The ICEBerg :: Legacy Automakers Unable To Let Go of Their ICEy Ways

Just like the Titanic headed towards an iceberg, the legacy automakers are headed towards a disaster. The automakers, like the ill-fated ship, have been in a fog; their's is a fog of uncertainty rather than a literal fog. The uncertainty for automakers has been around electric vehicles (EV). Will there be customer demand for EVs? Will the technology be dependable? Will it be profitable? Or should they stick to internal combustion engines (ICE) that they used to build their business? 

Over the last decade, these questions have been answered; the fog has cleared; EV ranges have increased, the charging times have decreased, charging networks have proliferated, EVs are the future. Yet, the legacy automakers are unwilling or unable to steer away from this looming collision that I've dubbed the ICEberg. 

The combustion engine was once the machine that made the automakers profitable companies.  Now the combustion engine is an anchor around their necks, anchoring them to the past, preventing them from driving into the electric future. It is the ICEberg and they are about to crash into it.

Bloomberg recently reported that EVs are about to cross the tipping point where their initial price will be lower than similar class gas-powered cars. This (combined with the lower running costs and smoother, quieter ride) will mean that the majority of new car sales will quickly transition to electric during this decade. Once a tipping point is reached, the world changes quickly; companies that are caught on their heels could miss out and join the ranks of those that dominated one era but fell into obscurity after a transition.

Despite the evidence of this upcoming sea change, many of the largest automakers are bound and determined to ignore or downplay the looming change. Even when they acknowledge the importance to embrace the future, as VW's Chief Executive Herbert Diess has said, the company culture makes it nearly impossible to change.

Let's look at two of the biggest automakers and see how they are dealing with this: Toyota, in denial; and VW, in culture shock.

Toyota

At Toyota's recent annual meeting, the company's CEO, Akio Toyoda, went on an anti-EV rant. As the Wall Street Journal reported, the things Toyoda said included claims that EVs were more polluting than gasoline-powered vehicles. This "longtail argument" has repeatedly been proven false by several credible studies.

Toyoda claimed that EVs are too expensive and that government EV mandates will price people out of new cars. It's true today that you cannot buy a sub $20k car with 300 miles of range, but that will not remain the case. Batteries have recently dropped below the $100 per kWh mark and they are continuing to decline, and when fueling and maintenance cost factors are included, EVs are already more affordable to own in many categories.

Toyoda's attitude has permeated the company and it shows in their marketing campaigns as well. See the ad to the right that bashes on EV recharging times. This ignores the fact that most charging happens overnight while you sleep. You wake up each morning with a 'full tank.' It also ignores the fact that on-the-go DC fast charging has gone from 50kW (CHAdeMO v1), to 120kW, to 270kW, to 350kW (CCS 1,000V) over the last decade. So today, you can recharge significantly faster than you could a decade ago.

As batteries chemistries continue to become more hearty and packs continue to get bigger, they'll become capable of even faster charging. Again, Toyoda seems to be willfully ignorant of this trend or intentionally spreading anti-EV information. 

Instead of talking about the convenience of charging at home or the environmental benefits of charging from an ever-greening grid (or even solar from your own roof), Toyota is putting out deceptive ads about “Self Charging” hybrids. 

This is a major inflection point in the auto industry. Toyota has been innovative in the past, but they are not currently displaying this innovative capability. Rather than trying to surf this EV wave, they are trying to hold back the tide. They should ask Kodak and Blockbuster how well that strategy worked. 

Perhaps Toyoda is not as anti-EV as these statements seem. One hypothesis is that Toyota is working on several EV projects behind the curtain. These projects, however, are not yet ready for prime time. They could be mass-produced today, but the trend in battery price reduction means that it would be more profitable for Toyota to produce EVs in 2025. When this profitability threshold is reached, then Toyota will announce their new product lines. They back-peddle on all the anti-EV statements by saying something like, "that was true at the time, but our new battery breakthrough eliminates all of the EV drawbacks..." This is the anti-Osborne effect method, downplay anything that you are not currently selling, even if you have similar products in development. 

Volkswagen 

VW is in a different place than Toyota. VW's Chief Executive, Herbert Diess, wants to go all-in on EVs. His efforts to reform the company have met with resistance from many levels within the company and in their dealership ranks. Even after the shameful events of Dieselgate, many within VW fight to retain their fossil fuel ways. Diess, frustrated with this resistance, demanded a vote of confidence in his leadership. He asked the board to let him lead the company into the future or send him packing. 

Powerful directors of various units within the company don't want to see VW change over to an EV company because it could mean the end of their department. EVs are fundamentally simpler machines than internal combustion systems. There are no pistons, no intake valves, no spark plugs, no crankshafts, no gearbox, no oil pan, no exhaust system, no catalytic converter; often there's no transmission... each of these are fiefdoms within the company and when you think your career is tied to a department, you'll fight to keep that department alive regardless of the CEO's vision. Other than the paint department, no one is safe. 

Speaking of jobs, VW's workers are mostly union employees. The union does not want to see layoffs and salary reductions. However, if the company is going to reinvent itself, that's going to mean rebuilding the company, which includes writing off stranded assets. All of this will be expensive. The company will have several years of little to no profitability as they transform. These lean years will mean fights with the union over jobs and wages. It will also mean unhappy shareholders. If you bought VW stock for its dividend payout, then you've already been disappointed when it dropped from 6.50 euros to 4.80 euros. We don't know what the future will hold, but I'm willing to bet that the dividend will continue on this downward trend as they have to build new factories or retool old ones for battery pack and electric motor production; as they have to pay severance packages; as they have to buy companies with the software skills for a modern computer-on-wheels car company. 

