Dyson announced yesterday that it’s planned foray into Electric Vehicles was no longer commercially viable. The original investment was expected to be £2-2.5bn.

EVs are no more for Dyson, it seems, but it’s still going to press ahead with its investment in batteries, particularly solid state varieties. If I recall correctly, about half of the original investment was for the car itself and half for batteries – so this is still an investmnet of over £1bn in new capabilities (those batteries could still supply cars for other manufacturers of course, or could be solely for Dyson’s current and any future products).

Why decide this now?

• Subsidies for EVs have been reduced across the world (recently in the UK but, particularly in China, the largest current market). Do Dyson see fewer buyers, despite the near universal commitments governments have made to take petrol and diesel cars off the road over the next 2-3 decades? That seems unlikely.
• Is a £2.5bn investment not enough? Tesla has consumed more than £14bn to date, and not made a profit. VW is expecting to spend $33bn over the netx few years. Joint ventures, mergers and deals between car manufacturers, “taxi” firms (such as Uber and Lyft) are proceeding at a pace. Perhaps Dyson couldn’t keep up with the expected spend rate?
• Cars are hard. Are they too hard for a new entrant? It’s a volume game, for most companies at least. 87m cars were sold globally in 2018. Tesla is shipping only (I say “only” in a relative sense) 100,000/quarter (or thereabouts, with ambitions for more). Perhaps Dyson think it’s not commercially viable in the short term – that the hockey stick of demand is too far away for investment now?
• Did they pick the wrong place? Singapore is not known for its car manufacturing. It’s an expensive, though stable, location to pick. Maybe it was the wrong place to setup a cost effective and efficient factory?

It could, and probably is, all of these. The ROI profile must look daunting, especially in an uncertain market where realistic large scale take up is a decade away (at the mass market, global level – the point of pickup in volumes is perhaps 3-5 years away).

Perhaps the most important point is Dyson went all in, quickly. And then all out, quickly. He saw an opportunity and funded it, but then saw that it wasn’t going to pan out as planned, and so pulled the funding. J

This strikes me as the mind of an instute businessman, used to carrying out experiments, working at full capacity

– He saw an opportunity and allocated investment capital to it. We don’t know how much of the £2.5bn has been spent, or is wasted effort, or can’t be unwound of course.

– Early in the experiment it was clear that there were significant hurdles, e.g.

• Car safety, with people travelling at 70mph+, comes with different regulations than his existing portfolio, for instance)
• Huge competition (other well capitalised companies investing much greater amounts)
• Long payback (governments cutting subsidies, adoption still slow, proposals to halt sales of petrol and diesel still two decades away)

And so he reviewed his investment/experiment and decided it would take more time and money than he wanted to commit. Could he have figured that out by commissioning studies to assess feasibility and so on? Sure he could, and maybe he did and that’s why it’s been cancelled, but the way of the engineer is to start building it and see whether it will work, and it sounds to me that that’s how he approached it.

Just as I’ve written here before, projects fail. They fail all the time. The trick is to see the failure coming, be sure it’s really failing and can’t be picked up, and that it’s not failing becuase of an elementary error (that is, you have learned the lessons that others learned before you), and then address that.

It’s a bold decision. And his investments live to make a return another day. Does this mean anything for the overall move to EVs though? Seems unlikely – it’s evidence that new entrants will struggle and reinforces why partnerships are increasingly the thing both within the existing motor industry and for those trying to break in.

A while ago I looked at the ingredients the UK has to support a successful EV design and build industry. I noted that whilst we were not Australia or Chile, the largest sources of lithium for batteries, we did have some in Cornwall.

I read recently that Cornish Lithium, the aptly named company with mining rights over much of the county, has recently raised £1.4m so that it can begin drilling at test sites. Doesn’t sound like a lot of money but doubtless if they find enough, the next funding round will be bigger and will let them explore more. This comes on top of previous funding rounds and also some government grants.

