Sam Abuelsamid  0:00  
Hello and welcome back to the guide House Transportation insights podcast for April 6 2022. I'm Sam Abuelsamid with guidehouse insights and I'm joined today by our full team including Christian Albertson, Ryan Citron, Sachi empanada Joe Janata, and after an absence of a few weeks Scott Shepard. Scott, why don't we kick off with you this week?

Scott Shepard  0:23  
All right. Thanks, Sam. Yeah, so this week, what I want to talk about is the GM Honda partnership that was just announced yesterday. The goal of the partnership is to produce vehicles under the $30,000 price point. And that's an important price point because it would put electric vehicles pretty firmly in the cost competitive zone at purchase cost with internal combustion engine powered vehicles or conventional vehicles. And in that price point has for the last 10 years really been seen as or that cost competitive parity point has been seen as the thing that will really make EVs into the mass market allow them to hit 100% of the market, potentially. A few interesting things about the announcement are one, they're targeting it for 2027. And they're also talking about some partnerships around battery developments regarding solid state batteries, lithium metal, as well as silicones, with some different chemistries. So so it's good to see this, you know, we've seen battery prices fall over the last 10 years, and we've seen vehicle purchase costs for EVs fall as well. But I'd say in the last two to three years, the the price fall has not really progressed as significantly as it has in the prior five. A lot of that I think is tied to increasing vehicle range. And we've seen vehicle range increase pretty significantly for EVs going from around 80 to 100 miles of that first generation to around 150 to 250 miles of the second generation, or more, as there are many premium segment vehicles reaching 350 to 400 miles now. So so getting to $30,000 is a you know, it's going to take more investments in battery technologies, the battery developments that they mentioned, specifically the solid state mentions, I'm a little bit skeptical as to whether they can really deploy that in in a way that would have a significant impact on purchase costs by 2027. But it's a rapidly evolving industry. So so so there is potential there. A little while ago, there was a, a, basically an announcement about how Toyota was planning to roll out solid state batteries and its vehicles and they were planning to, to initially deploy solid state in hybrids without plugs. So basically, your your standard hybrids like the Toyota Prius, and the reason for doing that was to get some real world data out of the solid state battery in the real world data out regarding solid state batteries in terms of battery durability. And they weren't expecting to introduce that until about 2025. So ultimately, I would expect that solid state battery developments that that might enable some of these cost declines are from our are achieved around 2030 or later. And that leading up to 2027. We're largely focused on the conventional existing technologies, and increasing scale, which is where I think this GM Honda partnership really comes into the fore in that they're they're partnering to expand the scale of the ultion battery platform. And that way, with increased scale, you can have improved cost savings from simply that increased scale. So I just want to know what, what everybody's thoughts on that

Ryan Citron  4:25  
are. Just a quick question for you. What are your thoughts on kind of the nature of these partnerships we're seeing in the Evie space, you know, you have GM and Honda coming together. You know, US and Japanese company, Volkswagen and Ford kind of have a similar partnership going on. Is this pretty unique to the Evie industry or on the internal combustion engine side? Did we see automakers like this kind of coming together to co develop vehicles or is it something that's pretty unique to EVs and this kind of new development?

Scott Shepard  4:56  
You know, there are some nuances to EVs, but it's it's definitely not unique in the industry and historically speaking, one of my first cars was one of my first my first car was a was it a Chevy Prizm which was just a rebadged Toyota Corolla? So that that aspect of sharing vehicle powertrains and just and vehicle designs and rebadging them is something that's been happening for a while. And I remember Sam, you wrote an article about was it captive imports? So I figured you have a good perspective on this too. I would just add that with EVs. The nuance is specifically tied to the powertrain. And I think what we're starting to see now is that over the last 10 years, there have been a lot of investments in startups focused on the powertrain. And that's not necessarily developed by the automaker, and that development in the powertrain specifically, could be deployed to a variety of vehicles as a skateboard platform, wherein the automaker is not necessarily in charge of the powertrain design, but they're more of the assembler. So you would have this sort of compartmentalization of the powertrain that could apply to many different vehicles. But I want to pause now and see, Sam, if you have a insight on on this.

