Seems China is becoming the Yellow Brick Road for U.S. companies with plug-in hybrid electric drivetrain technology. Or rather, it is becoming the hoped-for Yellow Brick Road. Will be interesting to see how many of the companies shopping their technology there actually make it to the Wizard’s castle. (Wizard of Oz reference. Those of us of a certain age watched that about a dozen times growing up. )
I recently visited with yet another U.S. company that couldn’t get U.S. Department of Energy funding and is shopping its technology in China. To be sure, ALTe LLC, www.altellc.com based in Auburn Hills, MI, also has funding from other investors here in the U.S., and is seeking customers here. But when I asked chief technology officer Jeff DeFrank which market would be bigger for ALTe he said: “We will launch in both more or less at the same time, but probably China will be bigger.”
That might be because of steadier government support for the EV sector in China versus the U.S. Like so many other companies with alternative powertrain technology, the DOE http://www.lgprogram.energy.gov/ kept ALTe dangling for two years regarding its request for funding. “We made the decision we weren’t going to put all our eggs into the DOE loan basket,” said DeFrank. ALTe has been able to find private funding—some angel investors plus investments from its founders, DeFrank, CEO John Thomas, and VP of Programs Nam Thai-Tang. The amount ”wasn’t seven figures,” said DeFrank. But it has been enough to build some prototypes that give ALTe something to show potential customers.
The Ford F150 pickup and Ford Econoline F350 van with ALTe powertrains that were at an the Enterprise www.enterpriseholdings.com rental car office in an business park in the LA suburbs (Enterprise is on ALTe advisory board and likes to keep an eye out for new technologies it might want to include in its rental fleets, said Greg Tabak, director of EV Programs at Enterprise Holdings.) are a far cry from the previous electric vehicle that the three founders worked on, which was the Tesla Roadster. www.teslamotors.com DeFrank, Thomas, and Thai-Tang are all Tesla alum, but they had a different vision from Tesla founder Elon Musk, said DeFrank. The trio figured there was a bigger market for electric vehicles in the commercial fleet world than the luxury world. Fleets are concerned with total cost of ownership, they calculated, so the additional cost of an electric vehicle would be justified over the longer term. With that in mind, in mid-December, 2008 (December 19 to be exact; they remembered the date), the three quit their jobs at Tesla. Two days later they founded ALTe. Seven days later they put in the application for the ill-fated DOE loan.
Dennis Baranik and Jeff DeFrank, two of the co-founders of ALTe, with a Ford Econoline F350 with an ALTe powertrain. The Tesla alum saw more opportunity in fleets.
ALTe likes to call its vehicles Range Extended EVs. Their powertrain is a series hybrid that runs on the battery for a certain distance, then switches to a gas engine which simultaneously recharges the battery and propels the vehicle. It must be plugged in to fully recharge the battery, however. “We recognized right away that with a series hybrid we would keep the cost down and maximize the effectiveness on routes,” said DeFrank.
The first prototype they built was a taxi. They completed it in March, 2009, and used it to attract more investors. But the trio soon realized the taxi market was not where the big bucks lay and switched to a pickup. Ford www.ford.com was a natural choice—all three co-founders had worked at Ford (as well as Tesla). The model—the F150—is the best selling pickup in the world. Besides, DOE guidelines mandated that the EV had to be a certain size, said DeFrank.
The Ford F150 was a obvious choice to modify–it is the best-selling pickup in the world and the ALTe co-founders were all Ford alum.
The pickup helped attract more investors, including former Chrysler CEO Tom LaSorda (an ALTe board member until February 2012 when he became CEO of PHEV-maker Fisker http://www.autonews.com/article/20120409/OEM06/304099984), and current board member attorney Simon Ahn, www.ahnlawfirm.com ALTe’s largest investor. To date, ALTe has raised more than $20 million, said Baranik in a follow-up email exchange.
ALTe’s demo fleet isn’t large—it has four F150’s and one Ford Econoline F350. But it does have a big Fleet Advisory Board, as ALTe calls it, composed of dozens of companies such as Frito-Lay that operate big fleets. ALTe claims nearly 100 major fleets have driven an ALTe prototype vehicle. Ten are ready to do pilot programs of up to two dozen vehicles, said Baranik. Be that as it may, the survival record isn’t so good for companies looking to make it in the electric fleet and/or commercial vehicle world. Bright Automotive aimed to sell delivery van PHEVs; it folded in February of 2012. http://nlpc.org/stories/2012/03/05/gm-funded-ev-company-gives-doe-loan-ends-operations Azure Dynamics, a producer of electric powertrains for delivery vehicles, filed for bankruptcy in March or 2012. http://online.wsj.com/article/SB10001424052702303816504577307672196301122.html Enova Systems, a producer of electric drivetrains for heavy-duty vehicles, reportedly has struggled to find funding. http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=ENA
ALTe is currently looking for more investors. But in this kind of environment, where many have failed, what makes ALTe think it will survive, I asked? “We have a different business proposition,” said DeFrank. Well, not totally different, but somewhat different. ALTe will modify used vehicles, unlike competitor VIA Motors, www.viamotors.com the Bob Lutz-backed startup that is converting new Chevy Silverado pickups at $79,000 a pop into Extended Range EVs (EREV as opposed to REEV….), An ALTe conversion costs $30,000. That will come down into the mid-$20,000’s within two years as battery prices come down, said Baranik. Yeah right. Still, it never hurts to dream.
