Investors Get Ready for the Coming Electric Car Revolution | Hacker News Reader

Investors Get Ready for the Coming Electric Car Revolution

wsj.com

91 pointsjseliger58 comments

I believe the two legacy issues are:

1) automakers have very little control over their product any more. They rely heavy on Tier 1 suppliers for major component development and production so they ship hodgepodge product

2) they look at a car as a product that is shipped and forgotten. They never have looked at it as a platform for continuous future improvement. This similar to the iPhone vs feature phone analogy-- cars from legacy manufactures are the best they will ever be the day they leave the manufacturing line.

Without changing these fundamental mindsets, they are in deep trouble.

Disclaimer up front: I work for GM, but not on vehicle development.

For #1, what would you do? Ship a much simpler product or ship a worse product?

In the current system Tier 1 supplier can concentrate expertise in a single area and spread development costs across many OEMs. A single OEM cannot effectively compete with this cost structure.

Tesla is notable for many things; one of them being its vertical integration. So far Tesla has been able to compete by both building simple cars (excluding the X, which is another story entirely) and charging quite a lot of money. They have also had serious quality issues, probably relating to their vertical integration. These quality issues may be resolved, but by that time either they or their competitors will have developed a new product, and then they will have to go through the development and refinement cycle again, at huge cost.

Regarding #2: the iPhone came out in 2007. Since then, there have been about 7 development cycles. For most automobile platforms there have been 3 or fewer development cycles since 2007. Before the iPhone, there was no real concept of remote update of mobile devices.

Automakers have caught onto the trend and you will see more mainstream OEMs doing remote updates pretty soon.

I think seeing more automakers doing remote updates is pretty scary actually, at least if they can't do it right. Which automaker had it so you could hack the infotainment system to stop a car?[1]

Tesla at least has a very good separate systems for the console and deeper underyling controls. Tesla's were designed properly from the beginning, and perhaps that's just it, if you have to add something like autosteering on after the fact it can't be as secure? Perhaps other automakers will get better with time though... From a wired article,

> Rogers likens [Tesla's system] to the way avionics and Wi-Fi systems are configured on commercial airliners. The Wi-Fi is able to get GPS location data about the plane from the avionics system, but a gateway implements tight controls over what data can pass between the two. In the same way, Rogers says, “we know [the Tesla gateway] stops the obvious stuff. But I haven’t tested it to see what happens if I hack the gateway. If we were able to hack the gateway, then we could control any part of the car just like the Jeep hackers.”

[1] https://www.wired.com/2015/07/hackers-remotely-kill-jeep-hig...

[2] https://www.wired.com/2015/08/researchers-hacked-model-s-tes...

>Automakers have caught onto the trend and you will see more mainstream OEMs doing remote updates pretty soon.

I don't know if your serious or hopeful? To simply have the computer that controls my transmissions shifting flashed cost me over $200 at the dealership. Do you think the dealership is going to give up this revenue stream?

Could you imagine paying for every update that comes across an Android mobile or tablet?

Both serious and hopeful. Serious in that I know the technology is already in vehicles being sold, hopeful in that it's use will expand.

The current application is to non-critical systems, so you aren't stranded if an update goes poorly. The idea is to learn from this and expand.

As far as I know, there is no plan to charge for over the air updates.

I would love to believe that mainstream car manufacturers have caught up but I don't. As you mention yourself, the product cycle for cars is easily 3 years and the EVs that most mainstream car manufacturers have announced here in 2016 that they will market in 2018-2020 are less ambitious compared to the models Tesla markets already now. So give it another 3 years from 2018 and I would expect GM, VW, Mercedes, Toyota et all to have compatible EVs in 2021-2023.

>They have also had serious quality issues.

This is not accurate. Their early models often suffer from issues, but not long term.

http://www.consumerreports.org/cars-tesla-reliability-doesnt...

He works at GM. He has to repeat what he is told in company meetings.

This kind of snark seems uncalled for. He announced up front that he works for GM to let readers assess possible bias, and then he made an earnest on-topic comment. Working for GM doesn’t a priori turn someone into a PR flack.

I don't think anyone has mentioned Tesla in any company meetings that I've been to.