Sam Abuelsamid  6:31  
Yeah, I agree with what you're saying. And you mentioned captive imports, which was something that we started seeing in the 1980s when domestic manufacturers like GM, Ford and Chrysler, were having difficulty developing a more affordable and fuel efficient vehicles to meet the the then relatively new corporate average fuel economy standards. And so they, they partnered with, primarily with Japanese automakers to get rebadged versions of some of the Japanese small cars. And you mentioned the prism, you know, GM and Toyota had a fairly long standing, it was more than 20 year joint venture that produced several different vehicles. The prism they were I think the first one was the brashness, the Nova, you know, and then there was the prism and then they had the there was a Pontiac matrix. No, that was the Toyota was the matrix version of it. There was a Pontiac small car based on that as well. So what we're seeing now, you know, is kind of a, as you said, a little bit different, really focused more on the powertrain. And because of the skateboard nature of these vehicles, you can take that those common electrical and mechanical components underneath and put different bodies on top and really create something that looks far more distinct and unique than than some of those captive imports of the 80s and 90s. You know, give them distinct styling, distinct user experiences, different different infotainment systems. And so they they can feel much more different from each other than some of those efforts in the past. One, one thing that I think will be really interesting to see about this, the extended partnership with GM and Honda because they've been working together for nearly a decade now on fuel cells, and then GM is already planning to build two electric crossovers for Honda and Acura starting in 2024, based on the current generation Altium platform, but I'll be I'll be fascinated to see what they do for this next generation. Because GM is launching, they've announced a $30,000 Chevy Equinox crossover for launch in 2008 and fall of 2023. And I was on the briefing call yesterday morning, with GM and Honda listening to this and you know, they're they're targeting cars, well under that price point, for this 2027 program. And it'll be interesting to see if perhaps they adopt things like moving from a modular battery pack design to a sell to pack or structural pack design that allows them to make it smaller and lighter, and reduce some costs out of there. Or if they use, you know, what different types of self chemistries they use to help them get down to that price point. All right. Any other thoughts on the GM and Honda announcement for anybody?

Sagie Evbenata  9:38  
I just have a quick question. So on that hopeful 30k dollars price point, without actually be undercutting. Do you think an equivalent is a vehicle or is it just pretty much on par with

Scott Shepard  9:53  
it? I'd say it's a little hard to say. Vehicle prices have been going crazy lately. and inflation has been going crazy. So thinking about it in absolute terms is probably a little bit fraught. I would say that. You know, I and Sam, I don't know, they didn't mention anything about necessarily undercutting the price point. But the the goal for the Eevee industry as a whole has been to basically not only become cost competitive, but become cheaper than that in turn combustion engine. There's obviously a lot of different ways you can structure your battery to achieve that price point. So it's Yeah, I don't know how how confident I would be to say that it is going to be an undercut or not, I would more so assume that it's achieving parody?

Sam Abuelsamid  10:54  
Yeah, I'd agree that they're probably going for price parity, you know, that the impression I got from the conversation yesterday, and they were very, very light on details is that they're probably really targeting that low to mid $20,000 price point. So you know, 22 to $25,000 price point, which is where, you know, where a lot of, you know, the more entry level vehicles are today, like today, you know, in the US market, there's only a handful of vehicles that are under $20,000. You know, for a new vehicle. For sticker price. You know, most of the, the smaller crossovers like the Nissan Kicks the Hyundai venue, you know, the Hyundai Kona, you know, they start right around $20,000. And if you project out five years with the changes that are gonna be required for emissions, compliance, things like that, those are going to be creeping up, you know, into that 2324 $25,000 price range. So if they can do an Eevee in that same price range in that timeframe, I think they'll, you know, it'll be at least you know, roughly at parity, and then when you factor in total cost of ownership, you know, the reduced fuel costs and service costs, then, you know, overall, it'll actually work out to be cheaper. Alright, well, why don't we go with Christian next? Okay.

