Tesla and Hype

There has been much made recently about Elon Musk going on the offensive (and sometimes being offensive) on Twitter in the last week or so.

Disclaimer: I’m an EV fan, drive a Chevy Volt, and own $TSLA and some Lithium mining stocks.

Drawing the line in the sand

Recently, Elon drew the line in the sand, effectively saying Tesla wont raise another dime from Wall Street (bonds, stock issuance) during the Q1 conference call by cutting off a “boring” question from a Wall Street analyst, and taking a question from a YouTube analyst. He has stated that in Q3 and Q4 of 2018 Tesla will be profitable, and he has pushed his company to start efforts to conserve cash and increase margins.

Good. This is probably something long overdue at Tesla and will help their gross margins on their products and increase profitability (or reduce losses). Tesla right now is roughly 400M a quarter in the hole from a balance sheet perspective (the operating profits from selling cars and other stuff don’t pay for all the overhead of running the company), so they’d need to generate that much to at least break even (not including any increases in debt service coming up in future years).

But the PR and news coverage…

The PR coverage over the last few weeks has been bad for Tesla. Between the Consumer Reports non-recommendation of the Model 3 (which was reversed yesterday after they updated the car’s performance via OTA software updates), and Elon has been going to war with the media and random people on social media, and having his mom defend him on Twitter (was not expecting that). It can be difficult for a non-enthusiast to think Tesla will be able to deliver, or even be a solvent company, by the end of the year.

Timing is everything

I learned something about myself and probably others this weekend about the news and PR and current events. It was announced that ICE had “lost” 1,475 children, and that minor children were being separated from their parents at the border. I drew the conclusion that ICE was taking those kids away and lost them. But that was not the case, in fact they are two separate things – ICE places children with family/extended family/suitable adults and is then no longer legally responsible, but does follow up with the kids occasionally to make sure they’re OK. Following up is good. Separately, ICE separates minor children from their parents at the border. Bad. But I had erroneously linked them in my head until I read a twitter thread about it. And it corrected my thinking on it.

Elon essentially did the same thing – by saying things like if Tesla made the $35,000 version of the car now, they’d bleed money and die, and then turning around and announcing the availability and prices for the AWD and Performance models of the Model 3, he linked those two items in people’s minds. So the media and people are having a collective freak out over the fact that Tesla isn’t going to be able to deliver a $35,000 model at all. Although having done this once before (the 40kWh version of the Model S) doesn’t help Tesla’s case.

While his timing was bad (layoff the twitter, hire more PR people, let them deal with this rough patch), none of the bad press has any material impact on whether or not Tesla will succeed in its goals. It might have an impact on the stock price, or if he has to go back to Wall Street to raise money, but that isn’t in their plans right now. It certainly wont deter the true believers who handed Tesla $1,000 more than two years ago.

Some napkin math

Tesla’s stated goal is that they will have 20% gross margins (profit on each car, minus the costs of the parts, assembling the car, set-asides for warranty work, etc.) on the car. So on a $35,000 car, that is $7,000 of gross margin and $28,000 in parts and assembly. But on a $60,000 AWD car, the gross margin is $12,000 and the parts and assembly cost $48,000. (these aren’t the actual numbers, typically the gross margins on the cheapest car are smaller than the goal while the gross margins on the highest-end cars are more than the stated goal)

The next battle, once Tesla (hopefully) gets to 5,000 cars a week at the end of Q2 is all about gross margins, getting the cost of manufacturing the car (assembly) down enough to make it a cash flow generator for the company. The first option I can think of is to work to trim the hours per car (through automation or otherwise). Right now the plant runs 24/7 – three 8 hour shifts per day everyday of the week. The first step is to reduce that to six days a week, and maybe down to five, and still produce 5,000 cars per week. Then move from 3 to 2 shifts. That trims the hours worked from 168, to 120 for M-F, and then down to 80 hours for two shifts. This is a reduction of 14% for each day they trim, and a total of 55% for 2x8x5, but is probably an even larger impact on labor costs due to overtime, shift premiums, etc. that Tesla is probably incurring with the 24/7 operations. This is easily six months of effort (Q3, Q4), if not longer but the gains are nearly immediate and flow to the bottom line quickly.

Back to the top, if Tesla needs 400M a quarter, at an average selling price of $45,000 and a gross margin of 20% ($9,000) that comes out to needing about 45,000 cars per quarter, or “only” about 3,500 to 4,000 units per week. If they want to be profitable (generate money for the Semi, Roadster 2.0, etc.) anything beyond that they’ll want more cars – like maybe 5,000 a week, 12 weeks a quarter for 60,000 cars.

It seems doable. I’m optimistic about their chances (if I wasn’t I would have sold my stock). Don’t believe the (negative) hype, but you should be skeptical of Tesla’s constantly moving goals, which look more like timelines for software projects that I’ve been a part of, rather than a mass-produced physical product.

Tesla will miss their Model 3 $35,000 target price, but not for *that* reason

Tesla will likely miss their $35,000 target price tag for the Model 3 due in 2017 or so. But not because the batteries cost too much, or production costs are too high.

Rather, demand will be what keeps prices higher.

It is my opinion that the demand for a 200+ mile range, well-designed, luxury Tesla EV will be so huge that Tesla simply raise the price to match demand with what they can supply. It might end up happening in a similar way to how Tesla cancelled the 40kWh version of the Model S. It might be bad PR, they might shrug their shoulders, but its smart business.

The initial roll out in 2017 or 2018 won’t feature vesicles at the $35,000 base price tag – in the pattern of the Model S and Model X launches, we’ll see the highest margin units go out first – signature, largest battery pack, AWD, supercharging, for around $50,000. It will be 6 months or more until they can start offering the lower priced cars (probably around 40K) that are the standard battery pack and trim levels.

Maybe after a year or so, they’ll get around to making the lowest margin units. But even then I don’t believe that Tesla will sell their base model for $35,000. Its likely that they wont get down to that point until about 2020 – after initial demand has been satiated and the Gigafactory is running full steam producing battery packs below $200/kWh.

