “Slow & Steady Is A Recipe For Disruption.” But the story is a little more complicated than that.
Naturally, as the director of CleanTechnica, I get to talk to a lot of EV leaders at conferences around the world. We also get millions of views a month and a lot of feedback on and off the record*. Some of that feedback is particularly useful for completing the EV transition puzzle in my mind. A couple of examples are two discussions I had earlier this year with some auto industry movers & shakers. These discussions have been tingling inside my head because of the context they seem to add. The information I’ve gleaned has been aching for a write-up but delayed by so many other stores. However, recent quotes from Magna CEO Don Walker pushed me over the edge and finally got me to write this piece up.
First of all, during a conversation this year with an EV leader at Volkswagen Group, I was thrown off a bit by how openly he talked to me about the company’s EV battery plans … or lack thereof. Not putting much pressure on him to reveal deep secrets, I asked about Volkswagen’s potential $11 billion investment into a battery factory in Salzgitter, Germany. To my surprise, he was quite open in saying that the Volkswagen Group board was still debating the approach forward — whether to do something like this or just rely on external battery suppliers. The way he put it, it seemed that certain board members were in disagreement about the best idea and were still debating the matter amongst themselves (without taking any significant action in either direction).
Well, I shouldn’t have to inform you that not knowing yet which path to take with regards to a large-scale supply of EV batteries means you are way behind. You can’t really plan any genuine mass-market rollout of EVs if you don’t have a solid plan for where you’re getting the batteries, and some basic expectations about what the batteries will provide (in terms of energy, power, energy density, and power density).
Just assuming that battery suppliers like LG Chem, Samsung, or Panasonic will be able to quickly satisfy needs comparable to what Tesla’s models demand would be idiotic, of course, so I’m certain none of these auto company execs are making such assumptions. They know the battery producers need a strong commitment from automakers that they will build a large number of EVs before they will feel comfortable massively ramping up battery production. And whether it’s Volkswagen, BMW, or GM, the executives know just how massive the battery production increase needs to be in order to make a transition to EVs.
Remember, global lithium-ion battery production (for all purposes) was below 35 GWh in 2013, and Tesla Gigafactory production is supposed to hit 35 GWh next year in order to support Model 3 production. Making a commitment with Tesla to get up to that level, Panasonic had to take quite a leap of faith that the demand would be there. A Panasonic company exec later said that he thought the idea was sort of crazy. Which battery suppliers are willing to take that leap of faith with Volkswagen, with BMW, with Nissan, etc.? Furthermore, are these automakers even willing to take that leap of faith themselves?
Volkswagen’s top brass understand the risk of making such a bet. They also understand the risk of succeeding. Why make a leap of faith into a pit that you don’t even want to leap into? My chat with this Volkswagen exec led me to believe that automakers were basically still waiting on “the right moment” to ramp up EV production, while EV battery producers were doing the same. If everyone is waiting on a sign that the other party is moving fast and ready to roll, when does someone stop waiting? The Model 3 release and huge production plans in the coming year are clearly some sort of impetus for large automakers and battery suppliers to start their own serious efforts, but how much impetus? “Hey, the target is ‘just’ 500,000 cars a year … and we don’t even know if Tesla will be able to do it.” That’s the kind of rationalization I assume some of these executives are using.
If Magna CEO Don Walker is correct, these automakers are putting out a lot of PR spin regarding electric cars while not wholeheartedly planning for them behind the scenes — maybe not even halfheartedly doing so. The information I received earlier this year and some basic logic seem to back that claim up.
And none of that even covers superfast charging.
On the other hand, I had another discussion a few months ago that gave a bit of hope … sort of. I was talking with an executive at an automotive powertrain design firm. They had no deep history in EVs or strong ideological leaning toward them, but they had been adapting to the market and were increasingly focused EVs because that’s clearly where the market’s headed. This guy told me that the vast majority of their work for clients (which included top auto manufacturers in Europe) is now powertrains with an electric component. There’s been a clear shift toward fully electric cars and plug-in hybrids in the past couple of years. Much more than what’s on the market or even announced, this is where auto giants have been shifting their design work.
That makes sense. Why waste more R&D money on gasoline or diesel engines when they will be getting pushed off the market in the coming years?
That said, designing cars is only one part of the process. It works fine for creating concept cars you’ll never produce as well as the basic underpinnings of new model skeletons. However, none of that requires massive capital investments into new factories or reworked factories. It’s just design work. It can indicate where the industry seems to be headed (electrified vehicles), but it doesn’t fully indicate how long it will take to get there.
There are certain timeframes that are standard for designing and then eventually producing new models, but those commonly known timeframes could get disrupted as the industry engages in a massive technological shift. As I tried to explain in this article, a quick transition to electric vehicles would mean that large automakers would have to drop massive investments into gas/diesel engine R&D, gas/diesel engine factories, other factories related to such powertrains, gas/diesel engine staff, etc. These automakers don’t want the transition to happen quickly because that will slam into their financials and likely cause serious investor backlash. If these companies are prepped with EV powertrains, cool, that’s fine, but they will still extend the life of their gas/diesel engine investments as long as possible and wait until the last moment to invest in massive capital projects or commitments to suppliers. The questions are: 1) When is that moment? 2) How much of the EV supply chain will be controlled by reliable old Tesla at that point? 3) Which companies will get the timing just right and which will suffer and perhaps even collapse from timing the transition too cautiously?
Don Walker was probably right about many automakers’ superficial commitments to EVs, but I think we have some strong signs that certain automakers (including Chinese automakers) are intent on making his guesses regarding the market’s uptake of electric cars end up massively off the mark. We’ll see.
- Analyst: $5 Billion Tesla Gigafactory Worth $50 Billion
- Tesla To Build 10–20 Gigafactories Around The World As It Scales Up (#ElonTalks)
- 11 Key Tesla Gigafactory, Model 3, Solar, & Elon Romance Takeaways From Today’s Statements
- Volkswagen: 40 Battery Gigafactories Needed For Electric Car Revolution
- What’s Actually New In The Electric Car World?
- What Goes On In The Minds Of Auto Execs?
*By the way, apologies if I don’t see some of your feedback. I probably miss most of the messages sent my way these days.
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