Tag Archives: EVs

Testing Tony Seba’s EV Predictions 20 (The Conclusion: Is It “Boom, Over” for the Internal Combustion Engine?)

Here we go. Tony Seba declares it’s “boom, over” for the internal combustion engine (ICE).

In this series of posts, I’ve tried to provide some metrics to measure whether Tony could be right. Central to my thesis is that when electric vehicles (EVs) match or exceed ICE vehicles on every criteria then “yes” it will be “boom, over”. Let’s revisit the criteria from post number 13 in this series. The sources of utility derived from a car can be thought of as threefold:

  1. Mobility
    • Acceleration
    • Top speed
    • Handling
    • Internal volume
    • Configuration
    • Off-road and specialist capabilities
  2. Aesthetic
  3. Status signalling

With respect to mobility, EVs are already superior to ICE vehicles in terms of acceleration and top speed. With their low centre of gravity (governed by the battery), their handling characteristics are also very good. Moreover, the small size of EV motors means that ultimately we can have motors front and rear, or, indeed, on each wheel. With each such modification, EV handling will pull away from that of ICE vehicles.

The powertrain of an ICE vehicle is a lot bigger volume-wise than that of an EV. It’s only through taking into account the big battery that the entire drivetrain of an EV matches, or possible exceeds, an ICE in volume. Here again, however, technology favours the EV. Batteries are getting smaller. The internal combustion engine has been around for 100 years. It won’t get much smaller. So, in time, the entire drivetrain of the EV will be smaller than that of an ICE, freeing up space in the rest of the car.

The fact that EV motors are so small and don’t require gear boxes, exhaust systems and other ancillary equipment means that they already favour creative configurations. At the minute, the size of the battery is so big that it limits flexibility provided by the smaller electric motors, even though we could chop up the battery and put it in different places. Distributing the battery around the car though is currently not an efficient thing to do since it adds complexity to the electronic control panel and heating systems regulating the battery. But as the size of individual battery cells come down, the battery can be placed within the required form factor of the overall car just as it is in a lap-tap computer. Ultimately, we will move to a designer-led car rather than an engineer-led car, as with smart phones.

With the independent control of each wheel and a freehand regarding configuration, designers can also dream up the perfect MPV, SUV or pick-up truck. Dropping the tyranny of the big engine, gear box, crankshaft, and exhaust system means that future EVs will be able to cope with challenging terrain or complex pulling and carrying requirements far better than ICE vehicles.

Now we get to aesthetic and status signalling. The rush by high-end German auto makers (such as Mercedes, BMW, Porsche and Audi) to roll out EVs in response to Tesla shows that EVs are soon going to dominate high-end auto sales. Indeed, Jaguar‘s top management is now debating whether to transform the brand into an only-EV one near term (here). The strategy of other top-end makers like Porsche is to offer a full-range of EVs alongside the old ICE vehicles. But the key point here is that all the luxury brands now see no contradiction between a car with an  electric drivetrain and a car that conveys high status.

True, for those ICE aficionados, the sound of an ICE engine and the steam punk-type glory of lifting a bonnet to see a V8 will never be eclipsed by an EV. But the new Tesla Roadster will place all of these vehicles in the rear-view mirror. So there will remain an aesthetic and status-signalling rump demand for ICE vehicles, but this will be the same rump demand as exists for Swiss mechanical watches. Demand for Swiss mechanical watches exists but its irrelevant in terms of aggregate revenue for the watch industry.

But now we come to the chink in the EV armour: price. As pulled out in previous posts, affordability is a temporal constraint: it stretches from the present to the future. So the purchase decision is not just bounded by the current available budget available to buy a car now, but also by the budget you will have to run the car through time and, ultimately, replace it. Restated, the purchase decision takes into account the sticker price and future costs captured by fuel, maintenance and depreciation.

EVs are already ahead of ICE vehicles with respect to fuel costs, maintenance and depreciation. And if something costs less in the future, theoretically you should have more money to buy it now (financing and credit facilities allow one to push payments for a car from the present to the future). In other words, if we can lessen future costs, we have more money to buy a more expensive car today.

So to repeat: given EVs are superior to ICE vehicles with respect to mobility functions, and can be at least as good with respect to aesthetic and status-signally, once their price approaches that of ICE vehicles, looked at in terms of the aggregate purchase price and future running costs, the market will tip. That is, sales of EVs will grow exponentially and ICE sales will collapse.