Lithium production may be profitable, depending on production at the time. Battery making, so far, isn’t, especially since China (the largest current market for EVs) cut subsidies. Like many industries, there will be consolidation and it will become a scale game. Local production, done ethically, could be a valuable addition for the right brand though. It will take more than Lithium of course – there’s still cobalt and various other rare earth elements needed.

I wish Cornish Lithium good luck at finding (first) enough and then getting sufficient funding to extract it safely and ethically. We don’t want this to turn into Sirius Minerals part 2.

The news over the weekend about a drone attack on Saudi Arabia’s oil infrastructure may cause a disruption in supplies to the world. Saudi Arabia produces roughly 10% of the world’s daily need, and up to half of that may have been disrupted by this attack; some theorise that redundancy in their infrastructure may mean that normal supplies will be resumed within days, perhaps as soon as Monday.

But what would the oil price need to be to change consumer behaviour? How much would a litre of petrol need to cost before there was a wholesale switch to mass transit, or to EVs?

With roughly 61% (the highest in the EU) of the price of unleaded petrol going to the government in tax (a mix of fuel duty and VAT), increasing prices at the pump directly increase revenues to government, provided consumer behaviour doesn’t change (shorter journeys, lower use of cars etc).

The government will take in £28.4bn this year in fuel duty, not including VAT. As I’ve written before, even a move to 10% EVs makes a significant dent in tax revenue. A bigger move makes a huge hole in spending plans.

Unless, of course, government moves to plug that gap by taxing EV mileage. The sooner such a plan is made clear, the easier it will be to calculate the benefits of an EV versus a petrol car, especially if petrol prices begin to increase in response to both actual and potential threats.

Pure battery EV sales in August, a slow month (because new registrations come out in September and, for some reason, we still like the prestige of a “new new” car rather than an “old new” car) showed amazing interesting increase, though market share is still only just over 1%. There’s a long way to go to match the hockey stick predictions … but lots of new models due over the next 18 months. Inside those BEV numbers is, I believe, the newly launched (in the UK) Tesla Model 3 which apparently made up 2,082 of the vehicles sold (this is 3rd in total sales behind the Ford Fiesta and VW Golf). One swallow doesn’t make a summer and all that … but the beginning of a trend?

Diesel remains the new tobacco where owners are increasingly relegated to car parks out of town and houses at the far end of the street. We can call it Big Diesel. Like Big Tobacco. And Big Sugar.

Soon showrooms will relegate diesel go the outer lots and then only for special orders. What does this do to Land Rover? Will those in rural areas continue to buy diesel because traffic density is lower and pollution lower? What kind of 4×4 would it take to make the difference?

Car sales, though, are down. And going further down. Car ownership is not the thing it was. Second hand car values could struggle soon … meaning PCP finance deals (often held by a subsidiary of the car maker) could leave the finance company holding the bag. And that would mean less money for investment … and some write offs.

And Germany is already struggling. Could this push their finances over the edge?

Reports in the last couple of days have said that some UK oil refineries could close, at least temporarily, and perhaps permanently if a hard Brexit meant that oil-based products were important tariff free (all the more so given that exports from those refineries would have tariffs imposed).  This is because the government has announced, though doubtless subject to change, that the tariff would be reduced to zero; exports would likely have a tariff of just under 5%.

The sector contributed £7.7 billion directly to UK GDP in 2016 and supported directly and indirectly 300,000 jobs, as well as enabling all other key sectors of the economy – from chemicals and other manufacturing to almost all transport-related business – to grow.

According to Zap-Map there are 9,328 public charging locations, 14,821 devices (individual charging stations, so 1 1/2 per location) and 25,225 individual connectors (nearly 2 per device), for Electric Vehicles as of 18th August 2019.  Those numbers will change by the time you look at the link – roughly 1 new location is added per day (based on figures over the last year).

For comparison, there are 8,398 filling stations in the UK, according to Statista.  Let me call them petrol stations; it’s just how I think of them.