Chevy’s 200 Mile EV

I’m quite happy to hear a mainstream automaker like GM will release a 200 mile EV that will be available for general sale (not limited to CARB states like CA, OR, NY) and it will be affordable. Its just their timing is bad. With gas around $2.75/gal around the country, people aren’t worried about switching to EVs. Its not until its back above $3.50 do people start to flinch and $4/gal is when they pitch a fit. We’ll see what gas prices are in early 2017 when the vehicle is released, and how that affects consumer behavior. I just don’t foresee a return to $4+/gal gasoline anytime soon.

I’ve been a proponent of raising the gas tax, and indexing it to inflation. I’d like to see the national gas tax raised 6c/gal, and then indexed to inflation. Boosting the current federal tax by 33% would allow the country to repair its deficient highway system, with the side effect of construction jobs.

Some notable pundits have suggested a “gas floor tax” of $3/gal, but that really wouldn’t work since oil companies, refiners and station owners would just keep the price at $3/gal and keep the profits for themselves, rather than sell it below $3/gal and turn the money over to the feds to bolster the highway fund. If you wanted to keep the price of gasoline elevated, you would need to create a supplemental gas tax that would index it to the price of a barrel of oil – an extra 25c the following month when the average oil price is below $60, 50c below $50, 75c below $40.

Ok, enough about infrastructure and gas taxes.

The other issue I have with this EV is that it’s built on the new Chevy Sonic platform. Which is pretty small. It’s almost as if GM is making a mistake putting 200 miles of range into a car that no one would be happy driving 200 miles/3 hours in. There is some amount of psychology built into that 200 mile number – people want to see a range number starting with a “2” before they feel comfortable buying an electric car, regardless of how far they drive it.

The concept has a little crossover style to it, which means it’s likely the batteries are going in the floor like Tesla and the car is sitting up on top of the batteries, 4-5″ higher than normal. This is a good design in that you still get trunk space and seating for 5. It might be that this car has a much narrower appeal in the US (where gas is relatively cheap and people like bigger cars), and higher appeal in Europe and Asia which is OK with smaller cars and higher fuel prices.

Another factor is fast-charging. Tesla has their supercharger network they’re constructing, but its proprietary (for now). The 90kW CCS charging standard needs to take off before people start feeling comfortable buying EVs. The recharge time on a 90kW station from a near-empty 200 mile EV battery is rather quick – the first 75 miles will recharge in under 15 minutes, allowing people to get around and finish their errands.

Finally, price. $30,000 after the federal rebate is still too much for a Sonic-sized car. Even factoring in a $3,000 premium for it being a crossover and $7,000 in first five years gasoline vs. electricity savings. The base model at $30,000 is going to need to be very well equipped (LT model) if it wants to attract buyers. I don’t think we’ll see a lot of price cuts until the $7,500 tax credit starts to expire for GM and Nissan, and they have to reduce the price of their smaller EVs to around $25K before people get interested.

Apple & Cars

So the latest rumor this week is that Apple is going to develop a car. They’re hiring automotive designers and engineers. Yes, it would be totally awesome if Apple came out with a car, and it kicked GM/Ford/Chrysler’s asses the same way the iPhone kicked Microsoft and Blackberry’s asses.

But can Apple fix any of the issues that currently face electric vehicles? Or will they just be a slightly different $100,000 Tesla, splitting the market that is not really that big in the first place?


As I’ve discussed before, the batteries in the new iPhones rival the batteries in Tesla’s Model S in some aspects, but fall behind in others. The six critical battery parameters are:

  • Cycle life: number of full battery charge/discharge cycles to 80% of its original capacity
  • Volumetric Energy Density: number of watt-hours of energy the battery can store per unit volume, usually measured in watt-hours per liter (Wh/l)
  • Gravimetric Energy Density: number of watt-hours of energy the battery can store per unit of mass, usually measured in watt-hours per kilogram (Wh/kg)
  • Power: the ability of the battery to generate or accept power, measured using rate-capacity defined as the C-rate – 1C is charging or discharging the battery in one hour, 0.5C is two hours, 2C is 30 minutes, and 10C is 6 minutes
  • Safety: how much torture can the battery withstand before it becomes a danger to the people around it
  • Cost: the price per usable kWh of battery capacity for the vehicle

Assuming the 1,000 cycle life promise Apple made when it went to sealed batteries is still true, that would provide for a long lifetime (for a 200 mile EV, 1,000 cycles to 80% yields about 180,000 miles on the pack before it only gets about 160 miles per charge).

The iPhone 6 and 6 Plus battery’s energy densities are quite good – 250Wh/kg and 575 Wh/l. The battery cells in the Tesla Model S are around 250Wh/kg and 700Wh/l. This means Apple’s equivalent batteries would weight the same, but take up 22% more space – this is a difficult thing to overcome, so Apple would need to be very creative on how they can come up with more space to store the battery pack relative to Tesla’s battery pack.

The power output of the current iPhone batteries is unknown, rate capacity generally isn’t an issue for batteries in small consumer electronics. The iPhone and iPad batteries can usually recharge in about 1 to 2 hours, which indicates a C-rate of 1C. Batteries for EVs generally need a C-rate of 2C to support fast chargings and highway speeds in all conditions (rain, snow, headwinds, etc.).

Apple’s batteries are generally safe. The lithium polymer cells are a lot safer than the NCA chemistry used in the Tesla Model S.

Finally cost, Apple and Tesla produce roughly on the same scale now (see below) but Tesla has a much more aggressive ramp planned for battery production than Apple does. And the lead time on building new battery manufacturing capacity is pretty long.

Quantities, Oh God The Mass Quantities, of Batteries

Next I wanted to figure out how many kWh of batteries Apple sold in 2014. This is pretty difficult because Apple’s phone models have different cell sizes: 5/5S/5C varied between 5.45 and 5.96Wh, the 6 has 6.91Wh, the 6 Plus has 11.1Wh. So beyond that, the mix of how many phones sold is unknown, so thats another estimation we have to factor in.

