01Jan 2022

To say 2021 was a busy year would be an understatement. So, it is timely that I return to writing, not to reflect on the past year, but rather to contemplate the trends of the new year.

We live in a unique epoch. The tide to electrify everything has turned. Government policies aimed to eliminate emissions are global and increasingly biting. Electrification of vehicles is a real economic tsunami. Classic global vehicle manufacturers are no longer paying lip service. They are launching new EV models by record numbers; models that end users are willing to buy from manufacturers other than Tesla. Commercial vehicle manufacturers including buses and trucks are ramping up their transition to electrification. Global Tier-1 suppliers are rushing to catch up after sleeping at the wheel and ignoring electrification in the past decade. So it feels like a slam dunk. What is there to predict for 2022?

Behind this transformation lie a number of geopolitical, economic and technological macro forces that will shape this transition, and determine the winners (and consequently the losers).

The geopolitical divorce between the USA and China, and to some lesser extent between western economies and China, accelerates. China’s policies for economic and technologic independence are well publicized. The United States has also made it clear that it will remain energy independent, with more policies to raise the export barriers on several technologies. Therein lies the conflict. With electricity, there is no physical energy traversing oceans the way oil tankers did. Instead, it is the components, systems and technologies critical to renewable energy and its storage that become the new battlefront. The United States and Europe are both investing in building new battery factories for the future. The supply chain of raw materials critical to batteries is investing in increased resilience from Chinese-controlled mines in Africa. 

In the face of geopolitical tensions, the economic wheels of electrification are accelerating. Battery prices are falling even with rising raw material prices. Investors continue to pour billions into battery and EV startups and SPACs, even when many of these companies aren’t ready yet to be publicly traded entities. Investments in charging infrastructure are rising. Local municipalities, states and the US federal government are heavily investing in grid and charging infrastructure.

Auto companies have committed to a vast expansion in their EV offerings by 2025. Several global Tier-1 suppliers have outlined to Wall Street their transformation strategies. Increasingly affordable EV models are making their way to showrooms. The expected tidal wave of electrified pick-up trucks will extend the appeal of EVs to vast geographies in the United States that favor larger vehicles. 

Against the backdrop of government policies, economic growth and easy access to capital, the tech sector continues to witness an influx of new ideas, willing entrepreneurs and talent escaping dying industries. But these technological advances are shaped by their immediate geographical and economic environment. Witness as an example the emphasis in China on LFP-based batteries, while the United States and Europe invest in next-generation solid-state batteries (SSB). The race to scale SSB into manufacturing is real. Companies with new anode or cathode material technologies aim to deliver where traditional lithium-ion batteries fall short. There will be continued support for such endeavors in battery materials though the market will soon demand proof that these companies can deliver what they promised – failure to do so will be very costly. Remember what happened to A123 only a decade ago!

Electrification is not only about EVs and battery materials. Software becomes king. Tesla has already demonstrated how a vehicle is defined by its software content. Auto manufacturers and global Tier-1 suppliers are rethinking their core competencies towards software. As we, at Qnovo, have learned over the past numerous years, software is ultimately what defines the performance and safety of a battery. 

Along with software is a concurrent race to collect vast amounts of data on vehicles, their batteries, their usage and their functionality. China already has its own data-collection systems. The private sector in the US and Europe is already applying lessons learned from other IT disciplines to batteries and EVs.

For governments and businesses, this decade is one of transformation. To meet a target date of 2030 to reach a variety of emissions and policy goals, the auto industry will need a tempo of product releases, akin to the maturity that the industry achieved in past decades. It means these companies will need to secure key technologies they are still missing (including software), secure their battery supply chain, secure their EV manufacturing sites, and address the rising labor problems that will accompany this transition (there are far fewer components in an EV relative to an ICE).

