Among owners and fans, it’s a foregone conclusion that Tesla will remain the dominant producer of electric vehicles (EVs) as the automotive world increasingly adopts this technology. And why shouldn’t it? Tesla produces the best EVs, and perhaps the best cars made, has developed an incredible brand, and fills waitlists years before a new car is delivered. This all seems to indicate that Tesla has developed a world-beating business model, but is it actually a signal of future trouble?
Tesla’s strategy has always been to build EVs that are better than their internal combustion competitors and sell them for premium prices. In the language of innovation theory, strategies that offer existing consumers better products at higher prices are called sustaining innovations. Sustaining strategies tempt entrepreneurs because they appear so logical: build a better product and customers will come. But research shows that it is a losing strategy for new businesses. In sustaining competition, the industry incumbents nearly always win.
Incumbents are favored because sustaining strategies build on capabilities that they have developed over the course of their rise to dominance. Worse still, a sustaining strategy presents the entrant as a clear and direct threat to the incumbents. The combination of these two factors creates a response that often proves overwhelming for the entrant. Incumbents respond ferociously and deploy so many resources to the battle that the entrant is overcome.
Consider the situation for Tesla: It would be difficult enough for a company that sells 50,000 units per year to fight even one major automaker head-on. But Tesla has attacked not just the automakers but also every incumbent in the value network that produces automobiles, including the entire base of suppliers and dealers. The resources that these aligned interests can bring to bear are vast. Collectively, these firms spend more on R&D every year than Tesla has invested in its lifetime.
Many have argued that the move away from internal combustion is simply too technologically painful for automakers, but the technology underpinning EVs is largely a modular combination of standard components purchased from independent suppliers. The technology simply isn’t a constraining factor, and with every new auto show the automakers demonstrate this with new concept cars, such as the Porsche Mission E, squarely targeting Tesla. With its fantastic design and beloved product, Tesla might have written the playbook that the incumbent automakers will follow to dethrone it.
If better products and technological barriers aren’t enough to defeat incumbents, is there any hope for entrepreneurs? We’re believers in disruptive innovation strategy, which allows entrants to beat even the most-powerful incumbents. Disruptive innovation begins at the bottom of existing markets or by creating new markets where people don’t currently consume. They target the least-attractive customers and produce worse products for less money with lower-cost business models than conventional offerings. In doing so, they create the phenomenon of asymmetric motivation, which causes incumbents to ignore or flee them. But disruptive strategies don’t remain at the bottom of the market – they possess a technological core that allows them to improve their performance over time, capturing more of the market and pushing incumbents into ever-smaller segments at the high-end.
Many observers say this approach could never work in EVs, but we’re seeing it happen today. It takes the form of low-speed EVs driven by security guards on college campuses, retirees in the Sunbelt, and middle class families in China. The manufacturers are largely unknown and that’s the point. Each year they grow bigger and improve their products without any resistance from incumbents. Soon they will be good enough to lure the least-demanding customers away from traditional automakers and the disruption will have begun. While these companies improve their performance to capture more customers, Tesla’s only option is to reduce its performance. Which position would you rather be in?
Thomas Bartman is a Senior Research Fellow at the Forum for Growth and Innovation at Harvard Business School
Do extended range electric cars and plug-in hybrids really save energy and make an environmental difference like all-electric vehicles? The answer is a resounding ‘yes’ if enough zero-emission miles are driven. To that end, the latest news from Chevrolet is encouraging: Since Chevy’s Volt extended range electric was introduced in 2010, Volt owners have reportedly driven more than a half a billion all-electric miles, resulting in no localized emissions over those miles and a pretty huge petroleum offset. In fact, Volt owners are spending some 63 percent of their time in EV mode.
All electric miles are even higher in an independent study managed by Idaho National Labs and conducted during the last half of 2013. Volt drivers participating in the Department of Energy’s EV Project totaled 1,198,114 vehicle trips during the six month period from July through December, 2013, with 81.4 percent of these trips completed without use of the Volt’s gasoline-powered generator.
Battery-only driving range is also proving to be better than projected. A GM study conducted over 30 months that focused on more than 300 Volts in California shows many Volt owners are exceeding EPA’s estimates of 35 miles of EV range per full charge. About 15 percent are surpassing 40 miles of all-electric range. GM data also illustrates that Volt owners who charge regularly typically drive more than 970 miles between fill-ups and visit the gas station less than once a month. The 2014 Volt features EPA estimated 98 MPGe fuel economy when running in electric mode and 35 city/40 highway on gasoline power.
