EVs will cause next Oil Glut soon..

Prediciting the Big Crash BB

source: Bloomberg Feb 25, 2016 

LI-PO “Lithium Polymer” Batteries are the Wildcard..

2023 is the earliest prediction we could see another Oil Glut according to big Media sages, however, few if any of these sources really understand the progress being made in new manufacturing processes with leading edge Li-Po battery vendors such as Electrovaya (Toronto, Canada). Our analysis says this event could be closer.. as close as 2020.

The Bloomberg report states there are four elements to battery cost reductions which currently make up 1/3 of the cost of an EV,  which will precipitate the next Big Oil Glut, in the face of Chevy Volt, Nissan Leaf, Tesla 3, Toyota Prius and others bringing viable EVs to market worldwide in 2016.

WHERE ARE THE BATTERY SAVINGS COMING FROM?

In the short term yes, battery prices will be driven DOWNWARD  as the article states as follows when:

1. Governments offer incentives to lower the costs.
2. Manufacturers accept extremely low profit margins.
3. Customers are willing to pay more to drive electric.
4. The cost of batteries come down. (by as much as 2X in 2 years)

The reality is manufacturing process and battery recipe improvements had little to do with the current 38% price drop OVER THE PAST YEAR, it was more Tesla stating a price for the Powerwall at introduction, and other battery vendors dropping their price on existing technology, and taking a BIG margin hit, to keep pace. Government impact is at the state level and in the USA a real bingo card with lots of red tape involved trying to capture that portion of the savings, therefore they government subsidies are not having as much impact. These new manufacturing savings driven  by  material processing and recipe mix advances (all patented) will start to show up in 2017 in volume, and really kick in 2018 , will be replacing old costly legacy battery manufacturing processes and their current battery recipes to deliver the cost savings the EV buyer market needs to “take the plunge” and buy an EV, where EV battery cost will only be 20% of the cost of the EV  in 2018 instead of 33% of the cost of an EV as of 2016.

Who’s buying (crying over the EV price tag) now?

Yes there are customers with a big green conscious willing to pay more, they are a leading edge early adopter type of customer which in reality makes up maybe 1-2% of the population with only about 10% of them actually acting out their buying disposition at the moment due to the economic crunch and current high prices of EVs, which ironically accounts for the 1/10th of 1% share the oil companies are gladly willing to point out in their research.

THE TIPPING POINT IS HERE in 2016.. Enter Manufacturing & Material Advances..

One look at the graph below makes it abundantly clear  Number 4 is the big impact item, and clearly manufacturing process improvements driven by new materials for electrolyte,  thermally stable separators containing the electrolyte, and new advances in cathode and anode material have already made the biggest impact on lowering battery costs and are just shipping now in 2016. While in the past 12 months have dropped 35% due largely to the latest announcements of Tesla’s Powerwall, a product due to be delivered end of 2016 to support in home EV charging stations ( and home power) fuelled largely by Tesla’s promise of a Gigafactory in Nevada delivering EV home charging stations which will work with any car by the end of 2016. What this means for the EV buyer is we can expect a similar drop in Li-Poly battery pricing by the end of 2016 or early 2017, which will drop the price of an EV in 2017 by at least 20% of current retail prices, and that will get the 1-2% of the total vehicle market early adopters to move on mass into EVs, shifting 25% to 33% of those buyers “off the fence” to a buy decision, and effectively tripling the EV overall vehicle market share over night by end of 2017. So Happy EV Day Sales are coming!

Its all about the batteries

The “Estimated range” in the above graph, in our opinion at Starwind5, based on our experience working directly with battery vendors is  pretty vague (where is the data?). We believe the drop in battery prices predicted for 2023 prices needed to trigger the next Big Oil Glut are more likely to show up in 2020. Why? The new manufacturing processes which eliminate much of the costly electricity charges and high acquisition and operating costs  of equipment used for evaporation and reduction of  electrolyte bulked up with dangerous solvents have been replaced by clean, safe low cost roll to roll “R2R” processes (much like printing newspapers). These new manufacturing processes and battery recipes are now in place at Electrovaya and other competitors with competing battery technologies.

