In an EV boom, will electric vehicles actually deliver?
Published 16-APR-2019 14:37 P.M.
6 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
It took one 330 kilometre trip from Chongqing to Chengdu in his Nio ES8, a seven-seater all-electric SUV, for its owner Wang Haichun to be consumed with buyer's remorse.
Despite being billed as capable of going 335km on a single full charge, the ES8 didn't get anywhere near that when driving on freeways at speeds above 100km per hour, he said, adding that after 180km, there was only 50km of range left.
"We had to recharge the car once and drove with a high level of anxiety throughout, constantly having to keep an eye on the range meter," the 44-year-old manager of a property firm said. Towards the end of the trip, he shut off the air conditioner and audio system to preserve power.
"I wouldn't want to do that kind of trip again – ever."
So unhappy was Wang, who paid 481,000 yuan ($71,700) for the vehicle, he sold it. He and his wife have since bought a Lexus NX300h gasoline-electric SUV.
Asked to comment on Wang's experience, Nio Inc said in an e-mailed statement the ES8 can travel more than 200km when constantly driven at a 100km per hour and that battery swap stations are available for quick recharging. The statement did not address Nio's advertising of 335km on a single full charge.
In real world conditions, all-electric cars can sometimes fall far short of advertised ranges, car engineers say. That's particularly so when driving at length on freeways or hilly terrain and in hot or cold weather.
The problem adds to drawbacks which have hindered wider acceptance - EVs have shorter driving ranges than gasoline vehicles anyway, are more expensive and take a long time to recharge.
China, Europe and the US state of California have set ambitious requirements for automakers to dramatically increase EV sales over the next 5-10 years, but those goals are at risk unless EVs can come close to matching gasoline engine cars in cost and ease of use.
In China, the country most aggressively pursuing the adoption of EVs and home to the world's largest auto market, some of the industry's biggest names believe pure battery electric cars will be as cheap as gasoline counterparts by 2025.
Those making that prediction include Ouyang Minggao, executive vice president of the EV100 forum, a think tank which is widely seen as the de facto voice of government policy.
"The turning point is coming. We believe that around 2025, the price of pure electric vehicles will achieve a big breakthrough," he said in a speech in January.
Ouyang cited a reduction in battery costs to $100 per kilowatt hours from $150-$200 currently and a planned tightening of emissions rules in China which will make gasoline vehicles there more expensive.
But others in the EV industry are less optimistic.
"Chinese policymakers think EVs will become more like conventional gasoline cars as early as 2025. But that's naive and all automaker engineers would agree with me," said a veteran EV engineer at Honda Motor Co.
"Sure, there's an EV boom but hybrids and plug-in hybrids will be needed as bridging technologies," he said.
The engineer was one of five interviewed by Reuters for this article who believe it will take a decade before battery EVs achieve cost and performance parity with gasoline cars. Most were not authorised to speak to media and declined to identified when describing the shortcomings of EV technology.
But pressure to deliver parity will only grow as China rolls back subsidies while setting quotas for sales of new energy vehicles (NEVs). China wants NEVs - which also include hybrids, plug-in hybrids and hydrogen fuel cell vehicles - to account for a fifth of auto sales by 2025 compared with 5 percent now.
For most automakers, battery cells cost around $200/kWh, the engineers said, although costs for Tesla Inc are believed to be around $150/kWh, partly due to its much greater scale of production. Tesla declined to comment.
To cut costs, firms are working on slashing the use of cobalt, the most expensive part in lithium-ion batteries.
Firms such as China's Contemporary Amperex Technology Co Ltd (CATL), BYD Co Ltd and South Korea's SK Innovation Co Ltd are developing NMC 811 technology.
It uses 80 percent nickel, 10 percent manganese, 10 percent cobalt, while a conventional lithium-ion battery uses 60 percent nickel, 20 percent manganese and 20 percent cobalt. NMC 811 also delivers more energy density, meaning batteries will cost and weigh less.
Others are developing similar technologies with slightly different ratios. Batteries jointly produced by Tesla and Panasonic Corp substitute manganese with aluminium and use less cobalt than NMC 811.
Less cobalt and more nickel increases the risk that a battery cell will catch fire - a problem still being worked on. Even so, South Korean battery makers say the next generation of batteries due in three years or so will cost much less and offer much greater driving ranges.
But the engineers who spoke with Reuters caution that even if battery unit costs are brought down to $100/kWh, this would not necessarily translate into a steep decline in vehicle costs.
That's because the investment to improve battery quality needs to be factored in, while the cars also need sophisticated battery management systems to prevent overheating and overcharging - adding thousands of dollars to their cost.
Toyota Motor Corp, which does not have a pure EV on the market currently, says it is concerned about battery durability. Battery capacity can drop by half over 5-10 years - the reason for low EV resale values, said Shigeki Terashi, executive vice president in charge of Toyota's EV strategy.
"Falling EV battery capacity is not a major issue in China now because sales there have only recently begun, but in time this problem will likely become more evident," he told Reuters in a interview.
A longer term effort to improve batteries are solid state batteries, where the liquid or gel-form electrolyte in a lithium-ion battery is replaced with a solid. That could help double a battery's energy density.
"That's the holy grail," says consultant Jon Bereisa, a former GM engineering director who spearheaded much of the automaker's early lithium-ion battery development.
Many in the industry believe the technology is at least a decade away from mass-market commercial use.
"There are a lot of limitations to solid state drive..it will be very difficult to adopt the technology in the automotive applications used by the general public," said YS Yoon, president of SK Innovation's battery business.
Advances in recharging are also key to making electric vehicles mainstream. A big obstacle is heat, which increases resistance and in turn reduces the current.
Most EVs can get a partial charge in under half an hour, although several models due out in the next year can get close to a full charge in 20 minutes.
TE Connectivity is working with automakers to cut charging time to as little as 5 minutes and Chief Technology Officer Alan Amici says that goal may be attained in five years.
But others are sceptical. Bereisa thinks battery costs could achieve parity with gasoline cars by the late 2020s but his verdict on fast fueling parity is "maybe never".
"It's physics," he said, adding that to charge an EV with the same amount of energy in the same amount of time as a gasoline car, you'd need a charger powerful "enough to run a small city". ($1 = 6.7119 Chinese yuan)
(Reporting by Norihiko Shirouzu in Beijing, Paul Lienert and Nick Carey in Detroit; Additional reporting by Yilei Sun and Beijing newsroom; Joe White, Hyunjoo Jin and Heekyong Yang in Seoul, Naomi Tajitsu, Maki Shiraki and Makiko Yamazaki in Tokyo; Editing by Edwina Gibbs)
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.