Lets assume that for the first three quarters of 2014 (no iPhone 6/6 Plus), the average battery size per phone sold was 5.7Wh, and in the final quarter the average battery size was 6.5Wh. In the first three quarters they sold 118M iPhones, and in the insane fourth quarter they sold about 75M iPhones (mix of 5-series and 6-series phones). This results in 672 MWh of batteries sold in the first three quarters and 487 MWh of cells sold in the final quarter, for an iPhone total of 1,159 MWh of cells, or just over a gigawatt-hour of energy storage devices.

The iPad sold 63.35M units. We can judge from the average selling price of around $420, that a lot more iPad minis are being sold than traditional, larger iPads. If we assume that the mix is 4 mini iPads to 1 large iPad (either last gen or current gen), then the average battery capacity was 25Wh, which is a total of 1,583 MWh of batteries.

This brings us to an approximate total of 2.75 GWh of battery cells produced by Apple for just the iPad and iPhone line. This doesn’t include the batteries used in the iPod or in Mac laptops. Estimating the mixes and volumes of laptops and iPods is beyond my expertise at this moment.

Meanwhile, Tesla sold 31,600 or so cars. If the average unit battery capacity was 75kWh (3 85kWh units for every 2 60kWh units sold), that would yield about 2,370 MWh, or 2.37 gigawatt-hours. For comparison, the Gigafactory will be able to produce 35 GWh of batteries.

It is safe to say that Apple uses more batteries than Tesla in 2014. However, that may change in 2015, as Tesla will try to grow their overall production by 70%, increasing their total annual usage to about 4 gigawatt-hours. Apple, with iPad sales flattening or even declining, likely will not see a 45% increase in battery cell usage to keep up with Tesla.

(the logistics and supply chain people at Apple really do the Lord’s work, hats off to them)

Design & Engineering

I have no doubt Apple’s design team would have a field day with an Apple-mobile. I just hope its as practical as it is beautiful. One of the recent thoughts that has caught my attention is that the value in the car itself is changing. Thirty years ago, 0% of the value of a car came from the software. As the cars got better, engine computers became more advanced, and the infotainment systems in cars became more prevalent, the value of software has increased, from 10% to 40% over the next 10 years as cars learn how to drive themselves, manage their internal components, and become more “smart” in general.

This puts companies like Apple and Google ahead of the game, with their fleets of software engineers and development know-how. Ford, GM, and everyone else has to play catch-up. Can they offer sufficient amounts of money and incentives to lure developers away from places like Apple and Google, where they could invent and develop things to change the world, to Ford, where they will make another difficult-to-use in-car infotainment system.

One interesting aspect would be Apple deciding to take advantage of Tesla’s offer to release all their patents. They can use the same skateboard battery module design and powertrain to underpin the car, with a new design and Apple flair to the rest of the car.

Actually Manufacturing the Car

Tesla’s most recent quarterly conference call brought out the bears – they’re burning cash like crazy on capital expenditures in order to ramp up for an annual run rate of 2,000 cars a week (100,000 per year) as well as building the Gigafactory that could make cells for 500,000 cars a year in 2020, plus batteries for renewable energy storage.

However, all this spending – $5 billion on a battery factory and $2B or so more on its factories in California, is just petty cash for Apple. Apple currently has a $177B cash pile, of which $150B is net of debt. Apple could easily invest $5B in the facilities to build the batteries and the cars – its not a matter of whether they have the cash, its if its the right way to spend that money.

More Importantly, Supporting the Car

The genius bar is usually pretty good about customer service (I haven’t been in a while, knock on wood), even if the lines are horribly long. But how does that translate to getting your Apple EV fixed? Most Apple Stores are in malls, not a place you can drive your car into to get fixed. So what does Apple do? If they go with automotive franchises, they lose their exacting control over the process. Beyond that, they run into the same problem as Tesla with franchises – it’ll be multiple brands under one roof since they will be a small-time player to begin with, and its always more profitable for the dealer to sell a higher maintenance gasoline car compared to a low-maintenance Apple EV because dealers make their money on service, not on new car sales.

It would make a lot of sense for Apple to partner with Tesla on the supercharger network, and infuse a boatload of cash to expand it to support the number of Apple EVs made. Here there are a lot of brand synergies between Apple and Tesla.

But What’s the Sustainable Competitive Advantage?

Apple would only be thinking about becoming a car manufacturer (because eventually it will be more than one car – it’ll be a line of cars) unless it thought it could bring something to the table that all the other companies out there (Ford, GM, Toyota) can’t, and that it would have a long term sustainable advantage. They aren’t trying to be like Elon Musk, who just wants to advance EVs and save the planet from carbon poisoning.

Design? Apple has impeccable design under Jony Ive. The Model S has great design, but lacks luxury in many ways that show its newness to the car industry (the seats, the small visor), and those are being fixed, but it will take a while. Apple will likely have some of these issues out of the gate too, but they would likely be fixed within the first few iterations.

Batteries? Could Apple be working on engineering and developing its own batteries? Not likely. As I illustrated above, Apple ships a tremendous amount of batteries every year. Is it enough to rely on the battery industry at large to continue to innovate in the battery space? Maybe not, but battery research is remarkably difficult – the annual improvement rate is only 7-8% and big breakthroughs are very rare, even if the scientific papers stack up to the ceiling. If Apple has something up it sleve to differentiate itself like working, mass-producible solid-state batteries that offer 700Wh/kg and 1300Wh/l, it would be a coup in the portable consumer electronics and EV worlds – phones as thin as 15 playing cards, cars that can go 400 miles without recharging. But this is very unlikely (I really hope I’m wrong but I doubt it).

