It Will Take More Than Tesla – Crossing The Chasm – Part 4

In Part 3 (News Roundup) I said that I would next look at some of the big questions provoked by the transition to Electric Vehicles (EVs).  My natural focus will be the UK but I believe that much of what I say is relevant to the rest of the world, and I will draw on examples of what’s being done (or is planned) in other countries for comparison.

There are plenty of questions, issues and risks to think about in this major transportation transition, but the first that I want to deal with is, from a consumer point of view, what it will take to “cross the chasm.”

Crossing The Chasm

In the early 1990s Geoffrey Moore pubulished a booked called “Crossing the Chasm”, subtitled “Marketing and Selling High-Tech Products to Mainstream Customers” – in essence a manual for getting your leading edge technology product beyond the early adopters, technical enthusiasts and “buy it because it’s new and shiny” types and into the hands of the mass market.  There’s a great summary by Jonathan Linowes.

Moore’s thinking was that rather than there being a smooth curve of adoption from innovators (the real enthusiasts) through early adopters and on to early majority and late majority (the peak of the curve of adoption) with laggards coming in at the end, there were gaps between each of these groups of customers.  Getting across those gaps – with the largest being between early adopters and the early majority, so large that it was not so much a gap as a chasm – required different thinking.  That is, what made your first few customers buy your product would not be enough to get the early majority to buy it.

The Innovators

So who are these innovators, the very early adopters of EVs, and just how many of them are there?  Well, not very many, perhaps by definition.  But even less than you might think given all the press coverage around EVs, some of which I referred to in Part 3.  One way to count how many there are is to look at applications for grants from the government’s Plug-in Car Grant Scheme.  As of Q3 2017, a total of 122,000 cars had applied for grants since the scheme started in 2011.  That’s a cumulative figure, which, when placed against roughly 2.8m annual car sales in the UK, suggests that these innovators, at roughly 25,000 or so cars in 2017, are pretty much the 1% of fable and lore.  But, that 122,000 total includes both Plug-in hybrid and EV – the former count for roughly 60% of the total, leaving about 45,000 EVs so far in 2017.  The 1% is really the 0.5%

The most popular car that qualifies for the grant is the Mitsubishi Outlander PHEV – around 29,000 cars in Q2 2017.  The Nissan Leaf follows up at around 17,000 cars.  Tesla, including both X and S, counts for about 6,500 – as I’ve said, it will take more than Tesla.  In total, there around 50 cars eligible for the grant, though not all have seen sales so far.  What’s clear from the numbers is that there are far more hybrid options available than purely electric, for now. Mitubishi are roughly the 25th most popular brand in the UK, selling about 8% of the number of cars that Ford, the number 1, sells.  Nissan are 9th, seeling about 45% of Ford’s total.

According to various profiles, these innovators are likely to be relatively younger and richers than buyers of combustion engine cars and, some say, smarter/better educated than them too.  It’s hard to disagree with the “richer” label – EVs (and hybrids) are more expensive than cars with combusion engines, even with a generous government subsidy provided for (not to mention lower ongoing costs in terms of fuel, tax and congestion charges).  It strikes me that the innovators, whilst thinking green, are unlikely to be choosing such a vehicle only to be green – there are too many other factors to consider, particularly range and charging locations.

Our innovators, then, are relatively well off and have evaluated the pros and cons of EVs and decided that they can handle range limitations (perhaps because most of their journeys are short and because they can easily charge their car at home, with off-street parking available), they’re thinking green but they’re also thinking about long term cost saves (in the absence of any guidance on future “fuel” tax levies).  They’re also, probably, chasing technology – these same innovators are likely first buyers of new models of phones, televisions and other electronic gadgets; they may also have their eye on future revenue opportunities by feeding energy from the car back into the grid.

They’re also, I think, risk takers – they don’t know how things will play out in the future in terms of residual value of the car in a few years, future software upgrades, possible software errors that result in problems and so on.   They’re “moon shot” customers, people who are happy to take the risks because they want to be first and, if they’re happy, they will make great ambassadors for the brand that they’ve chosen (possibly to the point of terminal boredom for some of their friends who may be less inclined to be innovators).  

The Early Majority

The second wave of EV purchasers will be quite different from the innovators.  They will be thinking through far more options and considering a far greater number of angles than their early adopter counterparts.  The issues and questions confronting the early majority, who will still be asking why should they buy and EV, rather than why shouldn’t they, include:

Do I even need a car?  There’s a reasonably large section of the population – probably skewed relatively young and living almost entirely in cities – who likely see no need for a car.  They have easy access to public transport and use Uber when they’re out, they may not have easy access to parking and they’ll see the congestion charge (if in London) as a needlessly expensive tax.    Many will be green-thinking and conscious of the pollution in cities and will want to do their bit, but it will mostly be a calculation purely based on cost – why incur the regular expenses of a car when they can have near immediate access to one by the minute or by the hour through Uber, Lyft (soon) and black cabs with Zipcar and equivalents handling the very occasional long journeys they’ll make?

What choices do I have?  The number of pure EV models on the market today is limited.  As I noted in part 3, that’s changing and, over the next 3-5 years, there will be considerable choice.    Choice is important – if it wasn’t, VW wouldn’t have 300 models (across 12 brands) on the market.  Every major manufacturer has made the commitment that certainly over the next 10 years, and in many cases even fewer, they will have electric and/or hybrid versions of every car in their range available. My sense is that VW won’t have 300 EV models though – engine sizes, fuel injection, turbo, diesel, petrol etc are all redundant and will be replaced by external shape and functions, interior design and features and perhaps battery size.  Just as now, a near infinite variety of colours and functions/accessories, but only a few core models – small, big, off-road even.  Not that simple perhaps, and not right away, but you get the picture – number of seats, amount of storage space, safety features, entertainment upgrades and software capability (today and in the future) will become the big decision points (once range becomes a non-question).

Where do I go and see the choices? Dealers are going to have make some interesting decisions soon.  They only have so much space available to them … so do they roll the diesel cars out of the showroom (diesel car sales are already falling and are at their lowest even percentage of the total, notwithstanding industry efforts to convince us that modern diesel is as clean as petrol – imagine why we might be just a little sceptical about such claims)?  Do they reduce the number of petrol and diesel cars on show and make more room for EVs and hybrid?  Do they open an EV / hybrid only showroom on the basis that if the customer wants to buy an EV, there’s no point in showing them a diesel car?  Wrapped inside this are some very interesting disincentives for dealers – I’ve heard various estimates but something like 2/3rd of a dealer’s revenues are tied up in the aftermarket support of a car; with EVs having 1/4 or 1/5 (and falling) of the number of parts of a combustion engine car, will much of that revenue disappear because there’s less to go wrong (and some of what goes wrong could be fixed remotely by software?).  Comparing models across dealers is also going to get interesting – given how much of an EV is software based, how long should a buyer wait before she knows that the software is reliable and so can confidently make a purchase?  How can you compare software capability between manufacturers?  How should a buyer evaluate a manufacturer’s ability to patch and upgrade the software regularly?

How much will my EV cost to buy?  If you’re making the choice to buy an EV today, you can see exactly what the purchase price is.  It will be the sticker price less the government’s incentive plus the cost for installing a charger at home less the subsidy for the same charger.  But what if you’re thinking about making the switch a year from now?  Will those subsidies still be in place?  Two years from now?  I suspect the government sees no need to announce changes to those subsidies now given that take up is low, but as it starts to move higher (and the graph of purchases is very clearly upward now), that susbidy will look like an increasing cash drain, and one that, today, is seemingly rewarding people who are already rich enough to buy an EV.

What are my long term servicing costs?   Routine service costs are relatively easy to forecast – there’s some data available for existing cars, but there are also some unknowns (e.g. if a future software update adds functionality, will that cost money too?) – and, again in theory, the cost for an EV should be lower than for a combustion engine car (though it seems likely that independent/small dealers will struggle, at least for now, to compete with the main brands which means that there will be a little less competition); it’s unclear, today, what “major expenses” might be expected were there to be a significant failure but it seems reasonable to think that (a) costs will be lower than combustion cars because there are fewer parts and (b) there should be fewer major failures.

What about running costs? The cost of fuel is an area of significant uncertainty, not today, but soon.  With £27bn of fuel tax and some £5bn of road tax at stake, it seems unlikely that once EV ownership becomes more widespread, possibly as soon as it reaches mid-single digit percentages, that tax loss will have to be replaced and, given that most charging will likely be at home, a per mile charge seems most likely – with the cars themselves reporting the distance travelled, for government (or a 3rd party agency) tallying it perhaps every month or every quarter.  Charging away from home can be estimated too – and various third parties offer membership fees that let you charge at their own stations.  There is, of course, an ugly scenario – one that we have seen before with bank ATMs (you can only take money out from your own bank branches) and mobile phones (you can only text people on the same network) – where a long range driver will have to join multiple schemes to be sure that they can charge wherever they are; that should, like the examples I gave, work itself out in time though I can see an initial burst of effort to get first mover advantage where multiple suppliers provide charging capability to the same places (there is a role for regulation here perhaps, where government drives common standards and cross-charging) but, if not, the market will take over and smaller companies will be acquired and rolled together to create ever larger companies competing on price, speed of charge and network reach.

