EVs and commercial challenges

Issue # 238, February 11, 2024

The challenges in large scale electric vehicle (EV) adoption are not just technical in nature. There are several important commercial decisions to be made too. Ford for example is relooking at its vertical integration strategy for battery making. For charging stations, dynamic pricing could be an approach to make profit. But it adds a layer of uncertainty for EV owners. Valuation of used batteries and EVs is a challenge dealers face and will be happy with any support from car makers. Regulators have been playing catch up with the EV industry, for insurance for example for situations such as fire accidents and counterfeit batteries. Ford's switch in EV strategy is to move away from large vehicles to smaller ones, with a low-cost platform in its pipeline. It is a matter of time before the Red Sea crisis leads to soaring costs and supply-chain strains showing up in companies’ earnings reports. Below are some commercial issues in the EV world that need to be addressed.

Ford and EV vertical integration

Henry Ford's River Rouge plant for making cars in the early 19th century was vertically integrated. That seemed to be the plan for batteries too. But Ford is reassessing its plans. CFO John Lawler said in addition to reassessing its vertically integrated system of producing its own batteries via joint venture operations, rather than sourcing from a third-party supplier, the company is further looking into adjusting installed production capacity to match demand and potentially delaying next-generation EVs to “to ensure they meet our criteria for profitability, given the new market reality.” - CNBC

Dynamic pricing for EV charging

EV charging companies facing losses are turning toward dynamic pricing as a solution, by deciding the price based on demand and electricity cost. This adds a layer of uncertainty for an average EV owner. Mobile apps for EV charging could remove the information asymmetry, provide dynamic updates on charging station availability and pricing to address the uncertainty. - Auto News

Used EV evaluation

For cost-concerned consumers interested in an EV, buying used vehicles is a way to sidestep premium prices. But dealers trying to sell them a used EV often struggle to answer all of their questions. Shoppers are armed with typical questions, such as whether the area where they live has enough charging infrastructure, how much range a certain EV has and if their purchase qualifies for a tax credit. But most dealership employees lack experience with EVs and their components. Some dealers say selling used EVs would be easier if the industry could improve the process for determining the health of the battery, which can cost $10,000 or more to replace. - Auto News

e-bike risks of fire and theft

The market for electric bikes, scooters and mopeds is expanding, which is a positive trend for cutting carbon emissions. Studies show they have a low carbon footprint. In China, the world's e-bike centre, and in cities like London, where e-bikes caught on later, the number of fires caused by e-bikes and e-scooters is increasing. Regulations have been lagging behind the market. For instance, the UK lacks regulations on e-bike chargers or kits to convert standard bikes into electric ones. And in many places, a shadowy international market for e-bike parts flourishes online. - BBC

Ford and smaller EVs

Ford is working on inexpensive, small EVs to stem its losses and take on Tesla and Chinese automakers. Ford is recalibrating its EV strategy to move away from large, expensive EVs because high prices are the biggest barrier to convincing mainstream car buyers to go electric, Farley said. “We’re also adjusting our capital, switching more focus onto smaller EV products,” Farley told analysts on a conference call. He said Ford “made a bet in silence two years ago” to develop a team to create a low-cost EV platform. The small team is being led by Alan Clarke, executive director of advanced EV development, who came to Ford two years ago after more than 12 years developing models for Tesla. - Fortune

The Red Sea impact on EVs

Attacks on container vessels in the Red Sea have been wreaking havoc on one of the world’s most important trade routes for weeks, and Maersk warned that the disruption could last as long as a year.With the crisis roiling shipments of everything from cars to energy, it’s a matter of time before soaring costs and supply-chain strains show up in companies’ earnings reports. Several firms are already warning of the impact. Tesla plans a two-week production halt at a German plant due shipment delays, while Sweden’s Volvocar AB has announced a three-day stoppage at its Belgian factory. - Bloomberg