Part Two- Is It Easy to EV? The Carmakers.

When I concluded the first part of this post on the Electric Vehicle revolution, the story had reached the early 2000's, including the emergence of Tesla as the first successful company in the Western world to rely solely on making electric cars. I traced the remarkable background to that emergence: first, that electric vehicles initially competed successfully with gas-powered at the dawn of the automobile age (1890s-1900s), but then practically disappeared for most of the 20th century. Second, that, first with the steep rise of gas prices in the 1970s, alongside the rise of the environmental movement, consideration of alternatives to fossil fuels (across the board) suddenly surged (at first aimed at controlling air pollution).

By the late 1980s, with widespread public recognition of the harmful consequences of steadily increasing human-caused global warming, electrifying transportation became even more urgent. But it took a major technological advance, the commercial availability by 1991 of the light and powerful lithium-ion battery (alongside the cheaper but weaker nickel metal hydride battery), before electrification could become a practical reality. Japanese car giant Toyota provided the first profitable alternative, introducing the Prius in 1997 (the ancestor of today's HEVs, Hybrid Electric Vehicles). These cars combine a high-efficiency internal combustion engine with one or more battery-powered electric motors (no chargers required). Consumers thereby got (get) cars with the same range as solely gas-powered, while significantly reducing (but not eliminating) the greenhouse emissions. The Prius created a significant new niche in world car-making. Did this mean a mad rush of the consumer masses to hybrids? Not exactly- in the U.S., General Motors at the same time was selling the Hummer, a 4-ton behemoth getting 10 miles to the gallon!

But meantime a more radical alternative, so-called "pure electric" vehicles or EVs, was also being explored. The first experiments were with small sports cars, especially AC Propulsion's "tzero". Its outstanding performance, an entirely new driving experience, inspired both the founding of Tesla, and the involvement in it of millionaire Elon Musk, who, after great difficulties, was able to turn Tesla, by 2010, into a real mass-production EV competitor with the world great gas carmakers (European, Japanese, and American).

Meantime another parallel story was unfolding in Communist China, which dramatically opened up its economy (and enormous population) to trade with the capitalist world after 1978. The pivotal event in that story was when a handful of engineers, including German-trained Wan Gang, wrote a letter to the Party leadership in 1986, advocating a broad, long-term, and tightly focused program for a technological "leapfrog" to catch up with the West. As adopted by the government, it became known as the "863 Program" (from "86-3," March 1986). Although EVs were not included in the original goals, once China's spectacular growth took off in the 1990s, so did equally spectacular, and deadly, air pollution (not just from increasing numbers of gas vehicles, but especially from the burning of huge quantities of coal). When China joined the World Trade Organization in 2001, China was flooded with new brands of foreign vehicles, causing both a trade deficit and even worse pollution. China's government, including its military, was also already worried about increasing dependence on oil imports, which could, as had already unfolded in the U.S., sap the nation's wealth and security.

Aware of the potential of the new battery technologies, the Chinese added EV development to the 863 Program in 2001. Being an authoritarian and planned economy, Chinese EV adoption meant taking a series of far-reaching actions: securing the necessary technical knowledge and (especially) materials for batteries; starting to convert existing domestic car-making to EVs; and beginning, starting with big cities, to build a network of public chargers. All of these actions really began to take shape by 2007, when Wan Gang became the minister of science and technology. He announced: "There will be a strategic window for developing electric vehicles over the next 10 to 20 years. We have to take action now." He set the near-term challenge of having electric buses be the sole transport for the upcoming 2008 Beijing Summer Olympics.

