GM's President saying he doesn't know how to read a Disruptive Technology curve. Come inside to learn what he can't see coming.
Yesterday’s opinion piece on CNN.com written by GM president Mark Reuss, is a self-serving attempt to spin what consumers already know: GM is desperately unprepared for the EV future. Based on the first and last paragraphs of his FUDicle, you might think you’re getting straight talk. Here they are:
The automotive industry is hurtling toward a future that will change transportation the same way electricity changed how we light the world. Electric and self-driving vehicles will alter the automotive landscape forever — it's only a question of how soon.
Like any revolution, this one will be created by market demand.
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To get the electric vehicle to first-string status, manufacturers simply must make it as good or better than the cars, trucks and crossovers most people are used to driving today. And we must deliver on our promise of making affordable, appealing EVs in the widest range of sizes and body styles possible. When we do that, electric vehicle adoption and acceptance will be widespread, and it can happen sooner than most people think.
The rest of his article is devoted to uncritically repeating irrational fears of some customers, while acknowledging that according to GM’s own research 40-45% of buyers would switch to electric today, even at a price premium, if the vehicles were available for sale. That’s mainstream demand. It has already arrived, and it’s just the manufacturers who need to catch up. Which, read again, is really what Mr. Reuss’ opinion piece says. While positioned as a thoughtful piece on lacking demand, it’s really a public admission that GM cannot field competitive, compelling electric vehicles. It offers no statement of action to do so, illuminates no pathway to get there, and strenuously avoids admitting that the leader in EV production can outperform gas cars feature for feature. GM isn’t doing that and therefore is not profiting from that 40-45% of the market.
It’s a mistake to project future EV demand based on historic demand. EV’s are a disruptive technology, and as such they take over use cases, not market share. Here’s the Disruptive Technology graph from Wikipedia, so you can orient your brain to the axis of change:
When electric powertrains enter new use cases, they start at the edges and move towards the middle. So things like Mars rovers were probably cruising the red planet before you saw your first electric car on a public street, right? Off-world rovers are an example of a use case where the functionality, (i.e. reliability, sustainability, toughness, independent resilience), was more important than unit cost. It’s a “most demanding use case” and all the latest technology went into making it functional and reliable, which they were. On the other end of the use-case spectrum is the remote control car that your neighbor’s kid used to zip around on the streets and sidewalks; cheap, robust, reliable, and easy to replace the batteries. Those are low price and limited functionality use case EVs.
Passenger vehicles are obviously between those extremes, and as a category have a wide range of use cases. Early EV’s made most sense as city-cars, because they were small, had short range and could charge in a user’s garage overnight. The first impressions of EV’s got stuck in people’s minds, and a lot of drivers cannot imagine that EV’s are already able to meet their driving needs. As soon as EV’s are brought up some wanna-be rugged individualist starts talking about how they have to drive 3,000 miles per day while towing a dinosaur between T-Rex rodeos. Okay, tough guy, you’re special. But the average car owner drives just 29 miles per day, or fewer. Which means an EV with 200 miles of range would require charging just once per week. And since nearly 95% of EV owners charge their cars at home or work, doing so doesn’t disrupt their routine in any way. The simple truth is, most car buyers wouldn’t have to make any compromise by owning an EV. So why are there so few options available in showrooms? A lot of it has to do with the magnitude of change required to build EV’s, and how more foresight is required to scale. That’s where GM is lagging, and that’s why Mr. Reuss is writing stall-tactic opinion pieces which blames GM’s unpreparedness as appropriate for the current market. That attitude will kill GM, because the forces at play act differently for EV’s.
Automotive blood bath 2020 — 2025
The next five years will be unmitigated disasters for some automobile manufacturers. I see no clear evidence that GM will survive. Their only significant EV entry, the Chevy Bolt, is not a compelling vehicle. There is a need for it, and it can be a great deal for the right buyer, but as Reuss says in his article, it’s “not ready for mainstream”. Net year, when VW introduces a series of low cost 200+ mile hatchbacks, sales of the Chevy Bolt will falter. Reportedly, GM loses thousands of dollars on every Bolt they sell. Which is ironic, because LG, the Korean corporate group which builds the Bolt’s drivetrain, infotainment stack and HVAC system, makes a profit. Is it any wonder Mr. Reuss isn’t more vigorous about EV’s?
To reach the production threshold of 300,000 — 400,000 units per year, you need batteries. Many of you are aware of the disastrous conditions in the DRC, where seemingly every warlord is pressing prisoners and child laborers into service as miners, digging for cobalt. Business has a lot of euphemisms for the inhumanity it cultivates, and the cobalt situation might be described as “an immature supply chain”, meaning it hasn’t had the time to grow and professionalize to the norms by which most industrial activities operate. Grotesque as that may sound, the solution really is to professionalize the supply chain, and VW, Mercedes, Tesla and BMW have all announced ongoing efforts to actively manage or monitor their supply chains for critical materials.
The business challenge for GM and other manufacturers, therefore, is twofold; to design and deliver a selection of EV models that will sell over 300k-400k units per year as quickly as possible, and to build a supply chain that provides the batteries for those vehicles. To reach the demand challenge as quickly as possible, VW Group (Volkswagen, Porsche, Audi, etc.) is using shared-platform vehicles and dedicated EV factories to offer a mix of 200+mi range vehicles to the market within a short window of time. The idea is they can see what sells, then crank up production of those. By using a shared platform, they know exactly what battery modules they need to build, regardless of the form factor on top.
