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This is the Kodak Moment for the Auto Industry

Plug-In Drivers Not Missin' the Piston Electric vehicles are here to stay. Their market acceptance is currently small but growing...

Sunday, January 29, 2023

EVs for Everyone, Better Batteries :: F, GM, TSLA :: Revisited

 Guess when this was written: 

Now there's a growing demand for electric car batteries. With GM, Nissan, Ford, and Tesla ramping EV production, battery usage in electric cars could begin to drive a meaningful segment of the battery market. As a result, a number of improved battery designs are being developed in laboratories, involving silicon, graphene, and a zinc-air composition to name a few.”
The above is not an exact quote, there are a few tweaks (removing vehicle introductions) so the answer was not too obvious. Drumroll please... This was written on April 12, 2013. 

Even though this is 10 years old, it reads like an article written today. There has been a massive amount of investment into battery research and manufacturing over the last decade, but the demand has been outgrowing the supply. 

The above quote came from The Motley Fool's blog site, but you can no longer find it there. Luckily the Wayback Machine still has an archive of it. Full credit to the author, Alexander MacLennan aka TulipSpeculator1, for spotting this trend so far before it was apparent to everyone.

Why does this matter? The goal is EVs for everyone, whether it's personal vehicles, public transportation, or rideshare; with all of this powered by renewable electricity. However, there are a couple obstacles. 

Why Are EVs Expensive? Batteries! 

EVs have far fewer parts than internal combustion engine (ICE) vehicles. This makes EVs quicker to build; making EV automobile factories more productive.

EVs are easier to design, you don't have to plan around transmissions, drive shafts, large engines, fuel lines, fuel tanks... 

So if EVs have fewer parts and the factories are more productive, why are EVs more expensive? The batteries. Today, batteries are the most expensive component in most electric vehicles, but there's good news on this front.

Battery Prices are Dropping 

The good news is that battery prices are dropping. 

You can see on the graph above, from 2010 to 2020 EV battery prices dropped by over 88%. This is a huge change. This is what allowed Tesla to move from selling $100k Model S and X to selling Model 3 and Y at about half the price, while still making a profit.

This trend is what will allow EVs to become more affordable and replace the vast number of gas vehicles on the roads over the next decade. 

Boom and Bust

Unfortunately, 2022 looks like a year that will not continue this downward battery price trend (as I write this, final numbers are not yet available). The legacy automakers have woken up to EVs; they will not cede the electric market to the upstarts. So now they are trying to ramp up their EV production volumes. This has meant increased competition for battery factory capacity, resulting in price spikes throughout the battery supply chain, from raw materials, to refined materials, to finished goods. 

Here's a chart showing EV sales. Each one of these vehicles has Lithium-ion batteries. Most of these vehicles have thousands of pounds (and thousands of dollars worth) of battery cells.

Via @skorusARK

This increased price does have a silver lining. This price spike will draw in more investments, the production capacity will grow, and then battery prices resume their downward price trend, but now with more production than ever before.

Better Living Through (Battery) Chemistry

Battery technology has been improving each year by 5 to 7 percent. This is true for cutting-edge battery chemistries, but it's also true for older battery chemistries. 

More research funding than ever before is going into battery technology. This includes research into Lithium-Air, Lithium-Sulfur, and solid-state batteries to name a few. One of these might turn out the be the battery of the future, but today there are two general categories for high-production Lithium-ion cells. These are Iron-based chemistries such as Lithium Ferrophosphate (LFP) and Nickel-based such as Nickel Manganese Cobalt (NMC) and Nickel Cobalt Aluminum (NCA).

Each manufacturer has their own twist on the recipe with different dopants, membranes, electrolytes, and the like. But to stay competitive, any advancement made by one will be answered with an analog by the others. 

Most EVs today are made with Nickel-based Lithium-ion battery cells. However, Iron-based batteries are lower cost, have high safety, low toxicity, long cycle life, and more heat tolerance. If Iron-based batteries have all of these advantages, why are Nickel-based batteries currently dominant in the EV market? The answer is weight. 

