We’ve been talking about electric cars and renewable energy sources for decades, and the volume of that conversation (and number of participants) has grown dramatically in the last decade. Chances are good most people in your circle could name at least one fully electric or hybrid electric car coming from the major auto manufacturers.
The names likely to come to mind include the Nissan Leaf, Chevy Bolt, and of course the company and car that injected the momentum into the electric car industry — the Tesla Models (S/X/3).
Not likely, though, that they’ll mention names like Evelozcity, Karma Automotive, Fisker Inc., or Independent Electric Vehicles.
Or maybe they will if they’ve been paying attention.
The electric car market may have struggled (and practically disappeared according to the documentary ‘Who Killed The Electric Car’) for some time, but it’s making a huge comeback. Countless startups are emerging to give chase to Tesla’s lead in the industry and they’re gaining fast.
Investors Want to Fuel the Next Generation of Electric Vehicles
During the first quarter of 2018 alone, electric vehicle startups managed to raise more than $2 billion in the United States — a staggering increase over the $650 million raised over the whole of 2017.
Here’s how U.S. investments in the industry are tracking in PitchBook:
The rise in investors coming to the table is thanks in part to the rapidly growing market (expected to reach more than $350 billion by 2023) but also to the minds and bodies behind some of the startups — including former Tesla engineers.
But not all the forecasted sales will come from the US. Approximately $200 billion is expected to be generated from the Asia-Pacific region. It’s not surprising that Asia-Pacific is expected to generate more than half of sales.
At the close of 2017 there were over 300 electric car ventures, with 59,000 “new energy vehicles” being sold in Beijing — more than any other city in the region.
What’s Spurring Electric Car Growth in Asia-Pacific
While the global market is ripe for growth, local regulation are creating incentive in electric vehicle development.
According to Nikkei Asian Review, automakers will face new regulations in 2019. Companies who produce or import more than 30,000 vehicles in China must ensure that electric, fuel cell models, or electric vehicles make up at least 10% of their sales volume. Coupled with the difficulty of getting new gasoline vehicles registered in China is driving a shift toward electric vehicles.
In fact, the odds of obtaining a license plate for a gasoline powered vehicle are less than 1% due to the pollution problems in major cities across China. The government has been restricting the issuance of license plates for years, using a lottery and auction system, and that’s not changing any time soon.
But there’s no limitation on license plates for electric cars.
Investors are banking on the population making the shift.
While the Asia-Pacific brands want to make their unique mark in the industry, there’s no shortage of startups aiming to unseat Tesla and compete directly. One manufacturer, NIO, clearly stated its intention to undercut Tesla with it’s eS8 SUV retailing at $71,000.
And it’s a sleek looking EV for that price:
While this isn’t far below the $79,500 MSRP of the Tesla Model X crossover, the cost of a Tesla after import can exceed $100,000.
Admittedly, I’d pay extra for gullwing doors on just about anything. Tesla knows it.
The discounted prices from local manufacturers is attracting a crowd of well-off young drivers who want an electric car but can’t quite afford a Tesla. They have more than 30,000 orders on hand for the new vehicle when production completes.
“Tesla paved the way, now we’re taking this a step further,” Padmasree Warrior, the head of the U.S. arm of Shanghai-based electric vehicle startup, NIO, told The Wall Street Journal. “We have a mission to transform mobility.”
Nio’s backers aren’t exactly shallow-pocket angel investors either, given that they include Chinese tech giants, Baidu, Tencent Holdings, and Xiaomi. Financial investors include the global venture capital powerhouse Sequoia Capital and domestic dynamo Hillhouse Capital.
Another local brand, Singulato Motors, is significantly cutting the MSRP with the sale of its iS6 — the first vehicle in its production line as it enters the electric vehicle market. Buyers of the iS6 can expect to pay somewhere between $31,000 and $47,000.
If the data from PitchBook is accurate about rising investments in the industry, Tesla has some serious competition growing on a global scale.
Here’s the seed and VC tracking for Asia-Pacific:
Granted, not all startups will last. We know that from the downfall of Faraday Future (which subsequently spawned TWO startups from the wreckage). Still, with hundreds of startups in China alone there are bound to be some serious competitors.
One article from the South China Morning Post listed 10 startups boasting both the manufacturing capabilities and the financial backing to lead the race both in electric vehicles and autonomous vehicle production.