How much will my car be worth when I come to sell it?  There is very little data on this so far – the two data points I’ve come across are that a Tesla S is probably worth as much as 60% of purchase price at the 3 year point and a Nissan Leaf is worth only 20%.    This likely reflects Telsa’s constant software upgrade programme and its expectation (supported by testing) that its batteries will last 20+ years (and that they can then go on to be used e.g. for running lifts in appartment blocks for decades more) versus Nissan’s 10 year warranty on batteries (implying a large replacement cost).  As more cars come to market, these figures will get more difficult to assess.  A more important question for a potential EV purchaser might be, how much will my current car be worth in 3 years?  With the press on diesel engines resolutely negative, large numbers of cars (as much as 90% of the retail market) being purchase on PCPs and the shift to EVs, an awful lot of combustion engine cars will enter the second hand market over the coming years.  Someone is propping up that market now, but it seems unlikely it can be continued for much longer.

Where will I charge the car? Some 60% of UK households have access to offstreet parking and so, for most of those (subject to local infrastructure), installing a charging point capable of fully charging your car in a few hours overnight will not be very difficult.  There’s definitely a shift in mentality required though – if your car is “full” every morning when you get into it, just how often will you actually need to charge it somewhere other than home?  Sure, if you are going from Edinburgh to London, you’re going to need to charge it at least once along the route, just as if you want to go from Bath to London and back in a day, you’re probably going to need to charge at the far end (depending on how leaden your foot is).  Nonetheless, there will be a continued need for “en route” charging stations – but just where they will need to be and how big they will be is going to take some work.  Filling a car with petrol, buying some sweets and paying is a few minutes; the equivalent with an EV, even with a super charger, is going to be several times as long.  That means more space devoted to charging than fuelling because cars will be there longer, with the possibiilty of queues if there aren’t enough charging spots.  It also means more thinking about the economics – what’s an acceptable margin on a full charge (it’s possible, I’m sure, that some people will want “half a charge” or less, but it seems more likely that if you’re going to stop for longer anyway, it might be more practical to get a full charge, unless you’re on your way home and just need enough to get there).    The 40% of homes without offstreet parking present a different problem – cables hanging out of windows and running across pavements are clearly not the solution.  Experiments are underway with converting lampposts to provide charging – but there are more cars in the typical town centre street than there are lampposts.   Induction charging is another option, but would involve serious surgery to roads.  Paris is taking a different route and massively increasing the EV equivalent of Zip Cars (building on the success of Ve’libre).  There’s going to be a tricky balance here about predicting need and putting in capacity, perhaps ideally doing the work at the same time as other infrastructure is being deployed – think fibre to the home for instance.

How future proof is my car really?   Perhaps the greatest unknown with EVs is whether there will be major changes in capability a few years from now that dramatically affect residual value.  Major changes to hardware – more cameras, better radar, huge improvements in battery capacity or run time, more autonomous capability that needs new technology – could all happen, or be thought to be about to happen, and so depress residual value.  New combustion engine car models are telegraphed early and come, generally, with only marginal improvements – some design changes, some clever new features at the high end, a trickle down of previously high end features (parking sensors for instance) to lower models.  By the time we get past the early majority and into the late majority, this issue will probably have gone away but it will be on the mind of many purchasers.

Is it really green?  The power to charge the batteries has to come from somewhere – coal? The elements inside the batteries have to come from somewhere – exploitative mines in the Democratic Republic of Congo?  The car has to go somewhere when it reaches end of life – landfill?  These questions are relative of course – combustion engine cars produce toxic emissions that are hyper-local, rare elements are in catalytic convertors, combustion engine cars sit in scrap heaps with seemingly little recycling.  Here’s a view from Wired magazine.  The Guardian recently quoted a study that said whole life emissions of EVs will be around 50% of diesel cars.  What we do know is that there is an increasing push for power to come from renewable sources and that the bulk of charging can be done overnight when power costs are lowest (because demand is lowest) and so can be provided by the base load capability (initially, though that will change).  Dealing with the rare elements in batteries, recycling/re-using batteries and handling scrap (the bulk of which will be diesel and petrol cars are we get closer to the 2040 point, in the UK, when petrol and diesel cars will no longer be sold new) will all need some work.
What if I break down? “Running out of fuel” still happens and is easily fixed with a combustion engine car by taking a walk to the nearest fuel station and heading back to your car with a can of fuel.  What happens if you run out of charge on the motorway?  Will the AA have something in the back of the van that can deal with that?  What about a typical breakdown?  Will the RAC have the expertise to diagnose and address the problem?

Is it secure?  Whatever the answer to this is, let’s not get the Smart Meter programme people involved.   This is going to be answered on a case by case basis, but I suspect that there will be plenty of scare stories along the way as teenage hackers as well as university researchers, tech companies and nation states discover that there are lots of ways to exploit the software in many cars.  How this turns out is up for grabs perhaps.

A Framework For The Future
Providing clarity and certainty around these questions requires a mix of actions from both public and private sector, with some co-ordination to avoid the otherwise inevitable chicken and egg scenario where buyers fear to buy and suppliers fear to supply.

Customers are already thinking  “I can’t buy an EV because (delete as appropriate) … I don’t know where to charge it … I’m worried that I’ll be taxed based on how far I drive … my car will be worthless when I want to sell it … it won’t be possible to upgrade it … it’s not green enough.”
Suppliers, whilst making commitments to ship huge numbers of new EVs across their range are worried that “we can’t ship all of these EV models because the subsidies might be about to go away … there isn’t enough charging infrastructure … government will replace fuel tax with a road charge … we haven’t got a recycling plan in place for the batteries”

The Role Of Government

Government has a key role in helping address some of these questions and also in being clear where it doesn’t plan to step in:

– Clarity is needed on future subsidies (for purchase incentive, home charger costs, fuel tax and road tax).  How and when will current subsidies be phased out?  What will replace them and will it be revenue neutral to government (meaning that the tax burden on an EV driver will be the same as now, just calculated on a different basis). Careful thought will be needed, as, for instance,  a per mile charge may actually increase the burden on careful drivers – those who consciously buy efficient engines and drive carefully likely use less fuel than those who do not, but will end up paying the same if it’s purely on a per mile basis.    Norway’s recent proposals can show us what happens if this isn’t well thought through – they look to be reversing course and increasing the cost of larger EVs (adding $5k to the price of a Tesla S for instance) because the original thinking was that the subsidies would encourage less well off people to buy EVs but it turned out that it encouraged far more rich people to buy bigger and more expensive EVs)

– A wider programme of incentives, encouragement and funding to position the UK at the top of the tree in the development of EVs and autonomous vehicles.  I’ve frame this in two parts – (1) a series of X Prize-style competitions but also (2) a comprehensive programme of proposals to encourage companies to take risks and develop new EV capabilities.

(1) The creation of X prize competitions, in partnership with VCs and research bodies, to promote the development of alternative battery technologies, development of autonomous capability and street infrastructure upgrades.  There is already some of this going on – for instance, see this £51m award across four projects in the “Connected and Autonomous Vehicle” (ugh) domain.    This funding is provided by the government’s new MERIDIAN brand (why it’s capitalised I don’t know).  Meridian (I can’t shout it every time) believes that the CAV market will be worth £907bn by 2035 … so £51m is hardly putting a dent in it.  I fear another graphene here – the hard innovation thinking is done in the UK and other countries exploit it because we don’t invest enough.  In this case, though, companies are investing billions (cf £1bn from Dyson into battery technology) and yet government appears to be fiddling with table stakes.

(2) Companies can already claim R&D tax credits but I have the sense that these are mostly chased by companies who know how the system works and who would likely do the R&D work anyway.  What about companies who don’t know how the system works or who really can’t afford to take the risk on the R&D, but who might if there was access to a buffer of cash to help them.  Government is terrible at picking winners so both (1) and (2) need some careful work to make sure that the risks are understood, and there should be the option for government to take an equity stake in return for its support of the work.

– Charging capability for the 40% of homes that do not have off street parking needs some thinking about and some regulation.  Streets may need to be dug up – and that should only happen once, packing in as much related work as possible (filling potholes, providing fibre to the home, installing smart meters, preparing for 5G rollout, deploying capability to support future autonomous vehicles and leaving easy access and capacity for future, yet to be thought of, infrastructure etc).  Local authorities may choose to award contracts, or give licences, through a competitive process to ensure that there is capability in their area but not a proliferation (note, I don’t, for a minute, believe that local authorities should fund widespread charging infrastructure, but that they should think about regulating it to ensure coverage and minimal overlap). Central government may need to step in to ensure that there is cross-charging between networks, though the market is likely to resolve that first I suspect. 