The ALTe guys also see their decades of combined auto industry experience as a big plus. Sure, lots of people can produce a few dozen, or a few hundred PHEVs, said DeFrank. But, “I can’t emphasize enough you have to understand how to make that work in thousands of units a year,” he said. That experience may give ALTe an advantage in China. Chinese automakers are often relatively new to the car making business, and always new to the alt powertrain business.
DeFrank said ALTe has signed Memorandums of Understanding with two Chinese companies—he wouldn’t name them, but did say one is a bus company. Perhaps ALTe pitched the principles’ backgrounds with Ford and Tesla as selling points. There are a lot of U.S. companies with PHEV and battery electric vehicle powertrains shopping their technology around in China these days, so having that on a resume couldn’t hurt as a way to stand out.
Chinese government policy is also on ALTe’s side, In April, the Chinese government issued new targets for the electric vehicle sector. The aim is for 500,000 battery electric and plug in hybrid electric vehicles to be on the road by 2015, rising to more than 5 million by 2020. That will be tough to achieve without relying heavily on fleet electrification. The government has recognized that BEVs are much more difficult to produce then it first envisioned, and the emphasis is now on PHEVs and regular hybrids in the near term. So ALTe is in a bit of a technology sweet spot as far as the China market is concerned. A caveat: ALTe company admits that vehicles using its powertrain lack acceleration and speed. But in China, where traffic jams are the norm, that won’t matter as much, asserted the co-founders. I’m not so sure that is true. Chinese consumers — even fleets — want it all, just like consumers anywhere. And there is a lot of competition, including from other U.S. companies that missed out on DOE loans!
Already planning expansion in U.S.
Back here in the U.S., ALTe has applied with Ford to become a qualified vehicle modifier. If accepted (the process takes 18 months), the modified pickups and Econoliners would be covered by the Ford warranty, if the vehicle was still within the warranty period. Since it is modifying three to six-year old vehicles, many may already be outside of the warranty period, said DeFrank. ALTe offers a five-year, 75,000 mile warranty for now.
It has not yet completed California Air Resources Board www.arb.ca.gov and U.S. Environmental Protection Agency www.epa.gov certification; ALTe is “in the midst of a major funding event” to help fund that as well as expand its current 185,000 sq ft building in Michigan and hire additional engineers (it may have to fight Coda for them; Coda is also hiring www.codaelectric.com .), said Baranik in his email. “We anticipate full execution of this funding this summer,” he said. “In the meantime, we are negotiating a bridge element with an investor that we expect to close very soon.” Seems there is quite a bit of uncertainty there, but like all of these start-up EV companies ALTe has big plans. If it completes the expansion, ALTe will have a 90,000 unit annual capacity (working two shifts). But ALTe can break even at only several thousand units annually, it says.
If ALTe’s technology is as good as it claims, the lower cost may make its product appealing. But what about the latest challenger to fleet electrification, natural gas-fueled fleets, http://online.wsj.com/article/SB10001424052702304707604577422192910235090.html I asked Baranik? “It is not all or nothing,” he said. “There are going to be some fleets where (natural gas) is an answer.” Now he just has to hope ALTe’s powertrain looks like the best answer for some companies.
Okay, this is a bit late but here are my impressions of the press days (April 23-24) at Auto China 2012, which this year was held in Beijing. First thought—I’m really glad Beijing built a subway line out to the new venue in Shunyi. Second thought—I really hate that venue. It is confusingly laid out and I always get lost. The bathrooms are dirty and lack toilet paper. The press room was hard to find, too small, and didn’t have any good food. The new venue in Shunyi is too small so the suppliers and commercial vehicle companies had to be placed in the old venue. I did not have time to go there and so missed out seeing them. I’m sorry to be such a complainer. But Beijing should do a better job.
I had much more positive impressions about the show itself, however. It demonstrated that Chinese automakers have come a long way in terms of styling and technology, and in how they present themselves at the show. China’s domestic OEs have grasped that the automotive industry is international and now avail themselves of global design firms and suppliers. The cars still have a ways to go before they will be taking on the global brands around the world. But they have made a lot of progress.
For those of you who miss scantily-dressed women at the Detroit show (I don’t count myself among that group), there are still plenty of those at Auto China. Alas, there was no good food, neither at the stands nor in the expo center itself. (Okay, I ate some decent food upstairs at the Fiat stand thanks to my good friend Jack Cheng. But few had access to that.)
If you are a guy, are you looking at the Jeep?
The rear view. Of the model, not the Jeep.
But I digress. First, styling. Okay, there are plenty of questionable-looking Chinese models. But the same can be said of foreign brands. It is clear that Chinese automakers have availed themselves of international design firms such as Bertone www.bertone.it and Pininfarina www.pininfarina.it , however.
Chinese automakers have also enthusiastically embraced foreign technology to improve a vehicle’s engine and transmission. Great Wall Motors Co, www.gwm.com.cn for example, China’s largest SUV maker and one of my favorite local OEs (hey, it has a woman president), now boasts turbo-charged, gasoline direct injection, and common rail engines. It works with many international suppliers such as Bosch www.bosch.com and Borg Warner www.borgwarner.com. Chinese automakers have long had trouble doing automatic transmissions themselves. Now they turn to overseas suppliers. Chery Automobile Co. www.chery.com.cn showed a model with continuously variable transmission developed with Ricardo Plc, www.ricardo.com for example.