And it all needs to happen by 2025 or thereabout. US, European, Korean and Japanese auto manufacturers and their suppliers that meet or beat this date will likely be winners. For them, their sun will be rising from the West where their markets will be based. For the rest, their sun will set in the East where China’s indigenous industries will dominate.

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23Apr 2021

In the 4th quarter of 2020, Hyundai recalled 82,000 electric vehicles globally due to battery fire risks at a cost of nearly a billion dollars. General Motors also recalled 69,000 Bolt EVs for battery fire risks. BMW, too, recalled nearly 27,000 plug-in hybrid EVs for potential fire hazards in the battery. And then there are countless anecdotal stories of Tesla vehicles catching fire either on the road or in someone’s garage. This is not a pretty picture.

As EVs increasingly become popular on the road, the safety of lithium-ion batteries becomes a top concern for drivers, car manufacturers, battery makers, insurance companies, firefighters and government regulators. Yet there is no consensus on improving battery safety; the clock is ticking for a possible future disaster.

Drivers are waiting on the automakers to deliver safe vehicles. Car manufacturers largely relied on the battery manufacturers for safety. Battery manufacturers thought their batteries were safe — until they weren’t. Firefighters would rather not see battery fires — they are more difficult to contain than conventional fires. Insurance companies are struggling with the economics of underwriting policies for electric vehicles. Government agencies are globally looking into imposing safety regulations. For example, China’s new 2021 battery safety standards aim to contain a vehicle fire long enough to give the driver 5 minutes to evacuate the EV. But what if the EV is parked in your own garage? How will this new standard protect your home from burning down?

The United Nations Economic Commission for Europe (UNECE) is seeking to harmonize global vehicle battery safety regulations under its Global Technical Regulation No. 20 (GTR 20) initiative. Much work remains ahead — yet it is clear that safety regulations will come some time during this decade.

To be clear, battery fires are rare, occurring at a rate well below 0.1%! But that should be no reason for comfort for these rare events can have catastrophic and traumatic consequences. Safety comes with maturity of the product/technology, concentrated effort across the entire supply chain, investment to reduce the incidence of accidents, along with requisite regulations. As the EV industry grows, it invests primarily in scaling its manufacturing capabilities and pace of product launches…but it is time now to make safety a top global priority.

Lithium-ion batteries can catch fire for a variety of reasons. One common cause of failure is the presence of minute defects in the battery cell itself or within the pack containing 100s or 1,000s of individual cells. These defects are often difficult or uneconomical to screen out during manufacturing. They remain latent leading to a potential disaster months or possibly years downstream.

At a more fundamental level, these minute defects (for example, a manufacturing defect in the anode layer, or a mechanical deformation in the separator) can, under certain operating conditions (for example, cold temperatures), become sites where the lithium ions accumulate to form metallic lithium dendrites. Over time, these dendrites grow within the cell until they create an electric short between the two electrodes leading to a fire. The moment of fire can happen any time: during charging, or while driving, or with the vehicle just parked.

A battery’s failure makes it difficult to assign blame to any one entity in the supply chain. The defect itself is likely to be the responsibility of the battery manufacturer or pack assembly. But the defect alone is not sufficient to cause a fire. The vehicle manufacturer, the choice of battery management system, and the driver’s behavior all play a role that can lead to a catastrophic failure.

The task is to identify and exclude these rare potential problems, not only during the vehicle manufacturing phase but more essentially throughout the life of the vehicle. In other words, the vehicle itself needs to be intelligent to conduct self-diagnostics, continuously, over all the cells in its pack, and predict the probability that the battery may contain a defective cell…at which point, the vehicle can be taken in for closer inspection and preventive maintenance.

That intelligence is squarely in the realm of the battery management system (BMS). These new BMS must be capable to monitoring the integrity of each and every cell in the battery pack, alerting the driver to a potential future hazard, and intervening in advance to mitigate a potential fire. If you are wondering whether such intelligence exists, the answer is an emphatic yes!

