Next Steps in the Small, Task-Oriented Vehicle Revolution

by Stephen Metzger
Managing Director, International Market Solutions

A Turning Point in the Global Transportation Industry

To say that we are at a unique point in he history of the transportation industry would be no exaggeration. One could put it in this framework: Both the external environment and the internal development of markets and manufacturing processes are radically changing.

Some things are obvious, some not so obvious. Put the two together and we see changes that many do not see, or would have foretold a half a decade ago. What do I mean?

First, the obvious factors. In the external environment we see:

• Rising fuel prices and more than that, the
• Tenuousness of fuel supplies as political crises loom in virtually all major oil-rich regions in the world;
• Global warming concerns have kept pollution issues at the forefront, reflecting not only national policies, but state and local laws and regulations, as well.

The less obvious factors are mainly internal to the transportation/utility vehicle industry:

On the demand side, the fragmentation of the market into a welter of small, niche markets, which nonetheless, add up to a significant number of units and substantial market size in terms of value;

• On the supply side, the increasing ability of manufacturers to customize product to meet changes in consumer buying preferences, whether driven by economics or styling;
• In a broader context, the coming together of three industry segments with distinct historical identities: recreational vehicle manufacturers, golf cars, and utility vehicles;
• Finally, the emergence of the neighborhood electric vehicle ( NEV) market, defined more by use than by vehicle type.

Let’s look at the demand side first.

Demand Factors: Are Small Vehicles a “Long Tail” Market?

Chris Anderson, editor of the Wired magazine has authored a new book entitled, “The Long Tail: Why the Future of Business is Selling Less of More”, which sets forth the marketing concept of the 21 st century. Anderson crystallizes what he sees as a trend toward highly individualistic, diverse markets, building off one or more base products but distinguished by the industry’s ability, which quickly becomes a competitive requirement, to satisfy individual consumer tastes and preferences.

Thus, a generic market of, say golf cars or UTV’s, is comprised of a myriad of adaptations fitting the personal needs of the consumer, rather than so-called standard models. While Alexander tends to emphasize consumer entertainment products and electronic devices, his concept of the long-tailed marketplace has been a lightening rod for comparisons in a host of other markets. It happens, I think, to fit our industry.

The other side of the coin is the ability of manufacturers to supply such a market.

Supply Side Factors: The March Toward Individualized Performance and Features

It’s one thing to catalog individual consumer preferences, it’s another to be able to configure the supply and distribution chain to accommodate such diversity. Demand and supply characteristics have to come together to create the long-tailed market. Our industry, I believe, fits those parameters: You take the basic golf car or UTV platform and you build consumer usability into it on demand—and most importantly, this can be done on a financially sound basis. Moreover, the basic platform itself is a low volume profit performer that can squeeze itself into a $4,000-$8,000 price range. Beyond this, performance can be enhanced, features can be added virtually at will to satisfy the most eccentric of potential customers, and price points can be flexibly adjusted.

Putting all these factors together and you have a powerful and profound basis for change—perhaps radical change. Link this market/manufacturing environment to what is available and what is coming down the pike, and you come up with a definitive trend toward electric power.

The Full Transition to Electric Power and the Expansion of Electric Vehicle Options

Golf cars and their major segments in the utility and privately-owned markets are something of a bellwether for small vehicle industry trends to electric power. The reason is that they are used in a variety of environments, including golf courses, industry, and gated communities. Further, they are subjected to a range of operating conditions; the only small vehicle segment that remains unchallenged is the off-road/recreational market.

Our research indicates that electric’s share of the market for golf car-type vehicles has risen from 57% in 2000 to 68% in 2005, and our forecast is for electric’s share to increase to 72% of sales by 2008. (These figures do not include the off-road/recreational market, which is, of course, mostly ICE.)

Our view is that even the off-road/recreational market will have increased participation by electric-powered vehicles, but more importantly, innovations are flying off the shelf that will greatly expand electric vehicle options—foretelling new product potential that our industry should pay attention to.

Even now, the range of electric-powered vehicle products grows by leaps and bounds each month. Some are recognizably very traditional, some revolutionary, from the Tesla, born of Silicon Valley tastes, lifestyle and pocketbooks, to the more pedestrian Cart-Rite, focusing on price points and bare-bones utility.

