It is expensive building cars, especially electric ones with few signs they can be profitable outside of selling carbon offset credits to polluters.
As Car and Driver magazine noted, the electric vehicle market is challenged as few consumers are interested, they are expensive compared to petrol or diesel cars and traditional car companies have struggled to develop appealing brands leaving the way for Tesla and other startups out of China, such as Nio, to try and take advantage.
But the future seems to lie in that direction given a predicted 21.1% compound annual growth rate over the next decade. As a result, Polestar, a Sino-Swedish electric car brand jointly owned by Volvo Car Group and its parent company Geely, is reportedly in talks to raise $500m from investors at a $6bn valuation, according to news provider Bloomberg.
Polestar’s first fully electric vehicle began production earlier this year in China but ran into production issues.
Others have found the space tricky, too. Henrik Fisker, car designer for the Aston Martin DB9 and the BMW Z8’s, previous company, Fisker Automotive, ended in bankruptcy. His new, eponymous car company, Fisker, however, has more promise and last week merged with special purpose acquisition company Spartan Energy Acquisition Corporation to raise $1bn.
Fisker is concentrating on design as told Fortune magazine in July: “A lot of the hardware in vehicles is going to end up being a commodity, and therefore we are willing to share those parts with somebody else.”
But this hardware, particularly the batteries, represent opportunities if the costs can be reduced. Rama Ayman, CEO of MMG Capital, is advising Caltech electric battery spinout Sienza on its European development plans to improve energy density at lower cost than Tesla or Panasonic’s and up against a host of other startups, such as Northvolt, Graphenano, Nawa Tech, SVolt, Enovix, SilaNano, Amprius, Enervate, Sion or SolidEnergy.
The relative differences in performance are marginal rather than orders of magnitude better.
As one tier one car parts supplier’s corporate venturing unit head said: “We just could not find any [battery] startups working on truly next generation technology or chemistries.”
Rethinking electric car batteries’ primary use as transit, however, could change the dynamics. If refueling moves from in-transit to destination with electric vehicles then the battery’s main use could well be storage and powering houses or providing grid-to-consumer backup to renewable energy power sources, such as solar and wind, whose costs continue to plummet but remain uncertain in output compared to nuclear.
The business model rather than the technology becomes the defining characteristic of the shift to renewable power and electric. Elon Musk, founder of Telsa, identified this four years ago and that helps explain why its share price has seen a 10-fold increase since then.
The batteries and new materials sectors will be reviewed for our next Global Energy Council report in early 2021 after covering hydrogen-fuelled vehicles in last month’s supplement. Do get in touch with your insights.
