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Tesla-red car

Tesla continues to walk the tightrope

One simple slide in a PowerPoint presentation by a Tesla official at an auto convention in Washington this month did almost as much damage as Elon Musk’s rocket blowing up soon after liftoff.

JB Straubel, chief technological officer and co-founder of Tesla Motors, put up a slide on June 15 indicating that Tesla’s Model 3 would not “begin production until 2018.” This apparent delay set the new vehicle back from the previously announced deadline of 2017 and almost knocked the company for a loop. The website Inside EVs broke the story, as it were, and word of the PPT slide was repeated in countless news stories. The interpretation was clear: Once again, Tesla had been forced to postpone key product rollout.

Within hours, Tesla had assured investors and analysts that it was not changing its schedule. The $35,000 Model 3 will be available in 2017, as previously planned. “Contrary to speculative blogger reports, we still plan to show Model 3 in 2016 and begin production in 2017,” Ricardo Reyes, vice president of communications, tweeted. The statement about production in 2018 was said to refer to “full production,” an attempt at back-filling that many analysts viewed with a grain of salt.

Whether the reference to 2018 was just a typographical error or an inadvertent peek under the kimono, the controversy showed how delicately balanced Tesla’s position is, both in terms of meeting customer expectations and in raising money to continue its projects.

Missing deadlines would certainly be nothing new for Tesla. In February 2012 the company said its crossover Model X would be available by the end of 2013. In February 2013, it said it would be late 2014. In November 2013 the company announced that a small number would be available by the end of 2014, but actual deliveries would not begin until the third quarter of 2015. Everyone is waiting to see if this deadline will be kept. Meanwhile, speculation has increased that any delay in the debut of the Model 3 may be due to the resources that have been spent trying to get the Model X out the door.

The Model 3 is Tesla’s bid for the big time. The car is projected to have a range of 500 miles and would be priced at the aforementioned $35K, less than half of the $79,570 MSRP of the 2015 Tesla Model S. The Model 3 is intended to be a mass-market sedan that’s well within the reach of the average car buyer. Musk, Tesla’s flamboyant co-founder and CEO, hopes to sell 500,000 versions of the Model 3 by 2020, a feat that could put Tesla on a firm financial footing.

But there are pending obstacles. One is the Chevrolet Bolt, a plug-in all-electric that is the successor to the Volt, a plug-in hybrid. GM demonstrated the Bolt in a sample model this month and will also be priced in the $35,000 range. GM promised to have the Bolt on the market by early 2017, which would beat Tesla’s Model 3 out of the gate.

Whether electric-car buyers will be attracted to the Bolt – or whether they will wait for what will almost certainly be a superior product from Tesla – is a hotly debated question. “GM is ramping up to make 20,000 Bolts. Tesla is ramping up to make 500,000,” said one commenter to a Wall Street Journal story. “When a company names its new car the ‘Bolt,’ Tesla has little to worry about,” said another. But other readers cited GM’s superior service network, and the company’s long history of making money, while Tesla has only lost money.

One thing is certain: Tesla is building brand loyalty. A survey of 145 Tesla owners by automotive analyst Dan Dolev of Jeffries found that 85 percent said their next car would also be a Tesla, and 25 percent wouldn’t even consider another brand. Eighty-three percent said they would recommend Tesla to their friends, and a remarkable 89 percent said they would still buy a Tesla without the $7,500 federal government tax break. The owners also turned out to be not nearly as rich as expected. Almost 70 percent had previously owned cars that cost less than $60,000, including ones as modest as a $15,000 Toyota Highlander. They paid an average premium of 80 percent over their previous car when they bought a Tesla. As a result of the survey, Jeffries raised its target price for Tesla stock to $350 from its current $265.

The battery-producing Gigafactory outside Reno is moving ahead on schedule, with the first phase of the structure near completion and machinery is about to be moved in. The current phase represents only 14 percent of the planned layout. Once completed, the Gigafactory will be the largest building in the world, with a footprint of 5.8 million square feet and two stories of manufacturing totaling 10 million square feet. Panasonic, Tesla’s battery partner, is expected to send hundreds of workers to the site this fall to prepare for full-scale production. The factory will also employ hundreds of local workers.

Wall Street Journal columnist Charley Grant threw a wrench into the works recently when he wrote that Tesla is still burning through cash and probably will run out of money if the Model X does not sell as expected. He says the company should sell another issue of stock while the price is still high. He suggested that a price of $200, 25 percent below the current market rate, could raise $750 million and carry the company over to the introduction of the Model 3.

Whether the company will dilute ownership or take a chance that Model X sales will reverse its cash flow is just one of the many decisions Musk will be facing in the near future. One thing is certain: He will be balancing atop that high wire for several years to come.

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Is Elon Musk a welfare king?

Elon Musk is a darling of libertarians and free-market advocates because he is proposing to change the way Americans drive their cars through purely private effort. But he is now coming under fire for accepting gobs of government assistance in the process.

Critics charge that he has already accepted $4.9 billion in federal and state assistance and is angling for more. One article even asks if Musk has not become a “welfare king.”

Well, let’s take a look at the charges and see how they stack up:

The original article appeared in Mother Jones and was not entirely unfavorable. Staff reporter Josh Harkinson thinks the Tesla is a marvelous car and quotes all the accolades from Consumer Reports and Motor Trend. He even thinks Musk may be the next Steve Jobs and quotes New York Times blogger Jim Motavalli to that effect: “Individuals come along very rarely that are both as creative and driven as that. Musk is not going to settle for a product that is good enough for the marketplace. He wants something that is insanely great.”

