Xavier Mosquet  

So good morning and welcome to our panel on the building platform and electric vehicles. I'm a Xavier Mosquet managing director and senior partner at BCG America. I am actually the founder of BCG in Detroit, and I've been leading our global automotive practice for many years. At BCG, we've been looking at electrification for quite a while. Our first report on the topic was in 2009, where we first you know, try to look at forecasting where the market could be. At the time, I have to remind you that we were pretty lukewarm on what the market would be, because we fail the economics of battery electric vehicles. We're not too attractive consumers. And I think we've been right for quite a while. In 2017, we came back with a new report that was called actually the tipping point where we felt actually there was light outside the tunnel, because battery prices had been declined sufficiently to see a point where, you know, the market would develop naturally. And what I'm going to share with you right now is actually the release of our latest forecast, which was just released yesterday, which is, you know, all forecasts but for 2030 of what the market You know, four different powertrains and electric vehicles will look like in the next 10 years. And then with the panel, we're going to be discussing together what are some of the opportunities and challenges related to this market for electric vehicles and the impact on climate champs? So the first thing that, you know, I think many of you are aware of is, you know, this is all actually related to regulation. And the regulation is tightening, I would say mostly everywhere in the world. The leading, you know, tightening regulation is actually in Europe, where a year ago, Europe has decided that they wanted more than 50% 51% reduction in carbon emission between today and 2030. California actually has reasonably but in a different way with different regulation, similar objectives, and it's forecasting eight to 9% BVs and pgv. Plugging electric hybrids in 2025, which means that it has to be a two, three to 4% in 2020. And for those who follow the China regulation, it's actually you're basically mimicking the California regulation and ensuring actually for the same objective with some your very ambitious targets that have already been set out. And we're still waiting for the next wave of the federal regulation in the US. Now, in this context of tightening regulation, it's clear that in 2020, and after there is no possibility for the car manufacturers to meet the regulation without electrification. And the good news there is actually that battery prices actually are going in the right direction. In our report in 2017, we were forecasting that battery prices would be roughly about $126 per kilowatt hour in 2030 at the patch level, By the way, I see many of you taking pictures, I would like to give you a way to get to that report later on where you will see many of those charts. So you can continue obviously making pictures, but it's fine. Actually, if you don't, you will get the information ready for you. So 126, where our baseline for 2013 we had an aggressive projection, just in terms of sensitivities, that was $95 per kilowatt hour at the pack level in 2013. And the reality is in between 2017. And now, the decline has been far closer to our more optimistic assumption. And therefore we believe today that the target for 2030 is 100, which leads us to revise our forecast to something that actually leads to more electrification. And then we thought just you know, three years ago, they are and you have to keep that in mind. They are actually even more aggressive or optimistic assumptions Bloomberg, for instance, your signal that we could reach close to $60 per kilowatt hour in 2013, which we think for VCG, that is too aggressive. But at least you know, you should know that there are actually these types of forecast. Now, what this means in terms of markets, is, you know, our latest forecast, we think that in 2030 51% of the cars out there globally, will be electrified. And the rest of the will be ice and a small share of diesel. Within this 51%. You have 24%, that's battery electric vehicles. It's namely 18% and 6%. plug in hybrid, that you can both recharge, but continue on your gasoline engine if you want to. This is your 4% more than what we had forecasted just two years ago. And you believe Bloomberg. I mean, this is obviously you know, going to be you even more electrified globally. Those forecasts differ slightly by region. I would say Europe and China are probably leading the charge there the US being a little behind, but the differences between regions are not you know, so dramatic and so expect it to be, you know, consistent reasonably across you the major automotive market. The good thing, by the way is obviously, this is driven by total cost of ownership. So, as battery prices decline, somewhere between 2022 and 2023. For us as a consumer, it will most likely be a better choice to buy an electric car that to buy a combustion engine car, over the next few years, you will pay back the additional costs of the bV. So that's one thing. So total cost of ownership is what drives actually this, you know, market driven evolution after 2020. The other thing is actually consumers are extremely satisfied with electric vehicles 70% of electric vehicle owner today will repurchase an electric vehicle and Know around you. But you know, if I look around, you know, the people that I know, I'm starting to see your guys's was to TVs and no ice anymore, which still says a lot about the degree of satisfaction. The question now is, you know, what does it do, you know, for the environment and for the climate. And so what we did here is a calculation of the co2 emissions of you know, a combustion engine car and an electric car over the life of the batteries. What's interesting so on the top you have the, you know, ice the combustion engine, which is voice, you know, the car itself, plus, you know, the fuel that you need, you know, over the life of the car. And below that you have the bV for different countries, and why for different countries because you know, if you are, you know, in no way, well, you know, all the electricity is clean. It's obvious that having a bV has a significant impact on the co2 emission if you're in control Where there is more coal, you know, to produce the electricity, the balance is not as good. And what you can see is, you know, in China and Japan, you are with today's electricity production mix, slightly negative in terms of co2 emission with electric vehicles compared to, you know, gasoline cars. But frankly, the difference is so small. And we know that, you know, the, what's actually the official number for emission in co2 of a car is usually, you know, lower than the actual emission of a conventional engine car. And so, you know, I think those differences which are basically 10% over the life of the car, for me are sort of meaningless. So you could say that China and Japan are somewhat of a wash compared to an ice for a bV. But as soon as you get to the US and other countries that are actually significant benefits. This is done with today's electricity production mix and but we Know that all countries, you know, have reasonably ambitious plans to increase the renewables in the production of electricity. And so if you look at some of the key countries here, like France, China, US and Japan, in terms of, you know, renewables in the midst of electricity, you know, France alone, you know, without counting nuclear, which is co2 free, is going from 21% renewables to 35% renewables and China, you know, will go in the next 10 years, from 26% to 35%. So, every year that passes, there is actually an increasing advantage to be. So I suggest that, you know, we, you know, open the discussion around, you know, this market evolution and the impact on climate change. And for these we have, I would say, an amazing panel, which is pretty unique, because, you know, this pretty rare that we have all the various expertise represented in this whole debate around electrification. On the same panel, and so, you know, I'm pleased to you know, introduce on this panel, Stephanie Greene, who is principal at the Rocky Mountain Institute, working on sustainability. And right before you know, our current work, as you know, Stephanie was responsible for electric vehicles, at BG any the California utility, Michael O'Brien is the VP for, you know, product,corporate and general planning at yandi North America. And we know that chunda you know, has your major inroads into electrification, and it will give us the point of view of the car manufacturers. Mary Gustanski, you know, was until a week ago, the CTO of Delphi technologies, she just retired, but you know, she was ready to share with us our experience so Mary, thank you for being with us. Thanh Nguyen is a VP for sales and marketing for Farasis. The battery manufacturer you know For the US and Europe, and my colleague, Cornelius Pieper is a managing director and partner at BCG. And he leads our new sustainability and climate change practice for industrial goods. So why don't we give them a round of applause to welcome them to the panel? And to start the debates, I would like to ask you know, it all of you a short and easy question, which is, you know, what do you think is your the potential of challenges seen from your own perspective of, you know, electric vehicles and the impact on climate change? Stephanie, do you want to start? 
 

