The car, reinvented. Episode 2

Your next car will be electric

The automobile sector is poised for a drastic shift with the rise of EVs. Strangely enough, some components of the switch are not unrelated to what happened in the digital sector with the smartphone and the deployment of fiber optic. (Episode 1 is here)

By Philippe Chain* and Frederic Filloux

It sounds like a bold statement, but I would be ready to bet with most of Monday Note’s readers that in less than four years they will be driving an electric car. (Will they actually own it is another matter that will be the subject of another article of this series). But the underlying trends are unstoppable.

In this installment, we will address the following questions:

1. Why will you buy an EV?
2. What are the industrial components of the shift ahead?
3. Will the infrastructure be able to respond adequately?

1 . Why will you want an electric car?

Let’s kill an idea that might be prevalent, especially in the American techie brain: the fact is, for most people rational arguments to buy a car play only a marginal role in the decision process of acquiring an automobile. Thirty years staring at market research for three different carmakers, down to the salesman dealings with clientele, taught me that the final choice of a model is mostly subjective. You want this car because you like it, not because of the number of cubic-inches in the trunk, nor the size of the interior. Functions and features play a secondary part in the acquisition (or the lease) of a car. You do of course review the extensive catalog of features and options, but you want the car because it’s cool to have, to be seen with, and fun to drive. Think about the motive of those owning an SUV in California. You might invoke your last painstaking winter trip to Lake Tahoe, but in fact, driving an SUV is simply enjoyable — even if absurd from a practical, ecological, or even an economical perspective.

This is weird considering that a car is the most expensive piece of technology purchased by any household: the average price tag for a car is about $37,000 in the United States and in Europe, it ranges from €22,000 to €47,000, depending on where you live.

Episodes of the series:
01: The car, reinvented. From scratch.
02: Your next car will be electric
03: How Tesla cracked the code of automobile innovation
04: The Global Race for Battery Supply
05: Code, on wheels

To a large extent, a parallel can be drawn between the purchase process of a smartphone and a car. While a Huawei phone or a Google Pixel might carry a better price/performance ratio, many will still prefer an iPhone. The mechanisms are similar. But except for a small segment, motives are everything but rational It is all a matter of sheer desire. Likewise, people will switch to EVs because they want one.

Therefore, the adoption curve of the EV won’t differentiate from the rest of technology and its well-known S-Curve:

As we can see on the charts below, EV adoption is nearing the tipping point (except that tipping points are usually identified way after their occurence).

By and large, experts agree that the next phase, starting in the coming years, will see an exponential curve with staggering evolution across all the key metrics as compiled by Bloomberg:

The electric car will soon be “cool to have” when its defining social characteristic will shift from the expression of power & wealth to the projection of a more responsible self, eco-conscious, in-sync with the aspiration of Millennials and Gen Z towards a cleaner planet. By the way, the same person will have realized that the quiet acceleration of an EV is totally dope and the 250-mile range is not an issue either for daily driving or for the long-haul when the average trip between two charging stations is about 50 miles…

2 . The industrial component. Volkswagen wants the lion’s share of the e-world.

In the same way that the mass adoption of smartphones was triggered by the global race started by Apple in 2007 with the iPhone, a deluge of new models available will play a key role in the adoption of the EV. According to Bloomberg New Energy Finance, there will be 500 models available worldwide by 2022.

A good example is the strategy of Volkswagen Group. By 2029, the German carmaker expects to roll-out 75 all-electric models. That’s the equivalent of one new model every six weeks. To achieve this unprecedented goal, VW is upgrading the platform concept with its Modular Electric Drive Matrix (MEB), which looks like this:

MEB is getting closer to the concept of “skateboard” explained in our previous article: The same “set” will be available in five or six versions able to support dozens of models ranging from a sports sedan to the offspring of the iconic VW van, with ranges varying from 330 to 550 km (200 to 340 miles). Volkswagen intends to apply the concept to its entire lineup of brands that includes Audi, SEAT, and Škoda. Their premium brands Porsche, Bentley, Bugatti, Lamborghini, and some Audi models will benefit from a similar concept dubbed PPE (Premium Platform Electric).

Here are examples of the MEB set applied to its most popular brands:

From a macro perspective, the EV sector is flush with investments. Last year alone, €60 billion was invested in Europe — including €40 billion injected by Volkswagen Group. And Europe is closing the gap with China at a fast pace:

3. The charging infrastructure

When I read a story inspired by EV skeptics, I see the recurring — and often poorly documented — argument questioning the range and the charging infrastructure. Let’s dive into it.

First, 95 percent of the charges for an EV occur either at home or at work. Charging on the road (on the freeway or on the street) is almost negligible. The current distorted views about the need for a charging infrastructure have two components. The first one is the visibility of public charging stations and the communication around them, with municipalities eager to appear on the top of the eco-mobility wave. The true response to the need of charging points will be addressed by a plug at home, or at the destination (work, commercial parking lots).