The Tesla

Why mention the Tesla, which has little to do with the small vehicle utility market? Simply because its technology strongly suggests what can be done with the electric vehicle in terms of power, drive time and speed. More about this below.

The Cart-Rite, pictured the left below is constructed from parts and components sourced from both U.S. and Chinese manufacturers and assembled in Guilford, CT. More about imports below.

The Cart-Rite Hauler

These particular examples are also chosen to indicate where competition for our industry is likely to arise.

To add further complexity to the picture are the NEVs. While NEVs are a negligible factor in the market, this is due to product and brand identity problems more than the lack of a market to feed into.

The leader among the NEV class is Global Electric Motorcars, or GEM, which is a wholly-owned subsidiary of DaimlerChrysler. The short-bed utility version of the GEM is shown on the next page. The GEM in its various transporter and utility versions might have a greater impact on the market were it not for the lack of serious funding for marketing and a distribution system which relies on a totally unresponsive DaimlerChrysler dealership network.

There are also entrepreneurial efforts in the NEV field, such as the EcoV out of Michigan, which are actively searching for funding. The EcoV is pictured below. Like the GEM it is configurable in various models, and its management will be focusing on the public and commercial fleet markets, which are under pressure from Epact legislation. The EcoV is of interest also because it is fully enclosed and incorporates a race car body and frame construction, making one of the most comfortable and safe NEV designs.

GEM Utility Vehicle EcoV

Impact of Technology

New technology and innovations are likely to have an across-the-board impact on the whole range of electric vehicles. Look at what has held back the growth of electric vehicles:

• Driving range—now 30-40 miles; need 100+ miles;
• Power—now 5 to 10 hp; need 18+ hp;
• Charging time—now 7-10 hours; need 1-4 hours;
• Enclosures/Comfort factors—now few; need more.

If the “need” criteria can be met, the versatility of the small vehicle platform, whether on-road or off-road, whether designed for transport or haulage, use would be greatly expanded.

Driving Range and Power

With regard to driving range and power, there are two developments in the making (or already here, depending on who you talk to), and these are the lithium ion battery and the AC electric engine. Certainly the latter is here and has been for quite some time, but it is just now being adapted to vehicles, after a relapse of many decades. AC Propulsion, San Dimas, CA, makes the engine for the Tesla, putting out 265 hp. Hi Performance makes an electric motor peaking at18 hp, which when combined with a Curtis inverter-controller, is now being retrofitted to order by Mountaintop Golf Cars. Overall, the AC motor is much more efficient than its DC counterpart, independent of battery type.

The tremendous potential for large format lithium ion battery power is generally acknowledged, but the problem with lithium ion technology is, or has been, it’s inherent potential for a runaway reaction throughout its composite cells, causing an explosion. We are all aware of what happened to Dell laptops using Sony lithium ion batteries. And, the larger the format, the greater the potential for disaster.

At the same time, the Tesla incorporates lithium ion batteries. According to industry scuttlebutt, Tesla’s main proprietary innovation is in its modular battery pack, which is highly engineered for safety, in particular, its own cooling system and containment structures for individual cells to cut off thermal runaway. All this is bolstered by an elaborate set of sensors for temperature, humidity, and leakages.

Another solution to the safety issue with lithium ion batteries has been offered by Valence Technologies, Austin, TX. By using a phosphate-based cathode coating in place of the more prevalent cobalt-oxide coatings, significant safety improvements are achieved, according to company literature: “Phosphates are extremely stable in overcharge or short circuit conditions and have the ability to withstand high temperatures without decomposing.”

Beyond technical feasibility is the issue of cost. Replacement cost for the Tesla battery pack, for example, is estimated at or around $20,000. The Valence 12 volt U-Charge® RT and XT batteries offer an alternative to traditional lead acid deep cycle battery. Valence claims that the cost of ownership is considerably less, although the upfront cost is significantly more. Now there will be some controversy, no doubt, on the economics of any current decision between lithium ion vs. lead acid technologies—aside from safety issues.

One can argue about the timeframes in which the AC engine and lithium ion technologies will be brought together in a volume-produced small vehicle that meets the “need” criteria noted above, but it is unlikely to be more than three years, at least in some applications. There simply too many developments going on in the United States and abroad to suggest it will be longer.