Let's not forget about VW's dealers. VW's marketing has been heavily advertising their ID.3 EV, talking about how battery-powered cars fight against climate change, and how VW is a pioneer in the drive to saying goodbye to Diesel and gasoline. Greenpeace Germany wanted to see if the dealerships reflected this messaging, so they sent secret-shoppers into dealerships around the country to see what the salespeople were saying. They visited 50 dealerships. Greenpeace found that if the secret shopper said they were interested in an EV, only eight dealers recommended the ID.3. If the secret shopper didn't mention EVs, then only 2 dealers even suggested the ID.3 as something that the shopper should consider. Despite being independently owned, dealerships and the salespeople that work there are the face of the company. If you want to buy a VW, you go to a VW dealership and talk to these salespeople. If they are not promoting EVs, even to customers that come in asking about EVs, then sales of VW's EV line will suffer. VW has a good EV in the ID.3, yet 84% of dealers did not recommend the car, even when shoppers asked about EVs.

VW is not the first automaker to encounter EV resistance at their dealerships. Dealerships are independently owned. They are not required to toe the company line. Much like the fiefdoms within a company, they act in their own best interest. Dealerships make most of their profits from service rather than sales. Sales can even be a loss leader for service. EVs, however, don't require much service relative to their ICE counterparts. In an EV, there are no spark plugs to change, no fuel filters, no oil changes... All resulting in few service visits and less service revenue. If EVs are not profitable for dealerships, they are more likely to steer people to the gas-powered cars that are profitable for them. 

Given this, the dealership salespeople are far more likely to repeat the anti-EV FUD that's circulated by groups with a vested interest in maintaining the fossil-fueled status quo. And this is exactly what the Greenpeace study found. When secret shoppers asked questions about EVs, nearly half of the answers were, at best, an ignorant “I don't know,” or at worse misinformation. Several salespeople volunteered various fearmongering myths about EVs to discourage shoppers from buying them.

Volkswagen is an 83-year-old automaker. They have a deep-set culture. A culture of making Diesel and gasoline cars; a culture where dealerships have an expectation for cars that need service; a culture where investors expect dividends; a culture where directors and vice presidents expect their departments to grow and thrive (or at least survive).  

Turning this behemoth into a modern high tech company will not be an easy feat. It's a culture problem. This is far more difficult to deal with than a technological problem. Every time the company promotes EVs as zero-emission or as better for the environment, it's an admission that their other products are pollution emitting and bad for the planet. They have products that some people at the company have spent their entire career developing, refining, honing. Being asked to recast that legacy as polluting and harmful is a pill too big for some to swallow. Some people within the company might see this as spitting on the sum total of the company history and all of their work for a current "fad" that "won't work" long term.

At the start of this VW section, I said that Diess called for a vote of confidence in his leadership. The board sided with Diess and he currently has their backing for “rigorously pressing forward with the largest transformation in the history of Volkswagen.” Diess went on to say: “In the upcoming years, we will continue to invest in electromobility, digitalization, and battery technology. At the same time, substantially reduce fixed costs and material costs throughout the Group in all brands and regions in order to ensure Volkswagen’s future viability.” We'll see if Diess can overcome the massive inertia within the company and dealerships.

Dealing With Disruption  

Disruption is not common in the auto industry, but it is common in the high-tech world. Maybe automakers can look there for some examples of coping methods. In the last few decades, Microsoft has reinvented or augmented itself several times. In the early 1990s, they were an operating system and office applications company (and they were ignoring the internet). Then in May of 1995, Bill Gates sent his famous “Internet Tidal Wave” company memo.  In it, he said, “I want to make clear that our focus on the Internet is crucial to every part of our business.” He went on to explain that they would not have an “Internet division”; instead, Gates expected every one of the company's products to embrace the internet. Later in 2001, Microsoft again added a new direction for the company with the Xbox gaming console. Then in 2010, they expanded into enterprise cloud with Microsoft Azure. Oh, and don't forget their failed phone efforts. This phone effort shows that you don't have to win them all, but the effort itself (win or lose) is a sign that they are not just complacently resting on their laurels. 

When you are in an industry that has a major disruption every decade or so, then when the next one comes along, you have leadership and employees within the company that dealt with the last one. There's a collective memory, there are toned organizational muscles ready for the fight. The auto industry has no such history, but perhaps they can learn from the industries that have this skill. For example, just as Gates did with his Tidal Wave memo, Diess could author an “Electric Vehicle Tidal Wave” memo to all of VW Group. The memo would set company-wide expectations that all departments are to be EV departments. All employee/executive bonuses would be tied to the company's EV sales growth. Similarly, there are ways that dealerships can have their incentives aligned to the parent company's EV goals.

Anyone that is not on board with this new company direction would be offered a severance package. This will be better for both the company and the employee in the long run. Long term, an employee would not be happy working someplace that they think is 'going the wrong way' and the company would be better off without people that want to anchor them to their ICE past. VW needs everyone rowing in the same direction.

Dealing With Company Culture 

A company's culture has been called its immune system. There are behaviors common in some companies that would not be tolerated in others and this is a function of their different cultures, leadership, and history. This immune system can also attack new ideas as if they were foreign invaders unless they are properly introduced into the culture.

Changing a company's culture is one of the most daunting leadership challenges. A company’s culture is not just one thing. It's how they communicate, their roles, goals, processes, shared values, practices, rituals, assumptions... all blended together in an interlocking system. 

Unless a company has a highly adaptive culture, it is unlikely that the culture will change significantly unless there is a serious shock to the system. The company has to collectively believe that the very existence of the company is at stake or else there's no motivation to do anything other than that which has worked in the past. This means that successful companies are often the ones that are most culturally ossified. This then means they are the ones least likely to adapt to market disruptions.

Success leads to complacency. Complacency leads to cultural ossification. This leads to an inability to adapt. Inability to adapt leads to extinction when things change. In the auto industry, things have just changed. 
 

Conclusion 

Above are the stories of two legacy automakers. Both are headed towards an ICEberg. On the Toyota Maru ship, the captain insists that it's not an ICEberg and they will be fine; full-steam ahead. On the Volkwagen Zerstörer ship, the fog has cleared and the captain sees the ICEberg. He is calling for the crew to turn hard to starboard. However, the crew's response is, "We've been on this heading for 83 years; why should we change now?"