At this juncture, we should emphasise that the car market is not one amorphous mass. It is highly segmented with the vehicles in each space having a particular combination of mobility, aesthetic and status-signallying functions and price points. Thus, we are not really talking about a single tipping point, but a series of rolling tipping points as EVs meet the required sales take-off criteria in each segment one by one. To get a sense of the segment breakdown in the US,  2016 sales by type are given here:

US Auto Segment Sales 2017

Next question: “Are EVs at the tipping point in any of the above segments?”. Twelve months ago, the answer to that question would have to be ‘no’. But you are lucky to be living at a unique point in history. As of the third quarter of 2018, the answer must be “yes”, and that is down to Elon Musk and his Model 3. The rise of Model 3 sales over the course of 2018 has been nothing short of stupendous despite all the much-reported production issues.

Top 10 Luxury Cars US

The Model 3 is leaving its rival brands in the dust:

Sep 18 Luxury Car Sales

The next segments up for attack by EVs are luxury mid-size and large SUVs and crossovers. Here, the incumbent brands look like they will get to market first since Tesla has its hands full fulfilling its Model 3 order book before it can move on to its crossover Model Y.

At the top end, we have the Jaguar i-Pace, soon to followed by the Audi e-Tron and the Mercedes EQC. The adage “build it and they will come” appears to be holding true again, as the i-Pace has a full order book and Jaguar has hopelessly limited capacity to meet demand. In short, we have evidence that when an EV offering is at a similar price point to incumbent ICE vehicles, you will be able to sell all the EVs that you are able to make.

Luxury Crossovers

To repeat: what the sales data are starting to show is that if an EV is offered at a similar price point to an ICE vehicle, the public will buy the EV since an EV is a better transport alternative in terms of performance. Basically, the meme that the pubic don’t want EVs appears total rubbish. Given this state of affairs, what are we to make of these two charts. The first is from a Citibank report on EV penetration rates, and the second from an article by David Roberts of Vox.

EVPenetrationCiti

EVForecastsBNEF

In the top chart, the high-end 70% sales penetration rate by 2030 forecast is predicated on a breakthrough in technology (probably a commercial solid state battery). Personally, I don’t think that will happen until a decade later, so can put that forecast aside.

Based on lithium-ion technology, we are really looking at 2030 sales forecasts by every single forecasting entity of less than 50% of total vehicle sales. One of the most bullish forecasts is Bloomberg New Energy Finance (BNEF). This company’s latest Electric Vehicle Outlook 2018, which forecasts forward to 2040, was published in August and can be found here. The headline quote for the report:

BNEFOutlook18

And from inside the report a percentages sales penetration number:

BNEFNumbers

So the bullish BNEF suggests we need another 20 years at least before EVs overtake ICE vehicles in total sales. Keeping that in mind, Tony Seba’s belief that the EV sales penetrations will be over 95% in 2030 is not just an outlier compared with other forecasts but on a completely different planet (my graph based on Tony’s statements):

Seba Central Scenario

The disconnect is massive. In effect, BNEF, one of the most bullish mainstream forecasters of EV sales, sees a penetration rate a lot less than half of that of Tony Seba in 12 years’ time.

Nonetheless, as one of the first vindications of Tony’s theory,  in the small- to mid-sized luxury car segment Tesla alone was around one third of total sales in September 2018!

TeslaShare

Moreover, with a slew of new entrants, the luxury crossover and SUV segments is going to experience an identical attack by EVs on ICE vehicles as the cost and performance metrics are basically the same as the luxury car segment. Accordingly, the only way that BNEF and all the other companies and organisations that forecast total penetration rates well below 50% in 2030 can be right if one or both of two conditions are fulfilled:

  1. EVs can’t get down to cost parity in the mass market car, SUV, crossover and pick-up segments, or
  2. The demand exists across all segments for a Seba style 90%-plus penetration rate, but not enough batteries can be produced and/or EV production lines put in place to fulfil demand.

Now if you listen through Tony’s presentations, he claims that battery-price falls have accelerated from 14% to 20% per annum. He then projects these trends forward and sees EVs being chapter than ICE vehicles across the board in a few short years.

The head of BNEF‘s team Colin McKerracher has some rude things to say about this. From his Twitter account,

ColinMcSeba1

And in response to Seba a short Twitter spat ensued:

ColinMcSeba2

Mckerracher’s argument is that as the price of the battery comes down, in percentage terms it will become less dominant in the overall price of the car. I agree with this argument, but I don’t think it is enough to knock Seba’s huge EV penetration number out of the ring.