To be perfectly clear: Tesla and Elon have done many amazing things, and I like their approach in many areas: Marketing EVs as luxury vehicles is genius, remote updates are amazing, etc.

Elon has a daring attitude that is very refreshing to see, launching or running many companies simultaneously, making big bets on things like the Gigafactory, etc.

But they also do some silly stuff too, like the falcon wing doors on the X, and some of their vehicle assembly systems, while cool looking may be a bit too cutting edge. There's some stuff that you just don't try to prove on the production line while it is making your bread and butter.

Anyway, while my original comment may not have been nuanced, I do have a nuanced view of Tesla.

the falcon wing doors were a little wonky and the source of delays.... but the factory automation... i'm curious what you think.... because i think that is where they are really innovating. they say general assembly will be completely automated and no workers will touch these cars within a year or two.

Anything can be automated if it is designed for automation. The corollary is that if it cannot be automated, you don't do it (this will probably be an expensive lesson).

The question is: Will the automation pay off?

A machine that replaces 1 worker may cost $100,000 to $500,000 (factoring robotics, machine vision, and error proofing). The design for the part and design for automated assembly may be comparable. Now you've spent $1,000,000 to automate your carpet install. Congratulations. You could have installed carpet for 10 years manually at that price.

The big question to me is: Can Telsa learn Design for Automation in a scalable way? Other companies have tried it before and has never really payed off. iPhones are still largely hand-assembled for instance. I think the approach may pay off in the next 10-20 years, especially in light of how cheap small components have become due to the rise of smartphones; and the rise of Machine Learning.

To be clear,these are just my impressions from observations.

I agree, regarding 2 again. Right now software upgrades come through service centers, it isn't going to be difficult to push it remotely for each user.

I think your #1 is especially true. Almost every car company seems to be nothing but Branding + Internal Combustion Engine expertise. Almost everything else gets farmed out (brakes, steering wheels, seats, windows, most of the car).

Until recently every electric car they made and sold would be at the expense of an ICE car they were not selling, while devaluing their ICE expertise and team. I can understand the reluctance, though I don't like the end result.

That is changing as Tesla and others are (hopefully) eating into ICE sales and they have more, um, incentive to get into the electric pipeline.

Aside but the US could help push this along by increasing the gas tax, since the gov hasn't done that since 1993. It would be cheaper than continuing the subsidy, but hopefully help future tech. (And I guess it wouldn't hurt to maybe fund some infrastructure.)

It's worth noting that the US gas tax is an absolute amount per gallon, not adjusted for inflation. In terms of real value, the gas tax is substantially lower now than it was in 1993.

It is, which is why the federal highway trust fund is broke.

Not only does it fail to adjust for inflation, but it also doesn't account for the huge increases in average fuel efficiency we've seen in that period, so it's a double whammy.

Also the amount of money due to parts profits. Everything is expensive, even the slightest piece of plastic.. because it's proprietary so if you're not into hardware hacking you bleed.

They've been ignored by mass DIY movements since forever but in these arduino / 3D Printing days they'll have to cut that fat off.

ad 2) You mean when new model comes out next update makes your model slower?

Thank you but no thank you. I don't want have EULA for a car and one more entity trying to track everything I do and pretending I own the car while actually they do.

Continuous future improvement is wet dream of locking car owner (in your world it should read "car user") into paying more.

The decision makers in big auto are around 10y from their retirement. Reluctance makes sense for them. It's similar to the consulting project I had at uni with an O&G company: everyone knows they should pivot for the sake of the next generation. On the other hand, upper echelons just want to simplify their life.

Now it's the labor unions that are pushing german auto makers over the EV cliff. Ironically, they have the greatest incentives to innovate/follow.

It's bothering though, that redundancies will be massive no matter what exactly they do about EVs. Can anyone offer a growth perspective for that sector (=not some kind of UBI vision)? My initial thoughts were space. But this is not really were to retool design prowess and factories either.

> Reluctance makes sense for them. It's similar to the consulting project I had at uni with an O&G company: everyone knows they should pivot for the sake of the next generation.

Honestly, I think the issue is that auto execs and the general public have very different views of the world.

