White House Report: GM Volt Is Not Ready for Prime Time 91 comments
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This extraordinary conclusion has been public for weeks but I've not seen it reported by any mainstream media. I would have missed it entirely if Plug In America, an EV industry trade group, hadn't made a point of issuing a press release that was drawn to my attention by one of my readers. While the White House did not specifically lay the Volt's problems at the feet of the battery industry, Plug in America did. In their refutation of the auto industry task force report, Plug in America said:
California law requires that the Volt and other plug-in hybrids come with a 10-year warranty. To ensure this longer life, automakers are as much as doubling the size of the battery pack, increasing cost to manufacturer and consumer. But not a single production plug-in electric vehicle sold to date, from GM’s early EV1 to today’s Tesla, has had a warranty of more than five years, noted Plug In America advisory board member Chelsea Sexton.
“To support early deployment, California should relax the warranty requirement for cars like the Volt to five years, phasing to 10 years over time,” said Sexton, a former GM employee. “This alone could cut the number of batteries required by as much as half and reduce the cost of each vehicle by thousands of dollars."
The warranty reduction would not impose added liability on GM or consumers, Sexton noted, because President Obama has said the federal government will guarantee the warranties of GM and Chrysler vehicles should they go bankrupt. And dealers can sell extended warranties, providing additional security for consumers who want it as well as revenue when auto companies need it most.
In January 2009 the DOE released its 2008 Annual Progress Report for the Energy Storage Research and Development Vehicle Technologies Program that concluded Li-ion batteries were not ready for prime time in PHEV and EV applications. In March 2009 the President's auto industry task force issued a report that the GM Volt, the first Li-ion powered PHEV proposed by a major manufacturer, was not ready for prime time.
Is anybody out there listening to the facts or are the PR jungle drums from a few undercapitalized Li-ion battery developers simply drowning out the voice of reason and prudence?
Cheap Li-manganese batteries from LG-Chem and $7,500 in Federal Tax Credits are not enough to make the Chevy Volt commercially viable. Comparable batteries from Ener1 (HEV) were not enough to keep Th!nk out of fiscal reorganization in Norway. More expensive Li-phosphate batteries from A123 Systems are unlikely to keep Chrysler out of bankruptcy. While Li-phosphate batteries from Valence Technology (VLNC) and comparably priced Li-titanate batteries from Altair Nanotechnologies (ALTI) are being tested in hybrid transit buses and other commercial vehicles that may put enough stress on the batteries to justify their high cost, none of the companies I criticized last July has demonstrated any ability to meet the challenge and do the heavy work of powering America's transportation future.
I love the Li-ion batteries in my laptop and cell phone and believe Li-ion is an excellent choice for applications like electric two-wheelers (E2W) and other vehicles where there is a rational relationship between vehicle weight and passenger weight. But it is high comedy to suggest that Li-ion batteries will ever be able to power 300 pounds of passengers and 3,000 pounds of steel for 40 or 50 miles at highway speed. It's like using 5,000 golden hamsters to pull a stagecoach when what you really need is a horse.
I've been rational, analytical, courteous and engaging for the last ten months, but it's high time for somebody to stand up and call bullshit on the shameless Li-ion hucksters who have nothing to offer but happy-talk forecasts and hype! It's also high time for taxpayers to stand up and say "Not with my money you don't!"
America's leading Li-ion battery developers including Altair Nanotechnologies, Ener1 and Valence had combined losses of $93 million on $42 million of 2008 sales, yet they sport a combined market capitalization of $1 billion. In comparison, America's leading lead-acid battery manufacturers including Axion Power (AXPW.OB), C&D Technologies (CHP), Enersys (ENS) and Exide (XIDE) carry a comparable combined market capitalization even though they had combined profits of $140 million on $6.2 billion of 2008 sales.
Something is dreadfully wrong with this picture. Summary data for each company follows.
| Price Per Share | Mkt Cap (millions) | Sales (millions) | Income (millions) | ||
| Altair Nanotechnologies Inc. | ALTI | $1.29 | $120 | $6 | ($29) |
| Valence Technology Inc. | VLNC | $2.22 | $273 | $29 | ($21) |
| Ener1 Inc | HEV | $5.40 | $613 | $7 | ($43) |
| $1,005 | $42 | ($93) | |||
| Axion Power | AXPW.OB | $1.40 | $49 | $1 | ($11) |
| C&D Technologies | CHP | $2.10 | $55 | $375 | ($8) |
| Exide Technologies | XIDE | $4.66 | $352 | $3,698 | $58 |
| Enersys | ENS | $13.96 | $670 | $2,162 | $101 |
| $1,126 | $6,236 | $151 |
For months my message to storage sector investors has been simple: the energy storage sector will ride the crest of an investment tsunami as we enter the cleantech revolution, but cleantech is all about price vs. performance and there is no room for irrational expectations. The DOE has said the same thing and now the President's auto industry task force has joined the chorus. Lithium dreams have become an investor's worst nightmare. It's time to wake up and smell the coffee, go to work and solve our problems to the best of our ability with cost-effective technical solutions like compressed natural gas and advanced lead-acid and lead carbon batteries.