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02Mar 2021

At a market capitalization exceeding $700 billion, Tesla enjoys a unique financial position among all auto manufacturers to expand its investments in electric vehicles and infrastructure. Special Purpose Acquisition Companies (SPAC) have taken Fisker, Lordstown Motors, Nikola, Proterra public with many other EV car companies rumored to be in the pipeline. 

These pure EV manufacturers are leveraging their access to capital to expand their market share at the fastest possible pace — they are limited by operational and supply chain challenges, not access to capital. Investors continue to applaud Tesla’s expansion strategy and pace, yet Wall Street remains shy about extending similar enthusiasm to incumbent car makers, for example General Motors and Volkswagen who have announced ambitious plans in electric vehicles. The result is an accelerating race to deliver electric vehicles with increasing performance, affordability, and choice. We are in the midst of deep disruption to the auto industry.

The entire supply chain feels the pressure to adapt to electrification. In particular traditional incumbent system suppliers (Tier-1) and component suppliers (Tier-2) are positioning themselves for the new reality. Electric vehicles contain fewer components than internal combustion engine (ICE) vehicles, and are relatively easier to assemble. Consequently, the automotive supply chain will change materially as the sales of electric vehicles (EV) dominate over the coming decade. As market forecasts show accelerating adoption of EVs, they also show rapidly declining sales of ICE vehicles putting further strain on the automotive supply chain. Expect that several companies in the automotive ecosystem may cease to exist as independent entities in this decade.

The battery itself remains the most expensive item in an electrical vehicle. The battery includes individual energy storage elements called cells that get assembled into a pack. A handful of cell manufacturers dominate the making of cells: LG Energy Solutions (formerly part of LG Chem), Samsung SDI, cATL, SK Innovation, Panasonic, BYD are the most prominent names. Most cells makers also provide the pack assembly, though some auto manufacturers, namely Tesla and the German auto makers, favor building their own packs. This points to the first tension in the supply chain: should the auto manufacturers allow the cell makers to also build the pack? There is a split opinion among auto manufacturers. 

But electric vehicles also require significant electronics and electrical systems making them a very attractive market to the supply chain. These include motors, transmissions, inverters, DC converters, on-board chargers, thermal management systems and, naturally, battery management systems (BMS). Historically, volumes were sufficiently small that the auto makers controlled or manufactured many such systems in house. For example, Tesla, GM, VW control or manufacture their electric motors and transmission systems. Traditional global Tier-1 system suppliers largely sat by the sideline. 

Historically, EV manufacturers recognized the importance of the BMS to the vehicle’s performance and safety leading them to keep significant portions of the BMS in house. But volumes were historically small; competition was virtually limited; software and system intelligence were rudimentary. Some auto makers commissioned the hardware to their suppliers (e.g., Hella built the BMS hardware for Mercedes, and LG built the BMS for GM) but kept control over the software. Once again, the traditional automotive supply chain sat by the sideline.

We now see evidence that the supply chain is changing rapidly. With the accelerating pace of EV adoption, auto makers are beginning to reach out to their traditional supply chain for help. GM was the first to outsource its BMS design and manufacture to Visteon. More Tier-1 suppliers are showing active interest in building more portions of the electric powertrain. Expect more disruption in the coming years as auto makers and Tier-1 suppliers assert their respective roles in building electric vehicles.

The fast pace of innovation is further driving disruption. In awarding the BMS to Visteon, GM saw an innovative wireless BMS solution that could shed significant battery weight by eliminating portions of the wiring harness. Rising vehicle specifications place significant emphasis on innovation in the BMS: longer range (400+ miles), very fast charging (20 minutes or less), long warranties (200,000+ miles) are only examples of this new frontier. Fleet operators, such as electric taxis, are asking for bold battery targets, for example, extended warranties reaching 500,000 miles, raising the bar even higher.