The Beijing show also demonstrated how important catering to local tastes has become for foreign automakers, many of whom showed models styled exclusively for the China market. Chrysler, for example, is just entering the China market and showed the Chrysler 300 Ruyi, a concept version of its 300 sedan styled by Chinese designer (albeit in Michigan) especially for Chinese consumers. http://media.chrysler.com/newsrelease.do?id=12279&mid=&searchresult
Chysler showed the Ruyi concept car, a version of the 300 designed by Chinese for Chinese.
Meanwhile, despite the government’s periodic calls for consolidation in China’s domestic auto industry, the number of brands is growing due to a mandate that China’s automotive joint ventures produce China-only brands. So, I checked out the Venucia brand, launched by Nissan and Dongfeng, as well as Guangzhou Honda’s Everus brand. Then there was the Denza brand concept car—the first electric vehicle out of the joint venture between Daimler and BYD. http://www.denza.com/index.php?a=show&m=Article&id=45&l=en
Which brings me to one of my favorite topics, electric vehicles. As we all know, the Chinese government has slowed its push to develop electric vehicles a bit. As I’ve told many people, China is clearly using its “crossing the river by feeling for the stones” policy-making approach in its EV plans. The most recent goal, announced in April, is for 500,000 battery electric and plug in hybrid electric vehicles to be on the road by 2015, rising to more than 5 million by 2020.
I would hate to be an automaker or supplier trying to figure out how to get ready for China’s EV growth. But, several that I talked to seemed resigned to the situation, and what choice do they have? I ran into a Ford Asia-Pacific www.ford.com executive on the show floor and asked him what Ford’s EV plans for China were. “We need to wait and see how the (government’s) plan evolves,” he said. “We are trying to time our entry right. Our deliberate strategy of electrifying the cars we have is the right one for China.”
I interviewed Luigi Lubrano, vice president of research and development at Magneti Marelli S.p.A. www.magnetimarelli.com and asked him about Magneti Marelli’s work in the EV sector in China. “We are working with a couple of OEs, but they are only making demos,” he said. The battery cost is too high, he said. “Right now, the China market is more targeted to downsizing—smaller engines, GDI, turbocharging,” said Lubrano. Magneti Marelli is ready if electrification takes off in China. “We have in our portfolio a standard solution” for electrification, said Lubrano.
It will be very interesting to see what the government says about electric vehicle purchase incentives between now and next year’s show in Shanghai and how that impacts what automakers are showing there. I look forward to attending the show in Shanghai. Not just because I want to see what technologies dominate, but because I cannot tell a lie, I like the Shanghai venue much more. The bathrooms are really clean.
Okay, I wasn’t completely correct about the implications of the Coda/Great Wall announcement back in August of 2011. http://www.greencarcongress.com/2011/08/coda-20110816.html At that time, Coda www.codaelectric.com said it had signed a letter of intent with Great Wall www.gwm.com.cn to develop electric vehicles. I predicted that the Coda/Great Wall partnership heralded the end to the Coda/Hafei relationship. Not so, at least not in the near term. Nonetheless, I am sticking to my prediction that the Great Wall relationship will be the dominant one with Coda, and that the Hafei connection will eventually die a natural death.
And I’m keeping a close eye on Coda. It seems Coda is taking a Tesla approach to the EV segment. That is, Coda is not just selling cars. It is selling its EV propulsion technology to other automakers. And it is selling its battery as a storage device. Of course, Tesla doesn’t have an energy storage business. But it has a damned good-looking car (and another on the way http://www.teslamotors.com/modelx) and its technology is going into a Toyota model (RAV-4) http://green.autoblog.com/2011/07/20/tesla-scores-100-million-toyota-rav4-ev-related-contract/ that will probably sell many units. Meanwhile, Coda has (so far) an ugly car with few units sold and its technology is going into a Chinese automaker’s cars. So Coda is lucky to have an energy storage business, too, just in case.
Another interesting aspect of this saga, at least for me right now, is what the new partnership means for Coda and Great Wall suppliers. Great Wall showed an electric vehicle at Auto China; it must have its own network of suppliers. Coda has its own. Who gets to supply the vehicles made through the new partnership? More on that later.
First, what prompts this discussion? On April 25 Coda announced that it had formed a strategic partnership with Great Wall to develop electric vehicles for the China, U.S., and European markets. http://www.insideline.com/car-news/coda-cements-global-ev-deal-with-great-wall.html I happened to be in Beijing at the time to attend Auto China and the Automotive News China Conference. Even though Phil Murtaugh was in town, too, we didn’t get to meet up. But I did get an exclusive phone interview with Phil the next morning. Of course, I had already listened in on the group phone interview the night before (for U.S. journos). But it was nice to get to ask my own questions.
Phil Murtaugh, CEO of Coda Holdings, says he has been talking with Great Wall since 2002. Finally, a good chance to work together has come along with the EV deal.
Under the agreement, Coda will provide the electric propulsion system; Great Wall will provide the chassis. The first model will be launched in the second quarter of 2014 and will be based on an existing Great Wall model (Didn’t I write about that a few months ago? My arm hurts from patting myself on the back. Or maybe it is just that old cycling injury….) The vehicle will be marketed in the U.S. as Coda, in China as Great Wall. “For Europe, it will be badged Coda, Great Wall, or some other brand we decide is even better,” Phil told me.
Coda’s propulsion systems can be used for BEVs, PHEVs, and HEVs. So what kind of vehicles will be produced in cooperation with Great Wall, I asked. For Coda, it will always be battery electric vehicles, said Phil. I asked Roger Gao, a spokesman for Great Wall, the same question at the AN China Conference. He said Great Wall would likely produce battery electric and hybrid electric vehicles using Coda’s technology. We didn’t discuss which would come first.
