Monday, May 24, 2010

Electric Cars' adoption rate: Washing Machines or Mobiles with iPods Squared? TNR.v, CZX.v, RM.v, LMR.v, WLC.v, CLQ.v, SQM, FMC, ROC, F, BYDDY, NSANY,

CS. The time has come for Electric Cars: we are sure about it, but how fast will they be adopted, will we be able to capitalise on Green Mobility Revolution - these questions are still open. Recent research paper from Deloitte "Gaining traction. A customer view of electric vehicle mass adoption in the U.S. automotive market" has sparked a lot of discussions. We will join it with a few pictures and charts, not as good as one from Nicholas Felton below, but always providing food for thoughts. Please do not hesitate to click on charts to enlarge the images.

The main open question is: will Electric Cars' adoption rate be correlated with Washing Machines' one or will it enjoy more explosive growth like Mobiles with rate of acceleration like iPods on the chart below? First, we will strike brutally and cynically (the way the Wall Street works): how can you compare washing machines and Cars? Even Electric ones? Cars are all about men, their personal social security space with a statement. How many of us discussed washing machines even the best ones? Brutal history about washing machines is that it was for the "best part" - to make her life better, it was not about status and not about statement - so it took 80 years to get to the 80% adoption rate. On a more serious note time has changed: it will not be about him all the time this time and it is not about U.S. only this time, but first back to iPod Moment.
"Ideal market situation for the new disruptive technology to create a life time investing opportunity is when Demand for product or service is already there and you are able to deliver it in a new way, which will be more appealing to Existing consumers of this product or service. You have a dramatic shift in consumer preference and are gaining a market share in a tidal wave fashion by shifting consumers from existing providers to the new product or service place. You do not have to teach the market and prove that they need this product - you just need to prove that the new technology you are putting in place is viable to deliver the Better Experience.
We have always loved our music. Sony made a Revolution in the way we consume the music with its Walkman - we were able to take our music with us as we go. CDs made the quality of music more appealing and record companies sold us our music one more time.
Steeve Jobs made another Revolution by providing the means to consume what we exactly want with iTunes and means to Store and Retrieve All Our Music as we go in iPod. He sold us our own music one more time and we were happy to buy it. He has brought us a new Experience of how we consume the same music: it is convenient, easy, Searchable, high quality and with us - all of it. We have moved in droves to the new source of Joy."

"With Electric Cars all market estimations that we saw so far (apart from quote from Warren Buffett) looks like a drop in the bucket at a time. Will it be 2%, 5% or 10% claimed by Nissan in 2020? It is not a Revolution - it is like a tea party. We dare to differ and think that Electric Cars will provide to us a new Experience how we consume Mobility: energy efficient, environment friendly and cheaper with all cost accounted. And yes - they will sell us our cars one more time, this time in Electric version.
Is it bad - not at all if you will be investing in
Electric Cars value chain. Even if not, we will all gain from it more than from iPods - after all we have never heard about somebody being killed by CD, but those, who still do not believe that cars pollute and kill our environment including us, can try to breath from exhaust pipe for a while to be sure.
We expect consumers to shift on a mass scale from CVs to EVs with prove that technology is viable and can provide the same utility with a Better Experience. Emotional Drive will be the driving force of this switch of consumer preferences."

Do not rush to buy every stock we are writing here about: we are biased. Our value in this very important education process is our own experience which we are ready to share. Who knew about Google short ten years ago? Chart above shows another Next Big Thing from the very recent past: Growth of Internet Advertising revenue. We did not understand the magnitude of change in the market space which Google has provided. We was not able to see the new and coming on the rubbles of previous market collapse in NASDAQ and assumed that Hype goes automatically with every Internet player claiming to take the world. Google did it. Company's valuation has collapsed in the end to our projected price of USD250 during the market crash of 2008, but the growth of the sector and Google's domination was astonishing. That is why we are so biased and you should never take anything as an investment advise on this Blog: we are in a constant search for the Next Big Thing and new Bull which will be built on the rubbles of this Economic Collapse. We have found Gold and Silver Bull before and now it is time for new exiting journey.

As you can see above, explosive growth in some sectors can happen even when economy is slowly growing as a whole. Authors of the Deloitte study very carefully took into consideration a lot of different aspects for adoption of the new technology like Electric Cars. Have they missed something? Maybe not when we are talking about U.S. in a "normal situation", but we are living in a "New Normal" according to PIMCO. Charts above and below bring us some more dimensions for thoughts. It is growth of Oil consumption in China from 1965 and below is Rate of this Growth compare to other countries. We will bring a new factor into the growth valuation for EVs - what if there is no more Cheap Oil left and how it feels to be grounded? We will address you to the Life After Oil and other thoughts on the Peak Oil.

Two charts below show the dynamic of China's expansion into auto space reflecting the explosive Oil Consumption Rate of Growth above.