As I have argued throughout these posts, EV’s are superior to ICE vehicles in a number of domains like performance, running costs and so on. Accordingly, they don’t need to be cheaper than ICE vehicles to replace them. All they need to do is reach price parity. And we are witnessing real time what happens when EVs match ICE vehicle in a particular segment with respect to price: in the small- to mid-size US luxury car market we are seeing the market tip toward EVs in a matter of months.

In the same Twitter exchange, another poster put up a helpful chart to show the price fall dynamics of a 16% battery price decline with the price of the rest of the vehicle’s main components kept static. The battery is very much the swing component.

Cost Split .jpeg

In my last post, I did some rough, back-of-the-envelope calculations so as to determine what the battery price needed to get down to in order for a mass market EV to sell at parity to an equivalent segment ICE vehicle. Look at the post for details, but the bottom line is that the battery needed to be produced for $2,500 for a 2017 US average sticker price model of $37,500.

From Electric Vehicle Outlook 2018, BNEF sees battery pack prices at $70 per kWh in 2030. Further, given the almost daily advances in battery charging speeds taking place at present (we seem to be on a through train from 100kW to 350kW and beyond), a mass market vehicle should be able to get away with a 50 kWh battery (which with a 350kW  charging station will recharge in a little over 8 minutes, assuming that battery chemistry and control will have advanced to a stage that can cope with that speed of charge in 10 years’ time).

Seventy times 50 is $3,500 dollars. So let’s say that this makes the EV $1,000 more expensive than ICE vehicle or 2.7% more. As I mentioned above, the aggregate cost of a car is the price of purchase plus running costs. Given EV running costs are lower, a slightly higher EV sticker price of purchase is completely compatible with my concept of total cost parity.

As a reality check, even today we are seeing the first stirrings of proper EV offerings in the smaller vehicle segments. The Hyundai Kona, a small SUV, boasts a 64kWh battery and a range of around 300 miles. Just launched in the UK, it sells for around £25,000. Add back in the government subsidy of £5,000 and the total comes to £30,000 or about $40,000. By comparison, in a similar segment in the US the Honda CR-V and the Toyota RAV 4 sell for around $30,000.

Hyundai uses the LG Chemical NCM 622, which has a relatively high cobalt content compared with Tesla‘s battery. Consequently, I would guess that the Hyundai Kona battery costs around $200 per kWh, or $12,800 for the 64kWh battery overall. If we could get the kWh cost down to $70 in line with the BNEF forecast, the battery would come in at $4,420, for a saving of $8,320. At that price, the Hyundai Kona would sell for about $1,500-$2.000 more than the RAV 4 or CR-V. Basically parity given that the Kona will be cheaper to run.

True, getting the battery cost well below $100 is a challenge. There are two opposing forces we should consider in the declining battery cost trajectory. BNEF rightly point out that Tony’s per annum price decline forecasts are less useful that an experience curve approach (in economics we talk about economies of scale and learning-by-doing effects). What this means is that price declines are not a function of time but rather how many batteries you produce. Thus, if the volume of batteries produced goes up exponentially, the price of the batteries comes down exponentially.

And if you want to get a sense of how fast battery capacity is being ramped up, then you should follow this link and read the  article by Simon Moores of Benchmark Mineral Intelligence. Moores notes that existing and announced battery factories will have the capacity to produce 1.1 TWhs of batteries per year. That is over a 10-fold increase over existing production. The scale of this application of capital and innovation should reap huge cost-cutting rewards.

The major impediment preventing batteries costs coming down well-below BNEF‘s forecast of $70 kWh in 2030 is the price of the raw materials that go into a battery. Very roughly, 0.8kg of lithium goes into a 1 kWh battery, and that amount of lithium currently costs about $10. The most expensive metal used in current generation lithium-ion batteries is cobalt, which at one stage got as high as $90 per kg, but is now around $62. From the chart below you can see that different battery technologies use different amounts of cobalt. The NMC 811 battery, viewed as one of the most advanced battery chemistries in terms of energy density, is eight parts nickel to one part cobalt to one part manganese). A 50 kWh battery uses 4.5kg of cobalt or about 0.1kg cobalt per kWh. That is worth about $6. Nickel current trades at about $13 per kg. So for an NMC 811 battery we are looking at about $10 per kWh for the nickel. Thankfully, manganese is relatively cheap, so isn’t a big swing factor in battery pricing.