Stephanie Greene  

Sure, I'll go ahead. Thank you again, and good morning, everyone. So the opportunity is that vehicle electrification and electrification more generally. So I would include building electrification and that as well as is one of the critical tools we have probably the most important tool we have to address global climate change in the next 10 years. with existing technology. So the challenge is that we're not moving fast enough. So I was very heartened to see your forecasts. I hope we get there. Many of you may not be familiar with the latest climate science, which says that we need to hit a 50% reduction in our greenhouse gas emissions in the next 10 years. So in the US for vehicles, that means we need to electrify up to 50 million of our vehicles in the next 10 years. And we're at about last I checked, we're at about 1.2 million electric vehicles today in the US, it's about double that in China. So we're getting there. And I hope your forecasts proved correct. But we need to think about what is it going to take and that next decade to get us there? And we see a few key challenges the first being cost primarily upfront cost, because even though the lifecycle cost is increasingly favorable customers are often get a little sticker shock at the upfront price comparison depending on the vehicle Second is charging infrastructure and range anxiety which are deeply linked. And then the third is customer education and awareness, which I believe can actually address many of those first two challenges. If we do it right.
 

Xavier Mosquet  

Thank you, Mike.
 

Mike O'Brien  

Good morning, everybody. Right now, the company I work for Hyundai Motor Group, we have nine battery electric vehicles available globally we sell to in the United States, Kona Evie, which won the SUV of the Year award last year. And I only say that because with that award, we have no problem selling our entire production in the state of California. However, we also sell it in all the northeastern states and we find that there we faced tremendous challenge. Frankly, it we have very big difficulty selling them. And it really comes with comes down to the things that Stephanie had mentioned. Customers are reluctant when they're spending money on the second most expense A purchase that they make in their lifetimes. They're reluctant to spend money on things are uncertain about things that they're unfamiliar with. And at the same time, they want to make sure that that investment will pay off in the long term meaning their cost of ownership will reward them in terms of what they're experiencing today. Certainly the ability to find easy, accessible, high speed charging in the northeast is a big challenge compared to the state of California, where there's a much more prolific availability for charging as far as the charging network is concerned. But I think it's really going to come down to building customer confidence in battery electric vehicles, finding ways to overcome the barriers to technology adoption when it's such an expensive investment for many customers. Thinking about the market today. Right now when you look at battery electric vehicles that are sold, they're generally purchased when you look at the entire light vehicle market in terms of household income, a living situation. Better electric vehicle purchasers tend to be far more fluent many cases, almost double the influence level of an average new car buyer. They almost always own a home with multiple garage spaces. For us to really achieve the goal of decarbonizing personal mobility, we have to think about a large section of the core light vehicle market where people don't own a home. They rent an apartment, they live in a townhouse. So how do we satisfy those customers in terms of providing easy, accessible, affordable high speed charging solutions to them. So because of their living situation, maybe they don't have a garage or a home, we can provide the same level of convenience that they currently experienced with a gasoline product. And I think that's going to be one of the biggest frontiers that we attack moving forward is making sure that customers have ready access to high speed charging.
 

Xavier Mosquet  

Thank you, Mary.
 