Christian Albertson  12:22  
So anyone's talking about alphabet, and their, which is the mother company of Google, their company called wing. They're currently doing drone deliveries over in Africa. So far this year, they've done over 200,000 deliveries using these drones. Well, they're beginning their biggest test in the United States, in Texas. So in a couple suburbs in Texas, they're going to be delivering from a see it is Walgreens, a couple other places that are going to be doing coffee. If you need, you know, Q tips from from Walgreens, you can order them and have a drone delivered to your house. So what's interesting about this is the drones that they're using are a vertical takeoff and landing drone that transitions into a into a forward flight drone. So it's got fixed wings, so it flies like a normal aircraft. As soon as it gets up to altitude, they fly at about 200 feet. They have software in them that basically allows the aircraft to fly beyond visual line of sight. So basically, they tell the aircraft, okay, here's the coordinates where we want you to go, the aircraft takes off with its package flies to that coordinate, using the software on board to avoid trees, power lines, any other aircraft in the air and everything and then flies that point and instead of landing to deliver the product, it has a cable that it drops the drops down to the ground. soon as it hits the ground, it releases the cable, it retracts the cable and then becomes transitions back to forward flight and flies back to the Oh. So it's it's the hubs are the places they're going to be used using this in his Frisco and little elm communities in near Dallas. They're going to be like I said, it's going to be interesting to see what happens with this. But this is going to be one of their tests in a larger area to see how these aircraft react and how the customers react to having drone delivery. Go on for probably normally these will go on for a year or two years and then they'll start expanding out beyond those two little suburbs. One of the biggest problems they've had with these little drones those noise where they're flying now, it's actually Australian if they've had a lot of complaints about noise. So right now they're in the process of re engineering the propellers on these little drones, so they don't make near as much noise. But it's really interesting, it's going to be great to see, Dallas is a great place to do it. Because you know, it's not a very hilly area, you've got a lot of wide open airspace in those areas to let these little guys fly around. So you know, be ready. If you want coffee from Starbucks, you should be able to order by drones in.

Scott Shepard  15:40  
So Christian, the reengineering of, of the blades to reduce sound. How difficult is that going to be? Is that it? It just sounds like these, these things, I assume are already battery powered. So yeah, they have some sound deficiencies already coming from the use of electricity. But yeah, I'm just I'm, I guess, curious and a little bit skeptical about how much noise can be reduced?

Christian Albertson  16:12  
Well, it all depends on the shape of the blade itself. So a standard propeller, if you were to put it on a electric motor, yeah, you're going to hear a whining noise from the propeller. If you tweak your blade just a little bit, every time you tweak it, you're going to change the noise that it creates, the key is to get it so it produces as little sound as possible, while producing the same amount of lift and thrust needed for these, these aircraft. Because they're using the way these are built, I believe it's got four vertical propellers. And then to that use, they use for for propulsion, so they don't transition. The thing about it is, is they still have to be small enough, where it doesn't change the the flying characteristics of the aircraft doesn't change the size of the aircraft, but it has to be powerful enough to provide enough thrust. So that's what a lot of people don't realize is like on a helicopter, what you're actually hearing most is the ends of the blades of the blades on that propeller make the most noise. And the tail rotor makes more noise than anything else. So by changing the shape of them, there's I feel like the will go back to the military side 864, patchy, if you look at its blade, the end of the blades have a kind of a hook tool, and kind of bins at the very end, that there was enough to quiet down the helicopter. So that's the kind of thing they're going to be looking at is how can they they change the shape of that blade, where it still produces the same amount of thrust, but is quieter. Then after that, then you have to manufacture enough of them to roll them out to every drone that they have out there. Which if they're doing 200,000 In the first part of the year. That's quite a few drones that they're using

Ryan Citron  18:23  
a Christian does each drone deliver kind of like one thing at a time? Or does it take multiple packages and make multiple stops before it returns to base to recharge you know,

Christian Albertson  18:35  
these are set up as a single drop for per mission. Basically, it looks it's about the size of from what I can see until they're about a foot by about eight inches package. That's about six to eight inches tall. And they look like a small lunch box, basically.

Ryan Citron  19:00  
Yeah, I was wondering because the article you said is talking about delivering ice cream and I'm thinking you know if it's making three stops for gets to me, how else is this ice cream?

Christian Albertson  19:08  
Hopefully the ice cream is the first stop. But yeah, it's usually just just one one stop per flight.