From an executives perspective, EVs are an over-saturated, incredibly niche market that's nearly impossible to make money on. They already spend a ton of money investing in EVs and the general public doesn't care about their EV offerings and they barely sell.

The general public seem to hold Telsa up on this pedestal of innovation and point to them as an example of how automakers need to be if they don't want to be seen as dinosaurs. But I bet if you talked to Mark Fields, he'd say something along the lines of, "Nobody is going to buy an $80,000 Ford EV."

The general public is clearly not interested in actually buying EVs right now. Heck, they don't even like hybrids. Instead Americans are happily buying pickup trucks and crossovers, then complaining about about a company's lack of innovation.

Ford has the biggest lineup of EVs (with a sedan, van, and compact hatchback offering) and probably the best availability of EVs in the USA, yet they only moved 24,000 EVs this year. Telsa moved about 38,000 Models S & X in the same time period. Total USA EVs sales were a hair over 133,000. This is in a country where pickup trucks easily sell over a half-million units a year and a beige family sedan will move 200,000.

So I don't feel like the large automakers are reluctant to adopt EVs for any other reason besides the fact that the market needs decades of double-digit percent grow in order to support more than two key players.

Have you looked at the Fird Fusion Energi? The trunk is just large enough to fit a pair of shoes. This car was clearly an afterthought. That they could shove the battery in any place and get away with it. No one wants to put down a serious amount of money for an afterthought.

I see the current generation of EVs he same as early desktop computing. Clearly it's getting there but it's still too expensive for the common person.

Yeah, this is such a huge issue it's worth mentioning twice.

When it comes to EVs, Ford's efforts are afterthoughts at best. They just take their existing hybrids, drop a underpowered-and-oversized battery in the trunk, and ship it to California. It's easy to have the biggest lineup (in terms of number of models) when you aren't actually putting any thought or effort into the EV portion of any of the vehicles. Ford doesn't really make EVs, they make compliance cars.

Chevy has plenty of issues too (the Spark EV, for instance). But in contrast to Ford, Chevy also sells some real EVs. It's immediately obvious that someone at Chevy spent more than 5 minutes thinking through the Volt / Bolt as an electric vehicle for people who really want an electric vehicle (and not just a compliance car) before it was shipped, which does not seem to be true of Ford's offerings so far.

> Chevy has plenty of issues too (the Spark EV, for instance).

Hey now, take that back!

I loved my Spark EV. When the lease ended I purchased a new Spark EV.

The Spark EV may have been slapped together as a compliance car or a prototype to learn from, but it is a great Bay Area car. The Spark form factor is really space efficient. It seats four and still fits into all the leftover parking spots that are too small for everyone else. It's not a perfect car, because except for the fantastic packaging the base Spark is pretty ordinary, but the electric version is massively better. The drive train is delightful, powerful, refined, responsive, and silent. One pedal driving with regen is a revelation. The Spark has been trouble free and requires no maintenance other than tires and wiper fluid.

I think there is a place for 100 mile range class EVs. The Spark EV makes the round trip from Oakland to San Jose which is the longest routine trip I make. I don't need to drive 300 miles in one go, and I don't need or want to pay for and haul around an extra 60kWH of battery pack.

Teslas are great and all, but they are _huge_. For getting around Oakland, Berkeley and SF the Spark EV is a better fit.

From an executives perspective, EVs are an over-saturated, incredibly niche market that's nearly impossible to make money on

EVs have been a niche market and will stop being niche the moment they can be made at mass scale and consumer pricing. This shift is likely to happen with surprising quickness: https://news.ycombinator.com/item?id=13039490.

I'm not sure the evidence suggests that price is the limiting factor for EV adoption.

http://insideevs.com/monthly-plug-in-sales-scorecard/

The best selling EV is also one of the more expensive options. As is the third best selling. And there are lots of BMWs selling as many units as Fiats and Kias.

The current market for EVs seems to be full of luxury or image-conscious buyers. Probably due to other factors that limit EV adoption, like needing to own a garage with a charger.