Importantly, while all the actions I've mentioned were having real success (especially securing the global battery supply chain, especially lithium, as I'll cover in another post), there remained one very big obstacle to adoption- a now-familiar one, and one not readily ordered from above. How to get ordinary Chinese to buy electric vehicles in large numbers? They had the same issues you hear routinely today: where can I charge it? How far will it take me? What's the quality like? That part of the government's program did not go well, for a frustratingly long time. Chinese did quickly adopt electric bikes and scooters, but the rapidly expanding upper and middle classes were far more interested in Western luxury cars (which did include Teslas, but also gas BMWs, Lexuses, Rolls Royces, etc.) as status symbols. By 2009, China did become the world's largest passenger car market, but even Wan Gang's initial program, simply "10 Cities, 1,000 [electric] Vehicles", which hardly seems ambitious, fell flat. Time for a new, and extremely expensive, strategy- namely LOTS of government money, in the form of subsidies, to incentivize both companies and consumers.

The government began to invest billions of dollars ($14.8 billion by the end of 2021) in:

1) tax credits to consumers (a discount of 1/3 off the price, for example); 2) accelerating the setting up of a huge charger network; and 3) especially in providing companies, both old and new, with big sums for taking the risk of making this new category of vehicles, designing and making a wide variety of models that could attract all levels of society. The first Chinese company that took off as a result was BYD. Today it's the only EV company that regularly rivals Tesla in world sales (I'll get to why most Americans don't know its name!).

Now I've gotten to the heart of this post's topic: who are the top EV makers today? An important note, first: the below is not intended as a car buying guide (readily available elsewhere, and also daunting- 74 new models are expected by 2025 in North America alone!). Nor is it meant as any sort of investment guide (also readily available elsewhere). In the interest of space, I won't cover either form of hybrid (either HEVs or PZEVs, Partial Zero-Emission Vehicle, which rely more on electric motors). Rather, this post is a survey of the full-electric adoption process, specifically in terms of the top manufacturers.

THE BIG PLAYERS:

Right now (the situation is constantly changing), making EVs is dominated worldwide by 5 companies (which combined account for 53% of sales): Tesla (American), BYD (Chinese), SAIC (Chinese), Volkswagen Group (German), and Hyundai-Kia Motor Group (South Korean). I've also included Toyota (Japanese) because of its big hybrid sales.

#1- TESLA: No question, this company has led the way, especially in the 2010s; particularly because it has only made pure electric vehicles from the start. It started with just one factory, in Fremont, California, but now, with 110,000 employees, has added 5 more (in Nevada, Buffalo, Shanghai, Berlin, and Austin). The newest, in Austin (now the headquarters), is on target to be the second largest manufacturing facility in the U.S. (exceeded only by Boeing's aircraft factory in Seattle), with plans for 20,000 workers. Tesla is rumored to be adding another factory in Mexico soon. This past year, despite multiple difficulties, Tesla was on target to sell well over 3 million vehicles worldwide, has 65% of the U.S. EV market, and is the top seller of electric cars in Europe. It produces 5 models: the Model S hatchback (which jumpstarted the company in 2012- when it sold just 30,000!); the Model X SUV (which comes in a Plaid version with extra power; introduced in 2015); the Model S sedan (2017), and the Model Y SUV (2019- the current global bestseller). Tesla has also been ahead of the curve in setting up its own Supercharger charging network, well ahead of other national charging infrastructure (the company has said that it will open the network to non-Tesla owners, though it's not clear when, and using it will require those owners to buy an adapter).

The company has also been a pioneer in manufacturing some of its own batteries, starting with the "Gigafactory" (a word that's now in the dictionary) in Sparks, Nevada (between Reno and Las Vegas). That huge factory made enough for 30,000 Model Ys in 2022 alone, with plans for far more. The "Gigafactory" term has now been extended to the manufacturing plants; the plan is for the Berlin factory to make car batteries as well. Tesla also buys many other batteries from the world's major suppliers (including its partner, Panasonic).

A recent piece of good news, which briefly raised Tesla's stock price, was a story that broke in late 2021 that Hertz, the well-known car rental company, had ordered 100,000 Model 3s for its fleet. CEO Musk promptly denied there was a contract, but Hertz has confirmed some deliveries, and has since ordered Model Ys too. If the 100,000 number is actually fulfilled, Tesla could earn $4.2 billion, and Hertz will have electrified 20% of its fleet.