This is why it will be not about only U.S. this time, but every move in China will affect U.S.

Chart below with vehicles per capita is very sobering: China and India have not even started Mobility Revolution by Western world standards.

Two most important points from here: Oil Consumption will go up dramatically with declining production, without major State level shift in technology China and India will not be able to bring mobility to its population without suffocating its own people and along the way they will drive prices for Oil above USD150 again.

Remember these faces above and these new brands coming from Asia. BYD has attracted Warren Buffet and has produced China's wealthiest man already. More to come.

"America needs to catch up with the rest of the world in Electric Space. U.S. is years away from recent advance in lithium batteries and electric cars compare to Japan and China. Nissan spent 5.5 billion dollars and 16 years developing electric cars based on lithium ion technology. Competition is heating on and it is very positive to see DOE supporting at least production of Electric Cars in U.S. developed in another countries. Green Leaf growing in the Homeland is better than nothing even if it is from a foreign tree.
Our main take from
U.S. Energy Secretary Steven Chu Video :
"Price of Lithium batteries is in access of 1000 USD/kWh at the moment, with mass production it will drop to 300-400 USD/kWh ( S. GM is aiming now for 450 USD/kWH in a near term) and with recent technological advance we can talk about 100 USD/kWh as possibility."
As we have wrote before, lithium battery price of USD 25o per kWh will make production of Electric Cars cheaper than a comparable CV - you do not need automatic transmission as part of your power drive.
This is why we are calling it Green Mobility Revolution. Make a step back and look at the big picture. With electricity being the most convenient form of energy known to us, stable pricing and ready availability from existing source infrastructure - we have a transformation technology in place: you can store energy on board of your vehicle Produced Somewhere Else. It means that that energy could be produced thousand miles away using mass scale and most economical production method including Nuclear power, Hydro power generation, Geothermal, Wind, Solar and other renewable sources of energy available today.
Our conventional vehicles did not move far away from steam powered trains. They still carry fuel and power plant on board with very inefficient conversion cycle technology from fuel to mechanical power. Power source is restricted to mobility application and it is very expensive, it can not use economy of scale or different sources including renewables (think about tidal wave generator on board) and you are caring exhaust pipe with you everywhere you drive.
It is time to start thinking about Electric Cars as means to transform our Energy Diet nation wide - you do not need to have power generation plant on board (which will be always expensive and inefficient compare to Industrial Scale version even of the same technology) - you need just most effective storage system and power delivery system: Lithium ion batteries and Electric Powertrain.
This is where you can start thinking with us: that all current estimations about Electric Cars adoption rate could be blown away once technology will be proven to be viable in a mass sale applications."

This stuff above in the bag will be at the heart of this Green Mobility Revolution. It is Lithium and auto industry has adopted the standard battery chemistry based on Lithium for EVs. There is enough Lithium in the world to let Electric Cars go for another one hundred years and it could become the Next Big Thing if our projection on Electric Cars explosive growth will be proven actually taking place within next years. Chart below is Byron Capital Lithium Index with the most leveraged Lithium exploration and development plays to the Electric Cars adoption rate and EV market development as a whole.

EV World:

By Bill Moore
When Deloitte Consulting came out with their study, Gaining Traction: A Customer View of Electric Vehicle Mass Adoption in the U.S. Automotive Market earlier this month, the media made much of the fact that electric cars were likely, in Deloitte's view, at least, to be adopted by consumers at about the same rate as washing machines through the Twentieth Century, taking some 80 years to reach just over 80% of households [See the chart they used above]. Do a Google search for "Deloitte study electric cars" to see all the various media reports emphasizing the slow growth of the market for electric cars. For example, "Major Study Predicts Electric Car Adoption Will be Low," reads the headline on, pretty much mirroring the view of the likes of Reuters, Economic Times, Fast Company, Wired, etc. Even here on EV World, we dutifully posted links to these reports, as well.
But then I got to thinking about Nicholas Felton's chart, especially the plots for washing machines, stoves, clothes dryers and refrigerators, and it suddenly occurred to me what I was seeing. Can you spot it? Let me help you. Take a look at the graph below tracking the rise of women in the workplace.
Notice any similarity? The rate of adoption of labor saving appliances for the wife would appear to track fairly closely with their entering the workplace. The more hours they worked away from home, the less time they had to engage in the very tedious and time consuming job of washing and drying clothes. Which also raises a second issue of why it took so long for the clothes washer to reach the 80 percent level: lack of innovation.
If you look at photographs and advertisements of washing machines from the 1930's, they are little changed from machines first advertised in 1908. The only real difference was the introduction of the electric motor to run the pump, turn the agitator, and cycle the wringer or mangle, as it was also called. In fact, it would take half a century to see the wringer disappear off the washing machine, replaced by a mechanically-timed spin dry cycle, as manufacturers finally figured out that women didn't want to spend all day squeezing their wet laundry between rubber rollers... twice: once to remove the dirty soap water, and a second time to remove the rinse water.
Not only was the pace of innovation painfully slow when it came to women's labor saving devices, but middle American appliance manufacturers hadn't yet caught on to the idea of planned obsolescence introduced into the auto industry in the 1950s. There are households across America that are still using 1950-era wringer washers 60 years later, some in the name of the new "green frugality" movement. You can even buy working replicas for $899. Those Maytags, Amanas, Hotpoints and Speed Queens were built to last and last, unlike computers, cellphones and television sets, where the pace of technological innovation and fickle fashion makes such devices obsolete in 18 months or less, fostering continual churn in the market and even more innovation.
But back to the central question of the rate at which electric cars will be adopted by society, the rate of consumer acceptance chart above also seems to suggest that the pace of adoption is also driven by gender. As a general rule, men have not, historically, at least, done the laundry or cooked the meals. We -- and I include myself in this -- do tend to take a far keener interest in technology, be it automotive or electronics. Look at the pace of purchases of radios, reaching 50% of the market in less than 10 years. It took just about the same period of time for color television to reach the same 50% of households. It took even less for the Internet.
I contend that an electric car is far closer to a piece of electronics than a kitchen appliance; and, as such, it will appeal to men far more than to women, initially. If I look at the percentage of men reading EV World versus women, it is something around 75 % male versus 25% female; and in our early days it was more like 90-10, which was a function of who was using the Internet back in the late 1990s. Still, this suggests that it will be men who will be shopping for that first electric car; and that means that the decision making process won't be driven by logic, but by emotion.
Much as we'd like to view ourselves as logical, hard-nosed, count-the-cost creatures, men aren't really Vulcans; and neither are women, for that matter. There's a ying-yang quality in our reasoning powers that is strongly influenced by emotions that include aesthetics (styling and creature comforts) and the perception of risk (vehicle performance). The classic example is the Harley Davidson motorcycle and the "logic" that goes into buying what is probably a far cry from a necessity for most owners. It's a grown boy's toy, plain and simple, and one that is used few times year. Of the more than 6.5 million motorcycles registered in America, less than 10% are driven seasonally, and just over 4% are used on a daily basis as a primary form of transportation. The rest sit for that occasional weekend romp, usually by aging baby boomers (1) with discretionary income to spend.
Take a look at this next chart. It accompanied the original Nicholas Felton chart from the New York Times that Deloitte uses in their study. It depicts American household spending by category and income level. After housing, transportation is the highest consumption item on the graph for all three income groups.
"Where does the plug-in and battery-powered car fit into this picture?" I asked myself. "Is the electric car more washing machine or computer?" Here is my hastily jotted list bullet points. The electric car is:
Novel and new
Has perceived economic value with lower daily operating costs than its gasoline competition
Like buying a Harley Davidson motorcycle, it's appeal goes beyond the pure, cold logic of "when will it pay-for-itself" ROI (return-on-investment).
Offers 'beyond petroleum' guilt-free performance and fun
With these four alone, I could easily make the case to the Mrs. -- who is likely to be much more logical and pragmatic about this decision than I would be -- that we really do need that Nissan Leaf or Chevy Volt or CODA or Think or... take your pick.
Of course, there are also the imponderables: range, charging time, battery life, cold weather performance, but each of these can be "reasoned/rationalized" to my satisfaction. I don't drive more than 30 miles a day. My car sits in the garage 23 hours a day. Prius NiMH batteries are going strong at 100,000 miles, so why not lithium? I can pre-warm the batteries overnight or drive my back-up gas-banger on really cold days.
Even cost is becoming less of an issue with the introduction of the Nissan Leaf at US$32,850 prior to federal and state incentives.
Yes, being guy who is as subject to our own form of "irrationality" when it comes to "big boy toy" purchases, as our female counterparts are to theirs, I can come up with as many arguments in favor of buying that grid-connected electric car (GEV), as those against. How about you, brother?
Taking this perspective into consideration, it is my view that the electric-drive vehicle -- in all its guises -- isn't going to take half a century to reach 80% of the market. Depending on the rate of impact of a whole series of social, economic, political, technological, military and environmental drivers, it could come a lot more quickly than we might assume. That, by the way, also happens to be the perspective of the International Energy Agency, as depicted in the final graph below.
So, washing machine or cellphone? Which do you think it'll be?
This isn't my first look at the parallels between washing machines and electric cars. Check out Of Front-loading Washing Machines and the Aptera 2e.
(1) According to a new study by the University of Michigan Transportation Research Institute (UMTRI), the number of motorcyclists 45 and older killed in crashes nearly quadrupled from 2001 to 2005 (the last year for which data is available). Crashes among this age group increased more than 60 percent during that time, compared with a 6 percent drop in the number of crashes for younger motorcycle riders."
Please visit the original article at the headline link for more graphics.

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