Some interesting trivia: Since the Volt’s launch in 2010, more than 25 million gallons of gasoline have been saved by Volt drivers. Chevy also likes to point out that 69 percent of those buying a Volt are new to the GM brand and of those trading in a vehicle during purchase, the most frequent trade-in is a Toyota Prius. The Volt was named Green Car Journal’s 2011 Green Car of the Year®.
Many believe that the ultimate goal for electric transportation is the hydrogen fuel cell vehicle (FCV), with battery electric vehicles being just a step along the way. Hyundai is skipping this step and concentrating on developing and marketing FCVs. The automaker notes that affordable electric vehicle technology is best suited to smaller urban vehicles, not to larger family and utility vehicles that many families require to meet all of their needs.
To that end, Hyundai is poised to offer its next-generation Tucson Fuel Cell vehicle in Southern California Hyundai dealers starting sometime this spring. Production is taking place at the automaker’s Ulsan plant in Korea. Hyundai already began production of the ix35 Fuel Cell, the Tucson’s equivalent in Europe, at Ulsan in January 2013. Since the Ulsan plant builds the gasoline-powered Tucson CUV, this allows Hyundai to take advantage of both the high quality and cost-efficiency of its popular gasoline-powered Tucson platform.
Hyundai’s third-generation fuel cell vehicle features significant improvements over its predecessor, including a 50 percent increase in driving range and 15 percent better fuel efficiency. The Tucson and ix35 Fuel Cell are equipped with a 100 kilowatt electric motor, allowing a top speed just shy of 100 mph. Instantaneous 221 lb-ft torque from the electric motor means spritely acceleration.
Sufficient hydrogen for an approximate 370 mile range is stored in two hydrogen tanks. Refueling is accomplished in less than 10 minutes, providing daily utility comparable with its gasoline counterpart. Electrical energy is stored in a 24 kilowatt-hour lithium-ion polymer battery that’s been jointly developed with LG Chemical. The fuel cell reliably starts in temperatures as low as -20 degrees C (-4 degrees F). Unlike battery electric vehicles there is minimal capacity decrease at very low temperatures.
Hyundai’s fuel cell fleet has completed over two million durability test miles since 2000. Extensive crash, fire, and leak testing have been successfully completed. Hyundai says that high reliability and long-term durability come as a matter of course with the power-generating fuel cell stack, which has no internal moving parts.
The Hyundai Fuel Cell will be leased for $499 per month on a 36 month term, with $2,999 down. This includes unlimited free hydrogen refueling and At Your Service Valet Maintenance at no extra cost. Hyundai will initially offer the Tucson Fuel Cell in the Los Angeles/Orange County areas at four dealerships that will have hydrogen refueling capability. The automaker says that availability will expand to other regions of the country consistent with the accelerating deployment of hydrogen refueling stations.
Hyundai is also partnering with Enterprise Rent-A-Car to rent the Tucson Fuel Cell at select locations in the initial lease regions. This will allow interested consumers to evaluate the Tucson Fuel Cell for their lifestyles on a multi-day basis. Rentals are also planned sometime this spring.
That changes with the coming 2015 Chevrolet Impala Bi-Fuel Sedan. Like the Civic, the alternative fuel Impala comes straight from the manufacturer – in this case Chevy – without the extra step of fuel conversion by an outside vehicle modifier. Current natural gas pickups and vans from Chevy, Ford, GMC, and Ram are sent to aftermarket suppliers for installation of natural gas components.
The new bi-fuel Impala will be able to run on either gasoline or CNG, addressing the range anxiety issue associated with dedicated vehicles that run exclusively on an alternative fuel. It also allows owners to use the least expensive fuel at the time of fill-up. The system seamlessly switches from natural gas to gasoline if the CNG tank is depleted. Drivers can also choose to run on their fuel of choice with a dashboard switch. Total range with both fuels is an expected 500 miles.
Making a bi-fuel Impala requires changes to the 3.8 liter V-6 engine so it can burn either fuel, plus the addition of regulators, filters, high pressure gaseous fuel lines, and a CNG fill receptacle. A large CNG tank is added in the trunk and does reduce cargo capacity. The system is factory-engineered and fully warranted.