There has been recent bad news for the company, most notably Musk's decision (after trying to reverse it at first) to plunge $44 billion into acquiring the Twitter social media company, as of mid-2022. That decision has had two very harmful effects: one, that Musk, to cover the cost, has been selling off massive quantities of Tesla stock, and two, that the deal has undoubtedly distracted him from all his other businesses, including Tesla. It's important to note the exceptional link between Tesla and Musk in the popular mind. That has to do with his making all of the important announcements personally, and also with a very unusual fact about Tesla: it almost never advertises! Think about it- especially in the U.S., one sees endless car ads, but have you ever seen one for Tesla? That corporate decision has meant that Tesla's fate has been seen as bound up with one man, in terms of policies and direction.

To sum up: the stock price has dropped over 70% in late '22 as of last check, and its sales in China have also dropped, while for now the company is still in the forefront of the EV transition, in sales anyway. There are other negatives at work: Tesla has had repeated vehicle recalls, and has not introduced a new mass-production model in several years, and its announced projects (the Semi electric truck and the Cybertruck, a truly futuristic pickup) have had multiple delays in terms of when they'll reach the market. At the same time, other companies have been rushing into the EV business; the competition is becoming red hot! Tesla's prices, too, have stayed higher than for comparable gas models. It's very hard to say what Tesla's position will be in just 5 years from now.

Tesla Model 3 (from Wikipedia.org; Public Domain)

#2- BYD: Of the world's top-10 bestselling EV brands, half are Chinese, and the government has set a target that by 2030 40% of the vehicles sold within China must be electric. BYD is the company best positioned, at the moment, to make that happen (it has 70% of the Chinese EV market, the largest in the world). It was started as a gas carmaker, by now-billionaire Wang Chuanfu, in 2003. The official explanation for the name is that it stands for "Build Your Dreams," but the founder has said that it has no specific meaning (also joking in an interview that it stands for "Bring Your Dollars"!). He intended the company to be part of the EV transition from the first. It got off to a slow start, until the massive government subsidy program kicked in in 2008; then it introduced one of the first plug-in hybrid models in the world, the F3DM. Another big boost is that American billionaire Warren Buffett was an early investor, buying 10% in 2008 (at the peak he owned 19%, though now he's been selling shares). This gave the company great international credibility. By 2010, two years before Tesla's first car, BYD already had 180,000 employees, and in 2011 it introduced its first full-electric (the e6- then used mainly as a taxi). One writer has intriguingly called BYD's rise "explosive, improbable, and cloaked with mystery."

But BYD still had significant problems at first. Its early technology designs were knockoffs (from Japanese Mitsubishi and Toyota), and the general quality of its vehicles was low. It gained its real success in EVs by making commercial vehicles (taxis, trucks, and now school buses, being used for example in California). Now it even makes garbage trucks, 60-ton dump trucks for mining, and a hatchback specially designed for the hailing service Didi. It has even made monorail trains! BYD has been instrumental in transforming one of China's great industrial cities, Shenzhen (just outside Hong Kong in the south) through electrifying its public transit.

Since 2013, it has transitioned to making its own distinctive models, each named for a Chinese imperial dynasty (such as today's Song, Qin, and Han), successfully competing with Tesla in quality, and undercutting it in prices. Its compact e5 sells for just $31,000 (compared to $47,000 for a Tesla Model 3). By 2019, it was making more electric (counting plug-in hybrid) models than gas, and, as of Mar. 2022, it makes ONLY electric (and sold 641,000 in the first half of the year, outdoing Tesla). It now makes the full spread of models (compacts, sedans, crossovers, and SUVs), and is now concentrating on spreading worldwide (at least 35 nations outside China, including Australia and Southeast Asia, and now entering Europe and Japan). BYD's EV strategy has essentially been the opposite of Tesla's: instead of starting with small production of expensive cars (the Roadster) and working downward in model price, BYD has started with inexpensive models, and then worked upward over time. BYD now plans to expand into the luxury category through a partnership with Mercedes (called Denza). It now has over 288,000 employees, and is poised to give Tesla very serious global competition. It has helped China achieve high EV adoption (21%, vs. 6% in the U.S.).