What does this mean for Great Wall’s partnership with Hafei http://www.facebook.com/pages/Hafei-Motor/110863255603984 , I asked Phil? He said: “That is an important partnership for us. It will remain extremely important to us. It gives us a customer for our batteries.” Now Phil is pretty crafty when it comes to answering reporter’s questions. But I checked with some suppliers to Coda at the Automotive News China conference. They confirmed that at least for now Coda still plans to produce pure EVs with Hafei. It would be politically too tricky to end that partnership, said one supplier, and besides, as Phil said, it gives Coda a customer for the batteries produced at the Coda/Tianjin Lishen battery joint venture in China. http://en.lishen.com.cn
As for volumes for Coda’s existing electric sedan, the supplier who confirmed the Hafei partnership said Coda has produced a few hundred of the sedans so far and planned to produce around 5,000 this year. That jives with Coda’s remarks. Another supplier at the conference said that Coda is sticking to its original future estimates of 10,000 annually for the time being.
Great Wall has already produced a battery electric vehicle—the electric small SUV was in the Great Wall stand at Auto China in Beijing. At the show, I asked someone in the Great Wall stand how many other EVs Great Wall planned. He said Great Wall was waiting to see what kind of support the government offered for EV purchases. According to Great Wall’s website, the automaker will focus on developing pure electric and hybrid electric models and over the next five years will invest 5 billion RMB (US $795 million at current exchange rates) in r&d and launch of new energy vehicles. By 2013, it will be capable of producing up to 150,000 new energy vehicles. http://www.gwm.com.cn/en/about.html If Great Wall achieves that target this could be a good deal for Coda. Fortunately, it seems Great Wall’s future EV sales won’t be held hostage to the Chinese government’s support or lack thereof for EV purchases since the partnership is producing vehicles for the global market.
Great Wall already has electric drive train technology.
Great Wall touted its own EV powertrain at Auto China in Beijing in 2012.
It touts a hybrid power system in its literature from the Beijing show, for example. Why did it form this partnership with Coda, I asked Dr. Liu Zhen, special assistant to the president at Great Wall Motor Co. He was a speaker at the AN China Conference. Great Wall is always looking for the best technology, he said. Phil gave about the same answer. He said: “Coda has a really good EV propulsion system. Great Wall decided they could achieve their goals faster by teaming up with us.” (First he said, “Ask Great Wall.” See Phil, I did ask Great Wall.) I wondered what that means for suppliers to either the current Great Wall EVs or the Coda EV sedan. For UQM Technologies, at least, it means trying to get the additional Great Wall/Coda business, a UQM exec told me. UQM www.uqm.com supplies the electric propulsion system to Coda. No guarantees the original suppliers will get the new contract, though with UQM I’d say it is a good bet it will. A supplier to Great Wall told me the same thing, that it was trying to get the new business. One existing supplier is sure to get the new business. Tianjin Lishen will definitely supply the batteries to the jointly-developed vehicles, Phil told the journos on the group phone call. “We have a great JV with Lishen,” he said. “We will utilize that JV.”
I visited the Shanghai campus of General Motors www.gmchina.com a few weeks ago and got a personal tour from Ray Bierzynski, GM China’s executive director of electrification strategy and his colleague David Reeck, electrification strategy manager. (Those titles make it sound like Ray comes up with the ideas and David has to come up with a way to make them reality. If so, I predict David will get a lot more gray hairs a lot faster than Ray. ;-0 )
I came away understanding that GM’s electrification strategy in China involves more than just producing cars. It is taking an holistic approach to electrification in China, looking at all the elements needed to make EVs a success. While I won’t predict GM will be successful in the foreseeable future – it will take a lot of factors coming together for EV use to become widespread in China – I think GM’s endeavor will benefit everyone involved in the EV sector in China, from utilities to automakers.
Bierzysnki listed three (or four?) areas they were concentrating on: Infrastructure, supplier development and capability, and public policy. “Cost and infrastructure are where it is at,” he said. “They are the two key elements to the development of the EV sector.”
That doesn’t mean GM is ignoring the car part of the equation, of course. The first thing you see when you enter the GM campus on Jinwan Lu in Pudong in Shanghai is a row of Volt hybrid—oh, I mean extended range — electric vehicles recharging using solar energy.
Volts charging at a solar station in GM's Shanghai headquarters. The Volt is on sale in China but GM's real goal is to expose officials to the technology, it seems.
The Volt is already on sale to consumers through GM’s dealership network in China for a hefty 498,000 RMB (US $79,250 at current exchange rates). But, says Bierzynski, “The Volt is not about sales volume. It is about testing the market place, seeing how people use the car, where they recharge,” and stuff like that.
In that same spirit is GM’s March 2012 agreement with CATARC, China’s national vehicle testing standards lab, to manage a test fleet of Volts for a year in Beijing. http://tinyurl.com/d3pzco7 The press release doesn’t say who will be driving the Volts, but you can bet it will be some high-ranking decision makers. In the press release Bierzynski is quoted as saying: “It is important for us to offer those in key positions to affect policy an opportunity to experience firsthand our variety of electrification solutions for reducing the automotive industry’s dependence on petroleum.”