As Peter Drucker said, “Culture eats strategy for breakfast.” That's what we're witnessing. Not much has changed in the automobile industry in decades, they lack relevant strategic expertise, and they don't have a disruption-resilient culture. Even people with long careers in the auto industry have not had to deal with major disruption, let alone several hitting them at once. Even if management has an excellent transition strategy, they may not be able to adapt. Ironically, past successes are a primary reason they are not culturally equipped to deal with a radical disruption.

Over the next decade, we'll see how the transition plays out for these two titans as well as others in the industry. Will they maintain their status among the biggest automakers in the world or will they crash into the ICEberg and drown at sea like so many other companies that failed to change course when the world changed.

Ω

 

Alternative Analogies 

You've reached the end of the post proper. Writing this, I tried to stick with the ICEberg analogy, but a few other ideas came up. I thought I'd share the other possibilities here. 

• BlackICE: Automakers have hit a patch of BlackICE and are headed toward a cliff; unable to steer away from it
• Attractive nuisance doctrine: under tort law, this is a hazardous object that might attract and injure people. Similarly, the automakers are attracted to their status quo operations and it could be very hazardous for them. (this one is a stretch) 
• Black Hole: Automakers are sucked towards a black hole. The question is, have they crossed the event horizon? 
• Mathematical Attractor: In the mathematical field of dynamical systems, an attractor is one or more values toward which a system tends to evolve for a wide variety of starting conditions. System values that get close to the attractor values remain close even if slightly perturbed. 
• Organ Transplant Rejection: EVs would be the new organ that the automakers need to survive, but the company culture antibodies are attacking it. 

Disclosure: I am long Tesla

How Tesla's Policies Discourage Owners From Buying A Newer Tesla Vehicle

There's no question that Tesla is an innovative company. Every year they have new features and new products. Many of these new features are via over-the-air (OTA) software updates. This is one of the great things about owning a Tesla. These upgrades keep ownership fresh and exciting. 

From the title, you might have assumed that this post would advocate for Tesla to end OTA updates. That's not the case, far from it. Rather, this post focuses on other policies that might make people think twice about trading in their current Tesla vehicle for a new one. 

Over the years, Tesla has had many offerings that are no longer available such as free Supercharging for life and free premium connectivity. If you have a car that has one of these features, you cannot buy a new car with the same benefits. If this is a feature that you use and like, you might think twice about buying a new Tesla without it.

Similarly, if you have paid for Full Self Driving (FSD) on your current vehicle, this does not carry forward to your next Tesla. You'd have to pay for it again if you wanted to upgrade to a newer Tesla vehicle and the price of FSD may have increased. The current $10,000 price tag makes this a non-trivial payment.

The last two to consider are the performance boost and range boost. In some of Tesla's vehicles, you can pay to reduce your zero to 60 time or increase your range. These two are a little more complicated in that they are not universally supported, so they may not be offered on a new vehicle that you are considering.

On the plus side, all of these items (free Supercharging for life, free premium connectivity, FSD, speed boost, range boost) should help increase the resale/trade-in value of your old car, but that's only a small consolation. It's really nice to take a road trip and know that you won't have a 'fuel' bill waiting for you when you get home. It's nice to stream Netflix and get live traffic information without a monthly connectivity bill. 

Let's look at the two examples in our garage. First, a 2016 Model X. This is an AP1 car with free lifetime Supercharging. I admit that I don't Supercharge all that often. Most days, charging happens overnight in our garage, but we have taken several summertime family road trips and the Supercharger network makes that pretty easy to do up and down the west coast. Carefree traveling on the Supercharger network is priceless.

Next, is our 2018 Model 3. This car has FSD and free premium connectivity. 

We are considering buying a Model Y, but with the current policies, we would not be able to get free Supercharging, free premium connectivity, or FSD (without paying for it again). This makes some aspects of buying a new Tesla feel like a downgrade. I understand why Tesla changed these policies; 'free' can incentivize the wrong behavior. It can create a 'tragedy of the commons,' some people become irrational about it and would even avoid the convenience of charging up in their own garage just to use the free Supercharging... So maybe there's a compromise. 

Possible Solutions

When you trade-in a vehicle with free lifetime Supercharging or lifetime premium data, Tesla could offer 2 or 3 years of the feature for free in your new vehicle. This is not exactly, the same, but it would ease the transition and perhaps I would not cling so hard to our older vehicles that have something that we cannot include in a new purchase. 

Another option is a transfer option (for a reasonable fee). If you want to keep a given feature, you'd be able to transfer it to your next Tesla. This would be a nice way to acknowledge the support that early adopters showed to Tesla, while still allowing them to upgrade without losing a feature to which they've grown accustomed. Tesla is able to collect data about how much these features are being used and could price the transfer accordingly. 

As for FSD, it would be really nice if you could transfer this from an old vehicle to a new vehicle. I understand that Tesla makes more money if they sell it with every car, but I'm not sure this helps them overall if I and others avoid buying a new car from Tesla because the price of FSD has gone up and I don't want to pay for it a second or third time. 

Elon Musk was asked about the ability to transfer FSD in the 2020 Financial Results call. He clearly stated that they have No Plans to allow transfers. Instead, they will offer a subscription option for FSD. The FSD subscription details will be coming out soon, so (as I write this) we don't know how much it will cost. Depending on the price, this may work out for people purchasing new vehicles, but what about the hundreds of thousands of cars that are currently on the road? They would continue to have a policy that dissuades some people (like me) from buying a new Tesla. 

I hope Musk and Tesla reconsider and take some action to remove these hindrances to new vehicle purchase upgrades. The new Model X is very tempting. Stalks are so 2020 ☺

⚡🚗

Disclosure: I'm long Tesla stock
http://ts.la/patrick7819

Tesla Robotaxi Fleet - Do I Have To Buy FSD?

This post is to explore one question: 

When the Tesla Robotaxi service starts, do you need to have Full Self Driving (FSD) to participate? 

As a sidebar, we'll discuss 'when FSD will be released as v1.0?' This is the date that you could nap in the car or watch movies as it drives you around. 

In 2020, there was only one way to have the FSD feature in your car: you had to buy it. However, at customer request, Elon Musk committed that in early 2021, the option to lease FSD would be available (see tweet below). 