Aside from NIO, Byton is another manufacturer that is expected to grab a significant market share next year. The vehicle manufacturer is backed by Legend Capital — which happens to be one of the best/largest funds (and so happens to also have the most government connections). Byton is also backed by auto manufacturer Harmony Autor and League Automotive Tech.
Byton is targeting the first quarter of 2019 for production launch and is likely going to hit that window given its team of established automotive executives programming the launch of its flagship vehicle.
Interestingly enough, Byton has also expanded to the States and opened a second facility in Los Angeles — the first is a major center in Silicon Valley. This new research lab, called “L.A. Future Lab”, will be dedicated to R&D around forward-looking projects while the larger Silicon Valley branch (home to some 300 employees) focuses on working with Byton in China to get its first production model ready for the 2019 release.
According to The Drive, along with the new L.A. facility, Byton announced a pair of key hires. Former Honda Research and Development America chief automotive engineer Chad Harrison joins Byton as its vice president of product-line management, and David Twohig was named chief automotive engineer. Twohig comes to Byton from Alpine, where he served as chief engineer and led development of the Alpine A110.
What the Big Auto Industry Has to Say About the Startups
Tesla and Elon Musk created a significant disruption in the automotive industry with his bold vision for the future of driving. Consumer’s balked at the cost of the original production models from Tesla’s line. But Tesla’s latest unveiling of the Model 3 — designed to be a “smaller, simpler, more affordable” electric car comes with a price tag of just $35,000 and saw over 325,000 preorders in the first week of its announcement.
New technology, like Tesla’s ability to manufacture 60–100 kWh battery packs at an affordable price — is a major factor in the price reduction and its forcing the hand of major automakers to step up their game.
Here’s a teardown of a Tesla Model S battery pack:
Some merely for competitive reasons, while others share Tesla’s focus on renewable energy. Volvo, for example, was so inspired by Tesla’s commitment to sustainable tech that it made a brand-wide switch to hybrid and battery-powered vehicles.
Whatever the position, the major players in automotive have no intention of sitting idly by during such a dramatic market shift.
Early in 2018 Reuters reported that the top automakers were committing in excess of $90 billion to convert some of their most popular vehicles to electric in addition to the production of new hybrid and electric vehicles.
What I can’t help but find amusing is that the major automakers already had a solid foothold in the market. They developed and were ready to lead on the electric car. General Motors had the EV1, which it rolled out in 1996 in response to a 1990 California law requires car makers to produce zero-emission vehicles if they wanted to continue selling conventional gasoline vehicles in the state.
When GM and the rest of auto industry succeeded in bringing about a heavily watered-down version of the California regulation the company promptly scrapped the EV1.
Actually, it was more than scrapped. Production ceased, and the company recalled the vehicles then had them destroyed. It’s been theorized that GM deliberately sabotaged the program for fear that electric vehicles would undermine its conventional business.
And now GM is racing to build a formula for a profitable electric car.
I especially find irony and amusement with the fact the former CEO Rick Wagoner — who resigned at the request of the Obama administration as he was considered to be responsible for increasing GM’s focus on trucks and SUVs at the expense of hybrids and progressive development of the electric car — joined Chargepoint’s board of directors in early 2017.
Chargepoint maintains a networking of charging stations for electric cars.
That’s right. The GM CEO who killed the original electric car is now in the electric car business.
Wagoner isn’t the only experienced automotive veteran to do the electric slide over to the world of startups.
Former Tesla engineer Azizi Tucker is the man behind the founding of XING Mobility.
Evelozcity has a $1 billion commitment from international backers and a seasoned team of executives that includes former chief financial officer of BMW, Stefan Krause; Richard Kim, who was instrumental in the development of BMW’s i3 and i8; and Karl Thomas-Neumann, who joined the company from GM’s European division.
Byton’s COO Daniel Kirchert was once in charge of marketing at BMW’s local venture in China and worked on the Nissan Infinity. Also, Byton’s CEO, Carston Breitfeld, was a leading engineer for the BMW i8 electric car and spent 20 years with the auto manufacturer.
Lucid Motors has former Tesla executives, including Peter Rawlinson (Tesla Model S chief engineer), building the Lucid Air.
The edge these startups have over the major automakers?