He put it much more simply to me during my tour: “We want (the various stakeholders) to experience that the Volt is a hell of a lot of fun to drive.” GM has 10 Volts deployed nationwide, between Beijing, Tianjin, and Shanghai. (For the record, Bierzynski again told me that GM has never been asked to transfer EV technology to China….) GM has regular meetings with MIIT www.miit.gov.cn , MOST www.most.gov.cn , CATARC www.catarc.org.cn , and other government agencies to share its thoughts on energy policy, said Bierzynski. I’d love to be a fly on any of those walls.
Walk a little past the recharging Volts, and you come to a row of charging units from domestic and foreign suppliers. Nothing from BYD www.byd.com.cn . Why not, I asked? They haven’t sent us one, said Reeck. One issue that has dragged on in China is the setting of national standards, be they plug, battery or whatnot. GM is involved in the whole standards discussion, said Reeck. China has finally settled on an AC plug standard of its own, which is close to the European standard, which is close to J1772, the SAE standard. But the Chinese standard is still “fuzzy and undefined,” said Reeck.
Just beyond is a collection of electric vehicles from domestic brands.
GM has a bunch of domestic EVs at its Shanghai headquarters. Helps GM check out the local supplier base, says Ray Bierzynski, executive director of electrification strategy.
Ahh, checking out the competition, I asked? Actually, it is part of GM’s efforts to develop a local supplier base, said Bierzynski. “One of the aspects of local engineering is you want to understand where the local market is,” he says. There are four main supplier areas in an electric vehicle, he said, the propulsion system, the heating and cooling systems, and the steering.
GM is evaluating local suppliers in all those areas, as well as testing locally-produced batteries. That occurs in GM’s new Advanced Technical Center, in a new building next to the main office building. The Lab is only partly finished, but is doing r&d into battery composition as well as testing batteries. (See my October 19, 2010 interview with John Du, director of GM’s China Science Lab, for more on the battery r&d). It has 96 test channels, Thomas Zhu, manager of battery systems and test lab at GM China, told me. Which sounds like a lot until you hear that some tests take a long as 900 days.
Besides the Volt, GM is also introducing its eAssist mild hybrid technology to China in the Buick LaCrosse www.buick.com/eAssist and developing the Sail battery electric vehicle which it showed as a concept at the Guangzhou Auto Show in 2010. http://www.autoblog.com/2010/12/26/gm-unveils-sail-ev-concept-in-china/ It has also just launched the second generation EN-V, a pod-like personal electric vehicle which GM first showed at the Shanghai Expo in 2010. http://tinyurl.com/7os5nno
The EN-V 1.0 lacked climate control and personal storage space, both of which the EN-V 2.0 has. Both versions are networked to the max, though.
At a press event in Beijing a few days after I toured the Shanghai campus, I asked GM China Group president Kevin Wale if GM thought there was an actual consumer market in China for a vehicle like the EN-V. He said: “We do think there is a market for it in the longer term. As we redesign urban living, different types of solutions designed to (adapt to) dense city environments (will arise). We want to be part of that solution.” (GM is not the only one. Other automakers—such as Chery Automobile Co. – showed similar tiny EVs at the Beijing show.)
Chery's pod-like EV that it showed at the Beijing auto show in 2012 is a stretch version of the EN-V. Not sure if the Chery EV is as technically advanced as GM's, though.
While at GM in Shanghai, I asked Bierzynski if he thought there would ever be a real consumer market for EVs in China. The Chinese government has mandated that fuel economy reach 5.0 liters/100K by 2020 http://tinyurl.com/7m923xr , he said, so the automakers are going to have to include EVs in their product mix to meet that standard. Just as in the U.S., however, EVs wouldn’t be the only answer in China, Bierzynski added. It would be a continuum of technologies, including fuel efficient vehicles and EVs.
In the near term, however, the majority of EVs in China would likely be commercial vehicles, said Bierzynski. That is easy to figure out from looking at the list of type approvals (government permission to produce a specific model in China), he said. Of the EV approvals, 80% are commercial vehicles, including buses.
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Toyota EV guru Bill Reinert not keen on pure electric; China government would agree for now.
Toyota rules the hybrid market here in the U.S.—sales of its Prius account for about half of all hybrids sold here. And the Prius family is growing – it now includes a larger Prius than the original model, a smaller Prius, and a plug-in hybrid Prius. http://www.toyota.com/upcoming-vehicles/prius-family/?srchid=K610_p3074941791 So it might surprise you to learn that Bill Reinert, Toyota’s advanced technology guru, is pessimistic about the potential for plug-in hybrid and pure electric cars. Hell, he is even pessimistic about the future for hybrids. His reasons are familiar—the battery is too expensive and thus the vehicles themselves. Consumers are most concerned about fuel efficiency, he said, and if they can get that in a car with an internal combustion engine that costs less than an electric vehicle of any kind, they will go with the ICE-powered vehicle.
Bill Reinert, Toyota's advanced technology guru, figures electric vehicles will only be a niche in 2020. And he figures fuel cell is the really promising technology.
Reinert’s remarks seem to validate the decision by China’s government to focus more on hybrids and PHEVs in the near term while they wait for battery electric vehicle technology to mature. His comments also add fuel to the fire currently raging in Washington, DC about the Department of Energy’s program https://lpo.energy.gov/?page_id=43 to provide loan guarantees and outright loans to companies developing EV technology. http://www.autonews.com/article/20120409/OEM01/304099974/1424/doe-auto-loan-program-was-badly-bungled
I think Reinert would agree, however, that those programs, and the Chinese government’s continued support of BEVs in the longer term, make sense. Remember when mobile phones were as big as a bread box? Only more research created the tiny mobile phones we use today. And only more research will improve battery technology. Just who will fund that, at least in the U.S., is up in the air, however. China seems to be forging ahead. Hey, maybe China will fulfill its dream of being a first mover in BEVs after all. With help from many U.S. and European companies’ technology….