Mary Gustanski  

Well, good morning and thank you for having Me, I'll start with challenges. And I think our challenges are going to be fairly consistent maybe with a little different twist. Consumer acceptance by far is the number one challenge that I see for electric vehicles. Consumers have range anxiety. And while they're perfectly fine plugging in a mobile phone every night, plugging in the vehicle, not so much cost, cost is an issue. In a little different side of things, though, battery costs are coming down. electric vehicles are really affordable at this point in many cases, but it's the transition cost that someone needs to manage. You have to transition from internal combustion engine to electric vehicles, while managing the cost of that low volume production of electric vehicle. And that's a big challenge for industry. And then third infrastructure. For those of us that live in suburbia and have a garage and it's easy to plug in, that's fine, but there needs to be suitable charging in cities and rural areas for those that don't. And the one thing you have to keep in mind The EC to DC conversion moves off vehicle, the cost of the infrastructure goes up dramatically. So who's going to pay for that? On the opportunity side, I love to drive. So I have to really say it's driving performance enhancement. That's what electric has to offer more power ready when you need it. And for a driving enthusiast like me, that's exciting. And with higher voltage electric vehicles, it moves that torque curve out. So there's more torque at high speeds, which basically means everyone has a race car. How cool is that? efficiency improvement and cost reduction materials are coming out particularly in power electronics, like silicon carbide, can again, extend the range of vehicles by four to 6%. And if you're creative in the way you package power electronics, you can not only reduce costs, but you improve the performance. So we make things like combo boxes with power electronics, high voltage products, all in one Or you've heard about three in one which has the motor and the axle and the inverter all packaged in the one, it will transform the way electric vehicles are made in the future. And then finally, we need to move fast, fast DC charging, that will go a long way to helping that range anxiety. 
 

Xavier Mosquet  

Great. 
 

Thanh Nguyen  

cost cost and cost. Guess what cost again? We we struggle with a cost every day. So every time when you put up a chart like that, I don't like it. Because then you know, people come to me it's like, well, that's why I want to buy is absolutely challenge from a battery perspective. Because not just cars. Think about your thumb drive or your storage. When someone gave you you want more you want more you want more. And at some point, what do you know when it isn't enough? So we're forcing to continue to innovate which is great, but yet bring our costs down. You know, the industry struggle with that. But we know that we get a cost down you know of now the TCS that happening people stop buying it. And but another thing too is, you know, US drivers. You guys are weird. I've seen it in China, I've been in China, I've been environment you know, you know, unfortunately a lot of places. And us and German drivers really have a hard time adapting to EV because people also think about, oh, I gotta drive that much. Seriously. You're going to drive 300 miles a day. Come on, I 20 miles a day maybe. But you go to India, you go to other places, actually, you know, the electromobility is going to happen and she would have smaller vehicles. We've seen it with the three wheelers. We're seeing it with two wheelers and people okay with that. Beijing I think within two years the entire taxi fleet in Beijing we EBS. Actually, today when you land on Beijing, you're going on a cab is gonna probably gonna EV probably can be a farriss Berry behind it. So, we need to think but differently, I think, also for for us to get adoption.
 

Xavier Mosquet  

Great. Thank you Cornelius. Thanks. 
 

Cornelius Pieper  

So good morning. I mean, you can say the automotive industry is one of the industries that has started to think about decarbonisation, very early on, almost like utilities, I don't know, five to 10 years back when the electrification discussion began, which is much earlier than whatever steel and cement and others but at the same time, things happened at a relatively slow pace. I think now we're seeing a moment where the developments picking up a lot of steam. And that has obviously the potential and also a lot of challenges for the industry to really change things. Let me say a few things. First, on the customer behavior, maybe also on the customer preferences, I would not expect this to be a linear development. And when I can reflect on the last two years, at least in certain geographies, there was a lot of change in, let's say, the awareness about the climate change, problem. And the climate crisis, as some call it. This is something that is also attached to, let's say, different views inside different generations. So younger people, those who may be now hit the voting age, they are much more aware and much more critical about this topic than our generation and the generation before us. So I would expect a significant and a nonlinear change in customer preferences, customer expectations, and also obviously, with regard to mobility and electrification. So one thing second thing that we you showed that slide on on the footprint or the climate impact of electric bill And there was the wheel to wheel piece, which differs greatly across countries, depending on the electricity mix, which by the way is changing in many countries given the good economics for for renewable energy. And there's the cradle to gate piece, which is obviously also a big chunk. And in some geographies, it's actually larger than the world to real peace. So what we're seeing is an increasing scrutiny and an increasing pressure also on VMs on tier one tier twos and the whole supply chain, to tackle this Cradle to Cradle to gate elements in the emissions piece, because from a climate change perspective, it doesn't matter where this carbon dioxide is emitted. It's the entire picture that counts. And this obviously has very, very significant implications on on the value chain in the automotive industry on the core operations of the industry. In terms of scope, one and two Meaning the production facilities of your own, but also along your value chain. So what you talked to with your suppliers about the carbon footprint of the products, but you're leaving, that you're selling. So that has a massive impact. And it only is only starting. And last thing I would echo Stephanie on that the regulation that we have, they are ambitious. But from again, a macro climate change change perspective, this doesn't get us anywhere near we need to get in terms of achieving a two degree pathway and depending a bit by geography, but the current regulatory framework kind of falls short of by 50% roughly speaking in many geographies,for the contribution of the transport sector. So, I would hope and I would expect that regulation will need to defend and will need to become even stricter with respective implications will be Mr. K. 


Xavier Mosquet  

Great. Thank you. So by the way, I think Have lots of questions for the panel. But at some point, you know, we will open questions, you know, from the audience, there will be a microphone that will be there in the middle, where you can all you know, go and reach to ask your own questions. And so if you do have questions, you know, please make sure that you will have time to, to ask them. So, you know, I'd like to maybe set the stage a little bit in terms of climate change. So first of all, you know, what do we do to make sure that people understand there is a climate change issue? And second, what, you know, what, in a way is the importance of transportation, both passengers and potentially goods, you know, in the overall, you know, contribution going forward?
 