Paying The Iron Price

Iron-based Lithium-ion batteries are heavier than Nickel-based batteries per unit of energy storage. When the batteries are used in a mobile device (like cars or smartphones), this additional weight is a problem. Heavier batteries take more energy to move, which requires more batteries... this negative feedback cycle limits the practical range of an electric vehicle that is powered by Iron-based batteries.

Improvements to Iron batteries are slowly unwinding this negative feedback loop. Lighter Iron batteries (improved gravimetric energy density) are allowing these batteries to be used in vehicles with a significant range. For one example, Tesla makes a Model 3 Standard Range Plus variant that uses Iron-based Lithium-ion cells in its battery pack. This car has a range of 253 miles. A 253-mile range EV can fulfill many people's driving needs.  

Iron-based batteries are also finding their way into utility-scale storage and backup power applications. For these stationary use cases, the heavier weight is not a significant penalty. But, more importantly (from the EV perspective), this means the Nickel-based cells (that were once used in these stationary applications) are now available for long-range EVs.

Today, Iron-based cells are about a quarter of the battery market and their share is growing. Iron cells are expected to be about half of the market by 2028. This will help make EVs more affordable.

Closing the Loop

The other mega-trend that will help bring EVs to all is recycling. Today, Nickle, Lithium, and other materials must be mined to make batteries for EVs. The good news is that the packs in each EV that going onto the roads today will be able to be recycled into new batteries. Unlike gasoline cars that have an unquenchable thirst for drill baby drill; EVs will reach a steady state.

One of the best aspects of recycling is that it can be done locally. Today, the materials in EV batteries make the equivalent of several trips around the world before being delivered to a final customer. Battery materials recyclers, on the other hand, will be located near battery manufacturers. Reducing these material road miles will reduce the price of new batteries.


Better Batteries: The materials in EV batteries are highly recoverable. Two things to consider: one, the average lifespan of a vehicle is 12-14 years; two, EV batteries have been getting better by 5% to 7% each year. Adding these two together means that when an EV that's seen a dozen years or more gets recycled, the materials in there will be able to power ~two similar range new EVs. Batteries that use half the amount of materials will cost less. 

When there's a river of end-of-life EVs coming off the roads, recycling this high-grade material will be cheaper than mining virgin raw materials. This will further help drive down EV prices. This provides a positive feedback loop: more EVs on the road, supplying more recyclable materials, making EVs more affordable, which puts more EVs on the roads. This is how we get to "EVs for Everyone." 


Tuesday, January 10, 2023

2023 Tesla's Two Million Vehicle Year!

Last year, we wondered if Tesla would be able to produce 2 million vehicles in 2022. Our determination and that it wouldn't happen in 2022. Tesla's final production number for 2022 was 1.369 million. 

Now we're asking the same question for 2023 and it's a real possibility for 2023. 

Tesla's Guidance 2.05 M

Tesla's general guidance is for 50 percent growth. Applying this to guidance to last year's number is 2.05 million vehicles. 

Exponential Growth 2.18 M

Looking at the chart above, plotting an exponential growth model on it and the forecast is production of 2.18 million. This is 130,000 more than Tesla's guidance. 

Linear Growth 1.86 M

Tesla is NOT in the linear growth phase, but this will provide a floor for a bad year. The result is a forecast of 1.86 million vehicles. 

Other Factors

Both Gigafactory Austin and Gigafactory Berlin will be ramping production this year. 

To truly model this in detail, each of the production lines would need to be modeled. The mature lines would have little to no growth; whereas the new production lines will be growing significantly. 

The last few years have been a mess. Supply shortages, pandemic shutdowns... there's no guarantee that this year will be any different. A new variant could pop up and cause similar problems or another force majeure event could occur; so as we often say here, the only thing we know for sure is that there will be plenty of twists and turns. 

This is the year the Cybertruck is expected to start shipping. Trucks are the best-selling vehicle in the US. Production could mean a big bump in sales. How fast Tesla can get to volume production will be a significant factor. 

Semitruck: Tesla has begun shipping their Semi. Each one has about a dozen cars worth of battery cells. If there's a cell shortage and Tesla has Semi delivery commitments, this could impact Tesla energy products or in the unlikely worst case, vehicle production. 

