
Investors Get Ready for the Coming Electric Car Revolution - jseliger
http://www.wsj.com/articles/mind-the-shock-as-auto-investing-turns-electric-1481626699
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noahmbarr
I believe the two legacy issues are:

1) automakers have very little control over their product any more. They rely
heavy on Tier 1 suppliers for major component development and production so
they ship hodgepodge product

2) they look at a car as a product that is shipped and forgotten. They never
have looked at it as a platform for continuous future improvement. This
similar to the iPhone vs feature phone analogy-- cars from legacy manufactures
are the best they will ever be the day they leave the manufacturing line.

Without changing these fundamental mindsets, they are in deep trouble.

~~~
csours
Disclaimer up front: I work for GM, but not on vehicle development.

For #1, what would you do? Ship a much simpler product or ship a worse
product?

In the current system Tier 1 supplier can concentrate expertise in a single
area and spread development costs across many OEMs. A single OEM cannot
effectively compete with this cost structure.

Tesla is notable for many things; one of them being its vertical integration.
So far Tesla has been able to compete by both building simple cars (excluding
the X, which is another story entirely) and charging quite a lot of money.
They have also had serious quality issues, probably relating to their vertical
integration. These quality issues may be resolved, but by that time either
they or their competitors will have developed a new product, and then they
will have to go through the development and refinement cycle again, at huge
cost.

Regarding #2: the iPhone came out in 2007. Since then, there have been about 7
development cycles. For most automobile platforms there have been 3 or fewer
development cycles since 2007. Before the iPhone, there was no real concept of
remote update of mobile devices.

Automakers have caught onto the trend and you will see more mainstream OEMs
doing remote updates pretty soon.

~~~
andrewtbham
>They have also had serious quality issues.

This is not accurate. Their early models often suffer from issues, but not
long term.

~~~
brianwawok
He works at GM. He has to repeat what he is told in company meetings.

~~~
csours
I don't think anyone has mentioned Tesla in any company meetings that I've
been to.

To be perfectly clear: Tesla and Elon have done many amazing things, and I
like their approach in many areas: Marketing EVs as luxury vehicles is genius,
remote updates are amazing, etc.

Elon has a daring attitude that is very refreshing to see, launching or
running many companies simultaneously, making big bets on things like the
Gigafactory, etc.

But they also do some silly stuff too, like the falcon wing doors on the X,
and some of their vehicle assembly systems, while cool looking may be a bit
too cutting edge. There's some stuff that you just don't try to prove on the
production line while it is making your bread and butter.

Anyway, while my original comment may not have been nuanced, I do have a
nuanced view of Tesla.

~~~
andrewtbham
the falcon wing doors were a little wonky and the source of delays.... but the
factory automation... i'm curious what you think.... because i think that is
where they are really innovating. they say general assembly will be completely
automated and no workers will touch these cars within a year or two.

~~~
csours
Anything can be automated if it is designed for automation. The corollary is
that if it cannot be automated, you don't do it (this will probably be an
expensive lesson).

The question is: Will the automation pay off?

A machine that replaces 1 worker may cost $100,000 to $500,000 (factoring
robotics, machine vision, and error proofing). The design for the part and
design for automated assembly may be comparable. Now you've spent $1,000,000
to automate your carpet install. Congratulations. You could have installed
carpet for 10 years manually at that price.

The big question to me is: Can Telsa learn Design for Automation in a scalable
way? Other companies have tried it before and has never really payed off.
iPhones are still largely hand-assembled for instance. I think the approach
may pay off in the next 10-20 years, especially in light of how cheap small
components have become due to the rise of smartphones; and the rise of Machine
Learning.

To be clear,these are just my impressions from observations.

------
alex_hirner
The decision makers in big auto are around 10y from their retirement.
Reluctance makes sense for them. It's similar to the consulting project I had
at uni with an O&G company: everyone knows they should pivot for the sake of
the next generation. On the other hand, upper echelons just want to simplify
their life.

Now it's the labor unions that are pushing german auto makers over the EV
cliff. Ironically, they have the greatest incentives to innovate/follow.