Stephanie Greene  

I'm gonna get you I'm gonna jump into that one. So yeah, so I did say before so just to remind everyone of the climate science targets, which are increasingly being embraced by policymakers and regulators around the world, is we need to reduce emissions 50% by 2030, and 100% by 2050. So it's pretty Bold, and will require transformative change. And so the transportation sector, I believe the global number is about 25% of GHG emissions in the US it's 30%. And in places like California and other like in France and places with greener grid mixes, and California is 40% of the emissions from the transportation sector. And so what's exciting to me about that is we can address this now with current technology. But yeah, it will, you know, we need to go from a million electric vehicles in the us today to 50 million in 10 years. And just one thing I just it was not part of your question, but I do want I feel like we are really Debbie downers about cost. One thing I will say, and I think many of us in this room will relate to this, which is, cost is a piece of the customer adoption equation, but it's not the only thing. So I think we do need to think more generally about customer demand. We didn't know we wanted iPhones until they existed and then they were amazing. Right? So I think there are things about how do we push this to consumers? I think Tesla has shown that there could be a cost premium on your car and you're still going to buy it. I realized there's a lot of caveats about the income level of customers and otherwise, but I think, you know, the life cycle cost of these vehicles, you don't need oil changes, they're more fun to drive. And so there's little policy changes that can help like kicker incentives to dealerships, getting dealers more incentivized to sell these vehicles or like what is it that automotive sector or spires can do to really get to get customers on board with realizing that these are actually amazing products to own? Like an iPhone? We didn't know we need to lift or Uber, but now we all use them right? So what how can how do we make these more like that and it's more than just cost?
 

Xavier Mosquet  

So Mike, sorry, you want Cornelius? Just wanted to please 
 

Cornelius Pieper  

Quickly one one comment on that in the greater scheme of things so to say automotive or passenger light transport Berta is an easy tools and mitigate sector compared to steel and cement and so on. It's worth while you all these things may sound kind of difficult and how we going to get there, it's so much more difficult to find solutions for the climate issue in other industries, right, just to put things into perspective now.
 

Xavier Mosquet  

So Mike, you know, as I know, you know, how do you see the consumer, you know, how do you need to do differently to the consumer? And, you know, how are you thinking about as an athlete to manage that transition? 
 

Mike O'Brien  

So I had to defend the American driver a little bit.
 

Xavier Mosquet  

So we'll put him on the spot later. Yes.
 

Mike O'Brien  

Be sure I have to take it. I'm going to I'm going to be on the side of the American of car owner and driver for a moment. So I worked for probably one of the top automakers there, it's a Japan based automaker for 14 years in product development. And we brought teams of engineers to the United States when we were kicking out the development of a new product. And the one thing that consistently amazed the teams of engineers we brought over was the vastness of the United States. And when you're in Japan, you know, the generally and in Europe is the same thing when you look at studies and see vehicle miles traveled by consumers, whether it's Europe or Asia, vehicle miles traveled are far less on a daily basis than Americans. So Americans drive more, and they drive further distances. And you know, going back to that, whether it was when I work with engineers in Japan or in Korea, one of the first things that they comment on when they come here, when we're studying new products is how big our country is and how much driving people do to get around. So I think that's the uniqueness. So maybe our drivers maybe aren't strange, they just have a lot of distance between the places they go. And so when they make their purchase decisions, they're thinking about vehicles that can allow them to visit their aunt that's 200 miles away. And so that's part of they buy half on the dream, something they do once every six months or once a year, but they use it in the day to day commute. So we always have that debate about well how much range Do you need for an EV for axial So getting back to your question, all automakers are faced with the same regulation, we have to hit 54.4 fleet mpg by 2025, I believe is that right? And so in order to do that, we have to have virtually half of our fleet electrified in some way. So mild hybrids a strong hybrid battery electric plugin, we have to do that. So we have to do that. So whether we electrify a pickup truck or we electrify an SUV, we have to do that. So that's going to be something that regulation will require us to do to participate in our market. On the other side, we have to do things to produce products that overwhelm customers with desire, we have to make the products much better than they expect, whether it's value or performance or design. So they're drawn to the products and naturally we don't have to sell them. Tesla is a good example of offering more than the customer expects, and making sure that your product offerings compelling. The third, I think the third spot This wheel is that, you know, both government and others are working on things to reduce vehicle miles traveled. That's really an important component, whether it's local regulation that encourages developments to occur closer to employment, whether it's shared mobility solutions and cooperation with local governments to sponsor and support, whether it's car sharing or other models that minimize vehicles miles travel at the same time, getting more people in those vehicles, we have to do our part in terms of creating products and programs that maximize the efficiency of our cars, not just when you're driving down the road for one mile, but the number of people that you're moving down the road for that one mile at the same time. So we have to be an active participant in those programs that create vehicles that will use or work well in a shared vehicle environment.
 

Xavier Mosquet  

Yeah, but but in your mind, you know, how much can you manage that with keeping You know, unacceptable PnL? And you how do you can you manage that transition without keeping an acceptable profitability? I mean, how does that work?
 