What Harkinson objects to is simply that Musk hasn’t given the government enough credit for helping him on his way. He quotes Fred Turner, a Stanford professor and author of From Counterculture to Cyberculture, as saying: “It is not quite self-delusion, but there is a habit of thinking of oneself as a free-standing, independent agent, and of not acknowledging the subsidies that one received. And this goes on all the time in the Valley (i.e., Silicon Valley).”

It’s important to note that Harkinson is not just talking about Tesla. Musk’s other enterprise, SolarCity, which is installing rooftop panels on private homes, actually gets more federal and state subsidies than Tesla. And SpaceX, Musk’s venture into space travel, has a $4.2 billion contract with NASA to build a launching pad in Texas, which does not count as a subsidy but still comes from the government.

As far as Tesla is concerned, here’s what Harkinson counts as government assistance:

• Everyone who buys a Tesla gets a $7,500 tax credit from the federal government. Buyers in California get an additional $2,500 tax credit. Tesla buyers have an average income of $320,000. The federal tax credit will go to the first 200,000 customers. So far, Tesla has sold only one-quarter of that.

• The state of Nevada gave Tesla $1.2 billion in tax benefits to build its Gigafactory outside Reno. The offer came as Nevada was in competition with seven other states for the siting. The factory is expected to produce 6,000 jobs.

• Tesla’s principal source of income in recent years has come from selling Zero Emission Vehicles credits to other manufacturers in a program particular to the state of California. All auto manufacturers are required to produce ZEVs. When they can’t meet their quota, they can buy credits from other manufacturers. Tesla has pocketed $517 million in recent years. Harkinson counts this as a government subsidy, although Musk points out that the money comes from other car companies, not the government.

Musk has been quick to fire back: “If I cared about subsidies, I would have entered the oil and gas industry,” he told the media after The Los Angeles Times ran a story repeating the Mother Jones charges.

He points out that the$1.2 billion from Nevada will be spaced out over a period of two decades. It will also be contingent on the factory having an output of $5 billion every year for the 20-year period. He notes that hiring and other aspects of the Gigafactory will make it a profitable venture for the state of Nevada. And of course he notes that the fossil-fuel industry has received huge subsidies over the decades.

It really isn’t fair to say that Musk is “living off welfare.” His original entrepreneurial success, PayPal, rose to a valuation of $1.5 billion without the slightest assistance from the government. Tesla did receive a $465 million loan guarantee from the Department of Energy under the same program that funded the ill-fated Solyndra. But Musk made a grand gesture by paying back the loan ahead of time.

The fact is, it’s almost impossible to start a business these days without becoming involved at some level with the government. If Nevada hadn’t offered tax abatements, some other state would have – and did in fact. Many other factors were involved in the selection of Nevada, and states obviously benefit from such facilities.

Musk is a unique visionary whose reach extends far beyond making money. His ambition is to completely remake America’s automobile system and end the dominance of fossil fuels. He also wants to see America succeed at space travel. He plans to build a colony on Mars and has said he hopes to die on the Red Planet.

“Just not on impact, he added.

(Photo credit: J.D. Lasica, posted to Flickr)

Is what’s good for the affluent also good for consumer fuel choice?

Rodin3.jpgYou and I want to be called rational. We want to believe that with solid analysis, most things are predictable by smart people in this complex world of ours. Are they? I thought about this after reading a recent interview with a noted futurist at Mercedes-Benz, Eric Larsen.

My conclusion, based on his view of the future of cars and transportation fuels, is that his thinking — while provocative — is too tidy, often too rational and many times likely wrong. His comments brought back the words of Matthew Arnold, “We do not do what we ought; what we ought not, we do; and lean upon the thought; that chance will bring us through” – a variation on chaos theory.

Let’s together go through some of Larsen’s views, which, at times, I have taken the liberty to paraphrase or summarize (fairly, I hope).

Larsen: Continued suburban growth, wealth and American family needs will support and create demand for large vehicles.

In making an argument for large cars, Larsen indicates that the suburbs will be around for a long time and that young people will want children and home-based lives, with lots of space around them. They will fill up a car with kids, dogs and stuff from big-box supply stores. That means people will still want big cars. Conversely, rich people want luxury, based on their income and their desire to show off. He indicates, In our new AMG model we have an idea of, one man, one engine. Although he doesn’t use the term, according to Larsen, wealthy people are somewhat schizoid. They want to show they care about the world, and to do this many often buy the more-expensive Prius or provide a niche market for Tesla. But they go back and forth between doing good and doing what their wealth permits and their status seems to generate, a desire for big, technologically contemporary cars. Wealth is so tough to manage! No wonder psychiatrists charge big bucks.

Kaplan: While America’s love for the big car remains a legacy of the good ‘old days when gasoline prices were low for long periods of time and incomes were growing – contrary to Larsen – habits, income and demography seem to be changing slowly, but nevertheless changing, and the result may lead to less suburban growth, more atypical families and less income for gasoline, particularly among low and moderate income families. In this context, smaller cars that behave more parsimonious with gas will likely show a visible uptick in sales, over time. Ladies and gentleman, place your bets on where prices will be in one, two, three or more years out. Make a fair guesstimate on trends concerning vehicle popularity and fuel use (your guesses will be no worse than what the experts predict). The odds are that gas prices will return to their “normal” highs and smaller cars that use alternative fuels will take a larger share of the market.

