Automotive insights

Innovators enter electric vehicle market

While manufacturers are perfecting the balance between electric and traditional vehicles, innovators from other industries are stepping into the market and bringing their money with them.

A divide has formed in the electric vehicle (EV) market. Traditional, established car manufacturers who are branching into EV development stand on one side, while on the other are inventors and innovators from different disciplines. This latter group brings with it a new set of priorities and a different approach gained from their diverse backgrounds in areas such a search engines and electrical appliances.

New entrants to the electric vehicle market

The most obvious example of this new breed of EV manufacturers is Elon Musk, the mastermind behind Tesla. Musk is all about innovation, always looking to the next idea. This month he stated his intention to create a tunnel connecting some of America's biggest cities. He already has 'verbal government approval’ to dig a tunnel connecting New York to Washington DC, which would see the journey between the two cities take just half an hour1. It’s a project that Musk is passionate about and work has already begun2.

Because he has substantial backing, Musk can employ an amount of blue-sky thinking, innovating and risk-taking on a scale that a traditional devotion to profit margins simply would not allow. He's not the only one either.

Affordable risks for innovators

This month James Dyson, the prolific inventor behind the eponymous brand, has announced that his company is also developing an electric car3. Synonymous with vacuum cleaners, fans and dryers, Dyson’s ability to create innovative versions of existing products should not be dismissed.

Dyson is committed to the idea of releasing a new EV by 2020, investing $2.7 billion in the research and development process4. It has also bought a company called Sakti3, which is working to produce solid state batteries. These batteries will be lighter and have a higher capacity than the lithium ion batteries that are currently used by the industry5.

Like Elon Musk, Dyson has the money behind it to be able to think differently and work to a new, individual, business model6. They have the freedom to spend more money on research and development, as the end result will have less impact on their business as a whole thanks to a wide portfolio of interests and products. This is a luxury that the big names in the automotive industry do not have. Instead they must move forward while keeping profits steady with traditional developing technology.

Porsche and Mercedes push back

Perhaps that's why some of the biggest, best known manufacturers are choosing to innovate in different ways. Mercedes is conquering EV development by establishing three manufacturing bases specifically to cope with demand for electric vehicles and batteries7. With a $1 billion investment in its US site over the last two years alone, it's clear that the German manufacturer is placing a huge emphasis on electric vehicles8. In fact, it is aiming to release the first electric SUV (a spin on one of the brand's highest selling formats) by 20209.

While Dyson and Tesla enter the EV market and Mercedes increases investment to match pace, their rivals at Porsche have taken a different approach.

Speaking to the Financial Times, Porsche CEO Oliver Blume reaffirmed his company's commitment to combustion engines, a move that sets the sports car manufacturer apart10. Blume commented that the industry does not change overnight and that combustion engines for high performance sports vehicles remain Porsche's “core business”.

While Porsche, like all manufacturers, is remaining committed to combustion engines with billions of dollars worth of investment to satisfy its core consumer base, they are not totally adverse to the concept of electric vehicles. In fact, Porsche is working hard to produce an electric car, the Mission E. A four-door sedan with a range of 500km, the Mission E is due to begin production in 2019 for a 2020 release, and is being touted as a challenger to Tesla. Blume maintains, however, that what Tesla does is of no concern to Porsche; “What Porsche is doing is to follow our own way.” he said. “Therefore it's not so important what Tesla does.”

“For us generating profits is the main topic and for Tesla it's not” he added candidly, acknowledging the difference between the companies on each side of the divide.

Finding the balance

Tesla and Dyson have come into the industry with a focus that is purely innovative and can rely on other revenue streams to fund their work. Established manufacturers, however, must also remain profitable, meaning that they must balance innovation more carefully with traditional development. As Mr Blume says, that's not something that is going to change overnight and the combustion engine will remain a prominent feature in the automotive industry and on our roads for plenty of time to come.

Sources:

  1. Business Insider UK, Everything we know about Elon Musk’s ambitious Hyperloop plan, 17 August 2017
  2. Wired, Elon Musk's Boring Company has completed the first 'segment' of a tunnel in LA, 29 June 2017
  3. BBC, Dyson to make electric cars from 2020, 26 September 2017
  4. The Guardian, James Dyson to invest £2.5bn on ‘radically different’ electric car, 26 September 2017
  5. The Guardian, Dyson could become next Telsa with its electric car, says expert, 11 May 2016
  6. The Guardian, Dyson: industry experts cast doubt on electric car project, 29 September 2017
  7. Financial Times, Mercedes-Benz invests $1bn to make electric cars in US, 22 September 2017
  8. Business Insider, Mercedes' parent company will pour $1 billion in a US factory that will create its Tesla rival, 21 September 2017
  9. The Independent, Check out Mercedes electric SUV concept car, 18 May 2017
  10. Financial Times, Oliver Blume: the Porsche CEO on the electric car revolution, 25 September 2017