The airbrushed Li-ion centerfolds may have serious investment merit in the future, particularly if somebody in the EV world develops a product that is proud to be an EV instead of pretending to offer the functionality of a family car. But that day is not today and investors need to stop deluding themselves. Cool technology that cannot provide a cost effective solution to real world problems has all the nutritional value of rainbow stew. So let's stop wasting time and money on feel-good solutions that cannot work and get to work solving the problems with readily available and cost effective technologies.
Disclosure: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide (XIDE) and Enersys (ENS).
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On Apr 24 02:43 PM speculawyer wrote:
> Your driven hatred toward Lithium-Ion batteries is quite apparent.
> And in its stead, you propose the lead-carbon batteries that you
> have a large financial stake
>
On Apr 25 08:11 PM engstudent wrote:
[blah, I don't know thereof I write...]
Again thanks for your very in depth analysis of the energy storage area. You have said repeatedly that the big bang for the buck will be in large energy storage systems. Not Autos. Yet time and again your sceptics turn the argument over to Plug in Autos. We need to save oil in this world. No question. Hybrid vehicles save fuel now. Not years from now. An inexpensive battery system along with gas engines work. The cars and SUV's can have power, room, and help this country become self sufficient.
Please lets get off this insane argument over lion vs. lead . If anyone has read your articles and does not understand the arguments you won't be able to change their mind. As a comic says " You can't fix Stupid".
Your time is more valuable to investors with the information you make available.
So an investment question. Why has ZBB been such a hot stock lately. I looked into their technology and see it as a "dry cell" type storage device. It seems expensive ( $1,000 per k/w) but why are you a believer in the company?
Thanks again.
A couple months back I spent some time with ZBB's management and discussed the benefits of their flow batteries and the direction they saw the company heading. They have a great technology for end of grid and off grid installations that rely on wind, solar or diesel but could easily top off the batteries during the day and use the stored electricity for reduced night-time demand. With a market capitalization of only $16 million, solid financial statements and a partner like Eaton working marketing and distribution I expect great things out of ZBB, which is why I bought a little last year. As I recall, the price point I discussed with ZBB's management was closer to $500 per kWh, a number that ties back nicely to the cost table in the DOEs' July 2008 SEGIS-ES report:
www.sandia.gov/ess/Pub...
I still don´t understand why you - based on the DOE or White House reports - can conclude that “The technology remains too unproven, expensive and unreliable for its planned uses” given that: (i) the DOE report did not in fact conclude anything; and (ii) the White House report fails to distinguish between conventional hybrid technology (e.g. Prius) with range extended electric vehicles (e.g. Volt) thus invalidating any conclusion regarding the Volt. For an elaboration on the latter argument see my EV World.Com blog (evworld.com/blogs/inde...).
I presume the 5% to 7% annual increments you mention are extracted from your previous analysis about the progress Li-ion batteries made in the last 9 years. If so, your argument is misleading because, as I argued in my January 2009 Industrial Minerals article (www.indmin.com/Magazin...), real interest in Li-ion batteries for electric cars started only after GM´s announcement in January 2007 that by 2010 it will introduce the first mass-produced Li-ion powered plug-in hybrid electric vehicle (PHEV) into the market. Thus, to be correct, you may have to relook at the data during the last two years only.
Here is link to the The Economist´s article: www.economist.com/busi....
Finally, I am afraid you didn´t really respond to my argument that your analysis is centered in the US while the Li-ion battery business is elsewhere, particularly in China.
As far as progress trends go, we both know that the more data points one uses the more reliable the line is. Finding hard data is difficult to impossible because everyone plays their cards so close to the vest. In any event, trying to extrapolate from two years of data is a fools game and I'll not play it.