CobaltUseBatteries

Nevertheless, if you add the three most costly metal components together, we have a floor cost of $25. And these are the raw materials for just one component in the battery: the cathode! You then need to complement the cathode with a graphite anode, an electrolyte and a separator.  Then these components have to be combined into cells, which are linked into battery modules, and finally fabricated into battery packs. And the whole system requires a very sophisticated charge management and heat control system. In sum, getting battery prices below $100 per kWh with current lithium-ion technology will be tough.

With that caveat in mind, I will ask the following question to finish this series of 20 blog posts on the future of EVs:

“Is Tony Seba delusional in seeing EVs totally displace ICE vehicle sales by 2030?”.

My answer to that would have to be “no’. Ninety-five percent plus penetration is certainly a stretch goal since it would require current lithium-ion battery technology to be pushed right up against the boundary of what is possible in terms of price and performance. But I feel it is just about doable.

Does that mean that I think it will likely happen? That is a different question. I’m a probability guy and prefer thinking about the range of possible outcomes as opposed to giving one point estimate. For me, saying EV penetration will definitely be X percent in 2030 when looking at such a dynamic industry is a meaningless thing to do. My own guesstimate is that the EV penetration rate will likely be somewhere between 60-80%, which still puts me completely outside of the mainstream.

Nonetheless, in the spirit of Tony Seba hyperbole, I am happy to go out on a different type of limb. So in my words (rather than Tony Seba’s):

“All those who think EV sales penetration will remain down at around 30% in 2030 (the consensus view) are completely, utterly and certifiably crazy!”

For those of you coming to this series of posts midway, here is a link to the beginning of the series.

 

 

Testing Tony Seba’s EV Predictions 4 (FoMO with the Big 6)

Let’s start with a chart from my last post. I’ve relabelled it to read ‘sales capacity’ adds rather than ‘production capacity’ adds just because we can then tack the time series on to the existing EV sales numbers we have for the last few years as reported by EVvolumes.com. In reality, there is a lag between leaving the factory and delivery to the customer, but given this is less than a year, I think it can be safely ignored.

 

EVSalesCapacityAdds

 

In the chart below I add a bit of texture so you can see some numbers (rounded to the nearest 100k) for total sales and sales additions both historically and projected into the future based upon my Tony Seba central scenario S curve:

EVSalesto2023

I’ve gone only as far as 2023 since we should be able to see evidence of action being taken now in order to obtain outcomes then.

To give you a sense of the development process, below is a fascinating presentation by Alex Patterson of Nissan showing you how to get from sketch to production for a new version of the Qashqai. What jumps out at me from this video is that the whole complex process only took three and a half years!

Now let’s do some bottom-up work. I’m going to do this by looking at the EV strategic intentions with respect to two main categories of auto maker:

  • The major motor manufacturers (VW, GM, Toyota, Hyundai, etc)
  • The disruptors (Tesla, BYD, SAIC, Geely, etc)

The Major Motor Manufacturers

A good starting point to this analysis is to take a look at the latest global market share of auto sales by maker to identify the big guys. The International Organisation of Motor Vehicle Manufacturers (OICA) publishes just such data, albeit with a lag. The latest release is for market share as of 2016 as can be seen here (2017 numbers are not out yet):

GlobalAutoSalesMarketShare

And because we are also interested in how many cars were actually sold, here is the same chart looking at those unit numbers.

GlobalAutoSalesUnits

So from my top charts, we were looking for 14 million EV sales in 2023 for Tony’s S curve, which also translates into 5 million units in additional capacity that year. Those numbers compare with Big 6 sales of between 5 and 10 million units per annum.

Next, let’s look at the declared intentions of the top six global auto manufacturers.

Toyota 

Toyota has been sparring with Volkswagen for the title as world’s number one motor manufacturer for the past few years. When it comes to sustainability, it is well know for its investment in hybrid technology via the Prius and also for pioneering hydrogen fuel cells through the Mirai, but the company has been a laggard when it comes to pure battery electric vehicles (BEVs). Indeed, the company previously pushed the benefits of hybrids far more than pure EVs.

On 18 December 2018, however, the company announced a dramatic change of direction  (press release here) when it stated that it was targeting 5.5 million EV sales by 2030, of which 1 million would be pure BEVs (not hybrids).

