Welcome to the Hyperdrive daily briefing, decoding the revolution reshaping the auto world, from EVs to self-driving cars and beyond.
- Toyota is managing through the chip shortage largely unscathed.
- The owner of the Tesla that crashed two weeks ago in Houston initially was behind the wheel.
- Formula One race car designer Gordon Murray is turning his attention to EVs.
EVs Made For Ride-Hailing
EV startup Arrival last Thursday announced that it was collaborating with Uber on a custom designed vehicle made for ride-hailing applications. Automaker BYD announced a similar collaboration with Chinese ride-hailing giant Didi last year, revealing a new EV called the D1. Ride-hailing so far has been dominated by hybrid vehicles like the Toyota Prius rather than full electrics, but there are good reasons to think this is about to quickly change.
Ride-hailing companies like Uber, Lyft, Didi and GoJek each have announced aggressive plans to electrify the vehicles operating in their fleets in the next few years. Still, progress outside of China so far has been slow. The latest BloombergNEF data shows that only 0.5% of vehicles used in ride-hailing in the U.S. are electric and 3.4% are in Europe. The numbers are very different in China where 21% of ride-hailing vehicles have already made the jump due mostly to municipal policies in 22 major cities which explicitly require that all new ride-hailing vehicles are either fully electric, plug-in hybrid or fuel cell vehicles.
In theory, the switch should be relatively easy in Europe, the U.S., and other markets. The total cost of ownership for EVs used in ride-hailing looks quite competitive on paper due to their high annual mileage, and the public charging networks to support them are improving. One of the problems so far has been availability of suitable models. The ideal ride-hailing vehicle is spacious, affordable, insurable, reasonably efficient and capable of driving ranges to cover daily needs – in the U.S. that has historically been workhorses like the Toyota Camry and Nissan Altima. A minimum requirement for ride-hailing services is that vehicles have four-doors and are spacious enough to fit at least four passengers.
My colleague Andrew Grant at BNEF reviewed 215 battery electric models and found that in markets like the U.S., just 13 EVs were adequate, on the basis of the number of doors and the vehicle dimensions. Most of these were outside of the price range that would be acceptable to drivers.
This shortage of BEVs with the appropriate ride-hailing credentials has opened the possibility for vehicles designed specifically for this application. There are now more than 11 million ride-hailing vehicles globally. Even at a modest annual fleet turnover of 5%, the number of vehicles sold each year is large enough to warrant dedicated production lines. BYD announced in February that it is producing 400 D1s per day and is aiming for annual production of 100,000 per year.
This highlights an important change for the auto sector. Dedicated EV architecture makes customized vehicle designs easier and faster to bring to market, mostly because you’re not moving around key parts of the engine and related drivetrain components to accommodate different body types and interior layouts. This changes the economics of when it makes sense for automakers to invest in new highly automated production lines. Ride-hailing is one of the first segments that is worthwhile for automakers to pursue in this way. It probably won’t be the last.
Before You Go
Among the battery-powered models Germany’s Mercedes-Benz plans to release in the coming year is the EQT van. The carmaker on Monday offered up some details of the vehicle, an electrified version of Mercedes’ T-Class, accommodating seven passengers. It’s all part of a plan to more fully take on competitors, especially Tesla – the EQT will be one of eight fully-electric vehicles the luxury carmaker will produce on three continents next year.