But I digress. Bill had too many valuable things to say for me to simply pull some comments and write a story. Below are edited comments from our conversation. Good stuff.
China-EV: Your title is National Manager, Advanced Technology Group at Toyota. What does that encompass?
Reinert: We look 20 to 30 years out to determine what are the trends and technologies coming along, when will they likely be mature, what does that mean to our fleet and our business model and brand,
China-EV: When did you start to look at the future of the battery electric vehicle?
Reinert: About 1999, when the RAV4 battery electric vehicle was offered for leasing, we did a deep dive and saw that even though there were a lot of hand raisers (who said they were interested in a pure EV), there weren’t a lot of wallets on the table. We were 100% subsidizing that product. Events in 2006,7 and 8 led us to believe there was not a first mover advantage to electric cars. The sales numbers bear that out.
China-EV: Why are other automakers seemingly rushing to offer pure electric vehicles?
Reinert: Sometimes you get wishful thinking marketing caught up in the reality of engineering. We could see right away there wasn’t the strongest business case in the world for a bigger battery in the car. The business case got upside down.
China-EV: Toyota pretty much rules the hybrid segment in the U.S., but sales in that segment in general haven’t shown much strength. Why not?
Reinert: Because the economic conditions in the U.S. and other economically developed countries, don’t favor spending a lot of money on fuel economy. The hybrid is still misunderstood, (and) if you can get a small 4 cylinder car that gets 40 miles to the gallon that meets your needs, why pay a premium for a hybrid?
China-EV: What don’t people understand about hybrids?
Reinert: People believe the technology might have a shorter life than gas engines (and that) battery replacement costs are high.
China-EV: What should automakers do to create demand for alternative fuel vehicles? Is it possible to “create” a market or does it have to emerge organically?
Reinert: I don’t know why you would want to create demand that would be supposing there is some kind of market out there. Alternative fuel vehicles are the result of regulatory push. Manufacturers should create a market for the best fuel economy cars that fit the buyers’ needs. There is a market for efficient cars.
China-EV: Must automakers have electric vehicles as part of their portfolio?
Reinert: Automakers see the need and desire to provide electrification of the powertrain, not the pure electric vehicle. A lot of that is from regulatory push. Start stop will become a bigger part of the mix, five years from now almost all cars will have start stop.
China-EV: What percentage of light vehicle sales in the U.S. will be alternative fuel vehicles in 2020?
Reinert: I’m a little pessimistic on compressed natural gas in light duty cars. It needs tanks that are light weight, have more pressure, etc. I think CNG is going to be problem. There are a wide variety of fuels that come out of natural gas such as methanol, gas to liquid, etc. By the late 2020’s you might have a substantial number of liquid fuels being made from non-petroleum fuels. Could be hybrid or traditional internal combustion engines. As internal combustion engines become much more efficient, hybrids and all the other alternative fuels will struggle to compete against ICEs.
China-EV: What about hybrids and pure electric vehicles? What is your prediction?
Reinert: I look at hybrids as 8-10% of the market by 2020, including advanced start-stop. Of that maybe 2% may be plug in hybrids. Battery electric cars by 2020 — .5% of the market. Fuel cells maybe .5% by 2020ish. I expect fuel cells over time to outsell BEVs but that won’t’ start until the late 20’s.
China-EV: What about the global market?
Reinert: It depends on how governments act.
China-EV: What country will have the largest market in the world for alternative fuel light vehicles in 2020?
Reinert: That is hard to say. It might be India, it might be China. The vehicles might be bicycles. Pure hybrids are probably going to be the domain of Canada and the U.S., as will plug-in hybrid electric vehicles. Battery electric vehicles (will do well in) managed economies (that do it for political reasons).
China-EV: You said at the Meeting of the Minds confab in last November that PHEVs didn’t make a lot of sense for consumers. Why is that? It seems PHEVs are being touted as the perfect answer to range anxiety….
Reinert: If you are going to put a bigger battery in a car than a PHEV is what you want to do. But the payback could be long. If you care about the numbers, then your motivation for buying a PHEV has to be different then motivation for buying a hybrid.
China-EV: How big a problem will EV battery disposal be for Toyota and other automakers in another 5 years? 10 years?
Reinert: It absolutely will be a problem. We know Nickel-Metal Hydride batteries. We can recycle everything except the battery case economically. But getting the lithium out of a battery is complex. We are talking more about battery disposal. We have an internal deal that we want 100% of our car to be recycled in the longer term. We have experimental factories to show how to recycle the cars, to develop recycling for the cars. Now you have these batteries (as well). http://tinyurl.com/79vnwwk We are looking for solutions. How can we keep them from ending up in landfills? In lieu of for-profit recycling, it looks like it is a manufacturer or societal burden.
China-EV: What other EV-specific issues do you see arising down the road?
Reinert: We can work the expectations on hybrids, but they are overblown on plug-ins and pure electric vehicles. (There is also) a lot of work to do on reducing auxiliary loads (on the battery), such as heating, cooling, windshields demisting, all that stuff. Is on a per-mile load, it goes up in heavier traffic. If you reduce those loads and manage them it is not range anxiety it is range repeatability. The load on battery makes range unpredictable.
China-EV: How to reduce auxiliary loads? Lighter-weight materials? Better technology? A Combination?