This means that when the Robotaxi service starts, there are three FSD-related states a car could be in:

1. FSD Purchased 
2. FSD Subscription 
3. No FSD

Some in the Tesla community have asserted that unless you are in category 1 or 2, you won't be allowed to participate in the Robotaxi network. With the subscription model, you can make a shorter-term commitment to FSD, but as I write this, the terms of the subscription have not yet been released (will it be annual, monthly, trip or distance-based...?). 

I'm proposing that Tesla will want to allow as many owners as possible to participate. That would mean allowing cars in all three categories. But this brings up a dilemma, cars in the network will be in FSD mode, but category 3 owners have not paid for FSD. This is a solvable problem. For a car that has connectivity and advanced software, this is an easily solvable problem. 

Here's how I propose it could work: When a car that has not purchased FSD or subscribed to FSD joins the Tesla network, FSD would be enabled while (and only while) the car is participating in the Tesla network. Additionally, there would be two owner payment tiers for vehicles that are participating in the network. For vehicles that have FSD, they would receive the highest tier payment. Vehicles that didn't already have FSD, would pay an FSD micro-lease payment with every trip they make. 

For example, say a fair for a trip was $5. In the highest tier, some portion of this would go to Tesla (let's assume 40% or $2) and the remaining funds (60% or $3 in our example) would go to the car owner. 

Well, if the car has to micro-lease FSD, then the percentages would be a little different. Let's see how the split might look for category 3 cars with our made-up revenue split of a $5 fare. Tesla network cut (again assuming 40% or $2), FSD micro-lease (assume 10% or $0.50), and the remaining funds (50% or $2.50) would go to the owner. 

	With FSD	No FSD
Tesla Network Cut	40%	40%
FSD micro-lease	N/A (0%)	10%
Owner Funds	60%	50%

This allows all of the Tesla vehicles (that have FSD hardware) to participate in the network. This is important since you'd want a network with good coverage or it would limit the number of people interested in using it. It also rewards the Tesla owners that have paid for FSD with a little more revenue when they join the network, while still allowing people that have not purchased or leased FSD to profitably participate. 

You might be asking yourself why Tesla should get 40% when your car is the one picking customers up and dropping them off.  First, a reminder that 40% is just a number that I made up for an example, but Tesla will have expenses too. That 40% (or whatever the number turns out to really be) goes towards the app development, the servers to run the app backend, some profit margin for Tesla, and (the big one) insurance for your car while it's in the network. 

There you have it, my reasoning as to why and how non-FSD vehicles will be allowed into the Tesla Robotaxi Network. Please let me know where you think I got it right and where I'm off base. 

Before we go, I promised a sidebar on when I think the Tesla Robotaxi service will start. There are the nay-sayers that don't think FSD will happen this century. They are clearly wrong. The FSD beta is out now and there have been some impressive videos with it navigating tricky situations, so it is coming. The only question is when. On the other side, there are enthusiasts that think the steering wheel can be removed from Teslas before 2022. I fall in between these two camps. The FSD beta is impressive and this allows the long march of the nines to begin. The car will quickly be a 99% effective driver and this might seem like we're at "mission complete" but a crash every 1000 miles or so not good enough. To be a true FSD system, it has to be better at driving than the average human, better than the average taxi driver, even better than you. That will mean that it has to be at 99.99999%. It will have to be able to handle strange cases of trees falling across the road, things flying off trucks, double-parked cars, drunk drivers... The list of things that you handle by experience and intuition are difficult but not impossible for an AI to learn given enough training and corner-case examples. Considering all of this, my estimate of when FSD will be ready and legally allowed nationally in the US is 2027. I hope I'm wrong and it happens sooner, but if I had to bet, that's where I'm placing my chips. 

Disclosure: I'm long Tesla stock
http://ts.la/patrick7819

Tesla Embedded Flash Upgrade (eMMC)

The National Highway Traffic Safety Administration (NHTSA) recently sent a letter to Tesla saying it has determined that the screens are defective and pose a safety risk because they can cause backup cameras to go dark and defrosters to malfunction. This issue impacts about 159,000 Model S and X vehicles built between 2012 and 2018. 

The problem is not with the screen directly, rather it is with a small flash memory chip in the control unit for the screen. The system reads and writes to this memory often for many activities. As the chip begins to fail, these read and write operations often have to be repeated several times before they are successful and this causes the touchscreen to be slow, unresponsive, or to fail completely. 

Voluntary Recall Covered Most But Not All

Tesla is aware of the issue and sent the above letter to impacted vehicles in November of 2020. Tesla says they are fixing it at no cost and if you've already paid for it, you'll get a reimbursement. Great, problem solved, right? You might notice, in the second paragraph, that Tesla has some caveats. The first caveat is 8 years. Well, it's 2021 and the problem is only in vehicles in 2012-2018, so that's no problem. Tesla didn't make too many cars in 2012 compared to later years and 2012 vehicles have likely already had this done, so their owners are likely getting a refund. The second caveat, on the other hand, is 100k miles; that can be a problem. There are some road warriors out there that love to drive or drive a significant number of miles related to their employment. These folks could easily be over the 100k mark in a 2013+ vehicle.

Because Tesla's voluntary recall from November left out some customers that did nothing wrong, NHTSA is pressuring them to do the right thing and cover everyone. Repairing this only costs $120 in parts for the new flash chip. And, Tesla offers an upgrade to the entire media control unit (MCU). The newer MCU infotainment system allows owners to play more games and to watch Netflix. This means that some people that come in for this, might opt to upgrade for $2500. This means that Tesla could actually make money from this and customers would have a more capable vehicle.  

I don't know what percentage of these 159,000 owners fell into the over 100k miles and how many were (like me) under the 100k mark. 

When I had my 2016 Model X in for service they replace my flash for no cost to me but there were some things that I think you should be aware of if you take your Tesla in for the eMMC upgrade. 

