JV aims to get in on ground floor of China’s EV surge…if it happens
I like to talk to little-known (to me at least) companies operating in China’s electric vehicle world to get a broader perspective. In that spirit, when I saw a notice that a U.K.-based company called Sevcon http://www.sevcon.com had formed a joint venture with a Chinese supplier named Risenbo to supply motor controllers and other components to China’s electric vehicle makers http://www.marketwatch.com/story/sevcon-announces-electric-vehicle-joint-venture-in-china-2014-02-04-221844958, I sent a note to Matthew Boyle, Sevcon’s president and CEO, asking if we could chat.
Talking with Boyle opened a window for me to the many layers of the EV industry, and made me think again about how many companies will be disappointed if China doesn’t pull off its grand plan to produce lots of EVs. The opposite could also be true, or course. China may forge ahead and produce many EVs – though mainly for fleets, in my opinion.
Getting in on the ground floor as Sevcon is doing is the way to be positioned to benefit if China does turn into an EV-full country. That’s Matt Boyle’s attitude. “If you are prepared to take a long term view that China is a market that will grow substantially, if you’re not there now you will be too late,” he told me.
Sevcon produces inverters to change DC current into AC current, AC and DC motor controllers, DC/DC converters, and battery chargers for zero-emission vehicles and hybrids. “We try to take as much in electrical components as we can,” says Boyle.
Doing business worldwide, Sevcon has mostly marketed to companies supplying off-road vehicles such as quadracyles, as well as fork lifts and motorcycles.
But Sevcon’s components can also be used in on-road EVs, including fleet vehicles and passenger cars. With the Risenbo joint venture it hopes to capitalize on what many anticipate will be a growing demand in China for electric vehicles in the passenger car, commercial vehicle, and scooter segments. Sevcon’s on-road business has really taken off in the last two years, says Boyle. “We are well known in off-road market; what has become an emerging market for us is on-road,” he told ChinaEV.
As for its partner, I couldn’t find much info on Risenbo Technology Co. Ltd., other than that is Tier 1 Chinese supplier. The 50/50 joint venture will to be known as Sevcon (Hubei) New Energy Technology Co. Ltd. Boyle got to know Risenbo through an industry trade group in the U.K.
Risenbo already supplies components to automotive, bus, and truck manufacturers in China, according to Boyle. The joint venture will market Sevcon products in China targeting on-road applications. And since just about every vehicle producer in China is at least saying it will produce some EVs and the central government is telling local governments to add EVs to fleets, Risenbo could provide Sevcon with an excellent doorway into lucrative markets. Risenbo has mainly served large vehicle makers, says Boyle, but Sevcon’s products are scalable so it is targeting all vehicle segments.
Wisely, given the slowness of Chinese drivers to warm to EVs, Boyle says light commercial vehicles and busses seem to be the best market for its products right now. But, “passenger cars can’t be ruled out,” he says. And the latest EV policy, which ignored hybrids, is also to Sevcon’s advantage. There is no charger on board a hybrid, says Boyle. PHEVs and BEVs do have a charger on board. “If there is a charger on board it will double the revenue for us,” he says.
There are Chinese companies that produce similar products to Sevcon’s, such as Shanghai EDrive Co. Ltd. http://www.chinaedrive.com a company I visited and wrote about last October. Boyle admits that “the challenge in China is our selling prices have to be a modicum lower than in the rest of the world” to compete against local competitors. “Our quality and reputation give us somewhat of an advantage,” he says, “and our partner has a good reputation in China.”
Fortunately Sevcon has been doing contract manufacturing in China for export in a Free Trade Zone in Shanghai’s Pudong district for about 11 years. It won’t have to add capacity to serve the anticipated new domestic business, at least initially, says Boyle.
Companies manufacturing in China often worry about intellectual property protection; Sevcon has had IP issues in the past, says Boyle, but they have been small. “We aren’t unique in the world, but there aren’t that many people doing what we do so it is easy to spot what’s going on,” he says. Also, Sevcon’s customers are all large companies who also have something to lose if something goes on, he adds.
It will take a while to know if Sevcon’s China gamble has paid off. Product cycles in his industry are generally 18 months to three years, says Boyle. And what about all this news that China’s economic growth is slowing to perhaps as low as 7% this year and even lower in the future? “China’s GDP growth still means you are adding an economy the size of Singapore every year,” says Boyle.
Alysha Webb
Alysha Webb's ChinaEV Blog 
It is no secret that Tesla, Solar City, and SunPower were among the biggest gainers in 2013 in the stock market. Through their success, they have invited all kinds of competition and political depth charges. For example, most recently New Jersey rescinded the right of Tesla to sell their vehicles their their own sales entity, not through franchise dealerships. Interestingly, GM was on the side of dealers, as they see this as a threat to their incumbent model, and they actively worked on the side of the dealers to stop Tesla from offering product in the market. The big money behind the scenes approach worked, and it is a pot hole of consequence for Tesla.