Integration? This is always where Apple shines. Apple isn’t generally the first to move (they weren’t first with contactless payments) but they are usually the first to get it right from top to bottom, in a way that the user can understand. The difficulty here is that cars are a mature industry, very mature. Its easy to say that just about every company could do in-car computers better, even Tesla. Apple will show everyone how its done. But after that, and people understand the new paradigms for how people interact with cars, then what? This knowledge and innovation diffuses throughout the industry and becomes general knowledge in the same way physical keyboards went away and capacitive touch screens became the norm.

Self Driving? The individual automakers aren’t doing all the heavy lifting individually, automotive suppliers like Bosch and startups like Mobile Eye are the ones coming up with the hardware and software to solve pieces of the autonomous driving puzzle. Apple could either redo that work or simply integrate parts from suppliers into a self driving system like Tesla is. It’s nothing terribly novel or unique.


The problem to be solved with Electric Vehicles is batteries – weight, volume, range, cycle life and safety. All five dimensions need to be improved, plus the cost will need to come down dramatically before the general public adopts EVs over gasoline cars (especially in the current gas price climate).

What isn’t a problem is design or features. Sure, design can be improved and refined, but a better designed car won’t bring out customers in droves. An electric car fits very nicely with Apple’s sustainability goals – working to have a cleaner environment, but there won’t be that much of a market given the current limitations on batteries. This is the problem Fisker had – brilliant design but they didn’t solve the battery problem in a new or novel way – and now they’re out of business.

Its difficult from the outside at this early stage to determine why Apple would want to develop a car, along with the immense investment that would need to accompany development and production if it had honest aspirations of being a worldwide automotive manufacturer. For Apple to enter the market, there needs to be some long-term competitive advantage here. I just don’t see it right now – just designing a better looking or more user friendly EV doesn’t solve the major pain points consumers have right now.

The problems with EVs are battery range, recharging time, and battery weight and volume. And Apple isn’t more or less likely to be the company with a group of electrochemists that discover a breakthrough than any other company, large or small, doing battery research today. It is for primarily that reason that I think Apple would be a fool to enter the automotive space, specifically EVs, in the short term. As cars transform from machery we operate to automated consumer electronics on wheels, there is a space for Apple and others who want to move in that line of products, but that transition is 10-15 years away.

Tesla Model S AWD, Autopilot and Model 3…

Model S AWD

The Model S AWD models are impressive. We knew they were coming for a while now – there is a space in the frunk that would be perfect housing for the motor for the front wheels. The performance is the headline here – 691 HP (combined) and 3.2 seconds for the 0-60 time launches the Model S AWD into supercar territory. But its not a supercar that just sits in the garage and looks nice – its a great daily driver, highly efficient, very low total cost of ownership per mile relatively speaking, and very user friendly. Beyond that, the way the two electric motors are tuned to work together help improve the overall efficiency of the car, allowing it to, despite the added weight of a second motor, increase the electric range from 265 to 275 miles for the performance model and a whopping 30 mile increase from 265 to 295 for the non-performance 85kWh model (numbers provided are Tesla estimates, EPA numbers are presuming to be pending certification before deliveries in December).


The new Autopilot functionality of the Model S seems eminently more practical than the hyped up Google self-driving car of the last few years. The great news is that instead of having to wait until 2018 or 2020, we can get highway autopilot several years earlier than expected.

The sensors include sonar around the car (forming a bubble around the car) as well as a forward-looking radar and camera system. These allow for active safety systems – automatically braking the car if an obstacle in front is detected, preventing you from steering into a car in your blind spot, etc. These features have existed in cars for a few years now. Beyond the active safety systems is the new Autopilot software.

Autopilot is a very fitting name for this feature, as it mimics overall idea of autopilot on a airliner – the pilots control everything until the plane is at a comfortable cruising altitude and can be turned over to an automated system. Same with cars – if your commute is a long drive on a highway, once you’re on the highway, you can manage the car with just the turn signal. Cameras read the speed limit signs, slow for cars in front of you, and perform actions to keep you safe.

Though after watching the official Tesla video and reading the press release, I wasn’t quite sure what features are being delivered today and what will be made available in future over-the-air updates to the autopilot software. What’s important is that the hardware necessary for autopilot is being delivered today. Software improvements can come in time, but its prohibitively expensive to go back and retrofit this hardware on existing cars (Tesla has stated they won’t retrofit, so you’d have to buy a new Tesla and trade in your old one). As Tesla adds features to the autopilot software over time (the ability of the car to park itself in a garage without you in it), the car will evolve to the self-driving ideal, though it won’t make it all the way there.

The only negative is I don’t think there are enough sensors – that in the future, rear facing radar sensors or cameras will be added to the package to help the car switch lanes when there are high differences in the rate of speed between the two lanes. And making sure the sensors are redundant enough to withstand a failure.

Model 3

One of the interesthing things about the new AWD cars is that the smaller electric motors (188 and 221 HP) seem to be a perfect fit for a Model 3-sized car – one for the standard model, and one for a “performance” Model 3. Tesla should be able to re-use the motors with small adjustments in the firmware to optimize it for single-axle drive.

Beyond this, we’re able to get a better idea of the specs of the Model 3. One thing Elon has stated is that the Model 3 will be about 80% of the size and weight of the Model S. The Model S originally (2012) had a curb weight of 4,450 lbs. However recent statements have indicated they’ve taken “hundreds” of pounds out of the car, I’d estimate the current curb weight for the single-motor model is around 4,200 lbs. A 20% reduction would put the car around 3,400 lbs. A 188 HP motor should be able to propel the car with respectable (certainly not supercar) 0-60 MPH times. By comparison, my Chevy Volt has a curb weight of 3,700 lbs and only a 160 HP motor. While 188 HP might not sound like a lot, the fact that its electric and instant torque will compensate for the relatively small HP rating compared to gasoline engines.