– A security laboratory, working with major vendors, GCHQ and others to establish standards and technologies to make cars secure, made available to all vendors as open source to encourage fast adoption (and patching) of their technology to reduce the risk of compromise
– A comprehensive plan for recycling EV components, particularly batteries.    This could be left to manufacturers but, actually, having a national plan for dealing with potentially dangerous components, particularly if there is life left in them that, whilst insufficient to power a car, could power other things, could be a real game changer for the UK, creating new businesses and business models. 

– A plan and infrastructure for dealing with the vastly larger number of scrapped cars that we will see over the coming years, not just through a “scrappage scheme” where owners are encouraged to retire their ageing diesel car in return for some money towards a new EV (see the points above about subsidies).  In this case, I mean how are we going to deal with the petrol and diesel cars that are end of life and that are not replaced by new petrol and diesel cars.  It seems to me that we are going to have millions more cars scrapped over the coming 20 years than over the last 20 years – where will they all go, how will we recycle components etc?

– A clear regulatory framework and plan to encourage investment in sufficient local power distribution to support increased EV charging.  TfL, for instance, say that when they increase the number of buses in a bus station, they often have to work with power companies to provide new substations.  What else could that capacity provide?  How can future demand be thought through and made available ahead of when it’s needed?  How will it be paid for (when it’s deployed ahead of time) and what does that mean for a power company’s regulatory asset base (and so its return)?

– Sourcing standards for components.  EVs today, just as many internal combustion engine cars (not to mention phones and many other electrical products, particularly anything with a Lithium-based battery) rely on a few critical components that often come from questionable sources – cobalt from the Democratic Republic of Congo (Half of global supplies come from the DRC and Amnesty International claim that as much as 20% is mined by hand, often by child labour).  We have an opportunity to funnel money, with appropriate controls, through our aid and development funding, to change how this works – to upgrade and automate mining, protect the labour force and avoid exposing them to harmful conditions and enhance the environment.  It would be a great shame if we went “full steam ahead” without addressing these issues before it’s too late and the damage is irreparable.  Government’s can step in here to drive sourcing standards and monitor adherence.

Bringing together these strands, as well as others that I will run through in future pieces, is some of what I think it will take to move EVs from the world of “why should I buy one?” to “why shouldn’t I buy one?”.    I don’t, though, see it happening without a well thought through, integrated approach that involves public and private sector – all the more as supply chains and custom processes are adjusted in the run up to, and aftermath of, Britain leaving the EU.

Anyone buying a car today should perhaps already be looking at EVs available and asking both of those questions and seeing how the options land – and possibly even consider deferring their purchase decision to see how the EV landscape changes over the next year or so.

It Will Take More Than Tesla – News Roundup – Part 3

The last few weeks have seen a veritable torrent of news on the Electric Vehicle (EV – throughout these pieces, when I use EV I mean a solely battery powered vehicle, not a hybrid) front.  It’s felt as if there was someone new shouting loudly about their vision, plan, idea or policy every day.  Entire countries have announced policies to sweep away both petrol and diesel cars in a matter of years.  Cities have claimed they have even more aggressive plans than their parent countries.  Companies are announcing research projects that may lead to results years in the future, or possibly never.    The supply and demand side has never yet been as active.
Let’s start with where we began, that It Will Take More Than Tesla …

… it seems that production glitches are affecting Tesla’s ability to ship the new Model 3 – the one that has around 500,000 pre-orders (where customers have put down a refundable deposit).  Tesla’s total production to date (beginning with the original Roadster) is around 250,000 and their current quarterly production, across all current models, is just 25,000.  The plan has been to ramp that to 500,000 total cars in 2018, or 125,000/quarter.  We know Elon Musk is capable of realising great visions – we only have to look at what Space X is doing to see that – but we can also see that scaling car production by a factor of 5 in a matter of weeks, much of that for an entirely new model, is going to be difficult and probably impossible given the dependencies on third party suppliers, the gigafactory, automation and workers (this in a month when Tesla reportedly carried out a huge appraisal process and let go several hundred employees – though they look to have added some 10,000 new employees in the last couple of years, so releasing a few isn’t terribly significant)..  There could be a lot of disappointed Model 3 deposit payers next year.  Jean-Louis Gassée has an interesting take on the problems, comparing them with the silky smooth Honda production lines he witnessed years before.
The Race To Be First, Bigger and Bolder

Globally, 95% of electric cars are sold in only 10 countries: China, the U.S., Japan, Canada, Norway, the U.K., France, Germany, the Netherlands and Sweden.  These, and other countries, are racing to increase sales of EVs through announcing ever more ambitious policies:

Oxford, England: Starting in 2020, six streets in Oxford’s city center will be free of smaller gas-guzzling vehicles, including buses and taxis. By 2035, the ban will have expanded to all fossil-fuel powered vehicles and will encompass the entire city centre. Oxford has a particular need to make this happen soon – it is one of 11 British cities revealed last year to exceed the safe limits for toxic particles, according to the World Health Organisation.  This suggests a faster move than the UK’s overall plan to ban sale of such vehicles from 2040. 

Scotland: The Scottish Government has set a deadline eight years ahead of the rest of the UK so wants to outlaw the sale of new petrol and diesel engines by 2032.

Paris, France:  banning all petrol- and diesel-fuelled cars by 2030, 10 years ahead of France’s 2040 overall target for achieving the same thing.  Paris is already practicing as it grapples with similar problems to those in Oxford – it already has car-free days, car-free zones and fines for drivers using cars more than 20 years old. On 1 October 2017, the most recent car-free day, nitrogen dioxide levels dropped 25 per cent and noise levels dropped by an average of 20 per cent.   Paris is also rolling out their equivalent of Electric Zipcars using a Boris Bike style model, see the photo below.

Norway: All new passenger cars and vans sold from 2025 should be zero-emission vehicles. The country is considered a leader in this area. About 40% of all cars sold in the country last year were electric or hybrid vehicles. 

Germany: proposing to ban sales of internal combustion engine vehicles from 2030 … there is no word from Volkswagen on this policy as yet.  Seemingly as many as 600,000 jobs could be at risk.  

Netherlands: putting together a proposal for a ban from 2030 which will need to go through their equivalent of Parliament for ratification. 

India:  planning to ban petrol and diesel cars by 2030.  The interesting thing about India, and China, is that car ownership is just beginning to explode – making EVs a viable choice soon will mean that existing pollution problems do not, at least, get any worse as a result of increased car ownership (plainly there are power generation issues still)

China: considering, but not committing yet, when to ban petrol and diesel cars.   It already accounts for some 40% of EVs sold.

Other cities, including Madrid, Athens and Mexico City are also announcing plans to ban diesel cars from their centres.

The Supply Side
In an effort to capture what, based on the demand side policies, could be a rapidly booming market, existing carmakers and new entrants alike are falling over themselves to announce their plans.  
In the UK, they face a new car market that has declined for six straight months with diesels falling faster than petrol (as reported by the Department of No Shit Sherlock), though to put that in context, year to date car sales are only 3.9% lower than the same period last year (comparing September 2016 to this September makes for worse viewing – the fall was over 9%).  Diesel sales, though, are down 13.7%.   September is, of course, new plate month in the UK so typically sees higher sales – hence it’s interesting to see combustion decline again.  On the other hand, there are all kinds of seasonable adjustments that can be made to these figures to present them in a better light – discounting, for instance, for April’s change in Vehicle Excise Duty rates.  
September saw just over 22,000 EVs sold – roughly 5% of the market and up 41% on the prior year.  Overall market share, globally, for EVs is thought to be around 3% but it’s clearly growing.
Perhaps it’s better to look at a longer term forecast to see what things might look like.  Here’s a recent graph published by the National Grid, covering UK volumes only:
This, naturally, given all of the policies noted above, says that the fall in petrol and diesel vehicles is only going to accelerate.  Today the question is “why should I buy an electric car?”, but in as little as three years, as the market is flooded with new models from the big name manufacturers and a fair number of new entrants, it will quickly flip to “why shouldn’t I?”  The implications for leasing, financing and PCP deals are interesting – what if there’s no second hand car market (at all) for petrol and diesel cars?  What if there’s a market, but the valuations baked in to today’s contracts are wrong by 25% or 50%?
From A Very Low Base
The starting numbers, though, don’t make for pretty reading:
– EVs amounted to only 0.5 percent of US car sales in 2016, or around 150,000
– Chinese consumers bought about 289,000 EVs and hybrids in 2016
– EU consumers bought around 215,000
To put those numbers into perspective, there were 92 million internal combustion engine vehicles sold in the same year.
On The Supply Side
Some of the supply side stories are:
Jaguar Land Rover – By 2020, the entire range of Jaguar cars and Land Rover sport utility vehicles will be available in fully electric, plug-in hybrid and an unclear combination called a mild hybrid, with a fully electric SUV (the I-Pace) launching in 2018.  Note that JLR will continue to offer petrol and diesel versions too – it’s going to make the forecourt a very crowded place, not to mention increasing the number of demonstration cars that will need to be provided (and then sold at a discount).  Some of you will already have seen the fully electric E type prototype that was recently shown.  Jaguar’s CEO, Dr Ralf Speth, is blaming delays on rolling out electric cars to government’s failure to deliver the necessary charging infrastructure – last I checked, government didn’t own, or subsidise, petrol stations.  My estimate is that more than 90% of charging will likely be done at home, work or a “destination” (such as a car park, supermarket, retail park etc) and 60% of homes have access to off street parking – I see a role for government to facilitate a market for on street charging (e.g. for terraced homes) but not to pay for it and run it.
Volvo Car Group (now owed by Geely, a Chinese company) –  Only hybrid or battery versions of its new models will be available as of 2019.  With China making up 40% of current EV sales and Geely playing a  part in that, it makes sense to bring that expertise to the Volvo brand. Separately, Volvo announced that they will move their Polestar brand (no, me either) to all electric vehicles, available by subscription (and in very low volumes initially – c500 for the first car, the Polestar 1) to compete with Tesla.
Volkswagen – In a head long and entirely predictable rush away from diesel vehicles, VW said that it would bring 30+ EVs to market by 2025 and aim to sell 2-3 million sold by then, roughly 25 percent of its total sales. Recently the company upped the ante again, vowing to create electric versions of all 300 of its models. A question, if I may … does 300 models make any sense at all in an EV world? 
BMW – by 2025, they plan to have a dozen EVs and a further dozen hybrids on the market.