Another big reason for its success is that it makes more of its own batteries than Tesla (it's the 4th largest maker in the world, and rising quickly!), and its own computer chips. Wang Chuanfu got his start in 1995, before car-making, in selling rechargeable batteries for cell phones. BYD uses safer, cheaper and more lasting iron-ferrous-phosphate batteries (LFPs), which can be charged 4,000 times (though they have lower energy density than lithium-cobalt-manganese, and hence the vehicles have shorter ranges).

So- a big question- why, if you live in the U.S., are you unlikely to have heard of BYD (or other Chinese car companies)? There's actually a one-word answer: tariffs, taxes on imports. Currently the U.S. imposes a 27% tax on imported Chinese passenger vehicles, which essentially erases any motive for those companies to enter the huge U.S. market directly. The tariff barrier is lower in the European Union (which increasingly is worrying that region's big carmakers). Of course the high U.S. tax is not accidental- besides the recent overall shift in national trade policy toward Chinese products (intensifying in the Trump years), American car companies simply don't want Chinese competition (especially in the soaring EV market).

#3- TOYOTA: This Japanese giant surpassed General Motors in 2008 to become the largest carmaker in the world (GM has just now exceeded Toyota within the U.S.). I've already covered its spectacular entry into alternative vehicles, well before Tesla (the hybrid Prius, introduced in 1997, which is now entering its 5th generation). That brand continues to be a big success, and dominates the world PZEV market (Partial Zero Emission Vehicles). There's a big paradox about that statistic. While Toyota sold almost 450,000 alternative vehicles in 2022 (a drop in sales, but 24% of its overall volume), only just over 14,000 were battery-electric. Toyota has been one of the most reluctant carmakers to embrace the EV transition; in fact its president, Akio Toyoda, has openly questioned the idea that BEVs are the wave of the future (most other Japanese companies have been reluctant too). Besides the fact that the company is still profiting from hybrids, the deeper reason has to do with the unique structure of Japanese car-making. The companies have exceptional vertical integration: each one has a long-standing web of hundreds of suppliers, of all sizes, and all are now expert in making parts for internal combustion cars (which have far more components than EVs). Conversion, for these companies, means buying components from abroad (Japan lacks the kind of EV supply chain- batteries, chips, etc.- that China has). It would mean ending contracts with supplier that can go back generations. The auto industry in general employs 5.5 million, or 8% of the whole Japanese workforce, so conversion could mean mass layoffs. Japanese consumers, too, have been wary of buying EVs, at least until they see a good charging infrastructure; only 1% of 2021 car sales were EVs. Toyota did recently introduce an all-electric SUV in May 2022, the bZ4x, but it planned for just 5,000, and it was a disaster; the first ones sold had to be recalled when it was found that the tires could become loose! The company has started a partnership to build electric vans and light trucks, but it is not (yet) a player in making full-electric passenger cars. Time will tell about that decision.

#4- VOLKSWAGEN GROUP

VW, headquartered in Wolfsburg, Germany, is the largest carmaker in Europe (with 665,000 employees!), and the 2nd largest (after Toyota) in global car-making. Its brands include, besides Volkswagen, Audi, SKODA (a Czech brand), Porsche, and SEAT/CUPRA (a sports brand). It is now fully committed to BEVs, having announced that it will spend $88 billion on the transition! It's about to sell stock in Porsche to offset the cost. Besides car manufacturing, the company is investing heavily in building a local supply chain. The first of 6 planned battery factories, in partnership with Swedish maker Northvolt, began production in Dec. 2021 (the first case of European design and production of EV batteries). But at this point its global EV sales are, so far, lagging far behind Tesla's and BYD's (257,000 in 2022, 21,000 less than in 2021, though a quarter of EVs sold in Europe).