A filling station might still have perhaps 6, 8, 10 or more individual pumps, so there are still more “places” to fill your diesel/petrol car than places to charge it.  But the filling station count is falling (down from 12,500 in 2000) and the charging point count is plainly rising.  Average annual mileage is falling at the same time as the car count is falling.  There’s less demand for fuel, before the switch to EV is even considered.

Maybe there’s a better number for potential EV charging points. There are c20m homes in the UK, and around 27m households, according to the ONS.  Some 60% of those have off street parking and so can, in theory, charge an EV without a cable dangling across the pavement, waiting to trip up some unsuspecting soul.   The 40% without off street parking will likely have to wait for chargers to be installed in lamp posts, their streets to be dug up to lay new charging points or autonomous cars that can drive off and charge themselves.  Or will have to charge at work, the supermarket or elsewhere.  It’s not a good solution and it will slow adoption in dense urban areas I’m sure … but people living there may be the very people who are opting out of car ownership altogether.

That means that there are, or could be, 12m charging points, plus the 10,000 (and growing fast) public charging points.  That’s important because, assuming you park your car at home at the end of every day, or at the end of every journey, it’s full of “fuel” the next time you want to take it out.  No need to go anywhere, at any point, to charge your EV for perhaps 90% of the journeys that are made day to day.  If your office and the supermarket have charging points, you may never charge anywhere else for most of your journeys.

This suggests that as EVs become more common, local petrol stations will need to fight for a role.  They are already mini-markets, newspaper stores, car washes, air pumps, ice cream sellers and so on. There isn’t much space, in most, to support an EV needing to charge for even 5 minutes, let alone, 10, 15 or 20 minutes.

Long journeys are mostly made on motorways which suggests that service stations will dominate charging – they have the space for multiple, high power chargers, and they have the space to entertain you and the family for longer than you need for a bio-break.

As well as the £28bn of fuel duty that will be lost, until it’s replaced by some other charge, government needs to think about the loss of jobs and revenue from petrol stations.  Rural communities, villages and even small towns, may lose another anchor tenant – the post office and bank have already gone.  What happens if the petrol station goes too?

Any meaningful change in the shipping volumes of Electric Vehicles in the UK is going to have a huge impact on workers in the car industry who are based here.  Some figures, from the SMMT (a car industry lobbying group, presently focused on telling us all that diesel is fine (i.e. government has orchestrated a scare campaign about its nasty effects), that Brexit will be a disaster and that we should, of course, be buying more cars):

They publish a handy booklet that contains more information.  Some of the numbers are different, eg. the picture above (which is in the booklet) claims 856,000 workers, the table below that picture in the same booklet says 823,000 (my sense is there is both 2017 and 2018 data mixed up throughout).

There are a couple of numbers that I suspect are more important than the others.

1. 2,722,325 engines built (in 2017)

2. 1,334,538 cars exported (out of 1,671,166 built and 2,540,617 registered)

That is, we build engines for a lot of cars that are not made in the UK.  And we export about 80% of the cars that we build; and we import pretty much as many as we export.

Plainly, as we, and the rest of Europe (and the world) switch to EVs, that number of engines built is going to fall, probably quite dramatically. There are many countries with far more aggressive targets for EVs than our own, of course, and they will stop buying engines far more quickly than we in the UK.  Maybe 50% of those engines are diesel (the overall number of diesel cars purchased has fallen in the last 2-3 years, perhaps by as much as 40% but some car makers, Land Rover, for instance, are still heavily dependent on diesel) – and those will therefore stop being built far faster.  The recent introduction of the WLTP test has done little to help the car industry.

If you play in

– the increasing trend of teenagers and young adults to skip driving lessons and the ritual of trying to pass your driving test (in an urban centric model of better public transport, Uber and other things to spend money on, why would a car be high up the list of wasting assets to purchase?)