Sam Abuelsamid  19:17  
What's, what's the range and payload capability of these wing drones.

Christian Albertson  19:23  
These, from what I can tell on these, if I remember correctly on wing, you're talking about a got a 10 to 15 mile radius that they can fly no problem. The that's about a two and a half to five pounds on this size of drone is with what they can deliver per time. And the reason you want to keep that, you know as soon as you start going to a 10 pound delivery, your drone has to increase in size accordingly. So these are very small drones. It's not meant for it probably won't take a gallon of milk you're talking about 78 pounds there for a gallon of milk versus, you know, like I said earlier, you know, some Q tips in a bar. So there's going to be the type of stuff you're going to do, you're not going to take it use it for any heavy loads, you're not going to use it for sodas, you're not going to use it for that unless you have one soda and a sandwich type thing.

Sam Abuelsamid  20:18  
Okay. I guess I'm just wondering about the, you know, with such small payloads, you know, it seems like maybe for for things like delivering prescriptions from a pharmacy, it would make, it might make sense, you know, if someone is at home sick, and they can't, can't go out, you know, prescriptions, usually pretty lightweight. You know, that's the kind of application where it makes sense. Things like groceries, you know, unless you're really desperate for a pint of ice cream, and you just don't want to go out for it. I'm not it doesn't. I'm not sure how necessarily economically viable or commercially viable this might be done. Has alphabet gotten? Where do we stand with FAA regulations for this right now, they got in some way, shape or form like this. Yeah,

Christian Albertson  21:11  
FA has approved this, they actually started asking for permission for this last year. FAA has approved it, and they're actually supposed to start this, like tomorrow is supposed to start very soon. So and originally these, this size of drone in this class of drone was was purpose made for just that for those emergency kits for, you know, first aid, your medications, things like that, yes, that's what they're there for. Here in the US, you know, they're going to be used for a little bit more than that everybody is going to be trying to, you know, how soon can we get a pizza on this thing. And they've actually some, some companies have already delivered pizzas using drones. But this is a full scale test. So it's going to be you know, a fairly decent sized facility. They're going to be working with these companies. Some Walgreens I believe is was one in there. And if you order from Walgreens, Walgreens will basically walk the package over to the facility, the loaded into the into the drone program, the drone and push play. drone will take care of the rest on its own.

Sam Abuelsamid  22:23  
So it's all about setting up depot's where they're going to operate these from that are adjacent to the retailers that are using them. Yes, yeah,

Christian Albertson  22:33  
they'll they'll do that. Or, in some case studies I've seen they've actually set up a runner that basically says, Okay, go down, you know, the stores two blocks down and we'll pick that up, bring it back, so we can put it on the drum. One of the the companies is that's doing the drones actually set up outside of a Walmart, and they deliver for Walmart. So this most likely this, this one here, they're probably going to set up right next to a Walgreens or right next to, you know, one of these larger stores are going to be delivering from and when they allow you to do this, they don't allow you to buy anything on the store, they give you a limited you know, because of the weight because of the size, these are the things that will fit, and they'll go from there. And you can use these, you can order these items, anything else you'd have to come in.

Sam Abuelsamid  23:25  
Alright, let's go to the Saji then.