Enter the Raptor(or Unicorn):

Electrovaya et al in 2016 to 2017- the Battery Underdog

AND maybe even Tesla by 2019. (with new recipes and new manufacturing process)

Electrovaya’s early experience with EVs (Chrysler and Mercedes Smart) plus the new release of new EV vehicles means companies like Electrovaya are well positioned to supply the EV vendors directly initially, and then through 3rd party OEM battery builders who will take supply of cells from Electrovaya and similar to then build their own battery cassettes under more swell known consumer battery brands, which are then sold to the EV  vendors.

In our opinion, Tesla’s giant Gigafactory in Nevada will run with tried and proven legacy battery manufacturing processes and current Tesla battery recipes, all the while sipping on a cheap electricity supply contract and leveraging state tax incentives to do so with economies scale feeding a supposedly large order back log, before Tesla themselves start to see the light (by 2018 after losing a bunch of big deals to Electrovaya supplied Battery OEM builders with big well known name brands) , realizing the right way forward to lower competitive battery costs is really the changes a battery vendor makes to the manufacturing processes and the battery recipes behind them. It’s these fundamental “playing field” changes which will really make the difference and keep such early movers in the Li-Poly battery segment the competitive, winning companies. Ironically Tesla does not have all the right patents to cross that next Li-Poly battery price drop chasm (where Electrovaya does), so Telsa will need to move quick and look at their future supply chain, and make sure they phase in the new manufacturing tech and Li-Poly battery recipes sooner  (by 2018) rather than later in Nevada, if they are truly going to dominate in the medium term up to the 2023 Next Big Oil Glut Event.

So what are we waiting for? 2020 is already in the books for the Next Big Oil Glut…

Ultimately 3rd party validation of “Risk Reduction” when buying an EV as a consumer is what we are all really waiting for. Will these new EVs really deliver the right value and appeal to eliminate our 300 mile range anxiety? Will a third party car magazine of trusted repute with real field tests tell us so? (and who really pays for their adverts, so will they really tell us in a way we can trust and believe them?) At Starwind5 we really think 2016 will be Chevy Volt’s year in the mainstream USA for hype to create awareness generally that EVs do work and save money (never mind the environment. Why Chevy? Well because GM wants to lead and not follow which they have done really since the 1971 oil crisis, it’s just in their DNA and the new executive want’s it bad. Also Chevy Volt is supplied by LG Chem Power Inc., the Korean giant, who is really in a fight with Tesla 3 and Panasonic Battery production. So it’s really a battle of the Korean and Japanese Battery Big Boys driving the show “under the hood” (or should we say under the frame? 🙂 )

If the Oil and Gas lobby think they can stop these Big Battery Boys well, we can say at a minimum it will be a Titantic battle and the Oil and Gas lobby is the boat and the Battery boys are the Iceberg. So Chevy, Tesla and others have picked their partner for the long run, and they will cannibalize the sales of those car vendors who don’t move quick enough.

Li-Po,  Apple Pie and Chevrolet (Volt that is): a New (North) American idiom?

So 2017 will be the reality year when we see noticeable numbers of name brand normal EVs on the road buoyed by Chevy Volt’s imminent success (and also when all the bugs get shaken out of this new crop of volume EVs), with Chevrolet towing Tesla  and their smart big battery builders (Electrovaya supplied for some models to hedge bets?) and gang along for the ride, and by 2018 we will start to see real volume sales of both EVs and home charging stations surge to the 60% levels needed to create and sustain the EV revolution year of year for the next 5 years. All this “bellweather ” change in 2016 through 2018 means 2020 is already in the books as a slam dunk for EVs and new Li-PO batteries  and 2020 will really be the year of the Next Big Oil Glut.

So go, go Chevy go, go go! Chevy be good!  🙂

*****

 

 

 

 

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