Tesla Model 3, Chevy Bolt And Nissan Leaf: Not All Are Equal

Summary

• Recent news of the jointly-developed Chevy Bolt by GM and LG has brought affordable long-range EVs back into the discussion.
• While the release of these three electric vehicles will be good news for consumers and the environment there is reason to be concerned.
• Each of these vehicles uses a different DC fast charging standard that may lead to network fragmentation and possibly confusion among consumers.
• For this reason, the vehicle with the most robust DC fast charging technology will have a strong advantage when these vehicles reach the mass market.

Overview

The news of General Motors (GM) jointly developing the Chevy Bolt with LG this week has brought the discussion of affordable, long-range EVs back to the attention of the national media and general public. LG Chem (OTCPK:LGCLF) (OTC:LGCEY) and LG Electronics (OTC:LGEAF) will supply many key components, including the battery cells and pack, GM-designed electric motor, power inverter, onboard charger and electric compressor for climate control among other critical components.

LG's involvement isn't a surprise, but the degree of their involvement is. One could argue that LG has just as much say in the Bolt as Chevy. This news is great for consumers who have been waiting for the first truly affordable, long-range EV. However, not everything is peachy for the future of the EV market.

Everyone Wins

The advent of affordable, long-range EVs on the market is a win for consumers and the environment. These vehicles will all likely have a range of 200 miles and cost less than $40,000. Consumers will love these EVs due to lower operating costs and the green credentials of having an EV. Even those who choose not to purchase EVs will benefit from better air quality in areas of high EV density. Now I know that everyone loves to point out that EVs are only as clean as the electric grid that charges them, but the grid is getting cleaner. In addition, in a large part of the country, EVs are already cleaner than pure gasoline powered vehicles could ever hope to be (see page 12 for map of US).

Starting in late 2017 and early 2018, consumers will have the choice of three, affordable, long-range EVs and possibly more if you count the BMW (BAMXY) i3 and/or Volkswagen (VLKAY) e-Golf. In fact, the CEO of BMW stated Thursday that the i3 will be getting a range boost next year. He even mentioned that it might be possible for current i3 owners to upgrade to the new battery when it becomes available. In addition, VW's new commitment to EVs may push them to have an affordable, long-range EV on the market at the same time as these other companies.

No One Wins

While the development of the aforementioned vehicles in this article is good news, not everything in the EV world is as promising. The fragmentation in DC fast charging standards between the three vehicles could hinder mass market adoption of these EVs. The Tesla (NASDAQ:TSLA) Model 3 will use the Supercharger network while the Nissan Leaf uses the CHAdeMO standard and the Chevy Bolt will utilize SAE's Combined Charging System (CCS). CCS is well developed in Europe, but lags behind the other standards in the rest of the world. CHAdeMO is well developed along the US coasts, Europe and Japan but typically charges at a max rate of 50 kW.

From this perspective, the Bolt and Leaf will be at a disadvantage due to an inferior charging rate compared to Tesla's supercharging network. This fact alone could materially affect sales for Chevy and Nissan as consumers will want the fastest charge rate available. At this point, Tesla has the quickest fast charging network in the world and also the most robust network in the US, Europe and China. In fact, Tesla is also expanding its efforts in Japan and Australia with moves into other counties in the near future.

The Real Winner

While it may be a little dramatic to say that the fragmentation of DC fast charging for EVs is a no win scenario, it's definitely not something to be taken lightly. In fact there is precedent for fragmentation causing issues in Google's (GOOG) (GOOGL) Android operating system for smartphones. However, it's likely the best DC fast charging network will win out. And the best overall charging network is Tesla's supercharging network. It operates at power outputs up to 135 kW with plans to move to 150 kW before the end of the decade. CHAdeMO and CCS aren't operating at these output levels and likely won't in the near future. Tesla's long range EVs also don't require frequent charging for long distance trips like the shorter range Nissan Leaf and VW e-Golf.

Another advantage for Tesla is that they are also capable of charging on CHAdeMO chargers with the aid of an adapter. In fact this setup could foreshadow a way for all three charging standards to get along. In the short term, these companies and organizations could work together to develop adapters that would allow any EV to charge on any network. While this development would undoubtedly be a big challenge, it would provide a solution to the fragmentation in the fast charging network.

Ideally, everyone would agree on the best standard and that standard is Tesla's supercharger network. The release of Tesla's patents has given the automotive industry the ability to join their standard, but so far no one has taken the bait. As I noted in a previous SA article, Tesla is currently in talks with a non-German, European automotive company for a partnership on its charging technology. We have yet to hear if anything has come to fruition, but Tesla's superior charging technology make them a likely candidate for collaboration.

Another secret weapon in Tesla's arsenal is the Destination Charging program. Tesla is partnering with hotels, restaurants and shopping centers to provide fast Level II AC charging at up to 20 kW. At this charge rate a Tesla can be charged at up to 58 miles of range per hour (when configured with dual onboard chargers) at a much lower cost than DC charging standards can provide. In fact, a Tesla Model S 85 can receive an 80% charge from this charging standard in about 3.5 hours. This cost effective solution will go a long way in assuring that Tesla owners have the best overall charging experience of any EV owner.

Conclusion

While news of the auto industry moving towards electric vehicles is good for consumers and the environment, there are still challenges to be dealt with. The advent of affordable, long-range EVs will bring about a war between Tesla's supercharger, CHAdeMO and CCS charging standards. However, there is an opportunity for these networks to work together or for a partnership revolving around Tesla's supercharging network.

LG's level of involvement with GM is a wild card and could provide an additional boost to a company looking to put the ugly past of the EV1 behind them. While the winner of this battle is yet to be determined, Tesla has a strong advantage from a cost and rate of charge perspective and is likely to continue leading the EV market forward in the coming years.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Disclosure: I am/we are long TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.