Sagie Evbenata  23:30  
Hi, guys. So I thought I'd like to talk about ups and their recent recent announcement of deploying a fleet of EAC cargo bikes in the UK in London. So mewps There, they they've announced that they're going to be using a fleet of 100 e cargo bikes, what they call he quotes to be making lots more deliveries in London. I think this is part of a bigger plan to try and roll these out in other European cities. And I think there's also a mention of also trialing these in the US and and Asia as well. So one of the key benefits for E cargo bikes that's really seen that increase increased usage in Europe in particular, is their compact format. So that allows them to use cycle lanes, which is which is a big advantage for maneuvering in cities and also potentially using pavement pavement or sidewalks or other other paths which are mainly for pedestrians. So So yeah, London is probably an ideal city for trialing this with lots of narrow streets and very small paths. And the vehicle itself. It's it's around 90 centimeters in width, which is about 36 inches I believe, which enables it to be Use in pedestrian zones so at the moment when accessing these pedestrian zones and delivery drivers will need to park their vehicles outside of the restricted area and then use some kind of a cart or other wheeled attraction to take the to make that final step of the journey so yeah, there's an increase in traditional zones in in Europe in particular but also increasing restrictions on vehicle usage and he cargo bikes obviously a lot quieter have no tailpipe emissions and have a favorable in terms of moving with congestion without adding to it too much. Also unusual here is that they using the what they call the equals which are the four wheeled e cargo bikes. So those aren't so established compared to the regular E cargo bikes which are typically three wheeled but they do provide certain benefits especially in in a climate in a European climates. So firstly, they have a cabin in which the rider or driver can sit in. So that protects the driver from rain and, and, and bad weather. And that's one of the one of the it's been seen as one of the key disadvantages for for cycle usage, especially for for business commercial deliveries. So that's one of the main advantages. Secondly, of course, it's has a much larger cargo capacity compared with an E cargo bike. And also, I'd say that probably having that cabin, I guess provides the rider a bit more assurance of safety in the vehicle. So the vehicle itself though the quad, so it with as I said it, it's, it's around 90 centimeters in width, and it's under two meters in height, and, and somewhere around three meters in length. So it's pretty small and compact, but it can carry a payload of around 200 kilograms in a secure container. And it has a range in electric range of around 60 kilometers with a top speed of around 15 miles an hour, which is similar to that of a of a regular pedal cycle. Because of its I guess configuration it's it's it's aligned with the European regulations which apply to E bikes. The typical three to four wheeled sort of three wheeled e cargo bikes. But it means that the driver of the of the E cargo bike has to actually be pedaling, which may look a bit unusual in that type of vehicle. But there is also obviously electrical assist just to reduce the amount of effort required. And the manufacturer of these e cargo bikes is Fern Hey, so they're a British engineering and design company. And they've been up to now I've been designing these portable containers suitable for for towing by bicycles and other micro mobility modes. And they've also got something called an E Walker which is essentially

a container small container about the same size as that on the big cargo bike. But it's its power to enable somebody to easily maneuver it through free narrow streets and on pavements in Europe. DH so ups I think they did mention that term, they are working with other manufacturers of these these quote he quotes. It's not mentioned who but in the UK, the probably the most established manufacturer is called Evie. So they've already today they've been working and been supporting pilots for for the likes of Amazon DPD, DHL, and some of the major UK supermarkets and also CTQ, which is a Norwegian based startup who have a similar a similar concept, although it hasn't really have too much of a presence outside of noise at this moment. So I think this is part of a trend of the logistics companies looking to to experiment with micro mobility with the cargo bikes and we've seen FedEx and DVD for example doing this. But but I think it'd be interesting to see of if the benefits of these four wheelers, four wheels, e cargo bikes catch on in Europe and potentially further afield.

Sam Abuelsamid  29:51  
So just to clarify, the the delivery person does actually have to pedal this device, right? Yeah, so it's electric assisted pedaling, right,

Sagie Evbenata  30:00  
correct? Yeah. So that's pretty much the same regulation for E bikes in Europe that you can't have like just throttle operated bikes, you need to have some kind of assist to the pedaling action on the rider.

Sam Abuelsamid  30:14  
So will these things be allowed to operate, for example, in bike lanes, or they have to operate on the regular traffic lanes of the street? Yeah, they're

Sagie Evbenata  30:25  
allowed to ride them bike lanes as our normal e cargo bikes and, and maybe it's a bit of a gray area, but it's expected that they would also use pavements. Also sidewalks. Although there may be slight differences in the regulations in the different European markets.

Sam Abuelsamid  30:44  
And when are they going to start deploying these?

Sagie Evbenata  30:47  
I think fairly shortly, I don't have a precise date. But I, I think, you know, based on EA V, for example, that they're already piloting these, these types of E Quad vehicles in London and in the UK. So I imagined it being very imminent.

Sam Abuelsamid  31:05  
It's pretty cool. I mean, it looks like just like a little regular brown UPS van, but just a tiny version of it.