Getting The eMMC Upgrade

As mentioned above, my 2016 Model X recently had the eMMC upgrade. The 8Gig flash was replaced with a 64Gig flash unit. A larger flash will mean that the reads and writes will be distributed over 8 times more space and each sector will have less wear and tear. This alone will improve the lifespan of the unit. Additionally, Tesla has made some software updates to be more selective about what they write to the unit. Hackers have monitored the traffic and found that they were writing a lot of unnecessary kernel debug information.

So happened when I received the upgrade? 

I asked if there was anything that I needed to know. They said, "No, the fob is on the dash and that the invoice will show up in your account soon." I hopped in my car for the drive home. Whoa, the first thing that I noticed was the nav was in bright day mode. I keep the display in the much cooler dark mode (as everyone should). And the map was in gaudy satellite mode. I quickly switched this to the much cleaner roadmap and dark mode. Okay, now that I look at the screen without being grossed out. I tapped nav to select home and it was no longer there. This is not surprising, they replaced a memory card, so I should expect the vehicle to 'forget' some things.

On the drive home I was on the freeway and attempted to turn on Autopilot. It refused to start. Ugh, it's a beta feature and you have to explicitly accept/enable it in the software controls before you can enable it. I had to drive myself the entire way - what is this the 19 hundreds, can you believe it!☺ It was five o'clock traffic and using AP really removes a lot of the traffic stress. I missed having it.

I finally made it home and now I knew there were a few more things they should have told me at the service center. It was time to take account of what needed to be restored. Here is the list of things that my vehicle 'forgot' and 'remembered' as part of this upgrade: 

Things it forgot:

• Autopilot (had to acknowledge it's beta)
• Its name
• All driver profiles including Easy Entry and Curb View
• Game scoreboard/progress
• Garage door opening/closing (HomeLink)
• Wifi settings/password
• Screen mode: Night mode, satellite view/road view
• App/mobile access setting ('Controls' and then 'Safety & Security')
• Location Favorites
• Recent Trips

Things it remembered:

• Streaming favorites/stations
• Binnacle settings

Seems odd that it remembered my streaming stations, but forgot driver profiles. 

I asked my service advisor why they did save and restore these settings. They said that they have a tool that attempts to read the old flash chip and then place those settings into the unit, but the old units are often too corrupt to read. I'm not sure I buy this explanation since the profiles, for example, were still working so this section of the old flash was still readable. Perhaps their tool is not as persistent as it should be or does not cool the flash to improve its readability... 

So, if you go in to get this upgrade, know that will likely lose all of your settings. If you happen to have a few restored, count yourself lucky, but at least you won't be disappointed if you lose them all if you come in with that expectation. 

Profile In The Cloud

Musk has said that they are working on a feature to move driver profiles into your cloud account. This would be a nice addition. It would allow you to hop into any Tesla (like a loaner) and automatically have the car know your seat/mirror/steering wheel settings as well as your favorite streaming services... This would be very handy and it would eliminate the above problem.

Disclosure: I'm long Tesla

The Tesla Cycle

Today (January 7th), Tesla stock blasted through $800 per share. As it did, Elon Musk's net worth surpassed Jeff Bezos' and Musk became the richest person in the world. 

As you know from our recent post, we've installed Tesla Powerwalls on our home. Today, was the day that I paid for those Powerwalls. 

Putting these two things together, I found it ironic that I was paying a handsome sum to Tesla on the same day that Musk made this achievement. I'm not saying that I should be able to skip the payment just because Musk made guap, just noting the irony. I'm getting a great product from a great company and I'm happy to pay the agreed-upon price, especially since my realized gains from Tesla stock investing is paying for these Powerwalls.

I have been investing in Tesla for a long time. Musk might be the richest person in the world now, but he's also made a lot of other people rich along the way. Some of those people are like me, both investors and customers. I don't want to know how much stock I'd own today if I'd held TSLA in 2016 instead of buying a Model X. Owning the X has been incredibly rewarding, I have no regrets.

This owner shareholder combination got me thinking about how many people were in a similar situation. They were able to afford Tesla products in part because of how well their TSLA investments have done. Or they became shareholders because of how much they love the product and/or mission. This is a positive feedforward system: owners become shareholders, shareholders become customers. Then customer/shareholders sell a fraction of Tesla stock holding to buy a Tesla product, Tesla sales increase, Tesla share price increases, remaining Tesla stock holding value increases... rinse and repeat. I'm calling this the Tesla Cycle. Of course, there is no such thing as a perpetual motion cash machine, nor am I suggesting that you take this as stock advice. But we've been able to do this multiple times to buy multiple Tesla vehicles and our Powerwalls and I wonder how much of Tesla's growth to-date has been driven by this cycle. 

If millions of people are customer/shareholders, this could be a significant flywheel that has brought in significant revenue and growth to the company. If you've hung out on Tesla twitter or the Tesla forums, you've seen that, for many people, Tesla is the first (or only) stock that they've ever owned, some opened a stock account specifically to buy TSLA. Similarly, in these online forums, you've seen that a Tesla car was often the most expensive thing (or at least car) that many of the Tesla fans have ever purchased. Tesla has throngs of fans, if even a small percentage of them are participating in the "Tesla Cycle," it could be a significant factor in the company's growth over the past few years.

Do you think there's anything to this? Did Tesla's stock growth turn individual investors into Tesla product owners? Did the love of the product turn customers into investors? Have you sold Tesla stock to buy something from Tesla?

Installing Tesla Powerwalls

On the final day of 2020, we had three Tesla Powerwalls installed. A more detailed post will be coming with energy impacts, usage data, cost... Until then, here are some quick shots from the installation day.

Thanks to everyone that used our referral link and helped us get that red one for free. 

From Diesels To D-Cells :: The Electric Transportation Epoch Has Begun

Transportation is moving from Diesel trucks to D-cell trucks

Transportation is entering a new epoch #TheElectricEpoch

As we ring in the new year we're entering a new era of transportation and Diesel is the old acquaintance that should be forgotten and never brought to mind.