Larsen: Fracking has been a strong influence, keeping gas prices low.

Kaplan: Sure, fracking has led to higher levels of oil production in the U.S. and softened the market for gasoline, but lower prices (already on the rise again) relate to much more than fracking. They include: lower consumer demand, increased global supply of oil, the changing value of the dollar, the decision of the Saudis to avoid lowering production and to keep prices low to secure increased market penetration, etc. Most frackers did not anticipate the recent significant drop in the cost to consumers at the pump. Quite the contrary!

Larsen: Internal combustion engines are getting better mileage.

Kaplan: Yes, they are getting better mileage, thanks in part to CAFE standards and thanks in part to technology. New cars also emit less pollutants and GHG emissions. So what’s the rub?

Internal combustion engines using gasoline are likely to always generate more pollutants, and more GHG emissions than the alternative fuels now on the market. Dependence on gasoline because of reliance on non-flex-fuel internal combustion engines will also continue to lead the United States into military conflict to safeguard our own and our allies need for oil. Big cars pushed by Larsen, for the most part, continue to be gas guzzlers. Larsen is right to suggest that use of alternative fuels, including natural gas and electricity, instead of gasoline in bigger and newer luxury cars will help mitigate their present negative environmental, economic and security impacts. I am sorry he didn’t extend his comments to converting older big cars to flex-fuel status so they could use other alternative fuels that he seems to favor.

Larsen: [In context of his support of larger cars] natural gas is a cleaner fuel and easier to install from a technical point of view.

Kaplan: Larsen’s comment is basically correct for new cars and cars aimed at a luxury market. The fuel is cleaner than gasoline and installation of CNG equipment, when building a new car from the ground up, is not difficult. However, CNG, at the present time, adds about $8,000 or more to the price of a vehicle – whether new or converted – which prices them out of the market for most low- and moderate-income families.

Thanks to the leadership of the governors of Colorado and Oklahoma, a bipartisan demonstration is going on in 22 states. It focuses on replacing older state cars in fleets with Detroit-produced CNG vehicles. One of the key objectives of the effort is to see if building demand among states can get Detroit to develop a CNG fueled car that fits the budgets of more than just a relatively few Americans.

An equally promising initiative that would convert natural gas to ethanol is now being considered by both business, political, and foundation leaders across the nation. Ethanol, while not perfect, is a better, cheaper and more environmentally friendly fuel than gasoline. Its use requires a flex-fuel vehicle. Together, both will meet Mr. Larsen’s priorities. They will clearly reach the pocketbooks of the rich and famous. Happily, although not apparently Larsen’s major concern, both together will also reach the budgets of many low- and moderate-income households.

Larsen: Refueling with gasoline takes five minutes, once a week. People have anxiety about running out of fuel with electric cars. Tesla, cities and garages are building charging stations. But will they be sufficient?

Kaplan: Electric cars will become more popular as the price comes down, batteries provide fuel for longer driving distances, more infrastructure is developed by the private sector. Larsen’s question, if electric cars become popular, are they really going to put a charger in every space in the garage, is a bit specious. Not every corner has a gas station and not every space in a garage needs to include a charging station. Greater mileage from batteries on a single charge will generate (excuse the play on words) the ultimate distribution of charging stations in garages and, indeed, on roads and freeways.

Larsen: Hybrids can do well in the suburbs, where everyone could have a charging station in the garage, with rooftop solar panels to produce electricity.

Kaplan: Clearly, Larsen would not be a good candidate for a coming-back-to-the-city initiative. Indeed, his apparent views do not fit the movement back to cities at the present time on the part of many diverse households in America. Irrespective, someday soon, solar panels will charge stations in different locations to fuel hybrids and electric vehicles. If panels succeed in the suburbs, they can also succeed in cities (please try singing to the tune of “New York, New York” … if you can do it here, you can do anywhere). The sun has not been appropriated by suburbanites.

Larsen works as research director at Mercedes, which probably colors his views of urban America, the demand for luxury cars and fuel options. His perceptions of where we are as a nation regarding alternative fuels is narrow and seemingly limited. But he has raised some interesting observations related to the roles of demography, place of residence, and income to car buying and consumer choices regarding fuels. I wish he was less dogmatic, more expansive and less riveted intellectually by his experience at Mercedes. We need to introduce him to chaos theory and more alternative fuels.

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Can energy storage assure Tesla’s survival?

Elon Musk’s bet that he can sell 50,000 versions of the Model 3, the $35,000 version of the Tesla, due out in 2017, still seems like a long shot, given the somewhat limited market for electric cars.

But he might have one more card up his sleeve. The development of solar energy for home use offers an alternative market for his batteries that could be enough to save Tesla from a market collapse.

Musk is unveiling a new home storage unit that will allow homeowners to move their electrical consumption from expensive peak rates to the rock-bottom rates of overnight power. If nothing else, this will create a secondary market for the millions of lithium-ion batteries that Tesla will be cranking out from its $5 billion Gigafactory in Nevada, which is scheduled to be operational in 2017.

