Amid declining sales of electric vehicles investors are searching for technologies that lower the cost of buying and owning EVs.
In April EV carmaker Tesla said it would bring forward the launch of more affordable cars after it reported a 9% decline in first-quarter revenue on the back of a sharp fall in sales.
Tesla is not the only carmaker to have reported falling EV sales. Most large carmakers have seen a drop amid declining consumer demand and increased competition from cheaper Chinese EVs.
Autotech investors are now shifting their focus away from hyped technologies such as autonomous cars and internet connectivity to investing in technologies that bring down the cost of buying electric vehicles as well as the lifetime costs of owning them.
“Electrification has been massively hyped in the last couple of years: how do you produce these vehicles; how do you recharge them. What we are now thinking about in our firm is what do you do after you have produced them and charged them – so EV after sales: how do you repair them; how do you auction them; how do you reuse or recycle them toward the end of their life,” says Quin Garcia, founder and managing director of venture capital firm Autotech Ventures, which counts corporates as limited partners.
Here are five areas of autotech that investors are turning their attention to as focus shifts to making EVs more affordable for middle class consumers.
Repairing EVs
Electric vehicles on the road today are still quite young and not many need repairing. But the time will soon come when they break down and venture teams are looking at what technologies are available to deal with a surge in repair needs.
“There aren’t many EVs that need repair today, but there will be in five years from now when they start to wear out. We’re trying to get ahead of that,” says Garcia.
More EVs will be driven by middle class consumers rather than wealthy people as the price comes down, and that means repair costs will also have to decline for people to be willing to buy them.
The repair costs for EVs today are high because few people are qualified to fix them. “There isn’t a robust industry of people who can fix EVs outside the automaker or their dealer,” says Garcia. “That is a huge coming pain.”
The electronic parts of EVs are also costly to replace. They then to be stuck at the repair shop for longer than petrol or diesel cars because spare parts are harder to get hold of.
To address the lack of auto repair shops for EVs, Autotech Ventures invested in Dutch startup Fixico, which allows owners to upload a picture of their damaged EV to an online marketplace where body shops in the area that are capable of fixing EVs can bid to repair the car.
Fixico partnered with VinFast, a Vietnamese EV maker that is entering the European car market. “They [VinFast] know their cars are going to crash and so they want to get ahead of that and make sure there are body shops available for consumers,” says Garcia.
Robots to manufacture EVs
Making the manufacturing of EVs more efficient is key to bringing costs down. Robots are already widely used in making cars on the factory floor, but they will be increasingly used for applications such as quality assurance where a robot will check for defective parts on the assembly line.
Autotech Ventures invested in Cogniac, an AI computer vision platform that can spot defects in car parts including metalwork, paintwork and seat cover quality.
Similarly, Volvo Cars Tech Fund, the corporate venturing arm of carmaker Volvo, invested in Viospatia, which has developed a 3D inspection system that can analyse high-speed moving components on production lines.
Autonomous vehicles will become ubiquitous on factory floors as a way to cut down labour costs. Autotech Ventures invested in autonomous forklift startup Fox Robotics, which can multiply the number of loading and unloading steps that a single operator can perform in a single shift. It also invested startup Safe AI, which retrofits heavy vehicles and site operations with autonomous technologies.
Sustainability, recycling and reuse of EVs
EV batteries that have worn out and are too costly to be refurbished could see new life in non-vehicular applications, such as stationary energy storage in the basement of a house or as backup power for a hospital. A large amount of used car batteries could also be used store renewable energy and deploy it back to the electricity grid, says Garcia.
The low availability of precious metals used in EV batteries, such as nickel and lithium, will also lead to an increase in startups that break down batteries to extract the raw materials. “There’s some really cool companies that are working on stripping down cells in their raw materials and then reselling those elements to be made into new batteries,” says Garcia.
Sustainable materials that make the supply chain and manufacturing of EVs cost efficient is a focus for Volvo Cars Tech Fund. “We know that regulation will push us into a circular business model,” says Ann-Sofie Ekberg, CEO of Volvo Cars Tech Fund. “We are exploring technologies and assembly methods that would help us be circular going forward.”
The investment arm invested in BComp, a developer of lightweight natural fibre composites for use in car interiors. It also invested in Niron Magnetics, whose iron nitride technology enables high performance magnets that can be produced more cheaply compared to rare-earth magnets. Another portfolio company is Circulor, a blockchain technology that improves the traceability of the supply chain.
The investment fund will only invest in sustainable materials technologies that are available in the three continents where it makes cars: US, Europe and Asia. “This is important from a cost perspective but also from a risk perspective,” says Ekberg.
Generative AI for customer service needs
It is common in transportation for consumers to communicate with customer service representatives over text chat. Large language models can now be trained to respond to customers in natural language. “There are all kinds of customer service applications in transport: listening to someone’s voice; listening to the noise that a vehicle or machine is making and taking action if it sounds broken,” says Garcia.
Cheaper batteries
The battery is the most expensive part of an EV and the search for cheaper battery chemistries is key to bringing down costs. “The real battle for cheaper EVs is around supply chains and material cost,” says Stefon Crawford, partner at GM Ventures, the corporate venturing arm of the US carmaker.
GM Ventures invested in battery startup SES AI, which designs and makes lithium-based battery cells. It also has a platform that improves traceability of the supply chain and monitors battery health.
The search for an alternative to lithium batteries has investors guessing what the next new battery chemistry will be. Crawford speculates hydrogen could be the next area of innovation for powering cars. “Hydrogen is an area that has been looked at for quite some time. I wouldn’t be surprised if that is the next thing,” says Crawford.