I think you're right on m the money, so to speak. Gas is under $2/gallon here (Kansas City) and people don't give a shit about EV's in any tangible way. They're fading up their trucks and SUVs for cheap. Hell, I'm one of them. I have two kids and drive a Tahoe. I mean a few do care, of course, but not enough to cause a sea change in something as huge as the car market. Until CI becomes painfully expensive, I see little real change.

You know the other thing missing? Proper infrastructure.

No one else other than Tesla has built out the right infrastructure. You can't just throw in a CCS port and call it done, there's tons of CCS deserts out there.

Talking with numerous people who've bought Teslas, that's the thing that usually seals the deal.

And round my house we park on the road. No access to charging. Heck I park across the street.

No charging point in the work carpark.

China largely owns the supply chain for electronics. Electric cars run on... electronics.

Either western countries such as Germany, USA and Mexico will develop advanced electronics supply chains, or China will own the EV market.

> Electric cars run on... electronics.

Batteries I'd say. Electronics - I'd imagine the complexity is comparable to a normal care roughly speaking so don't foresee any major power shift based on that from the status quo.

There's also a lot of things like rare earth metals in there, which China has fewer qualms about things like local environmental concerns or worker's rights or safety.

Also, complexity is not the main issue; China simply has the inertia to continue to be the leader in the electronics supply chain

Nissan and Tesla have proved the concept, I'd be surprised if investors are just now 'getting ready'.

Warren Buffet is an investor in China's BYD, I see electric BYD taxis in my city (Montevideo, Uruguay) everyday.

http://www.byd.com/la/auto/e6.html

http://www.byd.com/na/

Edit: seems Buffet made a killing

http://www.forbes.com/sites/russellflannery/2016/08/30/warre...

Second edit: seems that the rest of the world is leading electric car adoption way ahead of the U.S. . Electric cars still represent a tiny fraction of the overall market (1/300th of the world's car sales). Surprisingly, it's China that leads the way.

> seems that the rest of the world is leading electric car adoption way ahead of the U.S.

In parts of Europe, this is due to incredibly high taxes on ICE vehicles - that dwarf the US EV credits.

One of the reasons this is politically possible is because in areas with good public infrastructure, car ownership is a luxury (Or even a burden), while in most of the US, it is a necessity.

Could also be related to population density. Fewer vehicle miles travelled per capita = less range anxiety. More people living in urban-ish environments means these 'costly' electric cars are less relatively costly. Their typically smaller size makes them easier to park. Charging infrastructure is easier to locate. Etc.

Is there really a case for range anxiety in America? Getting exact numbers seems to be difficult but here in California it's about 15 miles each way. Seems like even the cheaper vehicles could handle this with a weekly charge.

Like other kinds of anxiety, it may not be fully rational :)

But one reason I own a nice car is to effortlessly drive across the state and to distant states with the comfort, power, etc of a modern car. "Just rent a car for those longer journeys" becomes less compelling when it's more than a handful of times a year.

For my commute, I could just keep driving the same 15 year old car forever -- though the butt warmers and bluetooth and so on of newer cars is a "nice to have".

I sometimes feel like i'm the only person in tech who loves driving and loves internal combustion engines.

I didn't enjoy driving until I got an elecrtic car, a Fiat 500e. That was enough fun for me to blow a hugely unnecessary amount of cash on a fun ICE car, a BMW m235i. I enjoy every day I spend in it, but I doubt I'll ever buy another gas car, as this one will bridge me to the future. I may take it to the track if I ever find the time and the right people, but it's unnecessary.

Gas cars can be fun, but if you look at what's actually sold, nearly none of them are fun. Those who love driving will continue to be a small minority, just as they are now.

Edit: I recently had the chance to drive the autobahn, and the most fun car I could get was a BMW 420d. It wasn't nearly as enjoyable as the skiing that it brought me to. So maybe I'm not that big of a driving fan after all.

You can build an app that makes ICE sounds as you accelerate in your electric car.

Fake engine noise is a thing. Ford now puts it in their trucks.[1] A DSP synthesizes V8 engine sounds, which are played through the audio system. Here's how to disable it.[2] (This is for engine noise inside the cabin, not for pedestrians. Outside noise generators may be required for very quiet cars, but they will shut down around 35MPH.)