I must start this post with an apology for the title. I liked the "Diesels" to "D-cells" alliteration and ran with it. Obviously, D-cells are not going to be the battery cell of choice for the EV revolution, but they are familiar. The cells to 'drive' EVs are more likely to be pouch, prismatic, or cylindrical cells (like the 2170 or 4680). However, the D-cell is cylindrical so I guess you could call it the 3362 ☺

The Epochs of Transportation 

First, we walked, then we rode horses and carriages; next came the horseless carriage and those horseless carriages have been primarily powered by petroleum products for over 100 years. The decline of the petrol and diesel era has begun and now we're at the dawn of the electrically powered era. This new era will start with personal transportation, move to cargo short-haul, then longer and longer range cargo-hauling semi-trucks, the seas will be next, and finally air. Electric air travel will start with puddle jumper prop planes, expand to turboprops, and finally, a couple decades from now, electrified turbofans making trans-Pacific flights completes the transportation transition.

Are Electric Motors Up To The Task?

Diesel has been the fuel type and engine of choice for hauling and towing. Electric motors are more than up to the task of replacing the hauling and towing work of Diesel engines. In fact, some of the toughest hauling situations, like trains, use Diesel-electric drivetrains. Wait, that says "Diesel." In a Diesel-electric powertrain, the Diesel engine is used to power a dynamo (e.g., electrical generator). The dynamo generates electricity, this electricity is fed to an electric motor, the electric motor provides the traction force to move the train, pulling all the cargo laden boxcars up the mountain pass. This same basic drivetrain design is used for many freight ships often carrying thousands of cargo containers. These Diesel-electric traction systems behave more like a Chevy Volt in range-extended mode than like a Super Duty Diesel pickup. 

So the answer to the question, are electric motors up to the task is a solid 'Yes.' However, powering them with a Diesel generator does not move us to batteries (D-cells). This leads to the next question, are batteries up to the task? 

Are Batteries Up To The Task? 

The question was 'battery' but the topic should be broadened to "energy storage systems" to include ultracapacitors and hydrogen fuel cells. As we move to electrify land, sea, and air travel over the next couple of 

decades, each of these energy storage systems is likely to find at least a niche market. Although fuel cells will find niches, batteries will be the vanguard of the electric epoch, so let's start there. 

I've said it before and it's just as true now, batteries are the crux. The primary reasons that battery electric vehicles are not the dominant vehicle on the roadways today is battery energy density and cost. The good news is that both of these have been trending in the right direction.

These price reduction and technology improvement trends show no sign of stopping. There's more investment in battery research and manufacturing capacity today than we've ever seen before. With each year's advancement, electric cars become more affordable and more profitable. Tesla’s goal of bringing a $25,000 car to market largely rests on battery improvements that would halve the cost per kWh. Battery prices have dropped 90% over the last decade, prices will likely decline another 50% by 2025. Today batteries are about $150 per kWh, this trend places them at $75 per kWh. This means that the upfront cost of a battery-electric car will be about the same as an affordable gas-powered car in around 2022 and more affordable than an equivalent gas car by 2025. 

Cars "fueled" by electricity cost less than 50% per mile to drive and have far less maintenance costs. There are no fuel filters or spark plugs to change, the brake pads last far longer. Some people buy EVs today for environmental reasons, energy independence reasons, or performance reasons; these are the motivated early adopters. However, when battery-electric cars are cheaper to buy upfront and cheaper to operate, they will quickly move from early adopters to the majority of consumers. This will be the decade of the EV. More adoption will drive more investment, will drive more innovation, will drive more adoption, rinse and repeat. 

Lithium metal anodes, solid-state batteries, lithium air... there are many technologies under development that will open even more markets to battery-powered transportation.  

So to answer the question, are batteries up to the task? Today the answer is, for many applications, yes. For other applications, not yet, but the trend is in the right direction. 

The Genie Cannot Be Put Back In The Bottle

Bloomberg says your next car will be an electric truck. Market Watch says EV sales will grow 50% this year. These are just a couple examples of the expected growth for EVs in this decade. Once people own an EV, over 90% of them never want to own another petroleum-powered car again. This market growth will additionally be fueled by state and national restrictions on new gas-powered vehicle sales: 

• China will aim for carbon neutrality by 2060 (link)
• Sales of new gas-powered cars banned in California by 2035 (link) 
• Biden wants to end gas car sales (link) 

More than 14 countries and over 20 cities around the world have proposed banning the sale of fossil-fuel-powered passenger vehicles at some future date.

What About Boats and Aircraft?

Electric tugboats have hit the waters in the Port of Tuzla in Istanbul and the ports of Auckland in New Zealand. The torque of the electric motor is perfect for this little boat that's a big powerhouse. Today's batteries are perfect for the short-ranges in which tugs operate. Using electric tugboats remove the particulate matter from the population areas near the ports. And once the boats they are towing are docked, they'll be plugged into shore power, using local grid power. 

As battery technology advances, the number and types of watercraft that are battery-powered will increase too. Just as electric cars started with niche vehicles like the original Tesla Roadster or short-range vehicles like the 2011 Nissan Leaf, electric watercraft will start with niche vehicles like tugboats and short-range personal vehicles like jet skis. And just like cars, the number and types of watercraft that can be electrified will start with a niche and slowly blossom into larger markets each year. Because of its higher energy demand, watercraft electrification will trail auto electric by 10 to 15 years. 

As for aircraft, these are a little more difficult than watercraft, but we're already seeing the first steps. The high reliability of electric motors makes them ideal for the safety requirements of a flight system. Today, there are training airplanes that are electrically powered. The small 2-seat planes and generally used for short student flights. This allows today's battery technology to fulfill this need. Flight schools using electric training planes have significant savings in fuel and maintenance costs. 

Just as with the other vehicles, as the battery tech improves, it will move up the aircraft food chain. When batteries cross the 400 Wh/kg mark, we should see aircraft with a range of over 1000 km. Each improvement in battery gravimetric energy density opens up new application opportunities. For those use cases that can't wait for batteries to improve, there are opportunities for ultracapacitors or hydrogen fuel cells to find their own niche. 