It's bothering though, that redundancies will be massive no matter what
exactly they do about EVs. Can anyone offer a growth perspective for that
sector (=not some kind of UBI vision)? My initial thoughts were space. But
this is not really were to retool design prowess and factories either.

~~~
mywittyname
> Reluctance makes sense for them. It's similar to the consulting project I
> had at uni with an O&G company: everyone knows they should pivot for the
> sake of the next generation.

Honestly, I think the issue is that auto execs and the general public have
very different views of the world.

From an executives perspective, EVs are an over-saturated, incredibly niche
market that's nearly impossible to make money on. They already spend a ton of
money investing in EVs and the general public doesn't care about their EV
offerings and they barely sell.

The general public seem to hold Telsa up on this pedestal of innovation and
point to them as an example of how automakers need to be if they don't want to
be seen as dinosaurs. But I bet if you talked to Mark Fields, he'd say
something along the lines of, "Nobody is going to buy an $80,000 Ford EV."

The general public is clearly not interested in actually buying EVs right now.
Heck, they don't even like hybrids. Instead Americans are happily buying
pickup trucks and crossovers, then complaining about about a company's lack of
innovation.

Ford has the biggest lineup of EVs (with a sedan, van, and compact hatchback
offering) and probably the best availability of EVs in the USA, yet they only
moved 24,000 EVs this year. Telsa moved about 38,000 Models S & X in the same
time period. Total USA EVs sales were a hair over 133,000. This is in a
country where pickup trucks easily sell over a half-million units a year and a
beige family sedan will move 200,000.

So I don't feel like the large automakers are reluctant to adopt EVs for any
other reason besides the fact that the market needs decades of double-digit
percent grow in order to support more than two key players.

~~~
yardie
Have you looked at the Fird Fusion Energi? The trunk is just large enough to
fit a pair of shoes. This car was clearly an afterthought. That they could
shove the battery in any place and get away with it. No one wants to put down
a serious amount of money for an afterthought.

I see the current generation of EVs he same as early desktop computing.
Clearly it's getting there but it's still too expensive for the common person.

~~~
maxsilver
Yeah, this is such a huge issue it's worth mentioning twice.

When it comes to EVs, Ford's efforts are afterthoughts at best. They just take
their existing hybrids, drop a underpowered-and-oversized battery in the
trunk, and ship it to California. It's easy to have the biggest lineup (in
terms of number of models) when you aren't actually putting any thought or
effort into the EV portion of any of the vehicles. Ford doesn't really make
EVs, they make _compliance cars_.

Chevy has plenty of issues too (the Spark EV, for instance). But in contrast
to Ford, Chevy also sells some _real EVs_. It's immediately obvious that
someone at Chevy spent more than 5 minutes thinking through the Volt / Bolt
_as an electric vehicle for people who really want an electric vehicle_ (and
not just a compliance car) before it was shipped, which does not seem to be
true of Ford's offerings so far.

~~~
davidgould
> Chevy has plenty of issues too (the Spark EV, for instance).

Hey now, take that back!

I loved my Spark EV. When the lease ended I purchased a new Spark EV.

The Spark EV may have been slapped together as a compliance car or a prototype
to learn from, but it is a great Bay Area car. The Spark form factor is really
space efficient. It seats four and still fits into all the leftover parking
spots that are too small for everyone else. It's not a perfect car, because
except for the fantastic packaging the base Spark is pretty ordinary, but the
electric version is massively better. The drive train is delightful, powerful,
refined, responsive, and silent. One pedal driving with regen is a revelation.
The Spark has been trouble free and requires no maintenance other than tires
and wiper fluid.

I think there is a place for 100 mile range class EVs. The Spark EV makes the
round trip from Oakland to San Jose which is the longest routine trip I make.
I don't need to drive 300 miles in one go, and I don't need or want to pay for
and haul around an extra 60kWH of battery pack.

Teslas are great and all, but they are _huge_. For getting around Oakland,
Berkeley and SF the Spark EV is a better fit.

------
csours
China largely owns the supply chain for electronics. Electric cars run on...
electronics.

Either western countries such as Germany, USA and Mexico will develop advanced
electronics supply chains, or China will own the EV market.

~~~
Havoc
> Electric cars run on... electronics.

Batteries I'd say. Electronics - I'd imagine the complexity is comparable to a
normal care roughly speaking so don't foresee any major power shift based on
that from the status quo.

~~~
csours
There's also a lot of things like rare earth metals in there, which China has
fewer qualms about things like local environmental concerns or worker's rights
or safety.