Dyson – Yes, that Dyson, he of vacuums, fans, hairdryers and other marvels of engineering, announced that he would be investing £1bn in new battery technology (presumably based on Sakti3, the company he bought a couple of years ago) and a further £1bn in a car design that he plans to have on the road by 2020.   For comparison, Telsa have invested roughly the same amount (a little over $2.7bn in their case) in just the last year.  I admire Mr Dyson greatly – he sees an opportunity and is unafraid to invest (and it’s his own / family money of course), but it’s an interesting call – Dyson’s revenues today are around £2.5bn and they’re profitable (Telsa after 14+ years is not yet profitable); putting sufficient investment into the car business may require an IPO or fundraising from outside investors.

Easyjet – Whilst we’re talking about strategies and bold calls, Easyjet announced a plan to work with a US company, Wright Electric, to develop a short-haul electric plane.  An EP I guess; LPs will come later.  As far as I can tell, Easykey are providing advice and counsel rather than hard cash.

The Other Shoe Dropped
Meanwhile, Royal Dutch Shell (FT link – will require registration if you are not a subscriber) suggests all this talk of banning petrol and diesel vehicles could mean that potential gains from more fuel efficient vehicles are lost, banking on a much slower switch to EVs than others believe is possible.  26% of global oil demand is from passenger cars so any reduction in that is going to hurt Shell right in the bank account.  That said, recently Shell announced the acquisition of NewMotion EV – a Dutch provider of charging points (for homes, offices and public sites).  Is this right hand / left hand, or sensible hedging to cover all bases?

Alongside Shell, Exxon, in a recently published study, is forecasting that, even by 2040, EVs will only amount to a tiny part of the total vehicle base:

I added the black lines in to make it easier to read across – I take it as a forecast that hybrids will number c300m in 2040 and EVs will be only perhaps 100m.  We can say, perhaps, that Exxon is sceptical that the policies listed above, along with manufacturer plans, will make much of a dent in the use of petrol and diesel vehicles globally.  Separately, BP recently said that they see 100m EVs on the road by 2035 – again, only a small percentage of the more than 1.5bn vehicles on the road by then.  If there were 100m EVs on the road, the world would need something like 2m barrels of oil per day fewer than today – all other things being equal.
The Penalties

Car makers may sometimes be altruistic, but it’s more likely here that they see both a market opportunity and a way out of some considerable penalties that come up from the turn of the decade.   Fines for failing to hit legally mandated CO2 targets from 2021 could reach £1bn for some manufacturers.    I’ve seen figures suggesting that 7 of the top 10 car markets – think VW, BMW, Fiat – are going to miss the numbers.  Diesel cars were a big part of meeting the targets – they emit less CO2 (whilst filling the air with far more noxious particles as now all know); with sales of those falling and likely to fall faster, things are looking tricky (diesel’s total market share in Europe even 3 years ago was 52%, it’s not 45% and falling).
Summing Up

This feels like the early days of the gold rush or the Internet boom.  Everyone is rushing to announce a policy or strategy that is bigger, bolder, sooner and more outlandish than everyone else.  There seems little in the way of substance behind those policies or strategies.  Governments can change their mind, blame others for slow progress, throw up their hands in despair when it doesn’t work.  Suppliers can blame lack of infrastructure, poor demand, shortage of supplies such as lithium or cobalt.  Some of the policies and strategies will, though, come off.  Some will crash and burn completely, others will develop, grow and shine.  In the gold rush, it paid to sell shovels.  In the Dotcom boom, it paid to buy Amazon and wait a while, perhaps buying some more every year as it fell.  It’s hard to see the winners and losers in the wider EV market (software, hardware, infrastructure etc), but it’s looking like a fascinating place.
Little was said in any of these grand announcements about self-driving cars – some manufacturers believe they are many years (even decades) away, some believe that they are coming soon, but perhaps they have nothing to announce that is tangible and don’t want the focus to be on what they don’t have.  Countries and cities will also need to carefully think about when self-driving cars may become a reality – why focus on rolling out a local charging infrastructure if cars will be able to move to a nearby charging point, charge and head home autonomously?  The implications of self-driving cars are even more profound than those for EVs – no more driving schools, no more driving licences, the resurgence of out of town eating because there will be no such thing as drink/driving, lower accidents, smoother traffic flows with more predictable travel times and so much more.
My next couple of pieces will look at the big questions that the transition to EVs (and then to autonomous vehicles) will raise and maybe even propose some ways ahead, if not answers.

G-Cloud – A Whole Lot of "G", Not Much "Cloud"

It’s been nearly two years since I last looked at G-Cloud expenditure – when the total spend crossed £1bn at the end of 2015.  Well, as of July 2017, spend reached a little under £2.5bn, so I figured it was time to look again.  I am, as always, indebted to Dan Harrison for his data analysis – his Tableau work is second to none and it, really, should be taken up by GDS and used as their default reporting tool (obviously they should hire Dan to do this for them).

As an aside, the raw data has been persistently poor and is not improving.  Date formats are mixed up, fields are missing, the recent change to combine lots means that there are some mixed up numbers and, interestingly, the project field has been removed – I’d looked at this before and queried whether many projects were actually cloud related (along with the fact that something like 20% of projects were listed as “null” – I can understand that it’s embarrassing having empty data, but removing the field doesn’t make the data qualitatively better, it just makes me think something is being hidden).

Recall this, from June 2014, for instance:

Scanning through the sales by line item, there are far too many descriptions that say simply “project manager”, “tester”, “IT project manager” etc.  There are even line items (not in Lot 4) that say “expenses – 4gb memory stick” – a whole new meaning to the phrase “cloud storage” perhaps.

Here’s the graph of spend over the 5 1/2 years that G-Cloud has been around:

The main conclusions I reach are much the same as before:

– 77% of spend continues to be in “Cloud Support” (previously known as “Specialist Services”).  It’s actually a little higher than that – now that PaaS and SaaS have been merged (to create a category of “Cloud Software”, Lot 4 has become Lot 3 but both categories are reported in the data.  It’s early days for Cloud Software – it would be good if GDS cleaned up the data so that historic lots reflected current lots.

– 2017 spend looks like it will be slightly higher than 2016, but not by much.  If the idea was to move work from “People As a Service”, i.e. Cloud Support, to other frameworks, it’s not obvious that it’s happened in a meaningful way, but it may be damping spend a little.

– IaaS spend, now known as Cloud Hosting, has reached £205m. I seem to remember from the early days of the Crown Hosting Service business case that there were estimates that government spent some £400m annually on addressable hosting charges (i.e. systems that could be moved to the cloud).  At the moment Cloud Hosting is a reasonably flat £6m/month, or £70m/year. It’s very possible that there’s a 1:10 saving in cloud versus legacy, but everything in me says that much of this cloud hosting is new spend, not reduced spend following migration to the cloud.  That’s good in that it avoids a much higher old-style asset rich infrastructure, but I don’t think it shows much of a true migration to the cloud.

28% of spend by the top 5 customers.  

In the past I’ve looked at the top spending customers and top earning suppliers, specifically in Lot 4 (now a combination of Lot 4 and the new Lot 3).  There are a couple of changes here:

– Back then, for customers … Home Office, MoJ, DVLA, DSA and HMRC were the highest spending departments with around £150m between them.  Today … Home Office, MoJ, HMRC, Cabinet Office and DSA (DVLA dropped to 7th place) have spent nearly £800m (total spend across all lots by the top 5 customers is only £100m higher at £925m which shows the true dominance of support services at the top end).  £925m out of £2.5bn in just 5 customers.  £1.25bn (51%) is from the top 10 customers.