Early indications are that the demand for batteries to power the mid-priced roadster might be thinner than anticipated. Musk was counting on big demand from China, and already there are indications that it’s a much tougher market than he realized. As reported here last week, China already has 100 manufacturers turning out 400,000 undersized vehicles a year that can reach 48 miles an hour. They certainly wouldn’t sell in the United States, but for a million Chinese, it’s just what they need to putter around their small villages and cities. China also has 90 million electric scooters on the road and 120 million electric bicycles — an entire electric-vehicle market that doesn’t exist in this country. Making a dent in this market with a $35,000 scaled-down version of a luxury vehicle is not going to be easy, which is why Musk cut his China effort in half only a few weeks ago.

But there’s an out here in the burgeoning market for home electric storage that is taking shape in the United States, particularly in California. The Golden State has established a goal of getting 33 percent of its electricity from renewable resources by 2020, and 50 percent by 2030. Now powering with renewables isn’t just a matter of putting up solar collectors and windmills. You have to store that electricity for a time when it’s needed. Otherwise, most of it is wasted. And that’s where Musk’s plan to power electric vehicles with large complements of relatively small lithium-ion batteries enters in, because such a system also will be ideal for storing electricity in household-sized units.

Without any fanfare, Tesla already has installed such a system in more than 100 homes in California. It also has a deal with Walmart to install it on a commercial scale. “Tesla has been able to install more than 100 projects, really without anyone noticing,” Andrea James, a Dougherty & Co. analyst, told Bloomberg. She also estimated that the home-storage business could add $70 to Tesla’s stock, about one-third of its current value.

The effort already has paid off for Tesla in that it has collected $65 million in state incentives under the advanced storage technology portion of California’s Self-Generation Incentive Program (SGIP), which rewards users for coming up with ways of generating their own power. With household units running anywhere from $2,000 to $10,000, they’re going to need plenty of help from the government.

Tesla is not the only company working on battery storage. Bosch, General Electric and Samsung all have experimental systems going. There are also research projects being conducted at Harvard, MIT and other universities.

In Notrees, Texas, Duke Energy Renewables, with the help of the Department of Energy, has built a project that is using thousands of lead-acid batteries to store the electricity from a large wind farm. The lead-acid batteries are more expensive, however, and require frequent repair. Also, Duke has found that there is not as much of a market for their product as it had anticipated, mainly due to the costs. “There was little interest from customers willing to pay for that,” said Greg Wolf, president of Duke Energy Renewables, according to The New York Times. “That has not evolved as much as some folks, including ourselves, thought.”

But there are other opportunities that could enhance Tesla’s overall business model. One is that when lithium-ion batteries begin to lose their power so that they are no longer capable of driving a car, they still remain strong enough to power a home storage system. That could mean there will be a secondary market for Tesla’s car batteries.

Another dream that has always been in the back of people’s minds is that the electric vehicles themselves could serve as storage for utility power, drawing on cheap nighttime power and then reselling it to utilities during the day. This would involve an elaborate infrastructure, however, and this would mean the cars would not be available for a good part of the day if their stored power was being fed to the grid.

Altogether, however, the storage potential of the batteries means that Tesla will have an alternative means of income in addition to the electric cars. This means the company could diversify enough so that it will not depend entirely on the success of the Model 3. In the long run, this might mean that the company can survive long enough to make the electric vehicle a standard item for the American consumer.

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Car buyers go shopping for better mileage

With the price of oil down from about $115 to $63 since last June, the impression has been created that the auto world is once again in the hands of the oil industry, and that the gasoline engine is here to stay.

But this week at the Bloomberg New Energy Finance Conference, there was the distinct impression that alternatives to the gasoline engine are moving up so fast that within another five years we may see big changes. Bloomberg Business wrote that the result is “Future transport is likely to look a lot different than what the major oil companies are fueling now. Instead of biofuels such as ethanol and green diesel making the internal-combustion engine fit into a world with greenhouse gas limits, wholesale new solutions are coming fast.”

“Where we are is in an age of plenty,” Michael Liebreich, BNEF’s founder, told Bloomberg. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition.”

The biggest piece of news is that gasoline consumption has leveled off over the last decade and now is lower than it was in 2006. This is a remarkable development that no one knows quite how to explain. Part of it may be the lingering recession. Fleet mileage improvement has definitely made a difference, improving from 24.5 in 2001 to 31.6 today, a dramatic surge of 29 percent in 13 years. The Age of the Hummer is over, and people are being more selective in shopping for better mileage, even as the vehicles improve.

But Bloomberg Energy sees alternatively fueled vehicles also making headway in a way that is just becoming visible. Electric car sales have quintupled over the last four years, although they did start at a very low base. But battery prices are coming down as rapidly as solar-panel prices, which means that they soon will be in a range where the average American can afford them. Tesla’s 2017 debut of the Model 3, priced in the $35,000 range, is going to be a real turning point, if everything goes right.

Also coming along rapidly is the hydrogen car, which the Japanese auto industry has chosen as its alternative to gasoline. Toyota and Honda are just beginning to market their models in Japan, and BNEF anticipates there will be 4,200 on the road in Japan by 2018. But California is another big potential market, and sales are scheduled to begin there sometime late this year. The California Legislature has responded by expanding the Hydrogen Highway initiated by former government Arnold Schwarzenegger, making it easier for drivers to refuel.