Mike O'Brien  

Well, you know, car companies were, we all have to make money to be in business, that's just a fact of life, we would be great if we didn't. But in order for us to survive, we have to make a profit. So, and the auto industry is one of the most competitive industries in the United States, when you think about it just for a moment, extremely competitive. So nobody survives without making a profit, not for long. Of course, we have a lot of efforts underway to improve efficiency, whether its materials like waiting, so we take less battery load. So one way as you reduce the load of batteries reduce the load for motor requirements by vehicle mass reduction. Another way is to work closely with our battery suppliers. We have to same to that many of the others have to improve costs and efficiency in the way we construct the whole battery system. So there's many parts of the battery system, not just the best battery cells themselves, but cooling, the manner in which we charge and discharge the batteries, cycle life considerations in order to maximize customer value. So we have to think about things that pull as much cost as we can out of our products. When you look at the tasks that we place our engineers under in order to be competitive in the marketplace, we have no choice. So competitors are going to price as best they can. And customers going to select the best value. automakers don't choose the price of our vehicles, the customer does. So the customers will pay what they think is fair, and the cars will sit on our stores lots until we arrive at different price. So the market is going to set the price. We have to find ways to reduce cost. Yeah.
 

Mary Gustanski  

Maybe just to add to that, you know, I think another thing that automakers really need to do and suppliers alike, is to look at the convergence of everything that's going on. When we bucket and we look at Legacy products versus electric vehicle it gets expensive. That's wrong. way to do it because you have something that's being invested with low volume. But if you think about it as those legacy products, when coupled with all the connected technology, and the electric technology that can be added, it can really transform what you're offering to the consumer, you can offer a more higher value product that they want, and they want to buy at an affordable price. Right. And I think that's the key to this. It's not saying the old is gone and new starts and you have this whole in between. It's how do you manage that path to electrification, that's really going to be those that come out successful on the other end. 
 

Xavier Mosquet  

Okay, thank you. So Thanh, I said, we put you on the spot at some point. But you're right, so I did. So here are some cost projections, you know, by 2030 with your son decline. What's your reaction as a battery manufacturer? Does that sound realistic? Is that too optimistic? Is that too shy?
 

Thanh Nguyen  

So, depend on what you're looking at. And the dependent is that microphone says that his cost right but his cost or similar his cost? No, I think we'll we're trying to get there. We hear a lot of from different always how much it will take to tip it. Right? And depending on the year you know, it's like a bit like, I don't think it's gonna be linear it's going to be somewhat other son is you know what we see actually two years ago it goes like this and boom it just drop I but the certain point when you hit a certain volume what other media can't squeeze or cost on material anymore? I mean, you can hit a cost curve once either cost curve and what's next. So things that we're we're looking at a lot I'm not sure you know, you thought about that. We start looking at the closed loop process also. So the idea is let's work with yo ease and the band That you're buying from us. If we can get it back later, that's economic advantage to do we, and we can arrange and what costs going to be a 910 years from now? Or not even that because of some, you know, some other packs that come off earlier, for some unknown reasons, right. So if we can get that battery back, and we've been working on the recycling technology now for the last eight years, so we can literally getting that active material out of the battery versus going my you know, but says virgin materials. So that's, that's another approach right now that we start looking at to managing the lifecycle costs as well.
 

Xavier Mosquet  

Great. And so talking about the life cycle then and maybe this question to you and Cornelius, is there actually an option for a second life of the battery or not?
 

Cornelius Pieper  

We've been looking at this and we'll we'll have a report out in the next couple of months. on that, I mean, there is a huge volume of batteries coming back. At some point in time, there's a time lag 5678 years. But we will be looking by 2030, roughly 100 gigawatt hours of returning batteries, which is huge. That's a very interesting opportunity, the way to look at from a carbon emission perspective, of course, because using those materials, assuming you have the right recycling technology, and there's still a lot of work to be done is a big opportunity to bring down the environmental impact of the battery itself. And then obviously, the question, what do you do with that battery? There is certainly let's say, a pocket of Second Life applications that will be interesting, but the complexities of transferring kind of the battery from first life to second life, they are not to be underestimated. they incur a lot of costs and you have to also consider that. Let's say in 2013, that Second Life battery is going to compete to a first life battery. Let's say the two generations down much better performance at a much lower cost, etc. So the competitiveness of Second Life, batteries is not so big. So we believe that roughly 20% maybe more of that returning volume may find its way into some kind of Second Life Application. But the bulk probably will, you know, be available for the recycling. And we do see the recycling batteries as big and important opportunity in this whole kind of ecosystem going forward. But
 

Xavier Mosquet  

Stephanie, from a utility perspective, using the same that the Second Life is, you know, a small part of the market?
 

Stephanie Greene  

I think. I think it's a small part, but I think it's an important part. So, pg&e actually did a really interesting pilot project with BMW that looked at it had both Second Life batteries and customer active BMWs and then it dispatched charging signals to them. Just either manage their charging at certain times of day. And then they would alternately call on the second life of batteries if they didn't have enough customer demand to meet that demand response event or they would use the BMW. So they would basically just stop charging the car, right. So it wouldn't be exploiting the power of activated but it would stop charging the car at peak demand times of day. So what we found from that was one customers were quite responsive to that. And to there was a really useful synergy between having some kind of battery so I think I don't have a strong opinion and are they Second Life? Are they fresh batteries, right? Like you there needs to be a closer view of like, what are the economics of doing that, but there is value from the grid services and doing some level of demand management on the customer side. And the ability to flex between a battery pack and the customer car was very useful in our pilot. And I think it's also important to remember you know, a lot of people and you know, we might talk about this as a separate question, but like a lot of people get very worried about what's the impact of TVs on the grid. What's going to happen? I think it's important to remember from utility perspective that a lot of times we're talking about, like one in 1000 moments, right? Like we're not talking about, like, all the time, we need this extra power, it's like, we just need a few vehicles or a few batteries to hang in there for a second, while we just managed this one peak in demand. And so then that can enable us to build the right size transformers and, and minimize the build out of extra capacity on the grid. And so it's kind of like when you look at graphs of this, it's like you only need to call the events a limited number of time. So that's what getting back to second life, right? Like, how long do you need to use those batteries? What's the performance they're needed? They might not actually need to be called that often, to be very beneficial to the grid and to help with the integration of electric vehicles on the grid. 
 