– the use of PCPs as a profit centre (I’m told that the entire profit on a new car comes in the arbitrage between interest rates as car companies increasingly finance their own sales) which is going to hurt as the second hand value of diesels falls precipitously (first) and then, later, as petrol cars go the same way (whether replaced by hybrids or pure EVs)

Car purchases are likely to continue to fall, even before we get into the potential for “connected and autonomous vehicles” as the SMMT refers to them (they don’t mention EVs in the booklet).  They will bottom, of course, but it doesn’t feel like they bottom with the same number of employees as we have today.

Similarly, if other countries are buying increasing numbers of EVs, they’re not making the cars that we are building today.    This is why car companies are trying to outdo each other by striking partnerships, link ups, buying each other and investing ever increasing numbers of billions in EV capability.

There’s also some worrying data presented.  The picture below, notwithstanding that the headline suggests CO2 emissions were 8.3% lower in 2018 for new cars, also says that emissions for newly registered cars rose 2.9%.  Confused?  I am.  Mort importantly, the EU target for just 2-3 years away is more than 30% below current emissions levels (and the chary handily says that we have reduced emissions by about that much since 2000, i.e. in 18 years.  As I’ve written here before, if the car companies don’t hit that target, they get fined – that’s one of the reasons for the partnerships (the theory being that the emissions target will then be averaged across the whole fleet and so come down if e.g. a company that makes small cars partners with a company that makes larger vehicles).

The booklet notes £3.75bn is invested annually in R&D in the UK.    Most of what, I assume, is in the vehicles of today, though it must be switching, pretty rapidly if they can see the same data presented here, to an EV focus.

What then, is the strategy for the car industry in the UK?  In a market where there is a rapidly declining requirement for “engines”, a falling need for new cars altogether and an increasing focus on EVs?

The Travelling Salesman Problem asks you to figure out the best route between lots of points on a map, given you know the distance between each point.  “Best” is typically taken to mean the shortest route, rather than the most scenic.

With deliveries of online orders ever increasing, it seems likely that, in any given area, a dozen companies – UPS, DPD, DHL, Parcelforce, Yodel as well as Ocado, Tesco, Sainsbury etc – are all grappling with this problem.  In reality I suspect that each driver has a reasonably defined route – the same people are generally placing the orders day to day and week to week – with occasional exceptions that deviate a little from the route.

We’re in a society where “we want it all, we want it now” has become the mantra.  Order online and “get it tomorrow if you order within 1 hour 3 minutes and 16 seconds.”  Or get it this afternoon if you order before 11am.  Or get it in an hour if you live in a certain postcode.

And, at the same time, we want to be greener, cleaner and less polluting; we want less traffic on the roads.  We certainly don’t want more diesel vans racing around the streets of the towns or villages in which we live.

Would you accept a later delivery – perhaps all of your orders in a week come on a given day of the week, at an agreed time (when you, or someone, will be home or when there is access to your “safe place” etc) – if the quid pro quo was that the vehicle was modern and electric?

Would you prefer it if all of the deliveries in your area – be that post code, borough, village etc – were made by a single company, with each company carving out an area of operations that made sense for them, based on their fleet size, investment plan and ability to retain drivers?

With the average life of a diesel van perhaps 10-12 years (a little longer than the life of the average car), it will take time to make the move to Electric Vehicles, but, at the same time, it feels like it could take far too long to make this happen unless we propose, or even impose, some constraints on delivery companies, and on the customers of online sites.

There are, already, some companies that propose “green slots”, that is delivery when they know that they are coming to your area and will be close by, thus reducing the overall mileage.  But what if you had to pay extra for an EV to make the delivery, or pay extra if you didn’t want an EV?  Or you had to wait a few days and got it for free, but paid if you wanted it tomorrow?

I suspect that these are the only ways to, ahem, accelerate the change in vehicle type … along with some consolidation of delivery companies.  The railway franchise model is clearly not a good benchmark, but perhaps there is a way to carve up territories between just 2 or 3 delivery companies – enough for competition but not enough to fill the roads with vehicles?