Most of them have a passion and determination to revolutionize the automotive industry while at the same time not eschewing the principles of the industry just to create a new product or usher in a new era in automotive design.
The “big three”, motivated more than ever to not be left behind or be outdone in their own business, are pushing to stay relevant. They’ve got some catching up to do but they have the financial backing and the established customer based to make it happen now that they’ve learned a thing or two from Tesla about how to get it done.
What Consumers Really Think About Electric Cars
There’s clearly a demand. The incumbent auto makers and startups wouldn’t be going head to head if there wasn’t a market for the product.
But that doesn’t mean consumers are completely sold on giving up gasoline and regularly turning over a portion of every paycheck to fueling their car. Data from RoadLoans and AAA showed some interesting insight into how consumers really feel about the electric car right now.
Check out these insights:
Almost half of consumers plan to stick with buying a gas-powered vehicle in the next 5 years.
The biggest turn-offs to buying an electric car? The cost of the vehicle, limited driving range, and of course those savvy consumers who refuse to be early-adopters and instead choose to wait for the industry to level off and advance appropriately.
Fair choice — it’s an expensive guinea pig.
But according to AAA, there’s plenty of optimism. Approximately 20% of Americans say they’re likely to purchase an electric car in the near future which is up 15% from a similar study in 2018 (and an exponential increase over prior years.)
The Future of Transportation
All signs and data point to a future where electric cars will be the dominant mode of ground transportation. Factor in consumer interest, investor relations, market growth, and tech advancements and it’s easy to forecast.
This data from McKinsey helps, detailing how affordable battery costs have become since 2010.
Along with this data from the office of energy efficiency on the growth of EV driving range.
These types of growth aren’t just leading a shift toward electric vehicles, they’re making a change to autonomous vehicles more affordable and far more likely.
Tesla shocked the industry in 2017 when it announced that it’s fleet of EV production modules were already prepared for full autonomous self-driving, which positioned them as the first automaker to future-proof their vehicles.
General Motors has linked autonomous vehicle technology with it’s drive to manufacture electric vehicles, specifically stating that electric vehicles are “the foundation for autonomous vehicles”.
GM’s main goal is create a service of both electric and autonomous vehicles tied to a rideshare service similar to the Tesla Network announced by Tesla in 2016.
Other manufacturers recognize that the technology isn’t just reshaping the industry and how cars will be used but also the car designs. In one article, CNBC reported the forecasted change of vehicle designs to accommodate a lack of gasoline engines and more passenger space.
“That is the next logical step,” Karim Habib, the design chief for Nissan’s premium brand Infiniti, told Reuters in an interview. “It is definitely the next step, particularly if you imagine a world of zero accidents with autonomous drive technology fully working. If cars will never crash, the ultimate most efficient (shape) of a personal mobility could be a glass cube.”
While the auto industry as a whole is embracing a shift toward electric vehicles, not all are sold on the combination of EV and autonomous driving. Ford has been the most outspoken, insisting that electric vehicles aren’t good enough for the demands of autonomous driving that are on the horizon.
Unlike General Motors, Chrysler, and Tesla going all in on EV and autonomous driving, Ford is focusing on hybrid technology for autonomy.
According to Ford’s Jim Farley, President of Global Markets: “Picking a hybrid over an EV will allow it to stay on the road longer without charging, he said, and designing a new vehicle to be autonomous instead of converting an existing nameplate, as GM has done with the Bolt, should better serve commercial businesses.”
The company wants its vehicles to be on the road for roughly 20 hours a day. Farley believes EVs can’t do that yet and that it would thus make little business sense to go electric.
The split opinions on EV and autonomy is a reminder that we’re still in the early days of the tech and it’s reminiscent of an entertainment industry hung on trying to decide between Bluray and HD DVD technology.
It will be interesting to see how opinions change between now and 2020 when many of these startups begin to bring their first production EVs to market.
Conclusion
There may be hundreds of startups pushing alongside the incumbent auto brands but despite all the competition it’s still clear that Tesla is leading the pack. Elon Musk’s accomplishments with Tesla are nothing to shake a stick at, and have paved the way for expansive growth in the market. That may come back to bite Tesla, however. With this many startups — some with solid financial backing and experienced executives, it’s going to be a tight race and a close call for who comes out on top as consumer adoption grows.