Wrapping Up

We've generated estimates from 1.86 million to 2.18 million. Will this be the year of 2 million vehicles or will they just miss it the same way that 2021 just missed the 1 million mark? We shall see. After the world of craziness of the last few years, I think we've earned a calm year of steady growth and that results in Tesla nailing their guidance at 2.05 million. 

Disclosure: I am long Tesla

Sunday, January 8, 2023

Energy Portfolio - Solar, Wind, & Batteries

“Don't put all your eggs in one basket.”

That ol' phrase is good advice for many things in life. One example is investing. A mutual fund is a basket of different stocks. This is safer than owning just an individual stock. To be even safer, you could hold a combination of stock mutual funds, bonds, and cash. If stocks are down, maybe bonds are up. If both are down, well at least you still have the cash. But this is not a financial blog and that's not financial advice, so let's move on to our usual topics EVs and Energy. 

This same diversity of assets lesson is now being applied to renewable energy. 

Oregon Public Broadcasting (OPB) reported that Portland General Electric, the largest utility in Oregon, is building a large-scale wind, solar, and battery facility.

OPB says, “Nestled in the hills of Morrow County, hundreds of solar panels and wind turbines are generating a product that will soon be in high demand around the state — clean electric energy.”

This is the diversified energy portfolio: solar, wind, & batteries.

Wind: Morrow County, Oregon is near one of the best windsurfing regions on the continent in the Columbia River Gorge.

Sun: Morrow County is also in the sunny eastern part of Oregon (really, it's not all rainy there).

Batteries: The 30 MW/120 MWh of batteries here will absorb the surplus energy when the sun and/or wind are making more than the grid needs. And it will fill in the gaps when the wind dies down or clouds pass over.

The goal is to have this site supply renewable energy 24 / 7 / 365.

With renewable energy, just as with investing, if reliability is your goal, diversity is a good thing. This is an energy portfolio of solar, wind, and batteries. Continuing the investing analogy, you can think of the solar panels as stocks, they are great when the sun is shining. The wind turbines are like bonds, they're not as sexy, but they are less volatile and often perform when stocks/solar don't. And finally, we have batteries, they are like cash-on-hand, you know exactly how much you have and you can save it or spend it as needed at your discretion.

Ok, enough for the finance talk. Solar, wind, and batteries complement each other well. The solar panels will generate energy during the day and (of course) nothing at night. This generally scales well with increased daytime energy use. Solar also scales seasonally with more generation in the summer when the air conditioners are humming. Solar production is significantly diminished in the winter up here north of the 45th parallel; however, this is when the winds tend to really blow. And finally, you have batteries to fill in the gaps and absorb the excess.

A surprisingly small amount of energy storage (batteries) will make a big impact on the grid; this will be a game-changer for renewables on Oregon's grid. Batteries are what changes renewables from a volatile source that spikes the grid with power one moment, then little to none the next moment, to something that the grid can use to add stability. Batteries are instantly dispatchable. I call this digital energy.

Managing batteries is a new challenge for electric utilities. There are lessons yet to be learned. Such as where's the best place to physically locate the batteries? Is it at the generation location (as in this facility) or should the batteries be closer to the consumption location? Or some combination?

Oregon's last coal plant closed in October 2020. This new installation is about 30 miles from the shuttered coal plant. My favorite part of this story is that the transmission lines that once carried the dirty energy from the coal plant will now transmit renewable power from this renewable energy farm.

Right now, we have the technologies that are needed to move to a future free from fossil fuels. We don't have to wait for fusion or some other big breakthrough. Let's put the resources that we have, here and now, to work. Most deployments are held back by a lack of political willpower, not a missing technology. 

Here in Oregon, we have the political will, and our major electric utilities are required to move to emission-free generation. The Clean Energy Targets bill (HB 2021) requires utilities to reduce emissions as follows: 

  • 80% below baseline emissions levels by 2030
  • 90% below baseline emissions levels by 2035
  • 100% below baseline emissions levels by 2040
That means the generation that's born about a generation from now might be referred to as the clean-generation generation.