Of course, all these predictions are taking place on a world scale, and there the progress may be even more rapid than in the United States. One thing Tesla discovered in its relatively abortive attempt to crack the Chinese market is that China already has a thriving electric-car industry. The cars, moreover, are not scaled-down versions of powerful sports cars but slow-moving vehicles that have been designed from the ground up.

In an article in Forbes last week, Jack Perkowski outlined what he called “China’s other electric vehicle industry:”

While the global automotive giants struggle to find a winning formula for electric vehicles, approximately 100 manufacturers in China have already identified a large potential market undiscovered by the traditional players. The common problems faced by EV automakers — high cost, driving range, and the availability of charging stations — are not issues for these manufacturers because their target customers are satisfied with low-speed and limited range EVs, as long as they provide affordable transportation. In 2014, 400,000 so-called ‘low-speed’ EVs were sold in China, compared to only 84,000 conventional all electric and hybrid electric vehicles.

To get a glimpse of the size of China’s potential market, consider this: China is already the world’s largest vehicle market, accounting for 25 percent of all vehicles manufactured globally. Yet there is only 1 vehicle per 10 people in China, whereas in the United States there are 8 for every 10 – more than one vehicle for every person of driving age. China also has another huge market for other electric vehicles. It has sold 90 million motorcycles and 120 million electric bicycles.

Estimates are that China now has a million such low-speed EVs on the road now and might reach 3 million by 2020. These cars can do about 48 miles per hour and are used for short runs around town in smaller cities, so range is not a problem. They are doing wonders for air pollution. Manufacture only began in 2006, and already some provincial governments are starting to write requirements that they be preferred to the older gasoline types.
Surprisingly, the only government entity that has been slow to embrace the low-speed EVs is the national government in Beijing. The Central Government has not counted these EVs is their official automotive statistics and is only now starting to write regulations on how crash-worthy they must be and on what roads they will be allowed to travel.

Perkowski concludes: “Low-speed EVs may not fit the stereotype of today’s modern passenger car, but in China, where incomes remain low for a large part of the country’s population, affordability often trumps those values held dear in more developed countries.”

Could China’s low-speed EVs find a market in the United States? It’s certainly possible. In any case, the anti-gasoline revolution may be coming in ways we did not anticipate.

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Alternative fuels and vehicles: Good news on all fronts

If we’re going to replace the gasoline in our tanks, we’re going to need help from all kinds of directions. None of the alternatives is likely to do the whole job by itself, but every little bit helps.

That’s why it’s so encouraging that there was good news on all fronts this week, and why each little success gets us closer to having legitimate alternatives to take the place of gasoline.

Here’s a sampling of some of the news:

Batteries. A team at Stanford University announced it had developed a high-performance battery out of aluminum. This is important because aluminum is much cheaper than lithium, the current favorite among battery-makers. Aluminum has been used to make batteries, but the problem has always been keeping the voltage high after repeated charging and recharging. Now the Stanford team believes is has found the answer.

“We have developed a rechargeable aluminum battery that may replace existing storage devices, such as alkaline batteries, which are bad for the environment, and lithium-ion batteries, which occasionally burst into flames,” said Hongjie Dai, professor of chemistry who headed the team. “People have tried different kinds of materials for the cathode. We accidentally discovered that a simple solution is to use graphite, which is basically carbon. In our study, we identified a few types of graphite material that give us very good performance.”

This raises the question of whether Elon Musk can substitute aluminum batteries in his Gigafactory, a work in progress that is set to build lithium batteries for the new Tesla.

Hydrogen. Hydrogen cars are clean, producing only warm water for exhaust. But the problem is getting the hydrogen. The only known methods to date have been electrolysis of water, which is expensive and energy intensive, and “reforming” natural gas, which produces carbon dioxide and makes hydrogen just another fossil fuel. But now a team of scientists at Virginia Tech has come up with a catalyst the can make hydrogen quickly and cheaply from biomass.

“Researchers from Virginia Tech have developed a way to drastically cut the time and money necessary to produce hydrogen fuel,” reports The Christian Science Monitor. “By using discarded corn cobs, stalks, and husks, they have improved on previous methods deemed too inefficient by energy experts. Their research, which was funded in part by Shell, was published today in Proceedings of the National Academy of Sciences.”

Using genetic algorithms, Percival Zhang and Joe Rollin developed an “enzymatic pathway” that speeds up the reduction of hydrogen from biomass. By including two simple plant sugars, glucose and xylose, they were able to increase the rate of hydrogen production while emitting an “extremely low amount” of carbon dioxide.

“Cost effective and productive in volume, this method could breathe new life into the hydrogen car,” says the CSM.

Biofuels. And speaking of enzymes, another team of researchers working for the Department of Energy has come up with a bacterium that efficiently breaks down biomass without pretreatment. The team has been using the system to extract ethanol from switchgrass, a fast-growing weed that has long been a favorite of biofuels enthusiasts. The strategy, called consolidated bioprocessing, uses the Caldicullulosiruptor beseii bacteria to split cellulose and then ferments it into ethanol. The strategy eliminates the very expensive pretreatment that requires heat and more enzymes. Several facilities are now trying to break down cellulose and convert it into ethanol, but this one-stop process would be a huge saving.