– And for suppliers, Mastek, Deloitte, Cap Gemini, ValTech and Methods were the top 5 with a combined revenue (again in Lot 4) of £67m.  Today it’s Equal Experts, Deloitte, Cap Gemini, BJSS and PA Consulting with revenue of £335m (total spend across all lots for the top 5 suppliers is £348m – that makes sense given few of the top suppliers are active across multiple lots – maybe Cap Gemini is the odd one out, getting some revenue for hosting or SaaS).  It takes the top 10 suppliers to make for 25% of the spend.  I don’t think that was the intention of G-Cloud – that it would be dominated by a small number of suppliers, though, at the same time, some of those companies – UKCloud (£64m) for instance – are still small companies and, without G-Cloud, might not exist or have reached such revenues if they did exist.

A couple of years ago I offered the observation that

“once a customer starts spending money with G-Cloud, they are more likely to continue than not.  And one a supplier starts seeing revenue, they are more likely to continue to see it than not.”

That seems to be exactly the case, here’s a picture showing the departments who have contracts that have run for more than 24 months (and up to 50 months – nearly as long as G-Cloud has been around):

If anything, this is busier than might be expected given the preponderance of Lot 4 – it might be reasonable to expect that support services would be short term and focused on a specific project, such as migrating locally hosted email to Office 365 or to Gmail, or setting up the capability to manage cloud infrastructure.  What we see, instead, is many long term resource contracts.
What should we really conclude?  And what can we do?
In 2012, with G-Cloud not even a year old, I asked whether it could ever be more than a hobby for government.   I wondered about some interim targets (at the time the plan was for a “cloud first” approach with “50% of spend in the cloud” – that should all have happened by now).  There is absence of strategy or overall plan for further cloud realisation – with GDS neutered and spend controls licking their wounds from the NAO’s criticism that they spent far more time than they should have done looking at projects spending less than £1m, it’s not clear who will grasp the mantle of driving the change away from long term contracts towards shorter, more cash intensive (as opposed to capital driven) contracts (be they with big or small suppliers).  Perhaps it’s time for Chris Chant and Denise Mcdonagh to come back?
  • Should there be spend control review of “Cloud Support” contracts to determine what they’re aiming to achieve and then assess whether there really has been a reduction in costs, a migration to the cloud, a change in the contracting model for the service?  If we were to do a show of hands across departmental CIOs now and ask how many were running their email in the cloud (the true cloud, not one they’ve made up and badged as cloud that morning), what would the response be?  If we were to make it harder and ask about directory services (such as Active Directory), what would the answer be?  If we were to look at historic Lot 4 and test how much had been spent in pursuit of such migrations, what would the answer be?  
  • What incentives could we put in place to encourage departments to make the move to cloud?  Departments have control over their budgets, of course, and lots of other things to spend the money on, but could we create a true central capability (key people drawn from departments and suppliers with a brief to build a cloud transition plan) that was architecture agnostic and delivery focused that would support departments in the transition – and that would be accountable (and quite literally held to account) for delivering on the promise of cloud transition?  If that was in place, could departments focus on their legacy systems and how to move those to more flexible platforms, in readiness for future cloud moves (or future enhancements to cope with Brexit)?
  • What more could we do to encourage UK based cloud companies (as opposed to overseas companies with UK bases) to excel?  Plainly they have to compete in a global market – and I were a UK hosting company, I would be watching Amazon very closely and wondering whether I will have a business in a few months – but that doesn’t mean to say we don’t want to encourage a local capability across all lots?  What would they need to know to encourage them to invest in the services that will be needed in the future? How could that information be made available so that a level playing field was maintained?  Do we want to encourage such a capability in the UK, or should we publish the overall plans and transition maps and let the chips fall where they may?
  • Are there changes that need to be made to the procurement model so that every supplier can see what every department is looking for rather than the somewhat peculiar approach now where suppliers may not even know a department is looking to make a purchase?  What would that add to the timeline?  Would it result in better competition?  Would customers benefit as well as suppliers?  Could we try it and see – you know that whole alpha, beta, A/B testing thing?
GDS have long since been quiet on grand, or indeed any, plans for transition to the cloud (and on many other things too).   Instead of a cloud first strategy, it looks like we have contracts being extended and delays to existing projects. IR35 likely resulted in some unexpected cost saves as the headcount of contractors and interims reduced almost overnight, but that also meant that projects were suddenly understaffed and further delayed.
Energy and Vision
We need a re-injection of energy and vision in the government IT world.  Not one where the centre dictates and micro-controls every action departments want to take, resulting in lengthy process, avoidance of spend that might be scrutinised and cancellation/delays to projects that could make a difference … but one where the centre actively facilitates and helps drive the changes that departments want to make, measuring them for logical consistency against an overall architectural plan and transition map rather than getting theological about code standards or architectures.
A Strategy And A Plan
At the same time we need to recommit to a strategy and a plan for delivering that strategy.  In terms of the cloud that means:
– Setting a cloud transition goal.  In the same way that we have set a goal to give increased business to SMEs (which G-Cloud is underpinning), we should be setting the same goal to move government to commodity, i.e. cloud-based, IT where it makes sense.  10% of the total budget (including Capex and Opex, or CDEL and RDEL if you prefer) in the first year, increasing from there to 25% in 2 years and 50% in 5 years, say.
– Reviewing the long (36 month plus) contracts and testing them for value, current performance and overall delivery.  Are they supporting migration to the cloud?  Is the right framework being used (if it’s not cloud but it is delivering, then use the right framework or other procurement option)?  It doesn’t matter, in my view, whether it was valid in the first place or how the process was or wasn’t followed originally, it matters whether there is value today and whether there are better options that will support the overall plan.  If it’s not cloud, let’s not call it cloud and let’s get to the root of what is really going on with commodity technology in government.
– Overwhelmingly adopting an architecture founded on multiple shared and secure infrastructures. There’s no need for a single architecture when the market provides so many commodity options – and spreading the business will foster innovation, increase the access points (and improve security through distributing data) and ensure that there is continued competitive tension.  Some of that infrastructure will be pure public cloud, some of it will be a shared government cloud (in the US, cloud providers maintain clones of their public infrastructure for federal government use – that may be one answer for specific areas; importantly, what I am not suggesting is that a department set up their own infrastructure and call it a cloud, thought there may be specific instances, in the security services, say, where data classifications may mean that’s the only option).  
– Migrating all of government’s commodity services to the cloud.  Commodity means email, directories, collaboration, HR, finance, service support, asset management and so on.  This doesn’t have to be a wholesale “move now” approach, but one that looks at when it’s sensible to close down existing applications and make the move.  No new applications should be built or deployed without first assessing whether there is a cloud alternative – this is a perfect place for a spending team to look at who is doing what and act as a hub for sharing what is going on across central and local government.  
  • I’ve been on the record for a long time as saying government should recognise that it doesn’t collaborate with itself – having collaboration services inside the department’s own firewall isn’t collaboration, it’s talking to yourself.  I believe that I even once suggested using a clone of Facebook for such collaboration.  Government doesn’t need lots of collaboration tools – it needs one or two where everyone, including suppliers and even customers, can get to with appropriate segregation and reviews to make sure people can only see what they’re supposed to see.  Whatever happened to Civil Pages I wonder?
– Putting in place a new test for Lot 3 (the old Lot 4) services to measure what is being purchased against its contribution to the department’s cloud migration strategy.  This is a “cloud first” test – are you really using this capability to help you move to the cloud?  What is the objective, what are the milestones?  A follow on test to see how delivery is progressing will then allow a regular state of the cloud nation report to be published to see what is and isn’t moving.  
– Working with local government, Devolved Administrations, the Health Service and others to see what they are doing in cloud.  With 84% of G-Cloud spend in central government, maybe the other folks are doing something different – maybe it’s good, maybe it’s not so good, but there are likely lessons to be learned.

It Will Take More Than Tesla – Follow The Money to 2040 – Part 2

The UK’s current strategy for the transition to EV and, beyond there, to autonomous vehicles isn’t yet integrated:

  • Defra’s announced strategy of no more petrol and diesel sales from 2040 (see Part 1), accompanied by some £1.4bn of investment (there’s an additional £1.2bn announced in this same strategy related to air pollution reductions)
    • £1bn – Ultra low emissions vehicles. This includes investing nearly £100m in the UK’s charging infrastructure and funding the Plug In Car and Plug In Van Grant Schemes.
    • £290m – National Productivity Investment Fund for reducing transport emissions which includes £100 million for new buses and retrofit, £50 million for a Plug In Taxi programme and £80 million for ULEV charging infrastructure.
    • £11m – Air Quality Grant to help local authorities improve air quality
    • £89m – Green Bus Fund to help bus companies and local authorities in England to put over 1200 new low carbon buses on the roads.
    • £27m – Clean Bus Technology Fund and Clean Vehicle Technology Fund to retrofit almost 3,000 of the oldest vehicles (mainly buses)

  • Within the National Infrastructure plan, Highways England has an Innovation Strategy, where they will:
    • Carry-out trials of driverless cars on the Strategic Road Network by 2017
    • Launch a consultation on reducing regulatory barriers in summer 2016
    • Establish a £15 million ‘connected corridor’ from London to Dover to enable vehicles to communicate wirelessly with infrastructure
    • Trial truck-platooning on strategic roads

It’s good, but it’s not yet good enough.  What do we need to do to make sure that:

The UK is the best place to develop, build and test EVs and all of the associated components, software, local and macro infrastructure that will provide the environment to support autonomous vehicles faster than any other country does

It’s early days for EVs – there is much to play for whilst the EV equivalents of Intel, Microsoft and, indeed, Facebook, Google and Amazon establish themselves. One or more of those could be headquartered in the UK. But not if we don’t get moving – many of those names already have a significant lead on any UK competition.