The economist article vaguely alleges that BYD has found a way to cut costs in half, and follows it up immediately with a skeptical view from a competitor. While you may have access to far better data than I, the only hard data I have from BYD is the price difference between their ICE and PHEV versions of the same car. That difference tells me nothing about manufacturing cost differences and nothing about management's willingness to take a loss on a low volume product to create demand for a higher volume product.
In an earlier response to earwig who asked about BYD I wrote:
"I read the Forbes article last week and thought "what a wonderful company." They have 120,000 low paid workers, roughly $3 billion in annual sales, roughly $625 million in annual gross margin and roughly $150 million in annual profit. Which means they make about the same amount of money as Exide and Enersys combined.
They also have a net stockholders equity of roughly $1.25 billion.
Buffet bought 10% of the company last year at a post-money valuation of $2.3 billion, which is less than 1x sales and roughly 15x earnings.
None of the Li-ion centerfolds are even in the same league."
BYD is a fine company and you'll never hear me criticize Buffett's investing acumen. ABAT is also a fine company. But extrapolating from two points to say the others are fine by transitivity is a fools game.
China has enough urgent problems with overcrowding, air pollution and a population that wants a better life to give a tinker's dam about what Americans want. Until China's population has mobility, the probability that they will take a little battery power away from 20 of their citizens who only want an E2W so that one American can have a lot of battery power for a PHEV-40 approaches zero.
It's been several days since I posted a question to Jack Lifton re: rare earth metals and their impact on this discussion and their investment possibilities, but he has not responded. What are your thoughts on it?
Thanks again
"Thank you. I will draft a response to these questions, and I will post it on my Instablog on SeekingAlpha. I have been jammed lately with (fee paying) consulting work, and you know how priorities are set."
Jack's instablog is at:
seekingalpha.com/autho...
The business failures, and they were far more common than the successes, typically occurred when the companies tried to move established science from the laboratory to a factory.
> the idea of cars with plugs is fatally flawed
John,
1) Since you're living in Europe you may have missed the news on the recent spot gasoline shortages during the hurricane season -- apparently Atlanta was particularly problematic with shortages and long lines.
Madison Avenue marketing sharps will have no problem getting folks to pay-up for, say, a 20+mile all-electric range PHEV by using "gas line" footage blended in the advertisements. Need to get to the grocery or pharmacy and back? No problem. Go on some other errand or visitation (without denting your commute fuel)? No problem. GM/Ford/Xyz PHEV is your answer!!! End with a picture of your "gas-only" neighbor watching you drive by. (Personally, I think that last picture is why four-wheel-drive vehicles scurry about after snow storms -- the "superiority" factor sells).
2) Anyhow, transit bus companies are building plug-in buses right now. Obviously they already feel comfortable with the price/performance of these batteries because they have been pitching them to municipal transit operators for months. Several heavy duty vehicle makers are moving to lithium from other battery types, and some are building all-electric lithium buses and trucks.
A couple of old bromides here--humor sometimes helps. As far as Speculawyer is concerned- "convince a fool against his will, he remains convinced, a fool yet still." On investment strategies " the race is not always to the swift, nor the battle to the strong--but that's the way to bet." Finally, this from over fifty years ago entitled "Hambone's Meditations"--"if yo' outgo 'xceed yo' income, yo' upkeep will be yo' downfall." Not politically correct, but absolutely true in every sense of the word.
Funny you should say that because I just drove an EV 60 miles carrying 500 pounds of passenger at highway speed (actually we were speeding by ~10 mph) and still had 38% SOC when we got back. You can keep saying that Lithium will never be viable but it already is and will only get better. What we did today screams so loud that I cannot hear what your saying John.
I put transit buses and commercial vehicles in a different class than passenger cars. Commercial vehicles operate 8 to 16 hours a day, fully utilize the batteries and are bought by users that don't change vehicles on a three to five year trade-in cycle. Passenger cars operate for two hours and are parked for 22, which cannot even come close to efficiently using the batteries. When you add in the propensity of consumers to trade-up to a new car every few years, the economics collapse.
Tireman ;-)
One Guy Two Cups, I apologize. Li-ion batteries can in fact power 300 pounds of passengers and 3,000 pounds of steel for 40 or 50 miles at highway speed. But once you get past the technical feasibility and consider the cost of accomplishing that task, Li-ion batteries make as much sense as a solid gold toilet seat.
I would respectfully suggest that your chances of getting $35,000 for a used battery based on 10-year old technology at some distant future date are between slim and none. They tried that trick with computer mainframes when I was young and it simply didn't work because technology moves on, even in the battery industry.