The shift away from ICE to EVs was made stark by this statement:

“Additionally, by around 2025, every model in the Toyota and Lexus line-up around the world will be available either as a dedicated electrified model or have an electrified option. This will be achieved by increasing the number of dedicated HEV, PHEV, BEV, and FCEV models and by generalizing the availability of HEV, PHEV and/or BEV options to all its models.

As a result, the number of models developed without an electrified version will be zero.”

And the R&D commitment to battery technology was unequivocal:

“Batteries are a core technology of electrified vehicles and generally present limitations relating to energy density, weight/packaging, and cost. Toyota has been actively developing next-generation solid-state batteries and aims to commercialize the technology by the early 2020s. In addition, Toyota and Panasonic will start a feasibility study on a joint automotive prismatic battery business in order to achieve the best automotive prismatic battery in the industry and to ultimately contribute to the popularization of Toyota’s and other automakers’ electrified vehicles.”

The commitments by Toyota don’t get us anywhere close to Tony Seba’s 95% EV penetration target in 2030, nor do they accelerate us up the S curve near term. But the central core of Seba’s analysis is that incumbents find it exceedingly difficult to counter disruptive technology since they are loath to junk past sunk costs in the old technology (in Toyota’s case also a bridge technology in hybrids). Indeed, every single one of Tony’s presentations has Kodak’s death at the hands of digital photography at the front of the slide deck pushing this point.

In this light, Toyota’s press release can perhaps be seen as reactive rather than proactive. And while Toyota has admitted that there exists a threat from pure EV, their response is measured when compared with arch-rival Volkswagen.

Volkswagen

Wind back two months from Toyota’s press release and you come to Volkswagen’s unveiling of “Roadmap E” on 17 September 2017 (press release here). It leads off with this:

“The Volkswagen Group is launching the most comprehensive electrification initiative in the global automotive industry with its “Roadmap E”: Volkswagen will have electrified its entire model portfolio by 2030 at the latest. This means that, by then, there will be at least one electrified version of each of the 300 or so Group models across all brands and markets.”

And this was written by Matthias Muller, Chairman of the VW Board (not by Tony Seba):

“The transformation in our industry is unstoppable.”

Unlike with Toyota, we have a nice big solid number to stick on Tony’s S curve:

“The Company estimates that around one in four new Group vehicles – up to three million units a year depending on how the market develops – could already be purely battery-powered in 2025.”

In my former industry finance it was always a good idea to follow the money to find incipient trends. In this regard, VW’s press release gives us a lot of money to follow:

  • $20 billion in direct investments in industrialisation of e-mobility
  • $50 billion of battery procurement tenders
  • Setting up of in-house battery production lines
  • Gearing up for next generation solid state batteries

It seems VW has decided to go ‘all-in’ with the EV game. Is this an incumbent showing  enough flexibility to survive? We shall see.

Hyundai

Like Honda and Toyota, Hyundai (and it’s subsidiary Kia Motors) has been somewhat lagging on the electrification of its line-up due to an ongoing commitment to hydrogen fuel cell vehicles. Responding to the aggressive plans announced by Toyota and VW, however, Hyundai announced a $22 billion investment in electric cars in January 2018 and that a new line-up of 31 models by 2020 and 38 models by 2025 . There doesn’t appear to be a specific press release related to their “Clean Mobility” strategy plan, but you can find details in one of Hyundai’s investor presentations here.

No EV sales targets have been announced as of this time.

General Motors

The three emblems of the rebirth of the EV have been Tesla’s Model S, the Nissan Leaf and G.M.’s Chevrolet Volt. Yet until October 2nd, 2017, G.M.’s commitment to the EV space appeared half-hearted due to its meagre model line-up. That all changed with this press release.

“General Motors announced today how it is executing on a major element of its vision of a world with zero crashes, zero emissions and zero congestion, recently announced by GM Chairman and CEO Mary Barra.

“General Motors believes in an all-electric future,” said Mark Reuss, General Motors executive vice president of Product Development, Purchasing and Supply Chain. “Although that future won’t happen overnight, GM is committed to driving increased usage and acceptance of electric vehicles through no-compromise solutions that meet our customers’ needs.”

In the next 18 months, GM will introduce two new all-electric vehicles based off learnings from the Chevrolet Bolt EV. They will be the first of at least 20 new all-electric vehicles that will launch by 2023.”

Like VW, GM appears to have got the EV religion.

