What Would Joe Do?
Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.
Patrick Groeneveld: Fact checking the EV hype
April 27th, 2016 by Peggy Aycinena
Now here in April 2016, rumor and information in the press about EVs is really on the upswing. Apple is developing an EV in various top-secret locations scattered about Silicon Valley, a rumor supported by the company hiring Tesla’s VP of Vehicle Engineering Chris Porritt. Tesla has its own dramatic announcement: As of mid-April, they’ve received upwards of 400,000 pre-production orders for their new $35,000 Model 3 sedan.
My recent phone call with Patrick Groeneveld was an opportunity to further understand the current EV landscape: We began with the Tesla news.
WWJD: The idea of 400,000+ pre-production orders for the Tesla Model 3 is quite extraordinary. At $1000 per order, that’s a cool $400,000,000 available to the company to ramp up production. What’s your read on this?
Groeneveld: That’s actually a very interesting statistic. Tesla is announcing over 400,000 orders for a yet-to-be-manufactured electric vehicle, when currently there are only 120,000 EVs in the U.S. in total, even after so many years of sales.
To have this many pre-production orders is quite something – it’s great for the company that they’ve got such a large back order – but I will wait to see if any of it actually materializes, particularly if you just do the math. To be frank, it all seems almost too good to be true.
It will be really surprising if Tesla can ramp up their production fast enough to fill all of these orders. At this point, they’re lucky to hit a target of 15,000 units of their current models in any particular quarter.
There is another thing: Buyers will only get to the top of the queue if they order the fully loaded Model 3, a much more lucrative sale for Tesla. I would be surprised if anytime before 2020, however, the company fills orders for cars that sell below $50,000, those with the [advertised sticker price] of $35,000.
There are other considerations, of course. Electric cars have fewer components. Except for the battery pack, it’s all much simpler than a combustion engine vehicle. From that perspective, an EV should be much cheaper to produce. And Tesla does have their factory in Fremont.
When it was the NUMMI plant [joint venture between GM and Toyota], it could produce half a million cars a year. But Tesla is currently using only a small corner of that enormous complex. [Successfully meeting the Model 3 production demands] will depend on how they enlarge their production line.
I’ve actually toured the Tesla factory, and I am not really seeing the kind of quality manufacturing required [to accomplish their goals]. In my opinion, it will require a change in company culture to bring that quality in.
And I was struck by how many very young people are working there. It seems like they are just high school kids on the production line.
WWJD: Some people might say that is a good thing.
Groeneveld: Yes, it might be a good thing because most of the value of the car is in the design and materials – and the [bulk of the] production is done by robots. [See video below.]
But the fit and finish of the Tesla could be better. At $100,000 they can produce the car, sell it, and make a profit – but the finishes could be better.
On the other hand, the whole [Tesla experiment] is an exciting one. And I give Elon Musk a lot of credit – there hasn’t been a new car company in 100 years and there’s no good reason for that.
These days in large part, a car is built of components purchased from suppliers – GM and Ford are definitely not doing their own components. The car company is only the final assembly point.
But that is not true of the products from Tesla. They do a lot of the building themselves – their own seats, their own electric motors. But you need to ask, why take the risk? Is it cheaper than buying from third-party suppliers?
WWJD: It’s my understanding that Tesla is providing some outsourced production for companies like Mercedes, for their electric power trains?
Groeneveld: Mercedes and other companies are only producing electric vehicles as compliance cars. Many Japanese and German companies do not really believe in EVs, but the Government of California is forcing them to have an EV in their product portfolio or they are not allowed to sell any cars here.
The trick is, these manufacturers only produce a couple thousand EVs a year, and just to be in compliance with California law. They’re required to produce them: Toyota’s EV and the GM Korea Spark, for instance, and the VW Eagle – just a [conventional] car with a battery swapped in, not the integrated EV that you should be buying.
But all of these models are built in small numbers. The companies lose money on them, but still the EVs have to be produced to meet compliance.
It’s important to note, however, that the Tesla is not a compliance car, and the BMW i3 is truly engineered and designed as an electric car.
WWJD: So what are the EVs we should be buying?
Groeneveld: The cars we should look at are those produced by companies dedicated to [electric vehicle] technology: the BMW i3, the Chevy Volt, the Nissan Leaf – these are all truly EVs – and the Tesla.
Of course, the BMW is an upscale car [starts at $42,000], where as the current Volt or Leaf are sold as economical cars [starting at $33,000 and $30,000, respectively]
WWJD: Really, why aren’t all companies seriously pursuing an EV strategy?