Xavier Mosquet  

Okay, so let's do there. So you go ahead, by the way, I will. There's a microphone over there. If some people have, you know, questions, you just, you know, go to the microphone, and then we'll take it from the audience. 
 

Thanh Nguyen  

Oh, So that's all.Okay. So Second Life, this come up with us all the time. And we've done several workshops with our customers talking about economics on a second life. It is a lot more expensive than people think to get a battery prep ready. Oh, by the way, there's no good model today to figure out different people drive differently. Not for over here. But we don't know what happened to our battery. Secondly, you talk about a 10 years. And guess what I'm going to bring back to the cost because as a virus suppliers, we're going to design to what Mike needs, because he's not gonna pay extra. Right. And as the as we got more and more data, we know better. We can build up our own model and we can see exactly how much we can build to that. Okay, that's what, that's what we do. Okay? Otherwise it's too costly for us. So you got that. Thirdly, Second Life liability. Who owns that battery? Right? What happened at a battery warranty? Guess what? People you paying for that? But oh, we can't tell you how much this thing's going to last because it's illegal and done. Nobody knows. I've seen so many Second Life startup come across my desk. And they finally figured out Oh, I don't know, I I can't warranty this. I don't know. I don't know who owns it. The liability is not us anymore, right? Because we're, our liability is with the first life, not a second life. Right. So that all the challenges are coming, but yet there are certain cases even total control. Yes, I can see that happening. But on a larger picture, get the battery back to us will direct you know Recycling will get the material as a much better economics.
 

Xavier Mosquet  

Okay, that's interesting. So recycling versus Second Life. That's good. So I have lots of more questions, but I think we have a few there. So what do we take it from there if you want to start?
 

Speaker 1  

Thank you. Hi, my name is Adam Richie from a consultancy I just picking up on Stephanie's point we're looking for 50% by 2030 reduction in emissions than 100% by 2050. If you look at the marginal co2 from electricity that will feed battery electric vehicles, it's not the average type numbers you're showing it is going to be marginal in the grid. Realistically, what contribution can this really make by 2030? Even with pretty aggressive battery electric vehicle forecasts?
 

Stephanie Greene  

I think I got 80% of that question. But I see you're asking what's the marginal continued concrete the last the marginal contribution
 

Speaker 1  

of co2 emissions is that if you put a whole bunch of electric vehicles in India and China that's coming from coal that's not coming from there. hydro, their nuclear because it's going to be incremental demand. And they're still adding capacity and coal. So when you look at your stack in terms of how much co2 you're saving by moving to battery electric vehicles, Are you clear that this is actually reducing co2?
 

Stephanie Greene  

Yeah. Now, it's a great question. And I'll let you go into as well, because I think, you know, your numbers showed some of that. I think my answer is, it's really about when are you charging? So again, get back to this on the grid? vehicles on the grid question. You know, what we saw at pg&e, which just I think I explained this before, pg&e has one in five electric vehicles in the US or in pg&e service territory. So it has a lot of TVs. And what pg&e saw was, yeah, if you manage that charging at during the daytime, so that's why workplace charging is really important. It's all solar. We have an over generation problem in California due to too many renewables on the grid, which is a Right Thing at certain times of day, and and so it's all soaking up solar. So on the margin, and then at night, its nuclear power and a lot of wind. So if customers are charging at those right times of day, you have very little marginal co2 emissions. But you're right. That's an important consideration. And I think it's worth thinking about how do you create either regulatory or economic incentives to make sure that customers continue to be charging their vehicles to maximize their renewable penetration.
 

Xavier Mosquet  

So I mean, just adding maybe two things, wonderful floor. In the end, electric vehicles really have a contribution in the mix of electricity production is cleaner. I mean, we saw the figures for China, I mean, today, it won't make a difference. It's expensive, but it will make a difference that in 1015 years, we will make a difference. By the way, I did not account nuclear as part of renewables, but this is you to free. The other thing that I think is important and to consider, you know, obviously that you know, the first And the other companies making batteries. It's actually a lot of the cost of the co2 is in manufacturing the batteries. If we can make you mad battery manufacturing more co2 efficient, then you it's very easy to make a positive co2 balance in any country right now. And so that's another thing which we have to work on, which is what's the manufacturing process that we use to manufacture those batteries? And I don't know, you know how piracies is looking at it.
 

Thanh Nguyen  

Right, we enter a partnership with Daimler carbon neutral battery production. That was the that was doing Frankfurt Auto Show. With that we made that announcement. It is a challenge. This is going to be a almost, I would say eight to 10 year project for us. You know, it's and you know, everything from what we can do today. Renewable Energy as well as innovation in the manufacturing process as well. Right. So everything that we're trying to use the That's that's our goal. I think with Donna, we said 2030 I think that we completely carbon neutral on the battery production or away through corporate options carbon neutral.
 

Xavier Mosquet  

Great. Next question. Thank you. 
 

Speaker 2  

My name is FileZilla. 
 