 Ford

In May 2017 Ford got a new CEO Jim Hackett whose brief was to prepare the company for a completely reconfigured marketplace. The incoming CEO’s  first strategy announcement in October 2017 was short on detail apart from a commitment to aggressive cost cutting. The forward-looking ideas vaguely centred around a smart car agenda, with the China market playing a key role. The most detail we got on EVs was this:

“The company recently announced a dedicated electrification team within Ford focused exclusively on creating an ecosystem for products and services for electric vehicles and the unique opportunities they provide. “

In January 2018, however, we got more meat when Ford’s Chairman Bill Ford announced the following measures:

  • 16 fully electric vehicles to be added to line-up by 2022
  • 40 fully or partially electrified vehicles to launch over that time frame
  • Investment in EVs to rise from $4.5 billion to $11 billion

In an important move necessary to increase EV penetration, Ford also explained how electrification of existing SUVs and pick-up was to take place, making this comment to Reuters.

“If we want to be successful with electrification, we have to do it with vehicles that are already popular.”

Nissan 

Rather than a standalone company, Nissan can best be thought of as part of the Nissan-Renault-Mitsubishi Motors alliance. As such the group taken together could be viewed as the largest auto maker in the world.

Rather like GM with the Volt, however, Nissan has been somewhat slow to take the technology from its breakout product the Leaf and apply it across its product range. Again I can hear Tony’s voice talking about the lack of ability of incumbents to disrupt their own businesses even when they are leaders in the technology driving the disruption.

But completing our orgy of announcements from the Big 6, Nissan has suddenly decided to aggressively play catch-up with a commitment to sell 1 million EV cars a year by 2022. The March 23rd press release is here and the “M.O.V.E. to 2022 Plan” has these goals:

  • Develop eight new pure electric vehicles, building on the success of the new Nissan LEAF
  • Launch an electric car offensive in China under different brands
  • Introduce an electric “kei” mini-vehicle in Japan
  • Offer a global crossover electric vehicle, inspired by the Nissan IMx Concept
  • Electrify new INFINITI models from fiscal year 2021
  • Equip 20 models in 20 markets with autonomous driving technology
  • Reach 100% connectivity for all new Nissan, Infiniti and Datsun cars sold in key markets by the end of the plan

Conclusion 

The strategy announcements are different in texture and difficult to to compare, but they have elements in common:

  1. A broadening of electrification across the product range
  2. The acceleration of EV model roll outs to the early 2020s
  3. A tidal wave of money going into the EV space
  4. A massive recommitment to EV R&D, particularly with respect to batteries
  5. Not one mention of any new initiative with respect to ICE technology
  6. Lots of FoMO (fear of missing out)
  7. And lots of plain FEAR (It seems that VW’s September 2017 strategy announcement has scared the crap out of VW’s competitors, and their strategic ripostes have been tumbling out one after another since then.)

Moreover, if we assume that the battery materials, battery cells and battery modules will be available to make the cars (I’ll come back to those issues in later posts), the Big 6 makers have the intention to try to sell EVs across every model segment. Thus, on the supply side of Tony Seba’s forecast, the big guys intend to play a major part. Of course, just because you can make an EV, it doesn’t mean anyone will buy it. But that is the demand side, which I also want to leave for later.

Rather, for my next post I want to look at the disruptors. How much money can they raise, how many factories can they build, how many EVs can they sell. To date, Tesla sales are really just a rounding error in terms of total global auto sales. Will that change? And, then there are the Chinese.

For those of you coming to this series of posts midway, here is a link to the beginning of the series.

 

Testing Tony Seba’s EV Predictions 1 (Spring Is Coming)

You should have an opinion on Tony Seba,  He is someone not to be ignored because the upcoming technological change he predicts is so important. Indeed, if he is right, everything is about to change. So if you aren’t aware of his take on where the world is going, I highly recommend you watch one of his videos (for example here).

Tony’s PowerPoint presentation and pitch hasn’t actually changed much over the last four years. Indeed, if you click through his YouTube presentations from a variety of events, you get a distinct feeling of deja vu. But perhaps, like a modern-day Messiah, Tony feels the need to deliver just one central message:

“Get ready for a technological disruption that will dwarf all those that have gone before.”

His first book “Winner Takes all” is a typical airport self-improvement shopping list for the wannabe tech CEO, but then came “Clean Disruption” in 2014.  In this, Tony broadened his range to encompass, well, everything. The tag line on the front cover says it all:

“How Silicon Valley will make oil, nuclear, natural gas, coal and conventional cars obsolete by 2030.”