EVs. A study at the Stockholm Environment Institute says that electric vehicles may be coming into their own much faster than everyone thought. This is because the price of batteries is coming down faster than anticipated. EV batteries now cost approximately $300 per kilowatt-hour. They weren’t expected to fall much lower than that over the next five years. But the authors Bjorn Nykvist and Mans Nilsson say that recent developments have brought the price down as low as $150 per kilowatt-hour, which could make electric vehicles appealing for a much wider range of customers. Since the batteries normally make up at least half the price of the vehicle, it could reduce costs significantly. Or manufacturers might use the new low price to load up on batteries, increasing the range of the electric vehicle. Either way, the package becomes more attractive.

And that doesn’t even include the possibility that the aluminum battery developed at Stanford could be making batteries more efficient and lowering prices even further.

There’s a tremendous synergy going on in these fields, as researchers pursue numerous pathways in exploring alternative vehicles. One way or another, it means that alternatives to foreign oil are soon going to be making their way into the customer’s field of vision very soon.

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Is Tesla really all that disruptive?

Elon Musk’s dream of revolutionizing the auto industry seemed to lose some of its luster last week as the fledgling electric car company ran into a few roadblocks in getting its new models into consumer hands.

The $35,000 Model X is scheduled to be leaking out to a few early customers late this year. Then full-scale production will begin in 2016. But already there is talk of delays and missed deadlines, so there might be an asterisk attached to those numbers soon.

The ultimate goal is selling 50,000 Model X’s by 2017, which still seems way over the horizon. A lot of those sales were supposed to come from China, and that’s developing into a problem. Musk was in China last week talking things over with Zhao Kuiming, head of Tesla’s China sales division, but Musk has already decided to “reboot.” It appears that Chinese buyers are still spooked by the lack of recharging stations, even though there have been a few grand openings around Beijing. Tesla was hoping to sell between 4,000 and 8,000 models in China in 2015, but only 120 cars were sold in January. Musk has cut the China staff from 600 to 420 and is recalculating just what can be expected from the Middle Kingdom. The tastes of the few Chinese millionaires who could be counted on to purchase the Tesla as a status symbol aren’t going to get him very far.

All this has spooked investors as well. They’ve driven the price of Tesla stock down nearly 20 percent since the start of the year. Once the highest flyer on the market, Tesla peaked at $293 a share last September, but it’s been a long descent ever since. Prices lingered around $180 per share last week. Even then, Tesla is trading at 232 times its expected earnings for 2015. The average stock on the NASDAQ, where it trades, is 21 times earnings. All this has lifted the short interest on Tesla stock to 27 percent of floating shares. The average on the NASDAQ, once again, is only 5 percent.

Nevertheless, all this could turn around quickly. Tesla already has 20,000 pre-orders on the Model X, and there is every reason to think its release could revolutionize the industry, much as Musk says. As it is emerging, the Tesla is going to be a device much more attuned to electronics and Silicon Valley as it is to Detroit and the auto industry. Musk is already introducing over-the-air (OTA) updates of the car’s software in a model, much more like an iPad than a Ford Focus. All those features you see advertised by the major automakers — rearview cameras, automatic emergency braking — will be standard in the Tesla. Musk is already talking about an automatic driving feature that will allow drivers to guide the car hands-free on Interstate highways. Of course, there are lots of state regulations that will have to be satisfied before this feature can go into effect. California, Nevada, Michigan, Florida and Washington, D.C., already have laws allowing driverless vehicles driving, but it’s unclear how Tesla’s system will be judged under these statutes.

Also decided at the state level is the question of whether Tesla can sell directly to customers or must work through established car dealerships. These laws are generally put into effect at the behest of local dealers to prevent the major auto companies from setting up their own shops. But Tesla has run afoul of the law in many states. The company just won a major victory when New Jersey Gov. Chris Christie came down in favor of Tesla. Georgia has also opened its doors to direct sales at five stores. But West Virginia has gone in the opposite direction, banning sales of Tesla altogether. There probably aren’t that many potential Tesla customers in West Virginia anyway.

Perhaps the unkindest cut came from Wall Street Journal columnist Holman Jenkins, who wrote a piece titled “Tesla: Just Another Car Company.” If you wanted to insult Elon Musk, you could hardly do better. “Elon Musk has proved that a market exists for electric cars, despite their many inconveniences, especially if they come wrapped in taxpayer subsidies,” Jenkins wrote. “But he hasn’t proved he can make a profit.”

Jenkins sees the Tesla operating in a niche market, in which a small percentage of customers are willing to ignore the problems in order to be “green.” Once this niche is filled, however, the market will thin out quickly. “Uber is disruptive,” he writes. “Tesla isn’t. Tesla is disruptive mostly of a driver’s confidence that he’s going to reach his destination without needing a tow.”

Yet this perspective is probably too negative of Tesla, and electric cars in general. There are people whose driving needs it fits perfectly. “I own a Tesla. It is beyond spectacular,” wrote one of the commenters to Jenkins’ piece. “The car has Di Minimus maintenance as there is nothing to break.” “That is why I bought a Tesla,” says another. “At 270 miles to start with, range anxiety is not my problem, yet. I rarely drive over 100 miles in any given day, and if I needed to, my Chevy Tahoe is still in the garage.” I have friends in Baltimore who bought a Nissan Leaf as a second car to tool around the city and love it.

So Tesla may just be filling a niche, but it is still a sizable one. Infrastructures can change a lot faster than we anticipate, especially where there is a demand for it. Tesla’s stock may be overvalued and due for another nosedive. But the company is still making big changes in the way we power our cars.