Xavier Mosquet  

And so we're sort of speak slowly because actually from here, the sound doesn't come well to us. So we need to make sure that we hear your question well.
 

Speaker 2  

okay, I will try to slow down. Some Ms. Greene alluded at the need to reduce to zero by 2050. And if we look at the regulations that are currently in place for the vehicle, market, none of those really get there. So with that in mind, and the topic that we heard on cost, where would you say, what is the regulation or the policy that is most needed or that would really move the market forward and bring us closer to that target? What is the single piece of policy that would need to really take this into higher gear and to get to those targets that maybe goes to your Ms. Greene or Mr. Pieper? Yeah.
 

Xavier Mosquet  

So that's a good question for Mike and Mary, maybe.
 

Stephanie Greene  

What's the best piece of regulation to drive us to 100% production?
 

Mike O'Brien  

Well, that's a great question. It's going to take a lot of work in a lot of different areas. So it's interesting that we were discussing before this forum began that when you walk into a new car retail operation, you know, you have a bunch of sales professionals, and they're normally going to take it to the places where they're familiar, you know, where they they know, products, the product, they're driving back and forth to work every day. And so, a lot of our sales professionals aren't that familiar with EBS, or plug in hybrids, for example. And so there's maybe a natural tendency to take them somewhere where they are familiar. So one of the things we've suggested to the state of California is we should provide salesperson incentives to sell battery electrified products. So we we've done that ourselves. So we actually, in the northeast, we actually offer special incentives for our battery electric vehicles just over and above any gasoline product that we sell, to help steer our sales people to take customers to learn about the products and take customers to them. I think that's the small step. Of course, co2 regulation is a big step. And that's what's really driving a lot of the product development is going on in the auto industry now is frankly, co2 regulation. So in our case, cafe, as well as a nitsa with mpg requirements, so we're required to reach 54.5 54.4, I'm sorry, by 2025. And the only way to do that is with electrification. There is no gasoline pathway to do that. There's no known liquid fuel technology that can get us there. So manufacturers have to do it. So they have to do it. And it's a matter of selecting that portfolio of products and features that Customers will will choose from and find favorable in the marketplace. So, of course, co2 regulation is a powerful one. I think on the customer side, we have to find some better ways to show the advantages of these products. So they're still relatively unknown to the vast majority of vehicle virus, believe it or not, we all know about them here in this room. But when you're in Ohio, or I grew up in Missouri, you just don't see many of them and customers aren't that familiar with them. So we have to find better ways to improve the natural awareness and consideration for these products beyond typical avenues that we choose today advertised and so forth. So that's going to be an important step as well.
 

Mary Gustanski  

Maybe just to add, though, I think you're asking what regulation really is going to move this forward, what really could change that? Let's just look at what's been most successful, right to date. It's the co2 mandates are really impacting industry. It's something they have to meet, it makes them design these products. But in the end, it's they can only sell what they sell. And it goes back to the consumer. So think about what happened in Europe in 2018. As a lot of the countries in the city said, older vehicles, older diesel diesel vehicles will no longer be allowed in the city limits. As soon as that happened, even new diesel sales and like duty dropped off because the consumer was afraid of their total lifecycle of that vehicle and what they would do so I think it really has to be things that touch the consumer, and and that make it a value for the consumer and incentives that help the consumer. Right, those are the two things that are going to really drive this forward.
 

Cornelius Pieper  

And I think the single one most effective regulatory move that could no shift, this would be a meaningful co2 price.
 

Xavier Mosquet  

For me, I would just add a couple of things, which is one until 2022. We need incentives. So any country that does not have a good plan to make it financially attractive for consumers in the next three years will fail. And China by the way, had a three year plan. We're just out of it, the market is stagnating, so they have to go another four year. And until they do that it will not grow again, then there's lots of small regulation issues that nobody thinks about, you know, I was working actually for the French government recently on what are all the changes we need to make to develop the market. One simple thing, you know, was the fact that if you live in a condominium in France, you need to ask an authorization to get a charging station. If it takes 12 months, there's no market. So now France has passed a regulation that in within three months, you need to add the rating, the authorization, there's lots of things like that little things that are you know, cast in stone in our current in legislation and infrastructure that we have to solve.
 

Speaker 2  

Thank you for that. And thank you, Mr. Pieper for mentioning carbon pricing. Because full disclosure, I volunteer for an organization, citizens climate lobby, who's actually pushing for that legislation in the US. I didn't want to prime with that. So that's why I didn't say earlier. Thank you. 
 

Xavier Mosquet  

Thank you, Next
 

Speaker 3  

Hi. My name is Sarah Canal, one of the earlier charge you showed brokedown projections by electric hybrid ice and diesel. I'd be interested in the panel's thoughts on fuel cell vehicles and how that might impact battery electric market. 
 

Mike O'Brien  

So let's talk about fuel. 
 

Xavier Mosquet  

So you should start maybe you can Cornelius. Yes. We will ask Thanh for that question.
 