Improvements in Fast Charging Technology

Fast charging technology that is not abusive to battery life has been somewhat elusive in the past. A new charging technology by FAZtech, Inc. of Fremont, NE, shows considerable promise in significantly reducing charge times of small vehicles. The company is concentrating on the forklift market, as its 3 KW and 9 KW models are too expensive for most small vehicle applications. The company is working on a stripped down model, however, using the same patented technology of its larger units, which would sell in the range of $1,500-$2,000 and is small enough to be placed on board a small vehicle. According to a company spokesman, this model, called the “2 Series” should be market ready in six months. In the development stage is a “1 Series”, even smaller and cheaper. Charge time for a typical golf car-type vehicle or NEV would be two-to-three hours with the 2 Series charger, and much less for an opportunity charge.

Aside from the greatly improved charge time, which is a major breakthrough for the electric-powered small vehicle, FAZtech chargers have other key advantages. For example, FAZtech chargers achieve near 100% state of charge with each charge; automatically charge battery cells equally; and continuously adapt to actual battery conditions, adjusting the charging current accordingly. The result is a minimization of charge time and no damaging waste heat.

To conclude the comments on technology, it should be noted that far too little attention is given to enclosures and other comfort factors—and for that matter, styling. The EcoV, above, is one of the few LSV/utility vehicles with a fully-enclosed driver and passenger compartment.

Finally, it is appropriate to extend the above criteria by one more factor, and that factor is speed. The LSV upper limit of 25 mph is simply too slow. To give the small vehicle the needed versatility to exploit a much larger market, a speed of 40-45 mph should be targeted. (Regulatory issues be damned! Full speed ahead!)

What the Current Small Vehicle Industry Brings to the Table

Market environment and technology, as reviewed above, may lead to some compelling theoretical conclusions, but the nitty-gritty of making it happen comes back to exploiting and building upon the existing assets of the current small vehicle industry. What are these?

First of all, the industry has, over the years, developed volume markets and all that implies in terms of product recognition and branding. Secondly, companies have been adept at identifying and developing niche markets; that is, market segments that spin off their basic manufacturing and technological expertise. Manufacturing processes have been made adaptable to product change and innovation. On the marketing side, companies have shown considerable willingness to listen to customer suggestions for product improvement and incorporate changes fairly quickly. Finally, the key industry segments have developed effective distribution networks to handle sales and service.

All these assets translate into a competitive advantage, which will drive the introduction and acceptance of new technologies and new product capabilities. At the threshold of major changes in the small vehicle industry, however, who, if anyone, will lead the industry in the development of a new, more robust, more versatile product?

Who Will Take the Lead?

The question, “Who will take the lead?” is actually a fairly broad one, because there are significant candidates both inside and outside the current domestic small vehicle industry. What are the possibilities?

Mainstream automakers—not likely, but the DaimlerChrysler Smart Car, quite popular in Europe, is about to make its appearance in a multi-fuel version with a pure electric to follow;

Golf car manufacturers—have many advantages, but seem unwilling at the moment to expand their current edge in the privately-owned market;

Utility/recreational manufacturers—also have significant assets to build upon, but so far are very wedded to the ICE;

NEV startups—quite possibly the most likely to lead the way with prototypes, but have significant barriers to overcome in the form of funding, distribution, and service networks;

International companies—here the potential is significant, as there are many small vehicle platforms from countries such as China, India, Brazil, and the European Union that could become competition for U.S. manufacturers.

Trying to pick a winner from among these industry groups would be difficult at this point, but those companies already established in the small vehicle industry have all the qualities and capabilities to take on the leadership role. The question is, do they have the corporate strategies and the inclination to break new ground.

Wrapping it up…

The future belongs to a robust, versatile small vehicle platform, in all likelihood an AC electric-powered vehicle. To reiterate, the needs are:

• More power—18+ hp
• More range—100+ miles
• More speed—up to 45 mph
• Faster charge—3 hours or less
• Better enclosures and comfort factors

These improvements add up to vastly increased versatility, and a platform upon which the small vehicle industry could accelerate over the next decade. And as noted above a little attention to styling wouldn’t hurt.

The Tomberlin ANVIL

With a wide range of potential sources and battery technology moving ahead rapidly, leadership could come from any direction. Hopefully, U.S.-based manufacturers with a wealth of current advantages will take the lead.

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