Sagie Evbenata  31:12  
Exactly. Yeah. And it's very narrow. If you're looking from, from

Scott Shepard  31:17  
Saudi, how much of the last mile delivery market do you think these types of vehicles could be deployed to? Because I'm imagining Deliveroo, and, you know, the bike riders for Deliveroo, using their own bikes and, and their own mobility devices to ride services there. And I don't really see this as as making a splash there, because the delivery drivers would have to, you know, basically purchase this for that. And that. Yeah, makes sense. So is it only really going to be for? Well, my assumption is that it's probably best designed for personal delivery services like UPS, but yes, the extent

Sagie Evbenata  32:01  
Yeah, I agree with that, I think. Yeah, it's it's probably more practical for the other big logistics companies, or other other other delivery companies who are doing last mile delivery, perhaps on the behalf of the look bigger logistics companies, but also supermarkets. I think that's probably a key area for them. Delivery of groceries. As you said, people like Deliveroo, they tend to use E bikes and their own. They they buy out their own pockets. They're their own personal vehicles. So this is probably a bit yeah. Firstly, it's probably too big for the types of deliveries they're making. But also, it's probably a bit too costly and probably too cumbersome for their day to day personal usage.

Ryan Citron  32:46  
Or surgery. Yeah, these vehicles, on the one hand, to me seem to make a lot of sense for last mile delivery and more flexible in cities, no emissions, all that kind of stuff. I get it. But I see a real concern. When it comes to safety, allowing these things in pipelines, you know, you're looking at it and like say it kind of looks just like a full vehicle. It's a four wheeler, it's, as you mentioned, 210 kilogram capacity. For American friends, it's 460 pounds that it can take, and that's without the weight of the actual vehicle. You know, that hits into a bicyclist you're talking minimum, like a 600 pound vehicle hitting someone, to me looking at a picture of it in a bike lane just looks wrong. I just, I would not want to see that myself riding a bicycle. So what are your thoughts on the safety factors here and how heavy these vehicles can be? And you know, hitting into a bicyclist with this is much different than you know, a bike on bike cocksure.

Sagie Evbenata  33:44  
Yeah, I think I think that's a very valid point. Especially I think in particular, if they're if they're riding on sidewalks, for example, whether it where they were, or other paths are pedestrian streets where the road is shared with pedestrians, I see that as being a risk. At the moment, at least in the UK, there isn't a specific additional regulation for something of this size, just because it falls into the category of an E cargo bike or a bike. I think the I think that the weight, the curb weight, or the vehicle itself is not that high. I think it's it's it's below around 70 to 80 kilos. But I think that, you know, if, obviously, if these do start to proliferate, I can imagine policymakers starting to clamp down on irresponsible usage of these vehicles. But yeah, in terms of legislation that they are, you know that they are actually permitted to ride on on on the roads and use bike paths and cycle lanes.

Ryan Citron  34:51  
Yeah, I thought I heard you say sidewalks. I do hope these aren't going to be driving on sidewalks like that. Yeah, it's a bit of a bike.

Sagie Evbenata  35:00  
Exactly, yeah, it's a bit of a gray area because yeah, at least in the UK, you can, you can you can find us bikes on just regular pedal bikes on pavement as well as E bikes. E cargo bikes, techie would fall into that category. But even a regular three wheeled e cargo bikes are still pretty big in comparison to to a normal bike. And I think just out of responsibility delivery drivers don't tend to do that, unless it's just just wheeling the vehicle to where it's being parked or to whether the deliveries being made. But perhaps on pedestrianized streets, where streets tend to be quite wide. I can imagine I can imagine them just like bicycles just being ridden around, but probably at low speeds, just being a bit more courteous and considerate, considerate of death pedestrians. But of course, yeah, it just takes a few irresponsible riders for a clamp down on this type of activity.

Scott Shepard  36:02  
Yeah, and I was going to mention the width, even though it's it's been at 90 centimeters, that's still double the width of a road bike. And about a third more than a than a mountain bike. So it, it doesn't take up a lot of space. But that's still, you know, a pretty big increase. So yeah, yeah.

Sagie Evbenata  36:23  
Yeah, it's a big cuboid mass to potentially collide with a pedestrian.

Sam Abuelsamid  36:30  
Yeah, it's it's, you know, three meters long. So that's, you know, it's a pretty good sized vehicle. Yeah. Yeah, ever given any indication of what these are going to cost?