The battery for the future Model S will end up around 45kWh using these smaller motors, reduced vehicle weight and improved efficiencies (an improvement from 300 Wh/mile in a RWD Model S to 225 Wh/mi for the base Model 3). This reduction in pack capacity, combined with the reduced costs of the pack through the Gigafactory increase the chances that Tesla will be able to hit the $35,000 price with a base 200-mile model. The conservative estimate for packs out of the Gigafactory is $196/kWh (down 30% from Tesla’s early 2014 baseline of around $280/kWh), and the aggressive estimate is around $168/kWh (down 40%), which would put the pack price between $7,600 and $8,800. This is 22-25% of the price tag of the overall vehicle, which should leave plenty of room for the rest of the car (50%, or $17,500) and a gross margin of 25%. A longer range 60kWh version could be made available with the beefier 221 HP motor for a range of just over 250 miles. The only issue with a battery pack that small is how fast (or slow) it can be supercharged.

Where and How to install public EV charging stations

I’ve been bitten by some poorly placed EV charging stations, so I thought I would write this up…

1. Are the charging stations located somewhere where they will be used?

In other words, are people going to keep their car there for sufficient periods of time to have a meaningful charge. The amount of time someone will spend with their car in the parking spot must match the amount of time to get a useful charge from the charging station. Installing an “slow-charge” 240V 3.3/6.6kW EV station at a fast-service place (e.g. McDonald’s) makes little sense – you’re better off installing a fast-charge station for a fast-service place (DC fast charging – although not many cars will support this anytime soon, and stations are relatively expensive). A 20-minute DC fast-charge can replenish up to 100 miles of range.

At places like movie theaters, shopping malls, etc. it makes more sense to install the 240V chargers – patrons will be there for 2-4 hours using the facilities. This translates to anywhere from 20-50 miles of charge, depending on how quickly the car can charge.

2. Do you plan on charging a fee for the charging stations? If so, can you set a reasonable price or is it too much of a headache? 

For most 240V charging stations, the amount of electricity doled out is about $1 per session. How do you monetize this small of a transaction profitably? Can you do it at all, or is it better to just give it away for free? Charging on a per-session level is difficult because the amount of time people charge and the amount of electricity they will draw will vary from person to person. Charging on a per kWh basis is problematic because it doesn’t scale well the longer you charge. Charging on a time-basis means that people who can only charge a 3.3kW pay twice as much for the same amount of electricity as compared to charging at 6.6kW.

An alternate system would have a both session and kWh cost – 50c per session, plus 1.5x the cost of a kWh. So in my area, that would be 50c per session plus 18c kWh. A full charge would cost me $2.48 (11kWh for the Volt) for roughly $1.20 of electricity. Its still cheaper than a gallon of gas (which is what people will compare it to) and would take me about 35 miles. This also would cause cars with smaller batteries (Plug-in Prius, Ford Energi series models) to stay away and leave the spots open for pure EVs and longer range plug-in cars.

One of the best options is the traditional all-you-can-eat style flat rate plan. This would allow unlimited charging at your EV charging stations for users. This works best at a place like a parking garage or gym membership where it can be added on to another annual charge, reducing per-transaction costs. The charge for this will vary depending on the expected usage pattern (charging every night vs. a few times a week at a gym or occasional use).

Finally, there is always the free option – the one-time cost of construction, plus a small amount of money each month (in the neighborhood of $100 per charger) considered the cost of attracting customers, a marketing expense. The free plan also might be required – if your state has stringent rules about who can offer electricity for retail sale, you might have no other option but to give it away for free.

3. Are they public or behind a valet or in a private lot?

A charging station in a public lot might be ICE’d (occupied by a non-EV). But behind a valet or in a private lot, its easier to keep them free for EVs. At places like hotels, you will want to put some charging stations behind a valet, so that they can manage the car charging (e.g. when a car is full, have the valet move it to a regular spot and then bring in the next EV to charge).

4. What is the EV sales in the area? Are they common or uncommon? What outside conditions (state rebates, climate) affect purchasing an EV? 

Installing a charging network in a region or locale where EV cars are uncommon may not be a good idea. Check the utilization of current facilities before adding more.

5. Are you planning on expanding this charging infrastructure in the future? 

If you want to have just more than one or two token charging stations, it may help to install the electrical and underground infrastructure in one go – things like circuit breakers, transformers, conduit, etc, should be sized to handle your future expansion plans when EVs become more common. You wont need to have every spot in your parking lot charger-accessible, but build out for 5-10% of all parking spots having a charger, at 6.6kW for each car.

You may want to consider designs that allow for four cars to share two charging posts, this will reduce infrastructure costs and allow more flexibility for cars who want finish their charge and unplug but don’t have to move their car immediately.

6. Can you cost-share with others that share the parking lot or neighborhood? 

In the early stages of EV adoption, it may help to have multiple companies advertise that they have EV charging stations available for use. This may increase utilization initially and bring down initial costs.

Chevy Volt Year One: 384 MPG

Its been one year since I bought the Volt at the end of March 2012.

Since then my monthly fuel economy numbers have been up and down. The ups in the Spring and Fall, when I don’t need climate control and get around 40 miles per charge, average in the Summer when I’m using the air conditioning and get 36 miles per charge, and the winter when I’m using cabin and seat heating extensively and get about 32 miles per charge (although its been as low as 27 miles on the coldest Vegas mornings).

Chart from MyVolt.com
Electric & Gas miles

In my first year, I’ve driven 11,853 miles. (32.4 miles per day) on only 31 gallons of gasoline; which comes out to 384 MPG. I’ve used about 3,185 kWh of energy for the 10,984 electric miles. 

From the VoltDC App
From the VoltDC iPhone App

Of that, 10,984 miles were electric, and 869 miles were gasoline driven. Of the gasoline miles, I got 28MPG, which seems low (the car is rated around 37MPG combined in gas-only mode) but several times I had the engine go on for automatic maintenance or it turned on when it was being worked on at the dealership (I had to take it in once for a error message, they reset the computer and I was on my way).

Compared to my last car that got 22 MPG, I saved 507 gallons of gas, at $3.63 (US avg 2012 gas price) that is $1840 for the first year. I estimate I spent about $225 on electricity (average cost of 7c/kWh, as it was a mix of flat rate 12c/kWh and time-of-use 5c/kWh) , for a net fuel savings of $1615.