Groeneveld: Well, for instance, Toyota doesn’t believe in EVs, and VW is always betting on diesel – which lately has been a horribly bad bet. But they are not alone. Now diesel is the thing in Europe, with 50-percent of the vehicles produced there being diesel.
It’s true that diesel is slightly better for C02 emissions, but it’s far worse for nitrous oxides. It wasn’t actually possible to make diesel cars meet the emission laws, but somehow VW said they could – but they were lying. They also claimed their MPG was more than was the reality, because VW didn’t really understand the rules.
Again they’re not the only ones. If you go to the Mercedes website in the U.S. versus the Mercedes website in Germany or the U.K., you will find the exact same car and make has better MPG in Europe than in the U.S. It just doesn’t make any sense.
WWJD: Do you think whistle blowers and fact checkers are the worst enemies of car manufacturers?
Groeneveld: What’s true for car companies is true in many other parts of life: The technical truth often doesn’t matter. If it’s a presidential campaign, the candidate can claim he will build a wall. Whether it’s feasible or not doesn’t matter, he can still say it.
But with a car, you can ask straightforward questions: If I drive a mile in this car, what will be the emissions?
The true answer is based on calculations: This is the best thing I can do, because it reduces emissions.
To get a sensible energy solution and make environmental improvements possible, it doesn’t have to be about spin. It only needs to be about the truth, and that should depend on the hard, basic-engineering analysis. Important to understanding the economics of EVs as well: If I switch to an electric vehicle, will it cost more or less than driving a combustion-engine or hybrid vehicle?
What I have been doing in my work on EVs over the last several years is not rocket science. It is straightforward analysis. You can calculate how much emissions different vehicles produce, because you can do the math for a vehicle using a gallon of gas versus the equivalent in electricity. You can compare the results and find the answer, with a caveat.
If you go to China where they are using more coal, it doesn’t make sense to drive an electric vehicle except outside the city. But if you live in Vermont, or Norway, or Switzerland the answer is completely different.
Elon Musk presented his Model 3 by saying: I have an answer for CO2 emissions. But for places like China, and even Utah, coal actually works and is still possibly a better solution.
So indeed, this is what’s happening: Everybody has a different message and we are having difficulty on agreeing what it is we want to measure.
Of course, it always seems the simplest investment is to switch from coal to natural gas [for generating power for the grid], the way to achieve dramatic environmental improvement. But again, the answer is not always simple.
It’s only when you see the recent news about a large coal company [Peabody Energy] going bankrupt that you understand how change actually happens. It happens when the technical issues and economic interests overlap – that’s when solutions emerge.
WWJD: And the lithium-ion battery packs, an expensive problem over the lifetime of an EV?
Groeneveld: The technology is improving.
For the current generation of cars, it won’t be that bad. The cost of replacing the battery pack in a Chevy Volt today, for instance, is only about $3500. And the new generation of technology is looking at better battery degradation [metrics].
It’s not like the lithium-ion batteries in a cellphone or a laptop, which only last about year and a half. The EV battery packs today will survive 10-to-15 years – the natural lifetime of the car. That means the current generation of EV owners won’t need to replace their battery packs at all.
Of course, we really don’t know any of this for sure yet. [Most EVs] have only been in use for 5 years or less, but if you extrapolate [the current data] it seems like things related to the battery packs will be pretty much okay.
And there will be lightly used salvage batteries to replace them.
Of course, what will change – and that’s true with every generation of equipment – working on an old Camero just won’t be possible. It won’t be possible to work on your car. The complexity of the system will mean that when it fails, you’ll just replace it. It’s not like in the past when you swapped out the spark plugs and timing belts.
WWJD: Are we at a discontinuity in automobile technology?
Groeneveld: Yes, somewhat of a discontinuity, but that really started years ago. It’s just accelerating now. For electric propulsion, we are at the beginning of the story. And by the way, for self-driving cars we are at the very beginning.
Today, a Tesla is not the right vehicle for a road trip. There’s too much range anxiety and having to plan your trip around the available charging stations along the route. But 95-percent of the time, an EV is totally within reach of meeting your driving needs – when you use it for your daily commute.
For now, your commuter car can be electric and the other car can be for road trips.
[Laughing] Having said that, I follow Steve Wozniak’s blog and he insists on making road trips with his Tesla. He goes from super-charging station to super-charging station, and it seems they’re always next to a Denny’s. He just loves junk food and so for him, this is his idea of wonderful.
You take a road trip with your Tesla and go from Denny’s to Denny’s. The world’s not yet perfect, but for Wozniak, this is wonderful.
This fabulous footage of the Tesla Model X production line was filmed by Germany’s Captain Gadget:
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