Tesla-car

Tesla hits some speed bumps

Tesla’s stock was down around $200 again after its fourth-quarter report disclosed that neither its sales nor profits had met analysts’ expectations. At the same time, the company went into what one analyst called its “insane mode” as founder Elon Musk predicted that by 2025 the company’s market capitalization would reach $700 billion, matching the current value of Apple.

Analysts were scratching their heads as Musk’s vision seemed utterly at odds with the difficulties that are starting to pile up with Tesla’s ability to meet current goals. The company’s 2014 revenues rose to $3.2 billion, up from $2 billion the year before. However, expenses continued to mount, and losses widened from $74 million to $294 million last year. For the fourth quarter, Tesla delivered only 9,834 of the 12,000 cars it had predicted. Musk blamed the winter weather and customers’ holiday travel for the shortfall. A bigger disappointment has been sales in China, where Tesla sold only 120 cars in January. Musk has supposedly messed up by insisting that the cars be sold only by dealers, whereas the Chinese want anyone to sell them. He also says that concerns about home chargers and the lack of public charging stations have made it extremely difficult to crack China’s notoriously tough market. Musk now says that the company is now not counting on any sales in China to help it reach its goals.

But those goals are wildly ambitious. Musk told analysts that Tesla is anticipating a 30 percent increase in revenues per year for the next 10 years, which is the pace needed to put Tesla’s market value on par with Apple’s. “That would imply sales volume of well over 5 million vehicles per year,” Edward Niedermeyer wrote in Bloomberg View. “That would have Tesla surpassing the 2014 sales of such familiar names as Nissan, Honda and Fiat-Chrysler – at highly significant profit margins – within a decade.” Needless to say, Niedermeyer and many others find this prospect unlikely.

But Tesla isn’t standing still. It announced last week that it will produce a battery for home electricity storage. This will fold nicely with its partnership with SunCity, run by Musk’s cousin. People who install solar panels on their roofs will welcome a battery system that allows them to store electricity for times when the sun doesn’t shine. Just as solar seems to function best when distributed across a wide variety of users, so energy storage may ultimately work best when it is distributed over a wide variety of users.

Whether Tesla will be able to survive all this, however, is still an open question. The main threat to Musk’s vision seems to be coming now, not from predictable delays and bumps in the road, but from healthy competition from experienced automakers. Chevrolet has announced the Bolt, a successor to the Volt, which will be swinging right in Tesla’s wheelhouse – the $30,000 market for electric vehicles that can travel 200 miles or more on one charge.

General Motors has moved the introduction date up to 2017 (the same as the Tesla 3) and seems deadly serious about entering the EV market. “The Bolt EV concept is a game-changing electric vehicle designed for attainability, not exclusivity,” General Motors CEO Mary Barra said in a statement. “Chevrolet believes electrification is a pillar of future transportation and needs to be affordable for a wider segment of customers.”

Besides the Bolt, GM will have an improved version of the Volt, plus the $75,000 Cadillac ELR, a plug-in model. Daniel Miller of Motley Fool isn’t terribly impressed with any of these efforts, noting that the ELR has already had little success competing with Tesla’s Model S in the luxury-car category. “Because of that premium, first-mover brand image that Tesla created with its Model S, it’s hard to imagine how the Bolt will steal much of Tesla’s Gen 3 market in 2017, even if it is price-competitive,” Miller writes.

But if Tesla really has something to worry about, it’s the rumors that Apple, its Silicon Valley rival and the world’s largest company, is preparing a secret plan to enter the car market as well. Just this week it was revealed that Apple has a secret project employing 1,000 people to come up with some kind of concept car that will rival the Tesla Model 3.

“Apple has batted around the idea of developing a car for years,” reported Adam Satariano and Tim Higgins of Bloomberg Business. “Phil Schiller, Apple’s senior vice president of marketing, said in 2012 court testimony that executives discussed building a car even before it released the iPhone in 2007. Mickey Drexler, an Apple board member and head of J Crew Group Inc., also said in 2012 that Apple co-founder Steve Jobs had wanted to build a car.”

Apple has worked on batteries for the iPhone and iPad and also has a supply chain that could easily be applied to vehicles. “The mapping system it debuted in 2012 can be used for navigation. Last year, Apple also introduced CarPlay, a software system that integrates iTunes, mapping, messaging and other applications for use by automakers,” Satariano and Higgins wrote. Of course, that’s a long way from turning out thousands of vehicles, but Apple has invaded other businesses before. It basically knew nothing about the music business when it started on iTunes, and had no experience with telephones when it invented the smartphone.

In any case, even if Tesla finds itself in competition with much larger established companies – something Musk predicted at the start – it is revolutionizing the field of automobiles by making the electric car seem practical. Although Musk’s dream may prove to be overblown, he has certainly advanced the search for alternatives to the internal combustion engine.

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Swappable batteries make a comeback, in the Smartscooter

Shai Agassi had a great idea. Buy an electric car in which you can swap out the battery for a fresh one. That way you bypass the recharging time, which may be up to 4 hours.

It was a great idea, and Agassi got a lot of publicity when he introduced it in 2011. He was going to set up a network of charging stations in Israel, then try to expand into Europe and the United States. But A Better Place, Agassi’s company, declared bankruptcy in 2013. The idea didn’t catch on. Battery-swapping stations proved more complicated and difficult than anticipated, and the idea just didn’t resonate with motorists.