In September 2016, the DfT published their annual survey of Public Attitudes to Electric Vehicles. One of the areas reported on was likelihood of buying an Electric Vehicle.  Note that a peculiarity of most government documents is that the source data is often months older than the publication date of the report – this is February 2016 data published in September, so getting close to 2 years old now:

The same survey said:

In 2016, those with a driving licence reported that the most important factors they considered when buying a car or van were costs (83%), reliability (82%), safety (74%) and comfort (64%). Only 6% of respondents said they considered whether the vehicle was electric to be an important factor.

I think it’s reasonable to assume that cost will still be uppermost in the minds of people if they were to be surveyed in October 2017.  Which is why it’s important to follow the money.


Let’s look at the other side of the money balance – taxation revenue – given that there are potentially significant benefits to EV owners through payment of less tax (and, as a consequence, high revenue gaps for government)

In the last tax year:

  • £27.6bn of tax came from fuel duties
  • A further £5.5bn came from Vehicle Excise Duty (tax discs as they used to be)
  • There’s also around £5bn in tax from the premium levied on car insurance – something to think about in a world of self-driving cars
  • In London, a further £280m comes from the congestion charge

For now, purchasing an electric car exempts you from fuel duty, the congestion charge (in London) and VED (other cars, that are low emission can also receive some or all of these benefits). With only 1,000 fully electric cars being sold a month, the tax take isn’t getting hit yet.

We could, though, plot a relatively simply graph that would show the route from 1,000/month to 160,000/month and see just how tax will be affected. A conservative straight line graph would suggest that government has plenty of time before it needs to worry about it – but if my inflection point thinking is right, it will go from not being a problem to being a problem very quickly.

It’s interesting, of course, that when it becomes a problem for government – i.e. when government sees it’s losing too much tax because people are buying EVs – it also becomes a problem for the consumer, because government will look to them to replace that lost revenue, removing incentives or, indeed, further punishing owners of petrol and diesel cars (or both).

Government, therefore, needs to think, now, about how and when it will make changes to tax policy – starting with the electric car era rather than the self-driving era. For instance:

  • Vehicle Excise Duty (VED) – incentives for electric vehicles could be phased out. Or changed so that only the most efficient – longest range on lowest charge, say – receive the benefit. Given an electric car is likely to be able to talk to the cloud all the time, a distance based tax could be introduced with the information coming directly from the car rather than from overhead gantry cameras.
  • Fuel Duty – this would appear to be going the way of the dodo, but at nearly 4% of the total tax take, that’s too much to lose. This feels like the most obvious candidate to replace with a distance based road tax. That is interesting though as today, in effect, you pay less Fuel Duty if you have an efficient car (the further you can go on a tank of petrol, the less petrol you need and so the less fuel duty you pay); if it becomes a straight tax on distance, then the more you travel, the more you will pay – which could penalise taxi drivers, salesmen, delivery drivers and so put up costs for them and so increase charges to consumers which would have the perverse affect of creating inflation (all other costs being equal).  “Filling” an electric car costs roughly 1/4 of what a petrol car does – a significant economy for a high mileage driver – closing that gap to replace the tax loss would make for a significant dent in the business case for buying an EV given their current costs.
  • There’s another angle on fuel duty which relates to whether tax will be levied when you re-charge your car battery away from home. Let’s say you use a fast charger at a motorway service station – and that costs you, say, £5 with tax taking it to £10. It would be weird, of course, to be taxed for electricity, but the lost revenue from fuel duty will need to be replaced.
  • Congestion charge – much like VED, EVs will need to begin paying this at some point, once the revenue hit to Transport for London gets too large to ignore. There may be ways to soften that blow and perhaps that will be discounts or annual purchase options for EVs

These tax changes need to be telegraphed long in advance. No one will say “thank you” if we have a repeat of the solar panel subsidies being withdrawn at short notice because there was too much take up. Publish a number of vehicles sold at which point the subsidies will be removed, or changed and let everyone see the clock ticking down day to day and week to week.

This could encourage an interesting market in EV call options – you buy a car now for delivery in 2020, but somehow preserve the benefits you would have got if you bought it today. That would allow car manufacturers to plan capacity, government to see what take up looked like and give a view to those putting the infrastructure in place of what was needed.

Going back to the vision

The UK is the best place to develop, build and test EVs and all of the associated components, software, local and macro infrastructure that will provide the environment to support autonomous vehicles faster than any other country does

We can see that government is working hard at “the inputs” – scattering money to various programmes to support the development of EVs, but that it isn’t integrating and co-ordinating that funding together with wider R&D investments to stimulate development of the other components of an EV strategy either in startups or in existing companies – mapping, sensors, autonomous software.  We see day to day headlines about self-driving cars from Google (through their subsidiary Waymo), Apple (more speculation than actual news), Uber, Lyft and many, many others.

We also don’t, yet, see any thinking on the taxation side of the government equation – how current incentives might be withdrawn or changed as take up increases.  The overall tax position of EVs is likely to be neutral versus petrol and diesel at some point – including subsidies for purchase, subsidies for installation of home charging units and so on.  The journey from overt subsidy to neutrality is interesting.

And what worries me, as it did in Part 1, is that this is an obvious programme.  This is the Crossrail of the roads – a huge piece of work that will unfold over up to two decades with complicated engineering, heavy lifting and strategic thinking as well as an untold universe of problems that will pop up as progress is made.

The transition from overwhelming petrol and diesel fuelled vehicles to purely electric (via perhaps a mix of hybrids) is a programme that requires:

  • Investment in local and macro infrastructure (charging points in public places as well as at the home as well as thinking about at home batteries and changes to the grid and home electrical environment to support charging)
  • Funding for technology and innovation – if we want the Google of EVs to be British, we need to seed and support potential companies.  This will need to cover not just cars but trucks, agricultural vehicles and other petrol/diesel vehicles
  • Trials and then full production of technology and infrastructure to support self-driving vehicles (including roadside sensors as well as software and hardware in the cars themselves
  • A plan for subsidisation and the subsequent withdrawal of those subsidies
  • The co-ordination of public and private sector partners to bring the necessary components together ahead of the expected need.

There’s a lot to do.  2040 is seemingly far off.  But 2040 will be 2060 if this isn’t seen as, and staffed as, a programme.  And 2040 could be 2030 if it is.

It Will Take More Than Tesla – The 2040 Vision – Part 1

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On 26th July 2017, Defra published their strategy for dealing with roadside emissions.  The big story is:

“The Government confirmed today that it will end the sale of all new conventional petrol and diesel cars and vans by 2040, as it unveiled new plans to tackle air pollution … We are taking bold action and want nearly every car and van on UK roads to be zero emission by 2050”

Contrast this with GDS’ vision for anything beyond 2020

“Nobody can predict what the world of 2020 will look like. Technology moves quickly and changes constantly. However we do expect what we call ‘digital’ currently to be largely mainstream by then”

Interesting, no?  Defra are prepared to think 20+ years out and GDS, our government’s lead technology organisation, can’t quite comprehend the world more than a few months out.

In my experience, it’s rare for such ground-breaking, multi-Parliament promises to be made.  Realising this vision will involve working across the whole of government as well as with the private sector.  The interesting thing about this vision is that it could happen by itself – so it’s not necessarily a daring vision – but it will be a lot quicker and easier if government is pushing rather than blocking. As it starts to unfold, though, government will need to be thinking and planning hard – there is plenty at risk including tax revenue and jobs.

Defra are, it seems, out in front of the rest of government by setting out this policy. There is, though, so much more to it than this. To make this work we need other parts of government to come alive and for them to spell out more of the “why” and “what’s it for”.  Government has announced an outcome (no more petrol and diesel cars), along with a series of funding inputs, but we need more – and we need a lot of different people to play their part.

So here’s my attempt to fill in the gaps and say what the announcement should and could mean.  This post will come in a few parts and this is part 1.