While this industrial disruption is epic, the follow-on implications for urbanisation, climate change, geopolitics, development, growth, wealth and inequality are just as mind-blowing. Thankfully, Tony didn’t run with those themes too, but it doesn’t take much of an imagination to extrapolate out from his conclusions into a broad variety of social and political domains.

So this is what he says will happen by 2030:

  • Solar will become the dominant form of energy production
  • Centralised electric utility companies will be in retreat and the price of electricity will plummet
  • Electric vehicles will replace internal combustion engine vehicles
  • Cars will become self-driving and individual car ownership will collapse
  • Nuclear is dead
  • Oil is dead
  • Natural gas is dead
  • Biofuels are dead
  • Coal is dead

Wow! Moreover, this book was written in 2014, and given it’s now 2018, that means we only have 12 more years to go! That sounds ridiculously ambitious, if not ludicrous. Nonetheless, Tony always includes a pair of photos to tackle such doubts. Here is a picture of New York in 1900:

Where Is the Car? jpeg

And here is a picture of the same street in 1913, 12 years later:

Where Is the Horse? jpeg

You have to respect Tony for one thing: he has given us a testable hypothesis. In times gone by, futurologists were careful to either give a specific numerical forecast, or a specific date for a vague non-numerical forecast — but never a specific numeral forecast with a specific date attached.

If such strategists were “doing a Tony”, they would have said everything will change in 2030, but not specify how much it will change; or, things will change by X amount, but not when such change would take place. By so doing, an erroneous forecast could always be dumped without too much reputational risk.

No such intellectual cowardice for Tony. Here is just one example of his forthright approach to forecasting, from page 127:

“There may still be millions of older gasoline cars and trucks on the road. Ten- to twenty-year-old cars are still on the road today. We may even see niche markets like Cuba where 50-year old cars are the norm. But essentially no internal combustion engines will be produced after 2030. Oil will also be obsolete by then.”

To make things manageable, I am going to pick off his forecasts in bite-sized chunks and see how they are doing from when they were first floated back in 2014. To put that in perspective, we are already 25% through Tony’s original forecast horizon.

Let’s  start with the above quote surrounding electric vehicles, not least because Tony set out a variety of milestones back in 2014 that should show us whether we are on our way to his EV nirvana. The first of these relates to S curves, which will be the topic of my next post.

Battery Banter 2: Sliding Down the Electric Vehicle Cost Curve

With impeccable timing (for my current blogging theme), Nature Climate Change has just published a commentary by Bjorn Nkyvist and Mans Nilsson reviewing the falling cost of battery packs for electric vehicles (source: here, but apologies as the article is behind a paywall). Bottom line: costs have been falling faster than predicted a few years ago (click for larger image).

Battery Electric Vehicle Costs jpeg

In line with Tony Seba’s estimates I blogged on two days ago (here), Nykvist and Nilsson saw total battery pack costs fall 14% per annum between 2007 and 2014 from $1,000 per kilowatt-hour (kWh) to $410. The market leaders in terms of auto battery technology, Tesla and Nissan, saw a slightly lower rate of decline of 6 to 9% since they have been at the cutting edge of improvements and have had less potential for catch-up than the industry as a whole. However, their costs per kWh are now seen at around $300 per kWh of battery capacity. Note that a BMW i3 has battery capacity of approximately 19 kWh, a Nissan Leaf 24 kWh and a top of the range Tesla 85 kWh. Continue reading

Battery Banter 1: Are Internal Combustion Engines Going the Way of the Horse?

A few days ago, a good friend of mine pointed me toward a presentation on disruptive technologies given by Tony Seba. A youtube video is available here:

The entire video is worth watching, but today I will restrict myself to the issues he raises relating to battery technology.

Seba stresses that technological change in the transport sector could happen at breakneck speed. With a pair of compelling photos of early-last-century New York, we are asked to remember that a grand disruption in transport has happened before. In the first photo, dating from April 1900, we play a game of spot the car (click for larger image).

Where Is the Car? jpeg

In the second, a mere 13 years later, the challenge is to spot the horse.

Where Is the Horse? jpeg

The lesson here is that once a disruptive technology reaches a particular tipping point, it doesn’t just take market share from the incumbent industry but rather completely replaces it. For Seba, we are close to reaching that point with electric vehicles.

Continue reading