Reiner: Work occurs everywhere—it might be better bearings on the air conditioner band, moving heaters, new materials, etc.
China-EV: Is it worth the investment?
Reinert: Yes. Most of these improvements spread across board—they also help internal combustion engines. Improved telematics will also help EV drivers. We also need bigger recharge infrastructure, and need to allow a for-profit charge infrastructure.
China-EV: What is coming in the future for the electric vehicle?
Reinert: Electric vehicles will move toward a shorter range, around 100 miles. Then (the market) will just jump right into fuel cells. We can get the cost down on a hydrogen fuel cell car.
China-EV: What does Toyota have in the fuel-cell segment?
Reinert: We have the FCHV – Adv. There are about 160 on the road. Hydrogen infrastructure modeling is being done at UC Irvine; they seeing how that overlaps with electric vehicle infrastructure. In pure electric cars there will be distributed mass transit—that means share cars, etc. It is not about selling the car, it is about taking out a monthly subscription to use one.
China-EV: So do you think the lower-cost Mitsubishi “i”, which Mitsu is marketing as a city car, is the future? http://i.mitsubishicars.com/
Reinert: At Toyota we have the IQ Scion EVs. http://www.youtube.com/watch?v=vlkT4-1WVkY We are studying how to take them to market in a non-traditional manner. Urban is the market, urban is a high rise environment. They are coming to market tests. The model is an extension of work Toyota did in 1999. But then telematics were on desktop computers (and so not convenient). That is solved now.
A123 looks to China cell JV for boost. Big market beats intellectual property protection
Battery maker A123 Systems Inc. www.a123systems.com just can’t catch a break. A Fisker plug-in hybrid electric vehicle powered by an A123 battery died while being driven by someone from Consumer Reports. A123 had to issue a recall. http://tinyurl.com/c25wadx Talk about bad luck!
In China, however, A123 hopes its luck will be better. Last week, the battery maker announced it would establish a second joint venture in China with SAIC Motor Co. http://tinyurl.com/d2o8kat The new JV will produce battery cells in China. Let’s face it, the lure of the China market is just too strong to pass up even if it means losing a little intellectual property in the progress.
I talked to Jason Forcier, vice president of the Automotive Solutions Group at A123 Systems, about the new joint venture. He was pretty gracious given that I raked him over the coals regarding his remark about the China market last time I interviewed him (see China-EV of April 18, 2011 for full context). But hey, I was sort of right. The Chinese government did have to back pedal on its hugely optimistic targets for EV production and sales. Unlike the U.S. government, however, China’s government consistently supports the EV sector. A123 has taken note.
“We continue to be very bullish on the (China) market,” Forcier said. “There is strong government support.
“The China market is still pushing ahead more than we are seeing in Europe and North America,” he added. “We still see a lot of activity around plug-in hybrids and even BEVs.”
Forcier is still bullish on the China market.
The first A123/SAIC joint venture was established in 2009. http://tinyurl.com/cmnao2d Advanced Traction Battery Systems, as it is known, produces lithium-ion battery packs using cylindrical prismatic cells imported from the U.S. The new joint venture will produce A123’s 20Ah flat prismatic cells. “We see a big demand for flat cells in China,” said Forcier. “A lot of programs will be migrating from cylindrical to flat because the density is better.” The two companies are still talking terms; they hope to have the agreement hammered out by September, 2012.
I asked if the new venture would become part of ATBS. The more likely scenario, said Forcier, is that ATBS will become part of the new venture. “The capital required to do the cell is much greater,” he said.
A123 will send its latest technology to China, said Forcier. Of course, what is state-of-the-art right now might not be when a model actually goes into production two or three years down the road. So the agreement also includes future cells, said Forcier. “The market isn’t accepting older technology,” he said. “There is no way you are going to win business (in China) with battery technology that is a generation or two old.”
Why didn’t A123 just start producing cells in China back when it established its first joint venture with SAIC? Trust was an issue, it seems. Now that A123 has worked with SAIC www.saicmotor.com for a few years, “as we get more comfortable with the relationship, we are willing to take our partnership to the next level,” said Forcier. In any case, he claims that the main intellectual property in the cell is the cathode powder, and that will still come from A123 in the U.S.
Okay, but I bet that like many U.S. companies A123 is willing to give up some intellectual property for a piece of the China market. SAIC has turned out to be good at generating business for A123 in China. Naturally, A123 will supply battery systems for SAIC’s electric car programs. That includes the Roewe 750 hybrid sedan, the Roewe 550 plug-in hybrid sedan, and the Roewe e50 battery electric vehicle.
The ATBS joint venture has also been awarded several other programs in China, said Forcier (Warning: He is very fond of the word “significant.”) On the commercial side, A123 has gotten production contracts in China through ATBS, though they haven’t been publically disclosed, said Forcier. One might be Shanghai Sunwin Bus Corp. http://tinyurl.com/82ngeya SAIC owns half of Sunwin and Volvo Bus Corp. owns the other half. A123 sees. “major activity” in the truck and bus market, said Forcier. “SAIC has played a significant role in helping us land new business,” he said. “We expect significant revenue growth.”
Forcier gives a lot of credit to the business development team at ATBS. The team’s first “significant win” is the just-announced agreement to supply complete battery packs to Geely Automobile’s plug-in-hybrid electric vehicle program, http://tinyurl.com/7twk7sf which is expected to launch in 2014. “We weren’t the ones who went out and won the business,” said Forcier. “This is the first big win without one of the parents holding their hand.”