What’s It For

  • Establish the UK in a leadership position on electric vehicles and, by extension, self-driving vehicles
  • Begin a programme of road upgrades that will support self-driving cars through establishing standards and ensuring that all changes to roads comply
  • Funnel R&D into electric and self driving. 
    • UK government spends £4.6bn on R&D each year – significant chunks of that can, and should, be diverted to emerging industries where we can move ahead 
  • Begin the restructuring of the UK manufacturing economy in support of electric and self-drive
    • There will be fundamental changes in the entire supply chain as the number of parts needed to build a car falls by as much as 60-80% (with increasingly standard components made to work more effectively by software)
  • Support the development of new national champions
    • If it’s not about internal combustion, new players can, and will, emerge.  Design champions, software leaders, battery technologists, sensor pioneers, and who knows what else
  • Pioneer new technology in eg fast charging
  • Leverage the work on cars to provide new trains, agricultural vehicles and, eventually, planes 
  • Aim to become a major exporter of electric cars and related technology
  • Begin planning for a restructuring of the tax base
  • Support the development of an app store, and applications, for electric cars
  • Start readiness planning for self-driving to be universal 
    • This could include restructuring the auto-insurance industry, taxi companies, driving instructors, road haulage ete

    Current UK Car Sales

    On average, 165,000 cars are bought each month in the UK, across petrol, diesel and “alternative fuels.  There is some recent uncertainty in these figures with the Society of Motor Manufacturers and Traders (SMMT) seemingly getting its numbers wrong, but the average seems about right.

    In the year to end July, nearly 1.6m cars have been registered, with the breakdown of electric and hybrid vehicles, based on SMMT, looking like this:

    Whilst the numbers are moving up, they’re not moving up very fast, despite the incentives available, including contributions of up to £4,500 against the purchase price and free road tax (saving another £200-300/year).

    We produce around 135,000 cars/month in the UK already, exporting roughly 100,000 of those.    Most of the capacity is already there, then, to build the cars we need, albeit for internal combustion engine models, if we didn’t export any. 

    There will be re-tooling and re-skilling, re-balancing and re-thinking.  Lots will need to come together.  But it could.  It will need leadership.

    The Inflection Point

    Sometime before 2040, this vision becomes self-fulfilling.  The infrastructure will be in place, there will be wide choice of electric cars, incentives will be signposted as going away and the decision will suddenly move, for every buyer, from “why buy an electric car” to “why not buy one”.  For a small number of people, that decision is already made – but if you live in the country, drive great distances, have a large car that needs lots of towing power or stowage space, you’re not there yet.  But you will be and pretty soon I expect. 

    Significant change is coming, but it’s going to take a lot of work for it to happen and a lot of rethinking about how our economy works, how tax to do with cars is calculated and levied and how we balance the phasing in of new economic models as we try and phase out the old models.

    It’s going to be interesting what the take up curve looks like – recent diesel scandals coupled with likely increased charges for such cars entering city boundaries mean that diesel sales will continue to fall.  

    Thinking ahead:

    We don’t have Tesla making cars here … but we do have McLaren and Aston Martin 

    We don’t have Google Maps … but we do have Improbable

    We aren’t Australia or Chile, the world’s top lithium producers, but we might have lithium in Cornwall that can be mined

    We don’t have Tesla batteries … but we are investing in batteries

    <img alt="Copyright: kasto / 123RF Stock Photo” border=”0″ data-original-height=”300″ data-original-width=”450″ height=”213″ src=”; title=”” width=”320″ />

    There’s a lot more still to think about and to bring together to make this happen.  The UK should now be aiming to be a leading player in both the electric car market and in self-driving technology.

    Some day soon, drivers of petrol and, especially, diesel vehicles will be like smokers today.  They won’t be welcome at parties, will not be allowed to drive within a mile of a school and will see their health insurance premiums climb, not to mention their driving insurance premiums.

    More in part 2.

    GDS Isn’t Working – Part 5 (No Vision, No Ambition)

    Credit:  Roger Hooper

    Efforts to transform government have been underway for more than 20 years.  Despite that, government has remained firmly as the catalyst – the part of the reaction that remains unchanged – throughout each iteration.    We need to understand that Government isn’t the subject of the transformation, it’s the object.   The citizen is the subject.  It’s their experience, their life, that we want to improve.

    Whilst I have a strong disliking for the word “transformation” – because it implies a sudden, dramatic shift from what we used to call “as is” to “to be” and because it means different things to different people (one person’s transformation is another person’s incremental change) – it’s the word that is used to describe current change efforts in UK Government.

    To get a sense of the level of ambition and vision for today’s programme,  I looked at the Beyond 2020 Strategy. It contains a couple of extraordinary statements.

    Here’s the first:

    “Nobody can predict what the world of 2020 will look like. Technology moves quickly and changes constantly. However we do expect what we call ‘digital’ currently to be largely mainstream by then”

    This is both true and false.  More importantly, it’s entirely irrelevant in this context.

    It’s true because we all know that there is a new iPhone coming out in a month or so and yet no one outside of Apple HQ knows how it’s all going to come together.    We don’t know what products will be released next year, let alone in 2019 and 2020.  So far so dull.

    It’s false because we know how technology is moving and what there will be more of and less of.  In 2001, one of our first demos of the Gateway to the then Minister of the Cabinet Office, Ian McCartney (the original sponsor of the Gateway), showed a VAT form being completed on a Compaq iPaq, sent over GPRS and acknowledged by HM Customs as being complete and valid.  We didn’t know it would be 6 years before the iPhone would come along and that it would be longer still before mobile access to the Internet was common, but we could see it coming. We don’t need to know which products are coming along to set a direction for how we want our online government experience to look for the citizen.  Technology in government, once deployed, can stick around for decades – ask HMRC how long the CHIEF system has been around, or the Home Office about the Police National Computer, or Cabinet Office, for that matter, about the Gateway.  We don’t need to harness the latest and greatest product capability to make a difference.

    And it’s irrelevant because:

    In these days of driverless cars, missions to Mars, rocket stages that no longer fall uselessly into the sea, artificial intelligence engines that get the maximum score on Ms Pacman, augmented reality and more … 

    … we are still talking about digital government as paving the cowpath, that is, putting forms online.

    And here, in that context, is the second extraordinary statement:

    “We want to make the best possible preparations for the post-2020 period. We will use current and emerging sources of data so that we can understand what is working well for the current transformation programmes and combine this learning with emerging macro-trends to make the best possible plans for the period after 2020.”

    I challenge you to tell me, in simple words, what that means.  I suspect you can’t, so let me translate as best I can:


    Instead, the so-called Transformation Plan for the period from 2017 to 2020 simply repeats the mistakes of the past, focusing on linear transactions, ticking them off one by one, without dates, ambition or any sense of rationale.  For instance, here are some of the “deliverables” picked at random from the document (I’d like to call it a “plan” but there are no dates or details):

    • continue to deliver world-class digital services and transform the way government operates, from front end to back office, in a modern and efficient way
    • make better use of data – not just for transparency, but to enable transformation across government and the private sector
    • broaden the definition of users, for example to reflect that some users will interact with government through third-party services that use government APIs (application programming interfaces
    • design and deliver joined-up, end-to-end services
    • we will build a framework for the best way to deliver transformation across government
    • building a national data infrastructure of registers (authoritative lists that are held once across government) and ensuring they are secured appropriately
    • building shared components and platforms, extending the use of the ones that we have and onboarding more services

    Are you any the wiser?  Do you see the vision?  Do you see the ambition? Do you know what’s coming and when and are you palpably excited for how it might change your life for the better?

    I wasn’t quite being honest when I declared that there is no vision.  The document does state one.  It says:

    We will transform the relationship between citizens and the state – putting more power in the hands of citizens and being more responsive to their needs.

    Which to me is a lot like saying “Our washing powder will wash even whiter than the last one that washed whiter.”

    We have forgotten about the citizen – the ones who we truly want to see changed for the better.  We have instead labelled them “users” and decided that if we work closely with them we will design better services.  That’s backwards.

    The citizen’s interaction with government needs to be about them, not about government.  We need to think about what we want them to become, what power we truly want to put in their hands and how we will make that happen.  Going through the list, form by form, is not how that will come alive.

    Here is an excerpt of the Transformation Programmes underway as of November 2016:

    Those programmes, inevitably, translate into some online forms:

    Transformation?  No.   Not even close.

    All the way back when this began in the late 90s and early 00s, we declared that we wanted to harness the potential of the web, initially, to layer a veneer on top of government – to mask it’s complexity from the citizen by presenting a joined up and citizen focused front end; we knew that the transactions underneath that would start off point to point.  We thought that would buy us time to engineer some truly joined up capability and we designed the Gateway to allow that – it could take in a single schema, split it up and send to different parts of government, get the responses, join it all up and send it out again.  That capability remains unused.

    A slide from a 2003 conference

    It’s time to move away from the point to point nature of efforts so far and to imagine, instead, what we want our citizens to be able to do when we have delivered a successful digital capability.  For instance:

    – We want to encourage new startups and make it easy to create a company with, say, 10 lines of information and 3 clicks?  Company registration, payroll, VAT, R&D credits etc. What will it take to achieve that?  How will we know we are doing it right? What will the impact be on accountants and other professionals as well as on potential startup founders?

    – We want to make it so that there is no need for anyone to ever phone HMRC to resolve a problem?  How many people who could use the Internet make a phone call now?  How many problems could be moved to an Internet channel meaning a call wasn’t necessary?  How many result from mistakes made by HMRC that we could correct before the citizen knew and how many can we prevent from occurring at all?    How would we make all of those changes?  How can we move the entire relationship a company has with HMRC to online interactions?  How can we do the same for a company employee?  For a retiree?  Not everyone wants to be online all the time, but if they want to be, we should give them a way.