Then comes battery safety! In the fall of 2020, Hyundai recalled 82,000 Kona electric vehicles over risk of battery fires. It will cost Hyundai nearly a billion dollars to replace the batteries in these vehicles. LG Chem supplied the battery cells. Hyundai Mobis, Hyundai’s internal Tier-1 supplier, provided the BMS. LG Chem blamed the BMS. Hyundai blamed LG Chem. Battery safety in electric vehicles was now headline news, and the BMS central to the safety story. This is disruption at its best!

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04Dec 2020

When it comes to electric vehicles, there is an understanding that the battery is a fundamental component to the vehicle’s utility. Yet, there is also a false expectation that the battery can deliver all what drivers expect from an EV.  Often underestimated is the role of battery management systems (BMS) in delivering critical performance and safety, in particular, extended driving range, very fast charging, long warranties and utmost safety. I will explore this topic in more detail in a series of blogs. 

In this first part, let’s define what battery management is and does. BMS historically included the electronics (hardware) that measure voltage, current and temperature, protect the battery from current or voltage spikes, and distribute charge evenly across different cells (called cell balancing). There is a basic layer of software that computes how much charge is stored in the battery.

Generally, these are electrical systems with very little intelligence related to the chemical operation of the lithium-ion battery. There are many suppliers of such basic BMS systems, spanning smaller companies to incumbent automotive Tier-1 and Tier-2 suppliers, and some of the battery manufacturers. Most electric vehicles on the road, whether you own a Tesla, a Nissan Leaf, a BMW i3, have one of these basic BMS on board.

Future EVs demand far more performance than what present BMS are providing. Specifically:

  1. Very fast charging: Newer EVs must be able to fully charge the battery in under 20 minutes without degrading the battery. This is strictly the role of more intelligent BMS.  If you try to fast charge your EV today at a DC-fast-charging-station, you likely will not do much better than 35 minutes. The vehicle’s manufacturer will also throttle your charge if you try to DC-fast-charge too many times in a row — in order to preserve the battery’s health. An intelligent BMS should be able to lift such restrictions!
  1. Maximum driving range: Car manufacturers reduce the available charge from the battery (and the driving range) in order to guarantee the battery’s longevity. It is one of the key tradeoffs between available charge capacity, fast charging, and battery longevity (hence warranty). This, again, is the role of a more intelligent BMS.
  1. Extended battery warranty: EVs have traditionally offered 100,000 miles of warranty. But, if you look closely, the fine print warrants that only 70% of the original driving range remains after 100,000 miles. So if your EV has a nominal driving range of 300 miles, the warranty covers you only if the driving range drops below 210 miles after 100,000 miles. Not ok! Yes, you guessed it, it’s the BMS function.

Fast charging, maximum driving range, and battery warranty form a triangle of tradeoffs. An EV maker must balance these three conflicting parameters. If they add more fast charging, then they must sacrifice warranty or driving range….and vice versa. This game of whack-a-mole makes today’s EVs fall short of market expectations. Next-generation of EVs must include intelligent BMS that are able to break this limitation. The technology exists.

The intelligent BMS diagnoses the battery in real time, assesses the likely degradation mechanisms and the battery’s health at that moment in time, then dynamically makes the necessary adjustments to optimize the operation of the battery. It is “computation” meets “chemistry.” 

In part 2, I will cover the changing landscape of the supply chain.

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12Aug 2020

Three factors contribute to the mass penetration of electric vehicles:

  • Driving range that eliminates range anxiety;
  • Lower cost batteries for affordable vehicles;
  • Availability of fast charging.

A common denominator is the battery’s energy density: it is the amount of electrical energy per unit volume (or per unit weight) that a rechargeable battery can store. Energy is measured in units of kWh. Hence energy density is in units of Wh per liter (Wh/l), or Wh per kg (Wh/kg). State-of-the-art energy density figures for lithium-ion batteries stand today near 700 Wh/l and 300 Wh/kg.

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