Suppliers in China used to tell me Geely http://www.geely.com/english/index.html was merciless at pushing the price down. “Geely won’t pay for a decent part,” as one supplier put it. I asked Forcier if ATBS had to take a haircut on pricing to get the Geely contract. He didn’t say yes, but he also didn’t say no. “Is there any automotive company in the world that doesn’t push the price down?” said Forcier. He added that the price was competitive, with a decent margin, defined as anything between 15% and 20%. I’ll wager A123/ATBS also has its eye on supplying future Geely EV programs. A123 is likely also interested in supplying Volvo programs in China (Geely owns Volvo). So it was probably willing to settle for slim margins. Alas, slim margins are like tax cuts. Once to you give them, it’s hard to take them away.
A123 may also bring in business to the new battery venture. It is supplying battery packs from its Michigan plant for the General Motors Spark battery electric vehicle due to launch in some states in the U.S. in 2013. http://tinyurl.com/6h3mdm4 A123 expects the Spark BEV to also be sold in China, said Forcier. “We might have multiple sites” from which to supply the program, he said.
Millen Works aims to infiltrate China’s EV industry–so long as no defense uses for the tech
I visited with Mike Reagan, director of the commercial OEM division for Millen Works, today. Millen Works www.millenworks.com is based in Tustin, CA, in Orange County to the south of Los Angeles. It has four business areas: commercial, defense, custom manufacturing and entertainment. It was founded by legendary off-road rally car racer Rod Millen, but sold to Textron Systems, which is a big military contractor among its other businesses.
So Millen Works currently earns a lot of its income from military projects. But it wants to diversify, and Reagan is working on that. His division focuses on non-military customers, and especially Class 5 medium-weight commercial vehicles. Reagan is concentrating on electric vehicles, both hybrid and pure electric. Why concentrate on EVs, I asked? “I’ve been in automotive for 25 years,” said the Delphi veteran. “Never have I seen the global industry so focused on one technology. That’s where the research dollars are.”
Mike Reagan of Millen Works with its battery management system at the SAE EV Tech Symposium.
Naturally, Reagan has his eye on China, where the government is encouraging automakers to jump into the electric vehicle sea. Not so long ago, battery electric vehicles were the big thing as far as the Chinese government was concerned. Now, at least in the near term, hybrid and plug-in hybrid electric vehicles are looking a lot better. In any case, China’s automakers are interested in electric vehicles of all types these days.
Millen Works aims to speed up that process. What kind of business is Millen Works looking to do in China, I asked? “Rapid development of engineering services for electric vehicles for Chinese OEMs,” he said.
There is a caveat. The technology can’t violate ITAR, said Reagan. That stands for International Traffic in Arms Regulations. To quote this website in brief: “ITAR places strict controls on the export of “defense articles” and “defense services.” http://www.oesrc.researchcompliance.vt.edu/ITAR/index.html In other words, Millen Works can’t help China produce electric tanks and the like.
Millen Makes vehicles like this EV for the U.S. military but has plenty of non-military technology it could sell to China.
But Millen Works has plenty of capabilities and technology that don’t fall into the defense article category. And as China’s leaders have admitted, there are some gaps in China’s EV technology portfolio which don’t seem to violate ITAR since other U.S. companies are already trying to sell the same technology to China. Two big gaps are battery management systems and battery packaging. Millen Works has both, and is hawking them in China, targeting Class 5 commercial vehicles, says Reagan. “We also do internal combustion engine development,” he hastens to add.
Millen Works is targeting Class 5 commercial vehicles in China--of which this is an example--for its EV technology.
Given the many other companies out there trying to sell this kind of technology to Chinese companies, it is a competitive area. Millen Works has a leg up because it already built prototypes for many defense industry companies—even if it can’t talk about them…. But Millen Works also has non-defense industry customers. Reagan mentioned that Millen worked on the first Coda www.codaelectric.com BEV sedans and also on Fisker Karma www.fiskerauto.com PHEV prototypes. And, there was a Ford-badged vehicle on one of the many machines in the Millen Works building.
Reagan is headed to China next week to meet with a list of Chinese automakers, whom I know but am not at liberty to disclose. Seems to me he should find a welcoming audience. The battery packaging technology should be as popular as the battery management system. Jeff Seidel, CFO of battery maker Ener1 told me that Wanxiang was interested in Ener1’s battery packaging ability. “They are probably 2-3 years behind in terms of their pack design and not as far in terms of their cell,” said Seidel of Wanxiang. If Wanxiang, www.wanxiang.com China’s largest automotive supplier company, needs that technology there is no doubt other Chinese automakers need it too. (Actually, Reagan said Chinese cells could use some improvement, which is doubtless true at many Chinese companies, though perhaps not Wanxiang.)
Of course I am not an engineer and I can’t really make a judgment as to the quality of Millen Works’ battery packaging technology. But hey, its batteries work in really big, heavy military vehicles so I’m guessing the quality is pretty good.
Reagan gave me a tour of the Millen Works building, which includes many testing machines such as two huge nitrogen tanks with frost on the top which are part of a dyno used to test shock absorbers, said Reagan. Also a chassis dyno in the back, and a huge precision machining tool, among other delights.
There is another market Reagan might explore in China given the many amusement parks that are being built there now. In one room were what looked exactly like roller coaster cars. In fact they were roller coaster cars. Millen Works makes suspensions; roller coasters need really good suspension system. One of its division is entertainment. Reagan couldn’t reveal who the customers are for the company’s entertainment division. But he did mention some of the product was going to Orlando….
Alysha Webb