Ford’s 3.7-liter V-6 equipped-150 pickup is now available with a factory-installed, gaseous-fuel prep package, making Ford the only manufacturer offering a CNG/LPG-capable half-ton pickup. The $315 engine prep package includes hardened valves, valve seats, pistons, and rings so it can operate on either natural gas or gasoline through separate fuel systems.
The light-duty Ford CNG pickup is now being offered as a ship-thru option by Michigan-based Venchurs Vehicle Systems, the first of several Ford Qualified Vehicle Modifiers (QVMs) that will be marketing the 2014 F-150 as a natural gas vehicle. QVMs supply the fuel tanks, fuel lines, and unique fuel injectors. Ford has a rigorous QVM qualification program to help modifiers achieve greater levels of customer satisfaction and product acceptance through the manufacture of high-quality alternative fuel vehicles. Conversions can be financed through Ford Credit.
According to Ford, upfitting to gaseous fuel operation costs approximately $7,500 to $9,500. Ford maintains the engine and powertrain limited warranty (five years or 60,000 miles) while the modifier is responsible for the system component warranty.
Conversions can provide stability against fluctuating fuel prices as well as lower operating costs. CNG sells for an average of $2.11 per gallon of gasoline equivalent, and as low as $1 in some parts of the country. The F-150 CNG/LPG can travel up to 750+ miles on one tank of gas.
Since reintroducing the option in 2009, Ford has established itself as the leader in CNG/LPG engine sales. It is on track to sell over 15,000 CNG/LPG-prepped vehicles this year, an increase of over 25 percent from 2012.
With the F-150, Ford will have eight vehicles running on CNG/LPG. These range from Transit and E-Series vans, wagons, cutaways, and chassis cabs to F-Series Super Duty pickups and chassis cabs.
Clean Energy Fuels has been hard at work building out a network of natural gas fueling stations along major trucking corridors across the country. The goal is to enable long-haul 18-wheelers to travel coast-to-coast, border-to-border on liquefied natural gas (LNG), a clean-burning and mostly domestic alternative fuel. To supply LNG for these trucks, Clean Energy has completed its initial phase with 70 LNG stations in operation and is moving ahead with another 80 planned for 2013. Many will be co-located at Pilot-Flying J Travel Centers. Pilot-Flying J operates the greatest number of truck stops in the U.S.
Why is this nationwide fueling network important? Truckers could save as much as 25 percent on their fuel bills while cutting CO2 emissions and helping meet the national goal of energy independence. These are three major transportation goals being addressed with a single strategy.
Joining in this effort is GE Oil & Gas, which is supplying its MicroLNG plants to produce LNG from pipeline natural gas. These plug-and-play modular plants can rapidly liquefy natural gas, producing between 50,000 to 250,000 tons-per-year while using a minimum of real estate. This compares to half a million tons, or more, of LNG annually produced by large LNG production plants, usually for international export.
Initially, Clean Energy is purchasing two GE MicroLNG plants that can produce up to 250,000 gallons-per-day, an amount sufficient to fuel about 28,000 heavy-duty trucks. This could displace more than 139,000 metric tons of CO2 emissions per year, equivalent to the annual greenhouse gas emissions from 7,000 trucks running on diesel fuel.
The two GE MicroLNG plants are planned to begin operation in 2015 at locations yet to be determined. As more fleets adopt LNG and demand for this natural gas fuel increases, plants could be expanded to produce up to a million gallons-per-day. Clean Energy plans to use a standardized design for these MicroLNG plants to facilitate building additional plants in the future.
Beyond applications as part of this nationwide fueling vision, MicroLNG plants can also provide small-scale LNG production for remote industrial and residential use. A MicroLNG plant can liquefy natural gas at any point along a gas distribution network. GE’s Micro LNG plants are also simple to install, operate, and maintain, and can be customized to meet a wide range of needs and site requirements.
Engine and truck manufacturers Cummins-Westport, Kenworth, Peterbilt, Navistar, Freightliner, and Caterpillar are all expected to have engines and Class-8 trucks available to use LNG. In 2013, four of the nation’s major truck manufacturers will offer the Cummins Westport 12-liter ISX12 G LNG engine as an option in long-haul Class 8 trucks.