If I were Tesla I would open New York and Pennsylvania dealerships right away to make a point, but status quo fix is in in so many areas where strange alignments are occurring, oh well we expected as much.
Then Bentley, Rolls Royce, and Mercedes all are changing their product development plans, but it is no longer cool at all to get 15 mpg in the luxury segment. Mercedes for example is coming out with an all electric S class, they are expediting product plans to make it happen, something tells me they have had their world changed by Tesla.
Ford is showing concept of concentrating lenses being only infrastructure their solar augmented vehicles need (meaning no grid, no electricity from utility) and this is a low cost infrastructure. They are sending a signal that they are not going to play to utility terms in how infrastructure comes together, expect more on this.
Bentley and Rolls, the most unlikely of new tech, are embracing fully and probably essentially hybrid technology to not be obsoleted. They have to spread a lot of development over very few units, and that puts them at a disadvantage, but luxury segment can absorb costs of batteries very gracefully in their economic model. This has surprised the entire industry, but now it is pretty much a consensus in luxury, Porsche, Mercedes, BMW, Audi, Bentley, Ferrari, Range Rover, Rolls, keep going.
Finally bureaucrats are waking up and realizing utilities are monolithic monopolies, not best purposed for innovating an open market of distributed renewables, this will be increasingly in the public arena, but we see early signs that the politicos know this is an issue that won’t go away, and back room deals for big special interests will be career threatening positions down the road, and they had better think strategically about being on the right side of the angels on this, or they will be shown to have not been.
Then there is the Ukraine, if the US had capabilities to deploy solar and small scale secure nuclear, we would have a response the Russians would understand, the damage to a market for their goods. The Ukraine is threatened with turned off energy, and anything less than a combo as proposed above (and in the research priorities I suggested for the department of energy) and the US has not met the challenge. Europe remembers having their energy turned off in the winter, well it is almost Spring and it will be interesting to see how the US responds to Ukrainian energy dependence and the implications.
We are almost through the winter, seeing good signs in overseas developments related to electric vehicles and ecosystem. Google and Apple are showing increasing cues as to how they intend to meet this market opportunity, expect more. China now has so many cities with horrible smog that they are ramping up the priority for electric vehicles. That seems to be a common thread, as viability is being shown, priorities are being adjusted to raise the priority for the smart renewables and electric vehicle future, and connected transportation.
Silicon Valley is launching dozens of companies that are addressing applications to facilitate all this working together, a very promising market opportunity of tech convergence. Companies like Waze and Uber are getting bought for literally billions, and silicon valley understands this is one of the key segments where the action is. Expect the clash of the titans between Apple and Google to increasingly go to smart cloud and smart connected transportation, as the future opportunities they want to dominate.
We would like to talk about some things going on but it is probably not a good idea to do so related to specific plans, but opportunities are growing and getting closer, and there is definitely a realization this is all coming. We don’t like to competitively preview our playbook, but generally the big picture is very positive looking forward. We expect to be spending more time speaking in California, and that is where the pulse of the industry is these days (isn’t that true for many new things)
Well no rest for the wicked, but progress just continues, and people are starting to connect the dots on how this is coming about.
By the way, BMW has sold out preliminary production of i3 and i8. Hard to know the actual details but it indicates they have plenty of demand and see market interest in the format, and are going actively after both mid range and high end of segment with purpose built challengers. Amazing how little Tesla with 25k in unit sales is turning strategy of the worlds largest auto makers but yes, that is exactly what is happening.
Now we hear Solar City is getting ready to work with Best Buy to bring lower cost solar to consumer market, Expect more approaches to make product cheaper, easier to buy, better financing, and more prepared packages to get solar and electric vehicles succeeding.
By the way, how much progress do we see on utility side of smart grid or smart meters, embarrassingly little, not much to show, and a huge expenditure of time and resources, compare with Tesla and Nest. The public is going to rethink how resources are deployed.
So can’t talk about the most interesting things going on, but progress is coming relentlessly, we expect a few surprises in 2014, hopefully we are not off on the timeline by much.
Winners- Tesla, Solar City, Nissan, Panasonic, Solar with electric vehicles
Losers- Utility smart grid efforts, status quo politics and bureaucratic efforts, wait and see approach, and having no alternatives prepared for a complex world
Have a happy St. Pats, tip a beverage for me and realize, this is on the right side of the angels, and nothing can stop it anymore, in fact maybe they (we) ought to properly enable it instead, as a true leader
Thanks for your very wordy comment. What does it have to do with China and EVs?