I would also point out that the risk weighted discounted present value of any reasonably estimated salvage value is insignificant in comparison to the front end cost of $50,000.
"70% of the value associated with a pack would still be remaining after its energy density degrades to the point its no longer useful in vehicles. Not taking into account other factors, that would change the cost estimate per vehicle to around $5k which leaves plenty of room for error. "
How do you gather I meant 50k? I meant the total cost for the entire lifetime would be 15000 USD. After the energy density of a lithium ion battery pack degrades to the point which its no longer worthwhile to keep in a car, 70% of its value would still remain strictly speaking from a mathematical point of view. Keep in mind the energy density degrades with respect to date from manufacture and not the charge/discharge cycles run on the pack. This is a fundamentally unique characteristic of Lithium ion batteries that you just don't get with any other chemistry as is the case with Lead acid, lead carbon, NiMH, or NiCD. This can be either a benefit or problem with Lithium ion. For example, it makes much more sense to use a Lithium ion pack for taxi or hybrid bus applications than it would for grandma to drive 100 miles per week.
Furthermore, you're estimates of a 10 year old technology are untrue, the chemistries of today are not at all the same as the chemistries of ten years ago. I'll agree with you it would be a terrible idea to develop lithium polymer or lithium graphite chemistries for automotive applications since heat generation leads to density degradation however chemistries such as lithium hard carbon generate very little heat during a typical drive cycle and even cool the pack during charging. The main challenge lead carbon is going to face is getting heat out of a massively large and massively heavy battery while at the same time maintaining cycle life. It may work in applications where volume and weight are not as big of an issue but forget trying to get a mechanical engineer who designs a vehicle chassis to put a one ton mass of lead in the center of a car and try to make it pass crash testing. Even a far lighter lithium pack will have and has already had problems doing that.
In summary, I'd say my biggest problems with your argument are twofold. First, you completely ignore the technical feasibility of building a vehicle using lead carbon. If it can't be done, it can't be done no matter how cheap it is. The heat and mechanical limitations of putting a lead battery in a vehicle are nearly insurmountable. I suggest you do more research into the quick charge capabilities of lead carbon and lead acid. You'll be lucky to get 100 miles out of a lead carbon driven vehicle, then what? Charge it at 100kW and wait 24 hours for it to cool down. There is simply no way to get the heat out even if you used liquid cooling. Secondly, you completely neglect to mention that lithium chemistries from ten years ago that you keep knocking (which you are right are not appropriate for vehicles) are only 33% more expensive per kW/hr yet providing 200% more energy density. I don't understand your logic of Lithium ion making sense at a portable level, ie electronics, and not at a portable level, ie vehicles, at the same time.
Obviously we're speaking from two different opposing views, you see it from the economics side and I see it from the scientific side. Lithium ion certainly will not be the end all be all. I say hard carbon isn't feasible for technical reasons. You say Lithium ion isn't for economical reasons. We both may be right. Neither is the right answer for the long term, only time will tell what is in the short term. To compete with gasoline we're going to need ten times the energy density that the best batteries give us today. Its certainly a pleasure hearing both sides of the story though John so thanks for the insight you provide just be careful not to overlook the technical point of view too.
Our big point of disagreement is whether cars with plugs and ICE will ever be economic. I don't think they will because the batteries cost too much and that's true for all types of batteries, lead and lithium alike. Current DOE forecasts have HEVs and MHEVs without plugs dominating the market for the next 20 years. When a car is only packing one or two kWh of storage, the size and weight equation is significantly different than it would be for 25 kWh. I agree that we won't see lead solutions in a 25 kWh application for anything smaller than a pickup, van or SUV. But I'm expecting a real horse race between lead and lithium for the one and two kWh systems if the manufactured lead-carbon devices perform like the prototypes have. That is, by the way a very big IF because we won't know which system is better until they're built and tested side by side.
I think we may be talking past each other on the re-tasking or salvage issue. I'm not suggesting that today's batteries are based on 10-year old technology. But if you buy a battery today and use it for 10 years, it will be a 10-year old battery when you try to recover your salvage value. Even if rates of progress in battery technology don't accelerate at the rate I believe they will, the salvage value of a used product based on technology that will be 10-years old on the salvage date is not a number that I would expect to be substantial.
Wired has just published a review of a year long study in Seattle about the performance of their fleet of Prius plug in retrofits that only averaged 51 MPG. The title of the article is "Plug-In Hybrids: More Hype Than Hope?"
www.wired.com/cars/coo.../