Today, private jets generally get less than the equivalent of 5 MPG, and a 747 flips this around and uses about 5 gallons per mile. Moving these to electrically powered systems 'fueled' by renewable energy sources will remove significant amounts of CO2 from our transportation system. 

The title is 'Diesels To D-Cells' and you might be surprised to learn that there have been aircraft diesel engines or aero diesels. They were used in aircraft in the late 1920s and 1930s, but never widely adopted. So for the sake of this title, I'll be generous and call that a transition from Diesels To D-Cells, albeit indirectly. 

Conclusion

The end of Diesel is coming. Anything Diesel engines can do, electric motors can do better. The current limitations of battery tech is the only reason that there is still a market for Diesel products. Advancements in battery tech are being made each year and there is no sign that this trend will slow-down. With each advancement, battery power vehicles become more and more capable. Personal transportation, freight hauling, watercraft, and flight will all become fully electrified over the next few decades. 

Modern EV Era Celebrates 10 Years

By my accounting, the modern electric vehicle (EV) era started 10 years ago this month. It started in December of 2010 when both the 2011 Nissan Leaf and 2011 Chevy Volt rolled onto showroom floors. Since this unveiling, EVs have been making slow but steady progress. More models have been introduced and range and capabilities have continued to increase. Given the historic importance of this milestone, I think it's important to have a little perspective. EVs have tried to become the transportation of choice before and failed. What happened then and will this time be different?

Thomas Edison shows
off a 1914 Detroit Electric

Early 1900s

At the dawn of the automobile era, at the turn of the 20th century, there were several contenders to be the fuel of choice; there were steam-powered cars, electric cars, and gasoline-powered cars. It was not clear if all 3 of these fuel sources would co-exist or if one would dominate. 

Henry Ford's wife, Clara, choose to drive an electric car, rather than a gas-powered car from her husband's company. Gas cars were loud, dirty, and you could break an arm or wrist while trying to crank-start them. Whereas, EVs were clean and quiet and much more suited to a high-class lady of the time.  

Despite Clara's preference (and that of many people like her), after the self-starter engine was invented and the wrist breaking hand crank was removed, the gas-powered-mobile won out and began its century-long domination of transportation.

I find it ironic that the biggest hurdle to the gas engine's adoption (hand cranking) was solved by an electric motor. With this problem solved, gasoline rose up and became the dominant fuel, leaving electric vehicles relegated to golf carts, milk floats, and niche low-speed vehicles.

1974 Electric Prototype

1970s

An oil crisis began in 1973 when the Organization of Arab Petroleum Exporting Countries (OPEC) proclaimed an oil embargo. The embargo targeted several nations. The price of oil more than quadrupled in the US. The embargo caused an "oil shock" that had lasting effects on the global economy and politics, but not significantly on personal transportation.

The crisis created a demand for fuel-efficient cars and alternative fuels. Many electric prototypes were created and DIY electric conversions grew in popularity. Although, battery technology had not advanced significantly from the lead-acid batteries that were used at the turn of the century.

After negotiations, the embargo was lifted in March of 1974. Be it from arrogance or deference, the world seemed to forget about the need for alternative fuels and continued their dependency on a single primary fuel source and we would pay for this again and again with another oil shock at the end of the decade and more to follow in each of the next three the decades ahead. 

None of the various EV prototypes from this decade ever made it into mass production but one ray of light that survived from this era was that the home conversion hobbyists persisted with groups like the Electric Auto Association.*  

 

GM EV1

1990s

The 1990s were the next attempt at an electric revolution. The GM EV1 rolled out in 1996 and was the vanguard of this wave. The EV1 and other EVs of this era had owners that loved them. Regenerative breaking helped extend the range and batteries had had their first major breakthrough with the Nickel-Metal Hydride (NiMH) chemistry, although most buyers (leasers actually) still opted for the cheaper lead-acid option. 

Unfortunately, this attempted revolution was also put down. Automakers sued California to eliminate the state's Zero Emission Vehicle (ZEV) Mandate. The automakers eventually won and most of the EVs were collected and crushed when their leases ended. To no avail, drivers held a mock funeral and candle-lit vigils to try to save their cars; some were even arrested while blocking the trucks carrying their cars to the crusher. Many of the drivers that held vigil would go on to found PlugInAmerica to promote EVs, public awareness, and better EV policy.

 You can see the entire intriguing story of this era in the documentary Who Killed The Electric Car? 

The people that would later go on to found Tesla, noted the devotion that owners had to a compelling EV (more on this later).

This era didn't populate the world with EVs, but it did demonstrate that there's a market of passionate drivers that want EVs which the existing automakers were unwilling to satisfy.

2011 Nissan Leaf SL

2010s

This finally brings us to the modern era of EVs. This era kicked off when both the Nissan Leaf and the Chevy Volt started selling in December of 2010; soon followed by the Tesla Model S in June of 2012. This generation of EVs had a few things that the previous revolution attempts didn't have: 

• Lithium-ion Batteries
• Major Automaker Support
• Tesla

2011 Nissan LEAF Battery Pack

Lithium-ion Batteries

Lithium-ion batteries power most of our modern mobile electronics from smartphones and tablets to smartwatches and earbuds. This has meant that a lot of money was pouring into battery R&D for longer runtime for these devices. EVs were the unintended beneficiary of this mobile digital revolution. All of the EVs coming out in this era are currently powered by Li-ion cells.

Batteries are the most important component in an EV. They are, by far, the most expensive part of the vehicle, they're one of the biggest determiners of range, and avoiding battery degradation is often the limiting factor to performance and recharge time.  

In this era, EVs have finally made it to a production level that they are no longer just dependent on battery advances from the consumer electronics realm. Automakers are funding battery research, partnering with battery companies to build out capacity, and designing custom form factors and chemistries to better meet the demanding cycle-life that EVs require. Advancements here enables lower prices, better performance, longer range, faster charging, longer lifespans... Batteries are the crux.

In the 1990s, NiMH was the advanced battery tech of the time but there was a problem. This battery chemistry was covered by one primary patent and that patent fell into the hands of an oil company. They restricted the license such that NiMH batteries could only be used in hybrid vehicles and not in pure EVs. 