Mike O'Brien  

So we were just wearing our second generation of hydrogen fuel cell vehicles. We have invested billions and billions of dollars since 1998 in fuel cell technology. And I will I have a bit of a different view than many people maybe within this group. We believe and we've been spending a lot of time in this area we believe that hydrogen is uniquely suitable for larger class vehicles. Where energy density, power train package density, power delivery, refueling time. Actually virtually identical to a liquid fuel product. And so we've been, not only do we sell an SUV that we call next, oh, that's a hydrogen fuel cell vehicle. But we're also working on a bunch of commercial applications. So we've just launched fleet of vehicles in Switzerland that are class eight trucks that are hydrogen powered hydrogen fuel cell powered. We're hoping to expand that we showed that vehicle in Atlanta at the heavy duty vehicles show a few months ago, we're hoping to start thinking about doing something here in the United States. We feel that there's some unique advantages beyond the ones I just mentioned. One is that when you think about the hydrogen economy, which I know is a very delicate subject, we're always thinking about how do we manage grid cost. And of course, we have to build a capital structure for grid generation that accommodates that one day of the year when everybody's air conditioners running. And you know, it's very hot out, but for the rest of the year, we're running under contract. entity. So hydrogen could be quite an ideal storage mechanism for electrical energy. So it can be stored forever. It can be used when needed. When you think about it, they could have some cost advantages in terms of grid peak management in the long haul. So, if you think about energy, hydrogen, not just as a motor fuel for personal mobility or commercial mobility, but also as a storage medium for peak energy periods, it offers some advantages that we should not overlook. So I think we shouldn't we shouldn't ignore hydrogen, I think it's going to be a very important fuel in the future. And I particularly think, when you think about commercial vehicles, you know, buses, trains, class eight trucks, there's some real advantages that hydrogen offers that could really be a transformative in terms of reducing carbon in the grid, as well as in our mobility.
 

Cornelius Pieper  

Continue. So Mary, any, just just two brief comments, I would agree hydrogen is really the technology to look at for commercial applications, in particular heavy transport where it's much harder to abate, let's say with conventional battery technology. And the second thing is we've been discussing a lot about can be infrastructure challenges for batteries. For hydrogen, these are so much bigger, and we are so much further back on that. So that's going to kind of slow down the adoption, I think, or at least the mass adoption in like light transport. 
 

Mary Gustanski  

Yeah, I would agree.
 

Xavier Mosquet  

Okay, great. Thank you. The next question.
 

Speaker 4  

Hi, my name is Maria. And I was wondering if you see a benefit to creating household energy storage solutions with higher proliferation of EBS, especially tied to more solar roof tops, and if there are any technical challenges in creating those kind of batteries with the reverse flow for household storage solutions.
 

Xavier Mosquet  

Stephanie?
 

Stephanie Greene  

I caught most of the question but what was so higher per liberation of EBS combined with solar and storage.
 

Speaker 4  

Yeah, using the higher proliferation of EBS to have basically a micro grid with all of the households using that as their battery their households in energy storage. 
 

Stephanie Greene  

Yeah, so I think it's a great question. So I do think that actually that gets that question gets really interesting when you start talking about electrifying the whole building sector and really thinking through electrifying having all electric homes with heat pump, h HVAC and water heaters and and then you can actually use all of those appliances to be smart storage devices, in some ways for the grid. I think what we saw, at least among pg&e customers is that you usually need some additional storage, right? Like it's not enough to have have customers want to be able to drive their car. Right and I think there we we saw that at least today. The additional capacity that's provided by the TV is not Always sufficient to provide the energy needs of a whole household. I think there, it's certainly worth exploring. But you might need some level of additional storage, right. And that's, again, where we get into these really interesting applications of Yeah, you could do some managed charging of the EV, and a little bit of backup storage that would help with the economics of the micro grid, but we wouldn't see it with EBS as the storage solution alone.
 

Xavier Mosquet  

So we have time for the last question. And then I think we'll have to wrap up, please. 
 

Speaker 5  

Thanks. Great honor. So we've been talking about a lot about long term perspectives and how to convince the consumers and stuff and also about co2 impacts which on which I agree completely with you guys that are really relevant. But do you do you see any real showstopper, medium term and long term concerning the resources like the raw materials like nickel special nickel, cobalt is already phasing out that nickel and maybe even lithium. Thank you
 

Xavier Mosquet  

So it may be a question actually for Thanh on what could be the showstopper notably in material availability and whatever and I think that's true to you potentially into Mary for the components
 

Thanh Nguyen  

Yeah, so actually in November I actually was at benchmark minerals conference and this come up a lot you know, what happened the raw materials in it is gonna be interesting as a mixed reaction from the minute the mineral guys so they actually telling me that we we we have raw materials, right? So that's not the bottleneck that everyone make it out to be. The thing that they don't want to do it because the projects are costly, so they want to see this, you know, chicken and egg right. So what comes first? Is the are the volumes are real. Everyone show me you shown a bit 1% in 2030 electrification didn't believe it. So this is, this is sort of, it's going to be a dance of that. But on top of it, so going, I'm going back to the boring recycling topics on top of it. Also, if we were able to get this back, do we really need, you know, the, you know, we wouldn't create a closed loop process. We can actually, you know, minimize, I'll say eliminated where we can minimize all the mining or raw materials out there. So, again, it's, it was an interesting discussion.
 

Mary Gustanski  

So, I might just go a little different on that topic and not so much raw materials that concerns me as much as the manufacturing capability for the components you need for EV So, electric motors, power electronics batteries. If you think about today, how much worldwide engine production internal combustion engine production, there's today Think about all that aging be replaced by 100% electric vehicle components. That's a huge shift and is a huge transition. And it's not once you're there, you're fine. It's from getting from here to here. That's going to be the challenge. 
 

Xavier Mosquet  

Great. So, I think it's time to wrap up. I would like to remind you that this report is available on the BCG website and I sent a link to CES there is a microsite also where you can find it. So you'll get actually these data and more. And I would like to know huge round of applause for our panel members. Thank you so much.


 

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