I’m convinced that EREVs like the Volt are the way of the future. The question is how quickly will the cost of batteries come down so that GM can reduce the selling price of the car and ramp volume. Beyond that, it will need to extend the Voltec powertrain into other segments like crossovers, SUVs and trucks.

My Predictions for the next Volt Generation

Word has spread that the GM’s new compact car platform is being worked on, named “D2XX” (for now at least). The current “Delta” platform underlying the Volt and the Cruze compact cards will make its final appearances in the 2014 model year vehicles, making way for this new platform in the 2015MY vehicles.

GM’s goal is to design the platform so that in addition to traditional compact cars, it can also accommodate the small-SUV category – currently filled by cars like the Equinox in the US.

So this leads us to believe that The Next Generation Volts are likely to arrive at the end of 2014 for the 2015 model year vehicle. What will it be like? While I will put down exact numbers, its pretty difficult to figure exactly what they’ll do two years from now, so figure a plus/minus 5% after each number I write.

First is the battery size and rage. I’d expect the new Volt to have a 17kWh, 11kWh usable Li-Ion battery. The battery will provide for a 40 mile EPA rated range, and 40-45 mile real-world range, with much better cold/warm wether performance than the first generation battery. Improvements in the battery’s ability to perform under varied thermal conditions, as well as upgrades to the vehicle’s electric heating and cooling system will reduce the range variation significantly from the first generation. The battery pack itself will be more space and weight efficient compared to the original 2010 Volt. The current pack is about 200kg, or 435 pounds for 16kWh. The new battery pack will weigh approximately 140kg for 17kWh, increasing the pack-level Wh/kg from 80 to 120. The cells themselves are likely to be around 180-200Wh/kg but the pack and cooling system and weight overhead to the cells. This will also reduce the volume of the battery from 100L (160 Wh/L) in the current model to 70L (240 Wh/L) in the second generation. Again the batteries themselves will be more volume efficient, but the pack wiring and cooling adds overhead.

This reduced weight and volume allow the 5th seat to return to the Volt. The battery will likely be stored under the bench of the rear seat, as well as into the trunk like the current model. I’d expect the Volt battery to be made in rectangular segments (similar to the top of the current battery’s “T”) with various segment lengths. This will allow the battery platform to be more modular.

The range extender will likely get a little bigger too, though not that much bigger. Probably 1.6L up from 1.4L now, along with direct injection to make burning fuel more efficient. I’d expect an gas MPG around 43-45, and a slightly smaller gas tank (8.5 gallons) for a gas-only range of 380 miles, up from 360 today.

I don’t expect the Volt to get any larger, at least not until the third generation where battery efficiency gains another 50% or more (sometime around 2020). However we will see follow-on models like an small SUV style vehicle with another modular row of batteries underfloor to give it 35-40 mile range despite increased size, weight, and aerodynamic drag. Likewise, this vehicle will get a slightly bigger gas tank as well.

The biggest factor in all this of course, is price. By 2015 I’d expect that the current tax credit will expire, and the volume of cars will have picked up enough (~50K/yr) where they can bring the price down in a meaningful way – probably around $30,000 (in 2012 USD). The small SUV style vehicle will probably be $6,000 more.

30 Days with the Chevy Volt

The Car

The car is based on GM’s global compact car chasis. Its not the biggest car, but thats OK since most of my driving is as a lonely commuter. Unfortunately, no wife and no kids means its usually only me driving by myself to work. I don’t even drive my friends around much, since I’m so far away from them. The car itself isn’t a 5 seater, rather a 2+2 configuration, due to the large T-cell pack running up the center tunnel of the vehicle.

The outside styling is great, in looks like a normal compact hatchback model car. It doesn’t stick out like most other green cars (Prius, Leaf). Its a little different in ways that respect the aerodynamic necessities of electric vehicles, but for the most part it still looks like a normal gasoline car, except for the charge port forward of the driver door (the girl at the car wash asked me if my gas tank was at the front of the car, I said  thats where I plug it in, she was surprised).

The interior is well appointed for a Chevrolet, which is good considering how much it costs. There are two LCD screens, one replacing the speedometer, tachometer and gauges area, and the other is the infotainment/navigation screen showing your music, outside temperature, and other facets of the car’s operation (showing where power is coming from or going to, efficiency meters, total power and gas used, etc). The center-mounted infotainment screen is touch-based, and you can tap around on the different screens. Your heating and cooling are controlled through the center screen, and not by any knobs or buttons on the center console. This can be a little annoying since you cant turn knobs by memory to crank up the heat or A/C – you have to look at the screen to tap. However, I usually operate the system by the “Auto” button on the console to turn on the climate control, and two other buttons to turn the fans up or down.

The Electric Powertrain

The electric guts of the vehicle is a 16kWh (10.6kWh usable) liquid cooled lithium-ion battery. This feeds a 111kW (150HP) electric motor. When you’re out of juice, a 1.4L engine turns a generator that creates 55kW of energy at maximum. The energy goes from the generator to the electric motor to turn the wheels, and when there is extra energy, the rest goes into the battery. If there is a momentary energy defect, the electric motor can pull a little extra power from the battery. The car gets 35-40 miles in EV mode and 38MPG or so afterwards. Cold or hot weather decrease the range significantly (down to 25 miles in the worst cold cases, around 32F).

The battery is warrantied for 8 years or 100,000 miles. Long enough to make a good return on the investment of the Volt. However the resale market is a little iffy due to no one really knowing how the batteries will last with time – Chevy only offers an “EV Miles” metric available to the user, and not some battery life expectancy forecast that would be useful to second-hand buyers.

The Technology

GM really went to town with the technology. As I mentioned above, there are two LCD screens in the vehicle, and one of those is a touchscreen.

There is also an app for iPhone and Android smartphones. This app allows you to view battery charge state, fuel tank status, tire pressure, total EV milage and MPG, send commands to the vehicle to lock or unlock the doors, remote start, and for those with a nav system, send navigation destinations to the car. The On-Star system can also send you reminders to plug in the car if you forget.