Sagie Evbenata  36:43  
No. No, so So, UPS hasn't? I knows that EA V. Have these in operation? At the moment? I don't think they've published pricing at the moment. But I think that I imagined it to be a bit more expensive than than high end e cargo bikes, which could be anything up to about five to 6000 pounds UK pounds. So I can imagine that being probably around $1,000 Mark would be would be my guess.

Sam Abuelsamid  37:20  
All right. Thanks, Christian.

Ryan Citron  37:25  
Yes, one more just follow up. Because I didn't do a quick Google, it looks like standard E bikes in the UK have to weigh 30 kilograms or less. So you're saying that the curb weight is even just without it being full of packages is still 70 kilograms and with packages can be up to 210. So is there like, was there an exception made in the rules for these kinds of vehicles? Or?

Sagie Evbenata  37:49  
I'm not sure to be honest. Right? I think that's for for and maybe it's a gray area. So for example, with E cargo bikes, so those could potentially be approaching that 30 kilo kind of weight, I can imagine. And also potentially also with heavy payloads on the vehicles as well. And yeah, those are typically considered just in the same category as your regular E bikes.

Ryan Citron  38:20  
Yeah, there may be some exception for more like commercial e bikes or something like

Sagie Evbenata  38:25  
that. Yeah. Yeah, I can look into that. But yeah, that's that's that's a very good and valid point.

Sam Abuelsamid  38:33  
All right. Let's jump over to Joe. Joe, what's, what's going on in your area.

Joe Jannotta  38:41  
So I came across an article about the UK government's new hydrogen plan. So in 2021, they released a 10 point green Industrial Revolution plan aimed at cutting emissions and creating greater energy independence. With their post Brexit existence was their energy solution for renewables and post EU membership. It included a plan to generate five gigawatt of low carbon hydrogen capacity by 2030. And it was primarily aimed at replacing natural gas powering around 3 million homes and only mentioned transportation as a secondary potential use case for the hydrogen. This left a pretty big void in the necessary investment if they eventually wanted to do hydrogen as a fuel source for vehicles. At the same time, they continue to invest in battery electric vehicle charging and pretty significantly. In the past several weeks, though, they have doubled that hydrogen commitment from five gigawatts to 10 gigawatts of production capacity, and included a lot of language about transportation. There was a handful of examples of fuel cell passenger crawlers across the UK. But the government and this plan seems primarily focused on Converting public bus fleets trucking and off road industrial vehicles to fuel cell technology. The lack of government support for the fuel cell passenger cars seems to be largely in line with a lot of the global trends as most people have opted for battery electric vehicles in the passenger car space rather than fuel cells, but they their firm commitment to fuel cells and heavy duty vehicles is a little bit bolder than a lot of other countries, they have really locked into the merits of fuel cells over over battery electric vehicles in industrial and heavy duty spaces, while other countries are still debating the merits of the two. There is very limited refueling infrastructure for hydrogen right now, there's actually only 14 stations in all the UK. And there's a relatively growing and established electric vehicle charging infrastructure. So it makes sense to focus on the heavy duty vehicles where they can cluster fueling stations, around bus hubs and truck stops and other industrial centers. It should be interesting to see how fuel cell vehicles work out because it's hasn't been widely adopted yet. And future adoption cases, there's obviously a lot of ways they can use fuel cells. So should be interesting to see how it shakes out.

Scott Shepard  41:30  
Yeah, was there. So you, you mentioned sort of a green, blue hydrogen, and I guess on the production side of hydrogen, did they provide any context about how they're going to get more production capacity developed, because right now, a lot of hydrogen is not blue. And it's not, it's not green.