Compared to compressed natural gas used in light-duty vehicles, LNG provides significantly longer driving range without compromising payload, making use of this fuel a very viable option.
How to extend the range of battery electric vehicles? A start-up company in Stuttgart, Germany has developed an answer in the form of the ‘ebuggy,’ a trailer carrying a lithium-ion battery designed to be towed behind an EV.
The ebuggy is viewed as an ‘on-demand’ solution since an EV would drive on urban trips without the trailer most of the time. Then, for longer trips, the EV would be driven to a service station where the ebuggy would be hooked up to provide extended range. It would be returned to the same service station or dropped off at another station at the destination.
The ebuggy can be towed at speeds up to 62 mph (100 km/hr) and has a four-hour battery capacity, which provides a range extension of about 240 miles for most electric cars. Add the standard range of the EV itself and trips of 300 miles on electricity alone are quite possible.
Envisioning franchised stations that could be co-located with gas stations, garages, or at highway rest stops, ebuggy GMBH says its system requires a much smaller initial investment compared to other range extension ideas like battery exchange stations. Battery recharging can be done using the same equipment used to recharge batteries in EVs. When an electric car owner signs up for ebuggy service, the user gets a kit for upgrading their car to the ebuggy system. This includes a tow hitch, power socket, and in-car display.
Just-completed field trials have produced a steady stream of natural gas from ice-bound methane hydrates in Alaska.
How important is this to the future outlook of commercial and light-duty natural gas vehicles? According to the Department of Energy, natural gas produced from methane hydrates may exceed the energy content of all other fossil fuels combined and make a significant contribution toward energy independence.
Methane hydrates are 3D ice-lattice structures with natural gas locked inside. They are found both onshore and offshore, including under the Arctic permafrost and in ocean sediments along nearly every continental shelf in the world.
Methane hydrates look remarkably like white ice, but do not behave like ice. When methane hydrate is ‘melted,’ or exposed to pressure and temperatures outside those conditions in which it is stable, the solid crystalline lattice turns to liquid water. Most importantly, the enclosed methane molecules are released as gas.
The Department of Energy (DOE), in partnership with ConocoPhillips and the Japan Oil, Gas, and Metals National Corp., has successfully completed an unprecedented test of production technology in the North Slope of Alaska. This technology was developed by the University of Bergen, Norway, and ConocoPhillips. In this proof-of-concept test, a mixture of carbon dioxide and nitrogen was injected into the formation, enabling researchers to safely extract a steady flow of natural gas from methane hydrates.
Building upon this initial small-scale test, DOE is launching a new research effort to conduct a long-term production test in the Arctic, along with research to test additional technologies that could be used to locate, characterize, and safely extract methane hydrates on a larger scale in the U.S. Gulf Coast. The next stages of DOE’s research effort will be aimed at evaluating gas hydrate production over longer durations with the eventual goal of making sustained production economically viable. The research will include examining the potential environmental impact of methane hydrate production, including possible contributions to climate change.
While this investment may take years to pay off, it could bring results like the shale gas research and technology demonstration efforts that DOE backed in the 1970s and 1980s. These investments helped pave the way for today’s boom in domestic natural gas production. There’s the potential that by 2025, producing gas from hydrates could find the cost of natural gas cut by 30 percent with thousands of American jobs created in the process.
For decades, both natural gas and electric vehicles have competed as alternatives to vehicles running on gasoline or diesel fuel. Now, it looks like sales of EVs may finally get traction in the U.S. But what about NGVs? While there are over 13 million natural gas vehicles in use worldwide, fewer than 200,000 NGVs, mainly trucks and buses, are plying roads in the States. Why?
Perhaps the most important reason is that NGV choices here have been quite limited. For years, the only natural gas passenger car sold by auto manufacturers in the United States has been the Honda Civic Natural Gas, recently named Green Car Journal’s 2012 Green Car of the Year. Both Ford and GM have sold NGV models here in previous years before being discontinued, mainly pickups and vans that achieved limited sales success. Ford also offered a compressed natural gas (CNG) Ford Crown Victoria sedan in the past, primarily for law enforcement and taxi duty.