    – We want to make the administration post loss of a loved one simple and effect, cutting by 80% the amount of paperwork and the time it takes to handle all of the different pieces – inheritance tax, pensions, council tax and so on.  Can Tell Us Once help?  Why is Tell Us Once not available everywhere?  What else would we need to do?

    We need to flip the thinking away from what do our departments do and how do we put that online to the problems that our citizens have and how we can solve them through smart use of technology.

    This isn’t about user needs. It’s about a vision of how we want our citizens to lead their lives in relation to government services.  This is Henry Ford territory, that is, it’s not about faster horses.

    As Paul Shetler says, “we can’t kumbaya our way through this.”  We need to get concrete.  Assumptions, plans, deadlines, delivery focus.

    To make this happen, we’ll want to lay out some assumptions

    1) The shape of government isn’t going to change materially in any way that would help our efforts.  Departments are still going to be departments.  We aren’t going to split them into horizontal layers focused on citizens.  We aren’t going to join up the machinery itself, we’re going to have to do that through our own capabilities – we are going to have to pretend that it’s joined up through use of technology.

    2) We have all the technology that we need.  We don’t need to wait for flying, driverless cars.  We don’t need to see what’s around the corner, or what’s going to launch in 2020.  The technology that we launched in 2001 and that we have today is all that we need to pull this off.

    3) We have all of the capability and capacity today.  If it’s not already in the public sector, it’s in the private sector.  We shouldn’t bolster one at the expense of the other, in either direction.  It’s all there today and we need only to focus it.

    So what we have is what we need and vice versa.  It’s time to lay out a true, specific vision and to back that up with plans.

    We then need to be transparent – about those plans, about the financials and about our progress.  Delays will be forgiven if they are telegraphed early along with the true reason.  Whilst we have what we need, it won’t be easy to create this level of change and so we need to bring people along for the ride, explaining what is and isn’t happening and why. 

    Rule #1 – No surprises

    Rule #2 – See rule 1

    GDS Isn’t Working – Part 4 (Verify)

    The conclusion to Part 3 (The Reboot) was:

    • Verify – It’s time to be brave and ignore sunk costs (investment to date and contractual exit costs if any) and let this one go.  It hasn’t achieved any of the plans that were set out for it and it isn’t magically going to get to 20m users in the next couple of years, least of all if HMRC are going their own way.  The real reason for letting it go, though, is that it doesn’t solve the real problem – identity is multi-faceted. I’m me, but I do my mother’s tax return, but appoint my accountant to do mins, but I work for a company and I do their payroll, and I counter-sign the VAT return that is prepared by someone else, and I act as the power of attorney for my blind father.  Taking a slice of that isn’t helping.  Having many systems that each do a piece of that is as far from handling user needs as you can get.  Driving take up by having a lower burden of proof isn’t useful either – ask the Tax Credits folks.  HMRC are, by far, the biggest user of the Gateway.  They need citizen and business (big business, sole trader, small company) capability.  Let them take the lead – they did on the Gateway and that worked out well – and put support around them to help ensure it meets the wider needs.

    Instead, GDS appear to be doubling down, based on this article in Computer Weekly:

    • GDS speakers at the event encouraged suppliers to use the GaaP tools in their own products, in the hope of widening their use. However, according to guests at the event that Computer Weekly talked to – who wished to remain anonymous due to their ongoing relationships with GDS – GDS was unable to give any guarantees around support or service levels.
    • GDS has now developed a new feature for Verify that allows “level of assurance 1” (LOA1) – a reduced level of verification that is effectively a straightforward user login and password system, which offers “minimal confidence in the asserted identity” of users for low-risk transactions. In effect, LOA1 means the government service trusts the user to verify their own identity.
    • The government has committed to having 25 million users of Verify by 2020, and offering LOA1 is seen as a key step in widening the adoption of the service to meet this target.
    This is, though, to miss the point of “What is Verify for?”:

    • The goal isn’t to have 25 million users.  That’s a metric from 1999 when eyeballs were all that mattered.  25 million users that don’t access services, or that sign up for one and never use another service isn’t a measure of relevancy
    • A government authentication platform is instead for:
      • Giving its users a secure, trusted way of accessing information that government holds about them and allowing them to update it, provide new items and interact with government processes
      • Allowing users to act as themselves as well as representatives of others (corporate and personal) with the assurance that there is proper authorisation in place from all necessary parties
      • Putting sufficient protection in the way so as to ensure that my data and interactions cannot be accessed or carried out by people who aren’t me.  In other words, “I am who I say I am” and, by definition, no one else is
    What then, if we took away the numbers and the arbitrary measures and said, instead, that the real purpose is to:
    • Create an environment where a first time user, someone who has had no meaningful interaction with government before, is able to transact online and need never use offline processes from that moment on
    • Sixteen year olds would begin their online interaction with government by getting their National Insurance numbers online
    • They would go on to apply for their student loan a couple of years later
    • With their first job they would receive their PAYE information and perhaps claim some benefits
    • Perhaps they would be handling PAYE, or VAT, or CT for their own employer
    • Health information and records would be available to the right people and would move them as they moved jobs and locations
    • Perhaps they would be looking at health information and records for others
    • They would see the impact of pension contributions and understand the impact of changes in taxation
    • Perhaps they would be helping other people figure out their pension contributions and entitlements
    • They might decide whether they can afford an ISA this year
    • In time some would pay their Self Assessment this way
    • Or maybe they would be completing Self Assessments for others
    A 2002 Slide

    Instead of spot creating some transactions that are nearby or easy, we would seek to change the entire experience that someone has who doesn’t know about government – they would never know that it had been broken for years, that paper forms were the norm for many, or that in 2010 people had to go from department to department to get what they needed.  They would take to this the way a baby learns that you swipe an an iPad screen – it would never occur to them that a magazine doesn’t work the same way.

    Along the way, those who were at later stages of life would be encouraged to make the move online, joining at whatever stage of the journey made sense for them.

    This wouldn’t be about transformation – the bulk of the users wouldn’t know what it was like before.  This would just be “the way government is”, the way it’s supposed to be.  Yes, in the background there would have been re-engineering (not, please, transformation), but all the user would see is the way it worked, fluidly, consistently and clearly, in their language, the language of the user.

    Progress would no longer be about made up numbers, but about the richness of the interaction, the degree to which we were able to steer people away from paper and offline channels, and the success with which we met user needs.  The measure would be simply that they had no need, ever, to go offline.

    Verify isn’t the way into this journey.  Verify started out trying to solve a different problem.  It isn’t seen, and wasn’t conceived, as part of a cohesive whole where the real aim is to shift interaction from offline to online.  In its current form, it’s on life support, being kept alive only because there’s a reluctance to deal with the sunk costs – the undoubtedly huge effort (money and time from good people) it’s taken to get here.  But it’s a “you can’t get there from here” problem. And when that’s the case … you have to be brave and stop digging.

    If my original take on “What is GDS for” was:

    GDS is for facilitating the re-engineering of the way government does business – changing from the traditional, departmentally-led silos and individual forms to joined-up, proactive, thought-through interactions that range widely across government.  It is not, in my view, about controlling, stopping, writing code or religious/philosophical debates about what’s right. It’s job is to remove the obstacles that stop government from championing the user cause.

    Then what if GDS took the vanguard in moving government to cater for the user journey, from a user’s first interaction to its last.  A focused programme of making an online government available to everyone.  A way of assessing that “I am who I say I am” is an essential part of that – and starting with a 16 year old with minimal footprint is going to be challenging but is surely an essential part of making this work.  This would be a visionary challenge – something that could be laid out step by step, month to month, in partnership with the key departments.

    It can be dull to look backwards, but sometimes we have to, so that we move forward sensibly.  The picture above shows the approach we planned at the Inland Revenue a long time ago.  We would take on three parallel streams of work – (1) move forms online, (2) join up with some other departments to create something new and (3) put together a full vertical slice that was entirely online and extend that – we were going to start with a company because our thinking was that they would move online first (this was in 2000): register the company, apply for VAT and tax status, send in returns, add employees, create pensions etc.

    It feels like we’ve lost that vision and, instead, are creating ad hoc transactions based on departmental readiness, budget and willingness to play.  That’s about as far away from user needs as I can imagine being.

    As a post-script, I was intrigued by this line in the Computer Weekly report:

    GDS was unable to give any guarantees around support or service levels.

    On the face of it, it’s true.  GDS is part of the Cabinet Office and so can’t issue contracts to third parties where it might incur penalties for non-delivery.  But if others are to invest and put their own customer relationships on the line, this is hardly a user needs led conversation.  Back in 2004 we spent some time looking at legal vehicles – trading funds, agencies, JVs, spin-offs – and there are lots of options, some that can be reached quite quickly.

    My fundamental point, though, is that GDS should be facilitating the re-engineering of government, helping departments and holding them to account for their promises, not trying to replace the private sector, or step fully into the service delivery chain – least of all if the next step in the delivery promise is “you will have to take our word for it.”