Electric Vehicles Driving Innovative New Value Chains
Connecting new technologies and start ups to create a new business is a key capability
Corporates, investment funds and start ups need to master this to drive change. In a previous D/SRUPTION article I outlined the principles about why and how this is the case, with an example of health venture creating a billion dollar entity..
In this article, we are looking at examples of industries that are going through seismic change and using Electric Vehicles as an example case. We consider where the value will be captured, the key intellectual assets involved and which different players will have significant advantage. Innovative New Value Chains will help organisations define their investment strategy and how their organisation will change. If this is not addressed organisations could go bust due to tech and business model changes as they are frozen in their current business.
The transition we are considering in this article is the move from petrol / gasoline internal combustion engine (ICE) vehicles that you own, to electric and autonomous vehicles that we could use as Transport as a Service (TaaS).
Aimava has worked with IP services firm Rouse, (and special thank you to Tim Smith for working on this article), to look at a number of sectors for clients that will be disrupted by new tech and business models. The data analysis shows China will not only be a significant market, but is also a leading tech manufacturer and new business model innovator.
Electric Vehicles: the scale of the change
EV sales and manufacture globally are growing at a rapid rate and many countries have stated that they intend phasing out ICE vehicles with many targeting bans in place by 2030 to 2040. This is not a long time in the scale of things to change a whole industry and infrastructure. China is the leading country in the sales and manufacture of electric vehicles.
Electric car sales and market share
Source: Rouse analysis of www.about.bnef.com
It will be important to understand the dynamics of the industry and the use of the solutions. When I was recently in Shanghai, in a discussion with executives at NIO, the Chinese electric vehicle business which was formed in 2014 and floated on NASDQ in Sep. 2018 for $6bn Valuation, it struck me there is a different approach to the industry. I would characterise Tesla as developing a vehicle and a model for suburban USA i.e. a vehicle on the drive and charging at home. China is developing its electric vehicle solution for dense urban environments and where customers do not have easy charging. You can see my short video and discussion on the different EV model here.
Different business model and Intellectual Assets
The customer journey (both literally and in business terms) is going to be very different to the current model of purchasing a vehicle and taking your car to a petrol / gas station for a fill up of fuel in 5 minutes and possibly purchase a coffee or snack.
With Rouse we considered the different Innovative New Value Chains, with a particular focus on the services that emerge around new battery technology, EVs, and their related business models.
An indication of the control of the key technologies at play is shown by analysis of intellectual property (IP), in particular the patents.
Let’s look at selected examples of organisations in the EV space and their IP assets. BYD, is one of the many Chinese car manufacturers, with total sales of $120 bn in 2017 and EV sales of 110,000 cars while Tesla has sales of $12bn and 80,000 EVs.
Looking at the territory coverage for Electrification and Hybrid granted patents, there is a stark difference in the quantity and geographical spread with BYD having 1,454 compared to Tesla’s 95.
Source: Rouse analysis of cipher.ai
Battery tech and capacity
If we look at the battery aspects of the Innovative New Value Chain, we compared Panasonic to CATL (Contemporary Amperex Technology Co. Limited, founded in 2011)
Source: Rouse analysis
CATL is expanding its capacity fast but what is the situation on the key innovations? Looking at the patent situation in total up to 2018, Panasonic is in the lead with 82% of the 3,493 patent families. If we look at the more recent filings though from 2014 to 2018 than CATL has 54% of 1,845 patent families.
Source: Rouse analysis of Cipher Automotive: Battery Technology, Panasonic, CATL and Tesla
Who controls the technology and the Innovative New Value Chain
To be able to enter and operate in the world’s largest market and manufacturing leader, China, we need to know – who controls the technology?
A deeper analysis is necessary, but just scratching the surface of the most prominent actors in charging stations, Toyota has the largest patent portfolio 2018. State Grid of China is a close second.
Granted and pending patent families in 2018 – AC-, DC-, Handsfree (robotic)- and Induction charging
Source: Rouse analysis of Source: Cipher Automotive – Charging – AC-, DC-, Handsfree (robotic)- and Induction charging
Concerning adjacent tech control in the Innovative New Value Chain we need to consider other areas e.g., payment systems: must be easy for the consumer, integrated with the energy distributor and meet government regulations. Who controls this area?
Moreover, to tackle peak demands and drive profits, will energy storage and smart charging be the solution? Most importantly, who controls the technology? Energy distributor or operator?
Business Model supported by the technology change
It is not just technology that will make a company success, it will also be execution of the business model. The old classic example is the most successful photocopier company was not necessarily the one with the best technology but the one that sold on a per print basis. In the EV and battery future then we have to look at the variations in battery charging (steady or fast) which has an implication for customer requirements and energy infrastructures. Battery switching and battery-as-a-service solutions can also be models. In the case of NIO they already have a battery that switches out of the vehicle and they have automated battery switching stations in operation in Beijing and major cities. There are now many start ups globally that are providing rapid battery charging services, battery switching, concierge services to charge vehicles.
Each of these interactions is creating data and knowledge opportunities. As a result, there is a wealth of intellectual assets which is where value can be optimised and captured by the organisation that has the control.
Autonomous EV gives another level of different business models as the end consumer has transport as a service, vehicles need to be cleaned, charged, serviced and potentially have other uses e.g. body switching for other logistics uses. Vehicle batteries can also be used as an energy management asset to help deal with peaks and troughs in the local electricity supply. Data and artificial intelligence in the systems to be able to manage the autonomy is likely to be a key control and value capture point.
Orchestrate your Innovative New Value Chain
We have looked at one small part of the EV and battery Innovative New Value Chain to illustrate the different technologies, companies and have touched on business models. Corporates that are looking at changes in a sector need to consider the interaction of the technologies. Tim Smith and I will be presenting a webinar on 21 November 2018 focused on EV and Innovative New Value Chains in China.
We are seeing how many other industries are being impacted by opportunities and disruption as new materials, digitisation, new business models with new ventures arise.
Just a few examples…
Consumer Goods – Next Generation Product vape devices are disrupting the tobacco industry with 80% of patents in China and over 95% of the manufacture.
Financial Services – WeChat Pay over 900m MAU (monthly active users) and AliPay with over 500m MAU. Cash is becoming obsolete.
Retail– Online selling, fast delivery creating Online2Offline new models with the likes of Hema / Alibaba. See a tour of Hema store at the Aimava YouTube Channel. The scale of online retail is also much larger and growing in China. Singles Day is a China phenomenon in China on 11.11 (November) the one day sales on the Alibaba platform in 2017 was over $25bn which is thought to be more than the online sales in the USA for Back Friday and Cyber Monday combined.
Luckin vs Starbuck Coffee –Even coffee sales are not exempt from disruption. Luckin opened over 600 locations in just 7 months from November 2017 by online order, no in-store till, delivery, integrated social media.
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Andrew Gaule presents further examples in his book ‘Purpose to Performance Innovative New Value Chain’ – You can sign up to his webinar on 21 November here.