But the gap can be explained by VW's late entry into the transition, and in turn by a major scandal! Volkswagen, confronted in the early 2010s, like all carmakers, by governments pushing it to lower emissions, decided to expand on an existing technology, diesel (its first diesel model was introduced way back in 1977). To quote the New York Times:

Its answer was a 2-liter, 4-cylinder turbo-diesel engine that could run seemingly forever

on a single tank while offering great acceleration and meeting even the most stringent environmental standards. The German automaker emphasized that message relentlessly: Diesel cars are fun, quiet, efficient and, most critically, they are clean. In essence, Volkwagen told drivers they could have their cake and eat it. To deliver its point, Volkswagen has spent $77 million this year [2015] to promote its diesel cars, often in a humorous way, a figure that represents about 45 percent of its total for television ad spending of about $65 million... (9/27/2015)

Researchers began to question VW's "green" claims by 2014, and a massive scandal (nicknamed "dieselgate") unfolded from Sept. 2015. In fact the company had rigged 11 million cars with a device to cheat emission tests! In close succession, it was hit with a huge recall order, a collapse in its share price, the resignation of its CEO, a raid on its headquarters, and ultimately a cost of $33.3 billion to settle all the lawsuits, buying back of cars, etc. It also had to pay into a $2.7 billion Environmental Mitigation Fund, distributed to U.S. states, to start electrifying heavy vehicles- trucks and school buses- which have been diesel-powered. Finally, it has set up a charger network in the U.S., Electrify America (which I greatly appreciate, as I use it often, with a wry smile for its origin!). Nor did the scandal end with Volkswagen (though it has certainly paid the highest price); Fiat Chrysler and Renault (now part of Stellantis), Opel (owned by GM), Nissan, BMW, and Mercedes-Benz have all been charged, and usually fined, for cheating on emission standards!

Not too surprisingly, the next two VW CEOs have wholeheartedly embraced electrification, not least to rebuild its reputation and stay competitive as the transition unfolds.

The good news is that its electric models, especially the id.4 compact, have been selling well (over 163,000 so far). VW has partnered with Chinese companies SAIC and FAW to make and promote EVs within China. And recently it has started investing in production within the U.S. (the 3rd largest market), putting $800 million into a new factory in Chattanooga, Tennessee. Volkswagen is such a large company that it could still move up the ladder, despite such a late (and controversial) start.

#5- SAIC (Shanghai Automotive Industry Corporation)

This is the largest carmaker in China, and is second only to BYD as a global maker of both hybrids and electric cars. It's the biggest of the "Big Four," with its origin, owned by the city government of Shanghai, all the way back in 1955. It started a partnership with General Motors to make gas cars, in 1997 (making Buicks, Cadillacs, and Chevys for China and export). It took control of British heritage brands MG and Land Rover in 2007. SAIC entered EV production in 2010. It now makes hydrogen and gas vehicles as well as electric, and has not set an electrification target, but it is introducing new electric and hybrid models all the time (aiming to sell over 2.7 million worldwide by 2025). Somewhat surprisingly, SAIC is headquartered in a relatively small Chinese city, Liuzhou, in the tropical southwest, and has 20,000 employees.

The secret to SAIC's success has been all about low price, combined with innovative marketing. Though it now makes many EV brands, two have been mainstays: Wuling and Maxus small delivery vans (which cost just $4,500!), and, above all, the Hongguan Mini EV, first introduced in 2010 (probably the most important EV Americans have never heard of!). Back then this 4-seat microcar, designed for urban commuting, was truly stripped down (it didn't originally have air conditioning or airbags!). It's barely larger than the forerunner of microcars, Mercedes' Smart brand. The Mini truly took off in its 2020 incarnation, still costing the same as the vans. It remains low-powered (with variants that have 75-mile and 105-mile ranges), and low-speed (can't go over 62 mph!). SAIC sold over 500,000 EVs and hybrids this past year, and most of them have been Minis.