Already, many cities have adopted housing regulations that facilitate the setup of a charging station. At a steady pace, private housing, as well as commercial real estate, will be equipped exactly in the same way that fiber optic is being deployed in most areas (except that it is way easier to upgrade an electrical setup). Still, some people live in large multi-dwelling buildings in large cities with no dedicated parking spot. For those, an electric car (or any car, for that matter) might not be the easiest choice, unless they somehow adapt their lifestyle by departing from a full ownership model.

The second element of distortion is a remnant of the gas station mental model: I want to stop in a station, fill my tank, and be good for days of use. EVs offer a different model in which the car will be charged the same way you charge your laptop or your phone: whenever you can, without ever draining your batteries. Having an electric car charged at home is like having a full tank of gas every morning when you take your car out, and having another full tank when you leave work.

The so-called “range anxiety” will be difficult to offset though. Research shows that the dreaded empty battery warning disappears for the majority of users soon after they get their EV. Again: based on usage data, it is a non-issue. The beginning of the commercial EV era started with small cars with a 100-km (62 mi.) range. Despite the fact that it was twice the average single-trip journey, consumers rejected it. At 200–300 km (125–200 mi.), they started to consider. Now at 400-km (250mi) range and beyond, they are buying. However, as an engineer and a former EV designer who reads commuting stats for lots of markets, I believe a 500km-(310 mi.) range is excessive considering the half-ton of batteries needed. A 400km or 250-mile-range seems the right balance. But again, rationally speaking… I’d love to see that after their first EV, some might turn to lower-range, cheaper, optimized new vehicles.

Still, the question of long-haul trips must be addressed. That’s where the concept of superchargers sets it. Tesla coined the term when it decided to build its own supercharger network of what is currently 17,000 stations in 2000 locations around the United States. Compared to a home charging system, the supercharger pumps up the car about 40x faster. Refilling 75 miles for a Tesla Model 3 is wrapped up in five minutes. The way to measure range vs the time to recharge the car is the number of kilometers you get for each hour of charge. A residential garage plug — to be used mostly at night — has a throughput of 30 km/hr. On a highway, a supercharger will spit out 600–800 km/hr. The last generation of Tesla’s station can even burst 1200 km/h but only for 10 minutes (after which heating issues set in — more in the next episode).

Tesla decided quickly that its supercharger network will be a marketing expense aimed at lifting one of the barriers to entry. It calculated that the cost of the supercharging network would eventually amount to approximately $1000 per car. For a $100,000 automobile, spending 1 percent for such a powerful marketing incentive makes total sense. Since it is barely able to keep up with its enviable solvent market, Tesla decided to put a non-optional $3000 price tag to access its network for free and recharge a Model S in about 30 minutes.

Volkswagen Group has been a little bit shyer and has yet to find a way to offset the cost of its European supercharger network Ionity. It is a joint venture of VW brands, BMW, Ford, and Mercedes-Benz. Unlike Tesla’s system, it is not free and relatively expensive, which could deter customers. Ionity has yet to find the right formula: the cars sold by the consortium will be priced at half or a third of a Tesla and therefore it might be more difficult to pass on the cost of the infrastructure to the customer. At least that’s the situation as of today. Eventually, the different business models might converge towards the Tesla way: brands that are part of the Ionity consortium will most likely access the German network for free. And from a driver’s perspective, there will be a network of superchargers, interoperable and sufficiently dense, to satisfy everyone.

In the United States, VW Group has been remarkably astute with its Electrify America project. The nascent German-made supercharger network is in fact the direct consequence of the “Dieselgate” scandal. In its negotiation with the United States Department of Justice, VW was able to convert the $2 billion fine into an investment in a (relatively) open project of fast-charging stations across North America. So far, only a few hundred stations are available; but it will soon be a granular network designed to support the spectacular growth of the American EV sector — of which a large chunk should fall to Volkswagen.

As anyone can see, the dust needs to settle a bit before anyone driving an electric car will be able to travel across America or Europe with the same ease of charging their car as they would get filling-up a gas tank today. But keep in mind how fast the landscape is evolving. Building a network of chargers, standard or superfast, is not rocket science (unlike deploying hydrogen tanks). Eventually — say less than 3 years — compatibility will be universal.
—

In episode 3, we will be talking about batteries — how they work, how they behave — , the critical importance of building “gigafactories”, who holds the cards, and who has already dropped the ball. We will be talking about the environmental impact of building billions of battery cells (a Tesla Model S carries 7000 of them), and the lifecycle of an EV battery and the geopolitical tension it might create.

Stay tuned and send us your feedback at automotive@mondaynote.com

philippe.chain@mondaynote.com
with frederic.filloux@mondaynote.com

• Philippe Chain is an international expert on electric vehicles. Trained at a top French engineering school, as well as INSEAD and Stanford GSB, he has accumulated nearly 30 years of experience in the automotive industry. At Renault, Chain was a Chief Vehicle Engineer before switching to an electric strategist position. At Tesla, he was VP for quality during the development of the Model S, and later, he worked for Audi and for Faraday Future. Today, he assists several carmakers and governments willing to venture into the electric car industry.