Li-ion batteries have no such patent encumberment. Because Li-ion was used in so many different types of consumer electronics, dozens of companies had patents for various improvements and in many cases, due to legal spats or partnerships, these patents were cross-licensed. Additionally, Li-ion was invented in 1985. This means that many of the initial patents have been long since expired. 

Sidebar: The inventors of the Li-ion battery; John B. Goodenough, M. Stanley Whittingham, and Akira Yoshino; received a Nobel Prize in Chemistry in 2019. 

Major Automaker Support

In the 1990s and aughties, when automakers were required to make EVs, these were generally "compliance cars" made in limited quantity with just enough range to meet state mandates. The limited production made them hard to find even within California and if you lived outside of the state, these cars were nearly impossible to find. However, the Leaf and Volt were being sold nationwide (or worldwide) and not in limited quantities. These were the first EVs that you could walk into a dealership, purchase, and drive off in an EV. That's assuming the dealership didn't try to steer you into the gas car they had on special that week. Dealerships were (and in some cases still are) an obstacle to EV adoption (but that's another story). 

A variety of factors from consumer demand to regional climate goals have pushed automakers to make EVs. Nearly all of the legacy automakers either have EVs on the market or have plans to have them out soon. Here are some of the currently announced plans: 

• Audi - 20 EV models by 2025 
• BMW - 25 electrified* models by 2025
• Daimler / Mercedes - Plug-in option of every offering by 2022
• GM - 20 EVs by 2023 
• Fiat-Chrysler -  30 electrified* models by 2022 
• Ford - 40 EV models by 2022
• Hyundai - 44 EV models by 2025 
• Renault-Nissan-Mitsubishi - 12 EV models by 2022 with annual volumes of over 1 million units per year
• Toyota - 50% of sales in 2028 will be electric
• VW - 70 EV models by 2028 
• Volvo - Polestar brand will be 100% electric

* "electrified" in automaker-speak often includes hybrid vehicles (the non-plug-in type). 

Certainly, some of these more aggressive goals will be missed or delayed, but the direction is clear. Automakers are going electric.

Tesla 

Tesla, or a company like it, might seem like an obvious inevitability today, but that was not the case when they started. The prevailing logic was that EVs had been tried in the past and there was no market, that California was not the place for a car company HQ, and that Tesla's $100k+ sports car would sell all of 5 to California billionaires and then the demand would dry up. Variations of this demand narrative continue to this day despite being proven wrong year after year.

Despite the naysayers, Tesla overhauled the way that people perceived EVs. EVs were considered slow. Tesla's cars were really fast. EVs were often weird looking little things. Teslas were sexy and (other than Roadster) were large vehicles. EVs generally has less than 100 miles of range, Teslas had 200+ miles of range. EVs were restricted to a radius of travel equal to about half of their range. Teslas had a vast fast-charging network. Tesla changed the public perception of what an EV could be. Tesla made EVs fun and exciting.

Tesla's business model seemed to be to knock down every objection to the adoption of EVs. And knock them down they did. Arguably, with one exception, affordability. This is one area where they have made great progress going from the $100,000+ Roadster, to the ~$35,000 Model 3 and it's a goal they continue to strive toward. As Tesla ramped their volume, they consistently reduced the price. A $25,000 vehicle was recently announced and expected in 2024. 

There is no question that Tesla has changed the game. People that had never bought a new car were doing the "Tesla Stretch" and buying a new Tesla that was often twice as expensive or more than any car they had purchased previously. People were drawn to Tesla for the performance, the tech, the fun, and the zero-emission factor was almost secondary. Tesla demonstrated that if you made a compelling EV, even an expensive one, there was a market for it.

The Tesla Wake-up Call 

Legacy automakers initially dismissed Tesla as a low-volume niche automaker. As Tesla has continued to make inroads into new markets, the legacy automakers have finally started to take notice. US automakers could initially dismiss Tesla. Volumes started small and Model S mostly ate into the luxury sedan market dominated by German brands such as Audi, Mercedes, & BMW. Next, Model 3 ate into the fuel-efficient sedan market and mostly impacting the Japanese automakers. But Tesla has plans for a truck, a Cybertruck. Trucks are the heart of the American auto industry. The top-selling vehicles in the US are trucks. Tesla can no longer be ignored by GM and Ford. Tesla's products, technologies, and plans are now closely examined by the worldwide auto industry. 

Viva La REVolución

(What Makes This Time Different?)

EVs have been here before, they've gained traction with an enthusiastic early adopter niche, but they were never able to go mainstream; never able to cross the chasm. Several things make this time different. 

With Li-Ion, there is a battery technology that allows for long-range and fast recharge and it's continuing to get better. There's support (to varying degrees) by the major automakers. There's a standard-bearer in Tesla that shows that EVs can be great and there's a swath of start-ups trying to follow in Tesla's footsteps (or even trying to leapfrog them). These start-ups are well funded by venture capital and pre-revenue SPAC-mania from investors with FOMO on the next Tesla. The genie cannot be put back in the bottle.

This time, the EV revolution will not be crushed! 

What a Difference 10 Years Can Make

Looking back on these 10 years, it's amazing how much EVs have improved. Compare the 2011 Nissan Leaf with the upcoming Nissan Ariya, the Ariya has more than 4 times the range. Or comparing the initial Tesla Model S (which won Car of the Year) to the recently announced Plaid Model S. The improvements in tech, performance, and range are amazing. If this trend continues, there will be no reason to even consider a gas car by 2025 for 99% of drivers. We'll move beyond oil.  

I've wondered aloud how good EVs would be today if the automakers had continued their 1990s efforts (or even better, their 1970s efforts). Taking this to its extreme, what if Clara Ford had won the day 100 years ago. Over the last 100 years, we've made great strides in internal combustion technology, we were just working on the wrong problem. What would that alternative history of battery advancement and transportation look like? Would we have battery-powered transcontinental flight by now? 

Disclosure: I am long Tesla

* I'm a member of my local EAA chapter, the OEVA