Now it's a new day for natural gas as Ford, GM, and Ram Truck have new natural gas pickups that feature bi-fuel systems capable of operating on either compressed natural gas (CNG) or gasoline. Ford has developed Super Duty trucks running V-8 gasoline engines modified to dual-fuel capability. GM, which already offers Chevrolet Express and GMC Savana CNG cargo vans with V-8 engines modified to operate on CNG only, has added dual-fuel CNG Chevrolet and GMC pickups to it choices. Dodge Truck’s Ram 2500 Heavy Duty CNG pickup is also now offered as a dual-fuel, CNG/gasoline variant.
Conversion to natural gas is possible, and in fact virtually any internal combustion engine can be converted to operate on natural gas. Companies like BAF Technologies and Baytech offer such conversions, although choices are limited to specific models, typically those popular with fleets since these are the largest NGV conversion customers. In the U.S., converters must invest a large amount of time and money – typically $200,000 or more – per engine family to receive EPA and CARB (California Air Resources Board) certification for their conversion systems. Also, certified engine conversion systems can only be installed by a very limited number of EPA and CARB approved installers. Thus, conversions can cost from $5,000 to $25,000 and are only available for vehicles whose sales volume can justify the investment.
In some countries, non-certified retrofit systems can be installed by just about anyone. That is why there are huge numbers of NGVs in places like Pakistan and India. It’s also why non-certified conversions installed by amateur installers have become a safety problem in places like Pakistan, illustrating why government regulation and oversight is so important here.
Another contributor to the relatively small number of NGVs on American highways is the lack of a widespread natural gas fueling infrastructure. According to the Department of Energy’s Alternative Fuels and Advanced Vehicles Data Center, the U.S. has about 1,000 natural gas fueling locations nationwide. While this number is growing, the total does underscore the relative scarcity of natural gas stations compared to stations dispensing gasoline, which number well over 100,000. All alternative fuels suffer from this challenge of fueling infrastructure build-out.
That said, the number of natural gas refueling stations is constantly increasing. This is being facilitated by the vision of companies like Clean Energy, which is actively building a ‘Natural Gas Highway’ with CNG and LNG stations located alongside busy trucking corridors. New answers like the Galileo Microbox, an easy-to-install and relatively inexpensive modular fueling station now being tested in California, are also important. This so-called ‘fueling station in a box’ contains all the main components in a single, factory integrated enclosure the size of a small shipping container, offering new ways for conventional gasoline and diesel fueling stations to add CNG fueling capability.
The substantially longer range of NGVs compared to EVs means much less range anxiety. For example, the Honda Civic Natural Gas has a driving range of up to 240 miles, more than twice the range of the typical EV. A bi-fuel NGV capable of operating on either natural gas or gasoline can travel anywhere a conventional internal combustion engine vehicle can go since the ability to run on both fuels means there is effectively no range limitation. Driving range can be substantial, with dual-fuel models like the Ford CNG pickup offering up to 650 miles between fill-ups.
Unlike an EV that typically takes hours to fully recharge, a CNG tank can be refilled in about five minutes at a commercial CNG refueling station. Like an EV, an NGV can also be refueling at home. For example, the Civic Natural Gas can be filled up with a wall-mounted Phill refueling appliance from BRC Fuel Maker. The process is similar to charging an electric vehicle at home since this slow-fill process takes several hours and is best done overnight.
Interestingly, an important reason why NGVs are not sold in large numbers in the U.S. may well be that they tend to be looked upon as strictly utilitarian vehicles with little excitement in their favor, quite the opposite of high-profile EVs. First adopters typically want their vehicles to shout ‘green.’ Conventional looking natural gas vehicles with a small CNG emblem simply don’t offer the same ‘wow’ factor, which can be a consideration when spending thousands of dollars more.
Natural gas for transportation has many advantages. It’s the cleanest-burning fossil fuel, which helps auto manufacturers build NGVs with extremely low emissions. The United States has abundant supplies of natural gas so this fuel does not have to be imported from far-away countries. Plus, natural gas costs less than gasoline on a gallon of gasoline equivalency basis, which means there are substantial costs savings the more an NGV is driven.
So, the question: Will NGV suppliers and manufacturers continue to concentrate on the commercial and fleet market, or will they see the value in consumer sales by also offering fun-to-drive, easily recognizable NGVs for the vast number of people who want to make a difference – and a statement – about driving ‘green?’ The answer promises to have a lasting impact on energy dependency, the economy, balance of trade, and air quality in the long run. Let’s hope it’s the right one.