Now a secretive American designer named Horace Luke has come up with the same idea, but he wants to apply it to a new electric scooter called the Smartscooter. The battery will be much smaller. The machine in which you exchange your depleted battery for a new one will be about the size of an ATM. You will get about 40 miles to the charge, which will make it excellent for commuting. Altogether, it’s not just an alternative vehicle but an entirely seamless system he hopes will revolutionize transportation. Once the idea catches on with scooter owners, he hopes it will eventually extend to cars as well.

There are pluses and minuses to the idea: Luke hopes it will diminish dependence on gasoline and introduce electric vehicles as a true alternative. Critics point out that there are no reliable indicators that powering a car with electricity does anything to reduce carbon emissions, especially if some of the electricity is produced by coal, which provides 46 percent of the nation’s power. Luke counters that much electricity can be produced by wind and solar, and that batteries are an excellent way of storing surplus power. There is even talk that these batteries will be a way of evening out the ups and downs of the grid — although, of course, they will not be able to feed the grid and get you home from work on your Smartscooter at the same time.

There are other problems as well. Many people complain that scooters are useless in the rain and cold, while others say a good raincoat or warm clothing will solve that problem. There are also concerns about scooter finding a place to park where they can be chained up, and worries that they are easily stolen. But overall, the idea of a scooter that can be easily recharged and make 60 miles per hour on an electric battery seems to have some appeal.

In any case, it’s enough to help Luke raise $150 million for his company, Gogoro, which intends to start marketing the scooter system this year. Both the price of the scooter and the subscription that will allow the owner to start swapping batteries are yet to be announced.

Luke is not the first since Agassi to come up with the idea of substituting swapping for recharging. In defiance of Agassi’s abortive effort, Tesla has shown off a concept for a station that would allow a Model S to replace its battery in 90 seconds. Although the system was promised by the end of 2013, Tesla has barely mentioned it since. There was some talk about a launch early this year. The problem is that a Tesla battery weights about 100 pounds and requires a complex system to replace, whereas the scooter battery exchange can easily be handled by one person. “We no longer want to talk about charge time,” said Luke, “we want to talk about swap time.”

The Smartscooter received a nice write-up in the current edition of Wired, but even there the sophisticated readership had its doubts that the technology could be applied to cars. One online commenter wrote: “Even if it [the battery] could be replaced in 1 second, people would still rather fill their tanks, than assembling heavy batteries back and forth. Only battery enthusiasts are willing to do every inconvenient thing, to keep their dream alive.”

Other readers complained about how lithium ion batteries lose their charge and don’t store easily. They will have to be continually recharged, which of course requires electricity.

In short, the swappable electric scooter is no sure thing. There are plenty of obstacles that will make it difficult to catch on. But it’s definitely a step in the right direction in making people more accepting of modes of transportation other than imported gasoline.

(Photo credit: Gogoro)

Bolt

Electric company: GM makes statement with Bolt, Volt

General Motors CEO Mary Barra has sent a strong message to the auto industry: It’s serious about producing electric cars for the middle class.

One of the most talked-about vehicles unveiled Monday at the North American International Auto Show in Detroit was GM’s Bolt, an all-electric concept car that could go on sale in 2017, the Detroit Free Press reported. The company also officially unveiled its redesigned Volt, a plug-in electric-and-gasoline hybrid that got a first glimpse at CES in Las Vegas last week.

The Bolt’s price tag is $30,000, including the $7,500 federal tax incentive, GM North America president Alan Batey said. It would get about 200 miles on one battery charge.

As the Detroit News reported, GM is positioning the Bolt as an affordable EV option:

“This is truly an EV for everyone,” Barra said. “For most people, this can be their everyday driver.”

Batey said the Bolt isn’t aimed at Tesla, noting Tesla’s current average transaction prices are above $100,000.

“They are for the rich and famous. This is for the people,” Batey said of the Bolt. “I would probably counter and say I haven’t seen Tesla with anything like this.”

Despite what Batey said, Forbes took the unveiling as a direct challenge to Tesla:

The Bolt is a clear shot at upstart rival Tesla, which has said it is working on a less-expensive version of its $70,000+ Model S. Dubbed the “Model 3,” it would cost somewhere between $30,000-$40,000, a clear attack on the most popular segment of the automobile market.

Barra is clearly looking to meet the challenge. The Bolt, she said, would be an “all-electric vehicle for the real world.” Tesla CEO Elon Musk is scheduled to appear at a related auto industry conference in Detroit on Tuesday afternoon.

As for the revamped Volt (with a “V”), the biggest news is that the battery range has gone up to 50 miles. At that point, the gasoline engine, a 1.5-liter “range extender,” kicks in, pushing the limit to 400-some miles before the vehicle needs a charge or a fill-up. With the electricity and gas range combined, mpg on the highway is about 41. In all-electric mode, however, it’s 102 for a gallon-of-gasoline equivalent, thanks to the new 18.4-kilowatt-hour lithium battery.

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To compare, today’s four-seat 2015 Volt has a 38-mile range from a 17.1-kWh battery in a powertrain that offers 37 mpg and 98 MPGe. So, across the board, there are notable improvements.

The blog has much more about the dashboard improvements, and the Verge has a bunch more photos.

The Volt is expected to be in showrooms in the second half of 2015 as a 2016 model.

(Photo: General Motors)