The MyVolt website offers a view into the statistics GM is collecting on your driving (if you opt-in to having an On-Star account).  You can view efficiency information, daily mileage, as well as send commands like the smartphone apps. You can also program the Volt’s recharging cycle. You can specify to charge the car immediately on plug-in, or tell it when you’re leaving in the morning on which days of the week (it’ll figure out what time to start charging so its done when you’re set to leave), or setup a time-of-use schedule so it will charge when your electric rates are the cheapest (my utility offers time-of-use rates, and even a special cheaper night time rate for EV owners).

On-Star is included for three years. After that, the included package is $300/yr.

The “Goldilocks” Zone

What makes the Chevy Volt unique is that, given its high price tag, you probably want to do the math to make sure this is the right car for you. If your average daily driving is between 25-50 miles and your daily driving is somewhat regular (doesn’t vary outside that range often, in math terms – the standard deviation is small), the Volt is a good choice financially. You’ll drive it enough to save a ton on gas, while not driving it too much where a Prius would be a more sensible car.

The effective cost of the car, when the tax incentive and gas savings are factored in, is closer to $25,000, rather than the $40,000 sticker price. The $15,000 difference is from the $7500 tax credit, along with $7500 in gas savings over the first five years of ownership compared to a standard 25MPG vehicle (15,000 miles a year).

For me this number is about right. I drive 12,000 miles a year, and my daily (four days a week) commute is 32 miles round-trip, plus weekend driving that usually stays in the EV range of the car.

So what happens if you’re outside of this zone? My advice would be to wait. Battery technology will get better, but slowly. As battery technology gets better and cheaper, the range will start to expand. Don’t expect a huge electric-only driving range (40 miles is about right given current US driving habits, though if that changes in the future then the range may change), but expect smaller, lighter, cheaper batteries. And eventually bigger cars. Don’t expect anything big for another 4-5 years though, since the batteries to make a crossover-style Volt wont be ready for a while, mostly because of how long it takes for a prototype cell to go through qualification to be used in an electric vehicle (2-3 years of testing to make sure it can last and it will be safe to charge in your garage every night).

My Power Bill

One Work Week of Recharging (the Volt is set to start charging each night at 10PM, to help out NV Energy’s grid so that it doesn’t get overloaded in the evening hours from 6-10PM)…

So the total kWh each night was 10.1kWh, 11.2kWh, 10.3kWh, 8.8kWh and 8.8kWh, finishing charging before 2AM. The data above was taken from NV Energy’s website via my Smart Meter. I tried to factor out baseload of my house, as well as minimize the impact of fans and air conditioners.

It’ll cost me an extra $25-35 per month for the Volt, most of the variability depends on how often I leave the house on the weekends to go hang out with friends (lately my weekends are spent at home and alone so it’ll be closer to the lower end of the range…). This will displace about $150 of gasoline from my budget each month based on my previous 23MPG car, for a savings of about $115-125 per month.

If I switch to a time-of-use plan with the electric vehicle rider, I would cut my monthly electricity costs to $12-15/mo. I’m waiting to see what kind of effect this would have on my electric bill, but my preliminary estimates indicate it would save me about $150/yr before the electric car savings are factored in, or about $350/yr total. I’ll find out when June and July hit and my smart meter can tell me how much power I use during the peak hours. (I’m also looking at new thermostats that claim to reduce A/C costs by 30% in dry environments like Nevada.)

Energy Implications

If there was one thing George W. Bush taught me (the only thing, perhaps) is that oil is fungible. When you buy an oil-based product, it doesn’t matter where that specific gallon of oil product came from. Because there is a worldwide, robust trading network to transport oil around the world, the money you give the oil company essentially is paid to each company and country that produces oil in the amount they represent the world market. A gallon of oil not purchased by me in the US is a gallon of gas purchased somewhere else in the world for a slightly lower price.

According to EIA, that $4 gallon of gas you bought, 72% of that cost was the cost of oil (or $2.86), and the economic impact of that $2.86 is spread out amongst every oil producing country in the world. So the US gets 12% ($0.34), Russia gets 12% ($0.34), the middle east gets 31% of that ($0.89), and Venezuela gets 3% ($0.08), and the rest to various other countries around the world. But if I buy electricity, not only do I get equivalent motive force for much cheaper, but that money stays in the US – to my friends and neighbors who work for the power company (and their CEO’s ever increasing total compensation), all that natural gas from fracking that pushed the price of natural gas to its lowest price ever, and coal from coal mines throughout the country (my utility’s energy mix is approximately 70% natural gas, 18% coal and 12% renewables, and natural gas only creates 1/4 the amount of CO2 per MWh as coal).

As far as the power grid goes, NV Energy says they can accommodate 1,000,000 plug-in cars on their grid at night without needing any substantial transmission and distribution upgrades (read: rate increases). Don’t expect to be able to charge those vehicles during the day in the summer time though. Nationally, the US power grid can accommodate an electric vehicle penetration rate of about 40% using overnight charging, and 70% using a smart grid-optimized recharging scheme based on information from 2006 (the grid has added substantial transmission capacity, especially in the West, so those numbers might go up). We have a very long way before those numbers become a reality.

The Unknowns

The biggest unknown is the resale value of the car. This car has a few things working against – first generation technology, only 4 passenger seats, along with the state of the battery along with replacement battery costs.

Replacement battery costs are closely tied with how successful (or not) electric cars become. If EVs are prominent in the future and lots of lithium-ion batteries are made, its likely that a replacement battery wouldn’t cost much in 2020 (around $3500). If EVs don’t take off, and the technology remains a niche application, batteries will be more expensive due to lack of mass production.

The Only Thing I’d Change

The front air dam. Chevy offers a shorter air dam, but it comes with an aerodynamic penalty and I lose about 1 mile of EV range if I switch to it. I scape this longer air dam everywhere I go.