So why- other than price- has it sold in the hundreds of thousands? That's because of intensive marketing on social media to young people (especially women), including responding to customers' call for the ability to customize. Fashion designers have been incorporated into the design process, resulting in an unusual variety of colors (especially pastels); influencers have been hired for ads; and the company publicizes the way that young people have individualized their tiny cars with decals and cartoon designs. The Mini is now #3 in Chinese EV sales. SAIC is now tinkering with this success, adding some improvement in amenities and raising the price somewhat (the new Wuling Air now costs about $10,000). SAIC sells midrange Baojun models within China, and its upscale alternative is the MG ES EV SUV (priced over $36,000, and being produced and marketed in India). The strategy is to make the Mini EV the first true global Chinese car, starting in Southeast Asia and now targeting Europe (assembled from kits in Lithuania, rebranded as the FreZe Nikrob with improved safety features). SAIC has just opened an "operations center" in a Detroit suburb, but hasn't yet sold any models in the U.S. It's clearly hoping that its future largely lies with enticing young people around the world into low-cost EVs, making short drives within big cities.

#6- HYUNDAI-KIA MOTORS:

This pair of companies dominates South Korea, one of Asia's strongest economies, and as combined are the world's 5th largest carmaker. Hyundai is the dominant partner, which purchased smaller Kia when the latter was on the verge of bankruptcy due to an Asia-wide financial crisis in 1998. Hyundai was founded in 1967, and got its start by making a Ford model; it transitioned then into low-end (and at first very low-quality) gas cars in the '70s-'90s (to the point of being made fun of on U.S. TV!). It regrouped, and started dramatic growth after introducing its first successful gas model in 2001.

Its policy toward electrification has gone through dramatic changes, starting with a very early experiment (the Sonata Electric Vehicle in 1991, which, using weak lead-acid batteries, had a range of just 70 miles). Next, Hyundai-Kia belatedly followed Toyota's lead in focusing on hybrids, starting in 2011, with a sideline in hydrogen fuel cell cars. These alternatives to gas were very much a minority part of its product (mainly just two models, the Kia Niro EV SUV and the Hyundai Kona Electric hatchback).

Since 2020, the entire company strategy has completely changed, thanks to the takeover that year of Chung Eui-sun, 50, the son of long-term leader Chung Mong-koo. He announced immediately that Hyundai had produced its own full-electric platform (Electric Global Modular or E-GMP) for all EV models, after "years of research," and he ended all production of cars without plugs. Experts have been impressed by the fast charging (800V), and that it even has the ability to provide some car-to-house charging. Next came a big shakeup of the management, with a new generation promoted (a third in their 40's). Entirely new designs and models followed in 2021: the Ioniq 5 SUV (the best-selling imported EV in the U.S.), and the Kia EV6 hatchback, both priced just below Tesla's fleet. As of July '22, the Ioniq 6 sedan has entered, with a longer range (379 miles) than Tesla's Model Y and Long Range. The luxury Genesis brand, since 2015 a stand-alone company, is also now electrified as well. Lastly, and most significantly, Hyundai-Kia has, in 2022, announced that it is rapidly transitioning to ONLY making electric vehicles, a clear challenge to Tesla. It is the first large "traditional" carmaker to do so in the world! The company also has the benefit of having one of the world's biggest battery makers, LG, also Korean, as its major supplier. Chances are very good that Hyundai-Kia will be playing a major role (maybe even as #1 or #2) in the world electric transition.

Hyundai IONIQ 6 (2022)- from Wikipedia.org, Public Domain

CONCLUSION:

There is so much more that I've learned in doing this research. There are the other big "traditional" carmakers: GM, Ford, BMW, Mercedes, Nissan, Subaru, and Mazda (the first four have embraced electrification, the last three not as much). There are the other up-and-coming Chinese companies (particularly Geely, which owns Volvo, but also Hozon/Neta, Li, and Nio). And then there are the new startups, which are frequently in the press, especially the American Lucid Motors and Rivian. One of the most interesting stories is the way that making of EVs is spreading to new countries: to India, Vietnam, and Turkey, for example. But I'm ending this post here!! In my next one, I'll shift away from the vehicles to the deeper story of the components behind them: the lithium, cobalt, and other rare earths in particular- and into the rush to mass produce batteries and come up with alternative types. Thanks for reading!