Modern engines just are not that noisy. People need to get over this. They got over sudsy laundry detergents. In the 1960s, it was a selling point for detergents that they generated lots of foam. This was a holdover from the soap era. Laundry detergents don't need foam to work, but people expected them. And customers wanted long-lasting foam, which resulted in sudsing agents which would survive all the way through the sewerage disposal plant and into lakes and rivers. That resulted in EPA regulations which ended the suds wars. Now, nobody wants suds from laundry detergents.

[1] https://www.washingtonpost.com/business/economy/americas-bes...

[2] http://www.f150forum.com/f118/active-noise-control-fake-engi...

Virtually everyone I know in tech loves cars. Most fellow sysadmins I know still insist on manual transmission cars, in fact. Most of my fellow car club members and performance driving instructors/enthusiasts are techies.

I plan to go straight from manual transmissions to electrics; I don't see why I'd ever buy an automatic. I don't see electrics taking away from the fun, at least not necessarily. I've driven lots of fun electric cars. My last purchase wasn't electric-suitable (wanted AWD, range, etc). But my next one will be.

I've always worked in west coast tech hubs, but never "in the city", where all the car-hating hipsters live.

I don't think you are alone. It seems most people on HN live in hub cities and don't, understandably so, like the commute in the cities they live in. So this is a means to remove that pain point. It should also drastically lower accident rates which seems to not get as much attention. If you have a self driving car who should pay for the liability insurance and if it passes enough safety tests shouldn't the premium be much lower??

That being said I absolutely love the idea of self driving cars for my aging parents!

You are misunderstanding the situation here. I personally love something like a nice road trip, prefer manual transmissions, and whatnot. I just hate commuting everyday by car. It's completely inefficient and has negative impacts on health. Are you suggesting you enjoy driving in traffic as well?

I take it you don't live in San Francisco, then?

I didn't really mind driving until I moved to the Bay area...

California is home to some of the best driving roads in the world. And there are plenty of great ones in the Bay Area. Most of us don't commute on them, but they're not far away.

Sure so go rent a really nice car and drive them once a year. There are only so many people who's hobby is actually driving that they would do it over 1/3rd of the weekends in a year. If you live in say the bay and never drive except to go hit these great roads then no reason to actually own.

Or buy a motorcycle. Small, actually much more fun to drive.

No, there are at least 2 of us

Driving a Tesla isn't boring either of course

I'm amused by the dissonance here between developing US policy w.r.t. subsidization and development of electric-first transportation and international investing houses willingness to invest.

I imagine they see it as a major opportunity to force better terms on companies developing these solutions for the US market. Which is probably exactly the goal in the first place.

Deleted comment

98% of what makes a good car has nothing to do with software, which is Google's core expertise. (And to be pedantic, Google's core expertise is cloud infrastructure.)

The fact that people love to complain about car software is testament to the fact that the rest of their car works really bloody well.

Tesla is absolutely not beating the big players of the industry. They have serious quality problems, they have a hard time scaling up manufacturing, and they aren't building affordable cars. ($35,000 MSRP Model 3s - the price of a Mercedes C - is not what most of America thinks of when you say 'affordable'. It's low-end luxury.)

They are successful, in the sense that they sell a premium EV with a long range. How much competition have they had in this market, to date?

If they were building ICE vehicles, premium or otherwise, they'd have been eviscerated by both consumers, and their competitors.

http://www.usatoday.com/story/money/cars/2015/05/04/new-car-...

    35k.

Average is not the same thing as affordable. Kia and Toyota can make a car for under $20,000. Tesla is not competing in that space.

If you remove the frills, the average cost of a new vehicle sold in the US would be substantially lower than $35,000.

Also, the $35,000 Model 3 will be a no-frills, base vehicle. The average Model 3 will cost a lot more then $35,000.

Google and presumably Apple have decided not to build their own cars (most likely electric). Two companies that easily have the resources to do it if they thought it made sense for themselves.

I'm no Tesla hater but cars are not phones.

Somebody figured out the best ETF around today to invest in this trend?

tesla has zero competition from big auto.

https://medium.com/@andrewt3000/tesla-has-zero-competition-f...

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