The Cost

As I mentioned above, the actual cost of the Volt is around $25,000 once you factor in gas savings and the federal tax credit. Recently, GM has been throwing money “on the hood of the car” (term used by dealers to describe cash rebate or financing incentives). When I purchased the car, the deals were $350/mo for a 36 mo. lease (not including taxes or registration) or 0% for 60 months to purchase. As of May 1, GM upped their incentives even more, to 0% for 72 months to purchase, and increased the lease capital cost reduction from $3000 to $4500, resulting in a lower payment – I’ve seen some dealerships offer sub-$300/mo lease offers, factoring in gas savings, that can lower your effective monthly payment to under $200.

One thing to remember, is that if you don’t qualify for the full $7,500 tax credit when buying the Volt, you can still take advantage of it by leasing the car. The lease rate factors in the leasing agency will take the $7,500 credit for themselves. Also, leasing reduces the risk associated with buying first generation technology.

The good news is that I believe GM is able to increase incentives because the Volt is getting cheaper to make as they manufacture more of them each month, as well as moving the battery cell production from Korea to the US – a GM executive stated that the cost savings of manufacturing batteries across the state of Michigan instead of the opposite side of the world was significant. Its my hope that the 2013 model year vehicle may have an after-rebate price below $30,000 (about the same as an after-rebate Prius Plug-in), compared to the current after-rebate price of around $32,500.

Final Verdict & Future Outlook

I’m very happy with my Volt. Unless world peace breaks out and the geopolitical instability oil premium goes away and prices retreat to $60/bbl ($2.50/gal), its a wise financial choice for me.

Almost five years ago now I stood in line for nine hours to buy the first iPhone for $600. I feel the same way about the Volt. The price wont come down nearly as fast but I’m confident that this is the wave of the future. (The rate of improvement on silicon chips is 40-50% per year, while the improvement in lithium-ion batteries is between 8-10%.) But I still look at it as the dawning of a new era. The electrification of transportation starts here, in the early 2010s. Once electrification takes off, we move to self-driving cars. Then self-driving flying cars. And then we’re the Jetsons.

Also, see my article on the six things regular car owners need to know when they buy a Volt.

Debunking the Spin

A lot of people (mostly right wingers) like to hate the Volt (to hurt Obama, to hurt the UAW, to support big oil, whatever). So here are the few bits of truth to counter the lies…

  • Its a rolling fireball. The battery fire was 3 weeks after the Volt had been crash tested. I’d die of exposure or starvation if the fire department cant get me out of the wrecked Volt after three weeks. I’d also want to move to a different city with a more competent fire department. The testing facility did not follow proper post-crash procedure to drain the battery of energy. GM knows through the On-Star system to contact field staff when there is a severe Volt crash.
  • The Volt is subsidized $250,000-500,000 per car ($3B/6000 units as of late 2011). Most of that subsidy money went to domestic lithium-ion battery manufacturers, an infrastructure shared amongst all domestically made electric cars that use lithium-ion batteries – the Chevy Volt and Spark EV, Ford’s C-MAX Energi Hybrid and Plug-in models, Ford Focus Electric, Chrysler’s various electric vehicles in various stages of development, and even the Nissan Leaf later this year. Also that money is spread out over 20 years in many cases (tax breaks on property taxes), so you’re taking 20 years worth of tax breaks vs less than one year of car production. Sloppy math.
  • It can only go 40 miles. I get this one repeated to me a lot, and I think it has to do with people not understanding its a dual-fuel vehicle. I can go 40 miles on electricity and then forever on gasoline as long as I keep putting fuel in the tank. I don’t have to recharge the battery before I refill the tank. Once the battery is empty, it acts like a hybrid car.
  • Obama is responsible for the Volt, and he is giving owners a hand-out. Development was initiated by Bob Lutz (who wanted a pure EV) and then with Jon Lauckner (who came up with the extended range idea) in 2006, and unveiled as a concept in January 2007. The $7,500 tax credit was in the 2008 Energy Act signed by George W. Bush. This is one of those things where, if successful, Republicans will try and take all the credit for the Volt’s success, no matter how much they bad-mouth it now.

All the Math!

Vehicle MSRP: $44,875 as delivered
Voltec at-home 220V charger: $878 total – $550 for equipment (including tax and shipping), $225 for installation, $103 for city permitting and inspection fees.

Monthly charging costs: $25-30 at 11.7c/kWh, or $12-17/mo at 5-7c/kWh if I switch to time-of-use (TOU) billing
Total miles driven: 1,000
Miles driven on electricity: 914
Miles driven on gasoline: 86
Fuel Savings over my old 23MPG Escape:  $123/mo at $3.75/gal

Six things new Volt owners need to know…

  1. The car switches from electric to gasoline seamlessly. I get this question asked by non-owners a lot, so you might want to be prepared. That and they generally don’t understand the dual-fuel approach.
  2. Hook up the smart phone app. Its really awesome. Plus in the cold winters and hot summers you can pre-condition your car before you get there. Plus it’ll remind you to plug it in at night if you haven’t. Also check out myvolt.com for many of the same features, plus the ability to set delayed & time-of-night charging.
  3. Make sure your recharge outlet doesn’t have anything else installed on that circuit (or get a dedicated 120V or 220V circuit installed). I had problems with my Volt tripping my 120V GFCI circuit that also had a refrigerator on it.
  4. To override delayed charging settings (so you can charge immediately upon plug-in), open the charge port door before you open your car door, then select temporary override.
  5. Charging at night is best for the power grid in most cases. Energy use peaks during the evening hours (5-10PM) and then goes way down. Most power companies have a lot of unused capacity at night.
  6. Make sure you take advantage of all financial incentives possible. Everyone gets the $7,500 tax credit if they buy the car (not lease), and many states have their own tax credit for state taxes (Colorado has a massive $6,000 tax credit). Contact your power company to see if they offer any incentives – from cheaper rates at night to recharge your vehicle or incentives to install a 220V home charging station. Also check to see if your state allows you to drive in HOV lanes with just one person.