EVs - the great leveller for the auto industry?

In the latest development on the deal between Dutch based Detroit Electric and Malaysian car maker Proton, Detroit Electric has appointed Proton as a contract assembler for Detroit Electric and vehicle platform donor for its own EVs.

The link between Detroit Electric and various other partners is a little complicated. The new EV maker upstart is cobbled together by British national Albert Lam with US Bay area based EV maker Zap and China based truck and bus maker Youngman Automobile as its initial strategic partners. Proton is an OEM vehicle supplier for Youngman Automobile, which sells rebadged Proton models in China under the Youngman-Lotus brand. And of course, Lotus is owned by Proton.

EVs are starting to look like a great leveller for the industry. Easily half of all vehicle manufacturers' income is derived from after-sales - maintenance and parts. An average car has between 50,000 to 80,000 parts depending on model. In an EV, things are much less complicated. The only main moving parts are the electric motor and transmission. In some cases, a transmission is not even necessary due to the high torque nature of electric motors. So how does a car company survives with a product that requires almost zero maintenance other than tire replacement and maybe the occasional software updates, which can be done online? So do you see why car companies are so reluctant to push for EVs, other than wowing the public every once in a while with their fancy eco-friendly concepts. We have the technology to build EVs since the 1990s. And the cost required to build / adapt the necessary infrastructure to support EVs is not really that high when you consider how much it costs to explore, drill, refine and transport fossil fuel. The whole talk about EVs pushing pollution from the car to power plants is just based on bad science and is a non-issue to start first. Electricity can be generated by various ways, not just from fossil fuel and secondly, electricity cannot be stored like water. Most of the power generated in the night goes unused anyway.

Contrary to popular perception, mechanical parts are the ones that wear out and need regular maintenance. Non-moving parts like electronic components rarely go wrong. The perception of unreliable electronic vehicle components have more to do with the way automotive electronic components are developed, integrated and tested with the rest of the car. The aviation industry relies a lot of aviation electronics and nobody questions the reliability of these electronic components. Probably due to its mainly mechanical background and lack of project management best practices adopted by the aviation industry, automotive electronics tend to be unreliable in the real world.

Also, EVs are easier to build in many sense. There are less high precision engineered mechanical parts. EVs in contrast have a lot less individual parts. To build one EV is a far more simpler affair than building a conventional car. The reason EVs are finding hard to break into the market place is due to negative consumer perception and a lack of experience in terms of vehicle manufacturing control and management, vehicle financing and marketing channels and also the highly complicated regulation compliance around the world and the biggest hurdle of all - the energy supply infrastructure.

This reminds me of the comments made by founder and chairman Chinese car maker BYD,
Wang Chuanfu. Early this year, BYD beat Toyota and GM by launching the F3DM model, the world's first plug-in hybrid vehicle. BYD's achievement went unnoticed by many, mainly due to the poor perception towards Chinese cars. But many don't realise that BYD is also the second largest producer of lithium-ion batteries, thus giving them a strong comparative advantage in the new EV push.

It's BYD F3DM uses a more advanced development of lithium-ion batteries, lithium iron phosphate (LiFePO4) battery. Think about it this way, other car makers rely on battery makers to help them develop EVs. BYD has full control over the intellectual property rights to the battery design and power control electronics and software. To put it into perspective, can you imagine if Honda or Toyota relies completely on someone else to come out with the next engine design for them? But this is what is happening to many established car makers - their EVs designs are only as good as their battery partner allows them to. Also, remember that one of the world's richest man Warren Buffett poured money into this Chinese company via his MidAmerican Energy Holdings Co. Maybe he realises something most people don't. People are more likely to laugh or poke fun at BYD's Western rip-off designs.




Yes the car is a rip-off from the front a Corolla (USDM /Altis model sold in Asia outside Japan) and the rear of a Honda City. But fact remains that this is the world's first production plug-in hybrid car. I take it as BYD sucks at designing and building cars - but they do know their EVs very well, if not better than the big boys like GM or Toyota.

Wang likens the established car industry as the Swiss watch and EVs as cheap digital watches. Referring to BYD's EV push, he was once quoted saying

"Anyone can design and produce digital watches, but it's virtually impossible for a newcomer to match the precision of a Swiss wristwatch."

This explains why BYD's strategy to break into the car industry is very much hinged on wider adoption of EVs.

There is a slow tide of change sweeping quietly under the industry. Players are forming new JV and strategic alliances to a future increasingly dominated by EVs.


Conventional automotive part suppliers are slowly adapting themselves to the new paradigm. Bosch, the world's largest automotive parts supplier have established a JV with Samsung SDI to create SB LiMotive. The challenge for them is to quickly established an accepted "architecture / platform / standard" for hybrid and EV electronics and batteries. Their "implied goal" is to tip the control of the industry's EV development more to towards the suppliers rather than the OEMs.  

Fellow German rival, Continental is also increasing their stakes in Enax, a Japanese specialist in EV batteries. The first result of this partnership was the world's first lithium-ion battery on a production car - in the Mercedes S400 BlueHybrid.

Tata too, is teaming up with Canadian EV battery specialist Electrovaya, whose proprietary Lithium-Ion SuperPolymer battery is said to offer the highest energy density in the industry. Tata is looking to a launch an EV version of the Indica Vista hatch in the EV friendly Norway by late 2009, with large scale production to start in 2010.