When you think electrified cars, Tesla instantly springs to mind. They are undoubtedly the singular catalyst that has shaken up the entire industry and forced incumbent automakers to rethink their futures.
Yet, we all seem to focus on the extreme end of electrification: the dream of an all-electric future. When in reality, the combustion engine will live on for at least a decade, maybe even two (aided with light forms of electrification).
The three big future trends of electrification will be:
- Mild Hybrid Electric
- Plug-in Hybrid Electric
- Battery Electric
Each has their own benefits and obstacles. A mild hybrid will become the norm, while battery electric will be our reach goal.
As with all new trends, the premium market will be the earliest adopter of battery electric. Tesla positions itself as a premium brand with the average selling price of its ‘entry’ level Model 3 well over $50K. But, at the same time, the premium market will be the bastion to preserve the traditional combustion engine. By 2030, over half of the premium vehicles sold will still have a combustion engine.
My contrarian opinion is that Tesla’s future is under long-term threat from the German giants from BMW AG, Daimler AG, and Volkswagen AG. Their manufacturing expertise, quality advantage, and distribution channels will usher in a flood of new products to rival Tesla. Hedging their bets with continued production of combustion engines, will buoy profits to aid in the expansion.
Look at the Volkswagen Group, owners of Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, Skoda, and Volkswagen: 2% of their sales volume comes from Porsche, yet that generates 30% of the group’s total Operating Profit. If you include Audi, 16% of their sales volumes come from these two brands, generating over 60% of the group’s total Operating Profit. This speaks to the strength of premium brands. Porsche is leading the charge for Volkswagen’s electrification strategy—directly taking on Tesla—yet their combustion engines will certainly carry the group long into the future.
This is all not to say, electric cars are not the future, they certainly are. However, I think it will be a long time before we see that future arrive. Additionally, premium brands will dominate in execution, performance, and overall profitability. They will also be the vanguards to preserve the combustion engine.
Below I have laid out the primary phases of electrification, you tell me, where do you think the future is?
The Three Phases
Phase I: Mild Hybrid Electric
Implication:
The conventional internal combustion engine (ICE) will die. Tighter emissions on manufactures and enormous taxes to the consumer will make ICEs all but extinct, barring a few super-high-end automakers. This solution will be the norm for almost all manufactures in the future as it costs little and maintains “regular” driving experiences, with some neat enhancements.
The Tech:
Combines a conventional ICE with a 48V battery
Reduced CO2 and improved fuel economy
If equipped with an electric compressor, nearly zero turbo lag and overboost acceleration
Allows for e-powertrain capabilities like all-electric mode self-parking or low speed maneuvering
Phase II: Plug-in Hybrid Electric
Implication:
A bridge solution towards a fully-electric vehicle. It allows automakers’ overall CO2 emission levels to be compliant with increasingly more stringent targets. It is especially important for European and Chinese cities that will eventually mandate zero emission vehicles in city centers. This is a good solution if the owner lives far from a city center and can rely on the conventional engine to take him there and then switch to all-electric mode for in-city driving. There are many disadvantages to this technology:
Expensive: the vehicle cost and price for just the powertrain is roughly doubled. It has a conventional ICE, a large and heavy battery, and electric motor(s).
Limited range: typically under 50 miles of pure electric driving. Once you deplete the battery, you are left with extra weight that degrades performance and reduces overall fuel economy.
Compromised interior space: this large battery cannot be tucked away seamlessly like the smaller one found in a mild-hybrid car. Instead it usually encroaches on trunk space or is jammed under the rear passengers.
The Tech:
Combines a conventional ICE with a large battery and electric motor(s)
Reduced CO2 and improved fuel economy
Gives additional horsepower boost to the engine when used in tandem (roughly +100hp)
Allows for e-powertrain capabilities like all-electric mode self-parking or low speed maneuvering
Phase III: Battery Electric
Implication:
The future of automotive. Clean, efficient, and powerful. With Audi, Jaguar, Mercedes-Benz, Porsche, and Volvo coming online with their answers to Tesla, there are still many obstacles before this can fully and practically become the norm:
Cost: incredibly expensive due to battery technology and additional engineering required for safety and thermal management. Tesla’s battery technology is incredible, but the firm loses money for a reason: the variable cost of their cars are incredibly high for what they charge (some estimates put the cost of the entry level Model 3 at $35K, making the entry level model nearly impossible). They also cut some corners that in the long run will see their cars not last as long (as is typical on the coasts, people keep their cars for ~8 years or more in which many problems with a Tesla will surface).
Charging and storage: with an 800V electrical architecture, we can now see 80% charge of a battery in 15 minutes. Though a huge improvement, the average customer cannot wait that long. Range anxiety is still an issue where maximum range in the industry is currently ~300 miles.
Infrastructure: 80% charge in 15 minutes would be quite rare as you need to find a charger that can produce that much power to charge a car like that. Even a Tesla Supercharger cannot do that (it’s more like 40 minutes). Thus, proprietary chargers from automakers are needed, in addition to unique wiring to supply that energy. Additionally, as more cars connect to a charging station, the available power goes down and charge time reduces. Current charging infrastructure in most of Europe and all of the USA cannot handle the mass demand of electric car charging.
The Tech:
Multiple batteries are strung together in either a “skateboard” configuration under the floor or in a modular configuration that allows traditional manufacturers to use the same platform to accommodate conventional engines or full-electric (i.e. the Mercedes-Benz EQC and GLC are produced in the same factory and on the same architecture that allows for flexible manufacturing according to market demand)
Electric motors: connected to the wheels, the advantage here is instantaneous torque that gives the blisteringly quick acceleration
Sound management: now mandated in Europe and coming online the US, at low speeds, the car must emit a sound to warn pedestrians since it is virtually silent. Porsche takes this to a whole new level and pumps in a Tron-like futuristic whir that displaces the typical growl of a combustion engine