Enova finds China EV market doesn’t live up to advance billing, but orders trickling in

In case you hadn’t noticed, the market for electric vehicles has not taken off quite as quickly as the Chinese government predicted it would. So for U.S. (and other non-Chinese) companies China has been somewhat of a disappointment, John Mullins, chief operating officer of Enova Systems www.enovasystems.com told me last week. In 2008, his company supplied hybrid systems to First Auto Works for 25 buses that were used in the Beijing Olympics. Then, it 2009, it provided components for 200 hybrid systems to First Auto Works. Enova thought it was the start of something really big. “We were pretty excited to get into the program,” said Mullins. “The Chinese government had this mandate for 1000 alternative energy vehicles in 25 cities. But we really haven’t seen the progress at the rate everyone expected it to.”

“Everyone” includes electric drivetrain providers such as Eaton Corp., which hopes, or hoped, for big things to happen in the China market. http://tinyurl.com/7kwsdcs   Enova has shipped a little over 500 electric drivetrains to China over the past three years, says Mullins. It expects sales of about only 200 annually in the medium term, he says.

Enova’s foray into the China market started with promise. It shipped 50 electric drivetrains to FAW www.fawcom  in December of 2011, and in January of 2012 Enova received another order from FAW for 50 drivetrains. Rather than reinvent the wheel, here is what Enova’s press release said: “The Enova drive system will be integrated and branded under the name of Jiefang CA6120URH hybrid. The Jiefang 40 ft long hybrid city bus can carry up to 103 passengers and travel at speeds of over 50 miles per hour. With the Enova hybrid system’s components, the Jiefang bus meets Euro III emission standards, consumes only 7.84 miles per gallon, and achieves a reduction of 20 percent in harmful emissions.” Jiefang is the First Auto Works large commercial vehicle brand. Jiefang means liberate, as an aside.

Enova is based in Torrance, CA, a Los Angeles suburb near Redondo Beach. It produces power electronics for pure electric and hybrid electric commercial vehicles. Specifically, it designs the electronics that enable the battery’s DC current to be changed into AC current so it can be used by the motor. Enova also designs and produces entire drivetrains. It buys the components such as the motor, gearbox, wiring harness, safety disconnect, etc. and assembles the drivetrain in the warehouse portion of its small office on a back street of the industrial city.

Though its chairman, John Wallace, was head of the Think electric vehicle program at Ford, http://tinyurl.com/6paerxq  Enova focuses on heavy duty commercial vehicles, says Mullins. (Yes, Think wasn’t always a failing Norwegian EV maker. Ford sold it in 2002.) Enova is too small to compete with the big companies in the car segment, says Mullins. In any case, “we believe commercial vehicles are a much better application for full EVs and in some cases hybrids because the routes are specific and the drivetrain can be chosen specifically for the vehicle” in terms of range requirements, he says.

Fortunately for Enova, unlike some companies it hasn’t put most or all of its eggs in the China basket. It already has several customers here in the U.S., including Navistar’s IC Bus division www.icbus.com . Enova supplies a bolt-on post-transmission plug-in hybrid system for school buses to Navistar www.navistar.com . The program started in 2005 and about 100 of the hybrid buses are on the road now, says Mullins. Enova is also the exclusive supplier to Smith Electric’s Newton pure electric route delivery, and it is working with Smith www.smithelectric.com to develop light and medium vehicle applications for Smith’s U.K. fleet customers.

The problem, says Mullins, is the cost. Without government subsidies there wouldn’t be a market, he says. The Navistar electric buses cost $210,000 each versus $70,000 for a regular gasoline-powered bus, says Mullins, with the battery pack accounting for most of the price premium. And since an average school bus only runs 9 months out of the year, it is hard to reach payback. As for the Smith EVs, in 2009, Smith received a $10 million Department of Energy grant to develop all-electric, emission-free commercial vehicles. The grant was expanded to $32 million in 2010. http://tinyurl.com/768sehs  The battery pack in the vehicles Smith now produces will push a Class 6 or 7 commercial vehicles (which cover vehicles from 19,501 lbs/8,846 kg to 33,000 lbs/14,969kg) for up to 150 miles, says Mullins. But the cost is $190,000 (For battery pack alone? He didn’t specify and I haven’t heard back from him yet. ). The subsidy cuts that in half, he says. Even FAW relies on government subsidies to keep the cost of its electric vehicles within range, says Mullins. “Our challenge is to find customers that don’t depend on government grants.”

Enova hopes it has done just that with Freightliner Custom Chassis Corp.,  http://tinyurl.com/7y7qdmw  a division of Daimler Trucks North America. Enova is the exclusive supplier for Freightliner’s’ all-electric delivery van, the kind of vehicle used by Fedex and UPS. Mullins figures this market is the sweet spot for pure EVs because the routes are set so the battery size (and thus cost) can fit the necessary range.

The Freightliner Pure EV delivery Van use Enova components.

Daimler has 80% of the market for such vans, so it can offer real volume potential, says Mullins. Therefore, “we have been able to attract very competitive pricing,” he says. “We are about to finalize the final battery supplier.” I don’t know who that will be. But Enova works with battery makers Valence and Dow Kokum on some of its other projects.

Pure EVs is where Enova figures the real commercial market is, says Mullins. Hybrids come with less of a premium than pure electric, but are still more expensive than gasoline-powered vehicles. Customers expect to use a hybrid like a regular gas vehicle and still see a big improvement in fuel efficiency. But only under certain conditions are those huge improvements realized, he says. “They are not seeing the payback they expected in the fleets for hybrids because the expectation wasn’t in line with what the technology is capable of achieving,” says Mullins.  That isn’t the case with a pure electric vehicle, he figures. The fuel savings is built in, though the price premium is greater. “Pure EVs become promising because a commercial customer is smart, and makes decision on finances rather than emotion,” says Mullins. “There is a commercial reason to buy one, not an incentive reason. We have plenty of hybrid capability but the real commercial potential we see right now is full electric.”

Of course, China’s government has just shifted its near and medium-term focus to hybrids and plug-in hybrid electric vehicles. So Enova can expect to see slow growth there for a while there in the pure EV sector. As for the U.S., I guess we will have to wait to see the outcome of the presidential election to determine how the market for EVs will go here. Unless more companies with fleets start doing the math and figure out pure EVs make sense for them. .