On the demand side, buyers want to see cars without compromise, so let’s address Mr. Reuss’ three criteria for demand; range, cost and ease of ownership, from last to first.
Ease of Ownership: EV vs. ICE (Internal Combustion Engine)
|
EV |
ICE |
| Fuel at home? |
YES |
NO |
| PUMP YOUR GAS? |
NO |
YES |
| OIL CHANGES? |
NO |
YES |
|
Mechanics
|
Seldom |
Routine |
| Updates |
Routine |
Never |
| Cost per Mile ($/Mi) |
<$.04/mi |
$.12+/mi |
Because EV’s have a couple dozen moving parts in their drivetrain rather than the couple thousand that ICE vehicles do, EVs require far less maintenance. They never require you to go to a gas station or pump gas. You’ll never need an oil change, or to check the coolant or the transmission fluid, because those are ICE problems that EVs don’t have.
Cost
Want an extreme example EV cost of ownership, from a completely different use case? There’s a Norwegian ferry company, think big car hauling ferries, which has been operating electric ferries for two years now, and claim it has cut emissions by 95% and costs by 80%. That might seem like an edge case, but that’s probably only because the company’s an early adopter. As more ferry companies switch to electric, the more of these success stories we’ll hear. And they’re doing it, because they can’t concede the cost savings to their competitors. To stay in business, companies have to match competitor’s sustainable cost saving or they’ll lose the ability to match their price, profitably.
The same is true for cars as has been proven by this car service that only runs EV’s and has models approaching 400,000 miles in just three years. Can your car do that? If EV’s could do that when rolling off the line three years ago, is it reasonable to think that the average drivers’ needs are already being met by modern EV’s?
Disruptive technologies move from the edges towards the center, within and across use cases.
That’s why when a use case gets “solved” by a disruptive technology, the entire segment transitions as quickly as possible. That’s one reason why people don’t see it coming, suddenly it’s just there and unavoidable. And it’s the fact that every battery built makes every future battery cheaper to build, that places EV’s on disruptive technology curve, plotted against markets worth trillions of dollars. The battery makers are rapidly innovating the production of battery cells, and trying every trick to strengthen their supply lines. Their ability to produce vast numbers of battery cells is accelerating almost as fast as they can possibly build. And it is that massive leap of battery production capacity that will allow EV’s to wash over the market place like a tsunami of vehicle value. Consumers are realizing that there’s literally no reason not to buy an EV, and they’re buying EV’s. Mr. Reuss is acting like some business-yokel on the beach wondering why the water got sucked out of the bay, and not able to comprehend the proximity of the incoming wave.
Range
The average car owner drives less than 29 miles a day. Most new electric cars have ranges from 230 — 300+ miles. That implies that even if you can’t charge your car at home or work, you’d only need to visit a charging station once a week, at most. EV owners with a garage plug their car in at night and leave every morning with the desired charge, (and often, with the car temperature pre-conditioned), so traveling locally, they will never have to visit a fuel station, again. For long distance travel most EV owners plug in at a charging station and get a sit-down meal. Horrible, I know, but that will get you to any destination within about 500 miles of home, which is likely ten hours of driving. Let’s do some math: if you add up how many times a year you drive ten hours in a day, that’s also about how many times you would need to enjoy a sit down meal while traveling by car. Or spend an equivalent amount of time watching cat videos. Seriously, that’s the grand compromise required for an EV lifestyle. Think you could tough it?
The challenge for Mr. Reuss and GM
The very first sentence of Mr. Reuss’ opinion piece acknowledges that the EV future is inevitable. But he then abley avoids telling you how GM will meet these three challenges:
1) Put competitive and compelling EV’s on the road
2) Have a plan for putting AV hardware into every EV built, no matter who invents it first, and,
3) Be ready to help GM dealers transition to becoming robo-taxi fleet operators, since their maintenance cash cow will dry up as soon as EV’s and AV’s are available in their area.
Although this article didn’t address the inevitability of AVs/robo-taxis, they are a key variable in this transition. Robotaxis will all be EV, because they have the lowest operating cost per mile. And fleet companies will try to buy the entire production run of manufacturers, so they can saturate service areas as soon as cities allow robotaxi deployment. So access to EV/AVs by individual owners, could get a little complicated. Stay tuned to EV Revolution for future diaries discussing that technology, and how it is already helping create the EV tsunami..
Mr Reuss would like you to believe the world is years away from seeing 250 mile EV that can seat six, carry a few thousand pounds of load, and still tow a few tons more. And if you’re waiting for a GM product, you’re right, that product introduction seems years away. But such a vehicle was introduced last week, with a starting price lower than the average purchase price of a comparable pickup today (which is over $48,000...the EV starts at $39,900). It’s the Tesla CyberTruck and it has all the hardware for autonomy already built in, so $46,900 should buy you a better-than-average pickup truck that can make money for you as a robo-taxi when you’re not driving it. (Note: Tesla claims Full Self Driving will be “feature complete” near end of this year, and will roll it out to a growing list of owners who volunteer as Beta testers, next year. It should take at least a full year of improvement cycles and assessment before they can go driverless, somewhere.)
In two years that truck will be ramping up production, and every future EV will be compared to it for value. The bar is set, and some car manufacturers are going after it hard, and showing their work. Mr. Reuss’s GM is notably not one of them.