Also, complexity is not the main issue; China simply has the inertia to
continue to be the leader in the electronics supply chain

------
Pfhreak
Nissan and Tesla have proved the concept, I'd be surprised if investors are
just now 'getting ready'.

~~~
GFischer
Warren Buffet is an investor in China's BYD, I see electric BYD taxis in my
city (Montevideo, Uruguay) everyday.

[http://www.byd.com/la/auto/e6.html](http://www.byd.com/la/auto/e6.html)

[http://www.byd.com/na/](http://www.byd.com/na/)

Edit: seems Buffet made a killing

[http://www.forbes.com/sites/russellflannery/2016/08/30/warre...](http://www.forbes.com/sites/russellflannery/2016/08/30/warren-
buffett-backed-byd-rises-to-14-month-high-after-electric-car-sales-soar/)

Second edit: seems that the rest of the world is leading electric car adoption
way ahead of the U.S. . Electric cars still represent a tiny fraction of the
overall market (1/300th of the world's car sales). Surprisingly, it's China
that leads the way.

~~~
vkou
> seems that the rest of the world is leading electric car adoption way ahead
> of the U.S.

In parts of Europe, this is due to incredibly high taxes on ICE vehicles -
that dwarf the US EV credits.

One of the reasons this is politically possible is because in areas with good
public infrastructure, car ownership is a luxury (Or even a burden), while in
most of the US, it is a necessity.

~~~
rconti
Could also be related to population density. Fewer vehicle miles travelled per
capita = less range anxiety. More people living in urban-ish environments
means these 'costly' electric cars are less relatively costly. Their typically
smaller size makes them easier to park. Charging infrastructure is easier to
locate. Etc.

~~~
Anasufovic
Is there really a case for range anxiety in America? Getting exact numbers
seems to be difficult but here in California it's about 15 miles each way.
Seems like even the cheaper vehicles could handle this with a weekly charge.

~~~
rconti
Like other kinds of anxiety, it may not be fully rational :)

But one reason I own a nice car is to effortlessly drive across the state and
to distant states with the comfort, power, etc of a modern car. "Just rent a
car for those longer journeys" becomes less compelling when it's more than a
handful of times a year.

For my commute, I could just keep driving the same 15 year old car forever --
though the butt warmers and bluetooth and so on of newer cars is a "nice to
have".

------
metaprinter
I sometimes feel like i'm the only person in tech who loves driving and loves
internal combustion engines.

~~~
greglindahl
You can build an app that makes ICE sounds as you accelerate in your electric
car.

~~~
Animats
Fake engine noise is a thing. Ford now puts it in their trucks.[1] A DSP
synthesizes V8 engine sounds, which are played through the audio system.
Here's how to disable it.[2] (This is for engine noise inside the cabin, not
for pedestrians. Outside noise generators may be required for very quiet cars,
but they will shut down around 35MPH.)

Modern engines just are not that noisy. People need to get over this. They got
over sudsy laundry detergents. In the 1960s, it was a selling point for
detergents that they generated lots of foam. This was a holdover from the soap
era. Laundry detergents don't need foam to work, but people expected them. And
customers wanted long-lasting foam, which resulted in sudsing agents which
would survive all the way through the sewerage disposal plant and into lakes
and rivers. That resulted in EPA regulations which ended the suds wars. Now,
nobody wants suds from laundry detergents.

[1] [https://www.washingtonpost.com/business/economy/americas-
bes...](https://www.washingtonpost.com/business/economy/americas-best-selling-
cars-and-trucks-are-built-on-lies-the-rise-of-fake-engine-
noise/2015/01/21/6db09a10-a0ba-11e4-b146-577832eafcb4_story.html?utm_term=.3ceaf28c0d54)

[2] [http://www.f150forum.com/f118/active-noise-control-fake-
engi...](http://www.f150forum.com/f118/active-noise-control-fake-engine-
disable-how-312261/)

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KirinDave
I'm amused by the dissonance here between developing US policy w.r.t.
subsidization and development of electric-first transportation and
international investing houses willingness to invest.

I imagine they see it as a major opportunity to force better terms on
companies developing these solutions for the US market. Which is probably
exactly the goal in the first place.

------
bahmboo
Google and presumably Apple have decided not to build their own cars (most
likely electric). Two companies that easily have the resources to do it if
they thought it made sense for themselves.

I'm no Tesla hater but cars are not phones.

------
kfk
Somebody figured out the best ETF around today to invest in this trend?

------
andrewtbham
tesla has zero competition from big auto.

[https://medium.com/@andrewt3000/tesla-has-zero-
competition-f...](https://medium.com/@andrewt3000/tesla-has-zero-competition-
from-big-auto-a9d314830ca6#.i7kuu1n41)