Joe Jannotta  41:57  
So. So their, their blue is, it seems to be relatively scaled up, they have a decent amount in that space, and they hope to be almost entirely green by 2030. That seems like a pretty lofty goal. So it should be interesting to see. But there wasn't a ton of language around that. Just that they hope to be green and blue. One day, and right now using the less clear versus Yeah,

Scott Shepard  42:25  
and there's a lot of momentum around that. Specifically, in Europe, we see a lot of countries, you know, having strategies for both developing blue and green hydrogen and looking for a mix of both to be heavily present by by 2030. The finally, it's interesting, the debate around which alternative fuel technology, electric or hydrogen is really going to be the the solution for for heavy duty vehicles, because that's, it's it's a big unknown. And, and I always look at it from the perspective of, you know, which technology is going to get there first? And it's hard to say, I, I think, and it's going to be a big question mark for a while. Because there's sorry,

Joe Jannotta  43:20  
I think they Yeah, I think the UK, it's a more interesting debate, because they have a issue around energy supply, especially with sanctions around Russia right now. So I think they are seeing grid issues already arising with the increase in battery electric vehicles. So I think by can, kind of pushing the fuel cells for more industrial vehicles and heavy duty vehicles, taking some of that pressure off the electrical grid, that

Scott Shepard  43:51  
it passenger, because both for blue hydrogen, you're using natural gas. And for green hydrogen, you're using electricity and using renewable electricity. And when you're, when you're doing both of those, you're actually increasing your consumption of either. So you need more resources for either natural gas or for renewable electricity. So the difference is you've just increased your your storage capacity for those two fuels in that, you know, with with heavy duty electric trucks, you're going to move from having something that would be picky with with heavy electric trucks to something that's a little more storable so you're not going to have so much picky and have more of a constant supply or constant demand stream for it. So yeah, it's interesting the the situation in Russia definitely highlights a quite a few different problems that are going to hit the energy generation and production side of the industry specifically in the UK over the next few years.

Sam Abuelsamid  45:10  
Joe, you mentioned that part of the original plan here was also to replace natural gas for residential use. And as part of that effort, would they be using the pipelines using the same pipelines to distribute the hydrogen? And doing that, as was the plan to distribute pure hydrogen or to blend in with natural gas in the pipelines?

Joe Jannotta  45:41  
i My understanding is pure hydrogen. i Not sure if they'll be using the same pipelines. I think that depends on the case. I didn't see a ton of language around that. All right.

Sam Abuelsamid  45:52  
Thank you. All right. Well, let's jump into the last story for this week, which is about the transition from internal combustion to electric vehicles. There was a a column published in the National Post in Canada yesterday, or two days ago, that basically took the government, the federal government in Canada to task. The title was the unintended consequences of the Trudeau Government banning gas powered cars by 2035. And the subhead was, expect to use car prices to go way up for one. The premise here, you know, with this article, and I think there's certainly some legitimate concerns around this, you know, a lot of regions are looking at Banning sales of new internal combustion vehicles. Norway, for example, I think, is the most aggressive they're planning to ban no sales by 2025. But they're already at 80% Bev penetration in Norway, other company countries like the UK and the Netherlands, I think, are looking at 2030. Here in the US, Washington State has talked about 2030, Canada has said they want to ban new ice sales by by 2035, which is an aggressive but probably not totally unreasonable goal. You know, especially if, if the focus there is at least on personal use vehicles, as opposed to commercial vehicles where, you know, hitting that target and that timeframe might be, might be a little unrealistic. But one of the one of the challenges, of course, is you ban sales of new ice vehicles in favor of BEVs that some people may decide whether they want to keep driving ICs. And, you know, the the expectation is that this is you're going to start seeing hoarding of ICs. And the the author of this, this column, gives the example of Cuba, when following the Cuban Revolution, they weren't able to import new vehicles anymore, because of the the embargo that was placed on Cuba. And as a result, we saw 1950s era, American cars being continued to be maintained and operated in Cuba, well into the early 2000s. On a regular basis. In fact, I guess they're they're still many of them on the road today. And, you know, the this author, Tristan Hopper, says, you know, could see the same thing going on, which would negate the benefit of an ice ban, and drive up prices because of limited availability. And I'm, I'm kind of skeptical of that argument. You know, the, there's a fundamental difference with what happened in Cuba versus what's happening everywhere else. And that, you know, in Cuba, when the band in a band trade with Cuba, there was no new product coming into Cuba to replace those existing vehicles. You know, with ice bands, there will be, you know, available products to replace those ice vehicles. Just as you know, over the last decade, we've seen over the last couple of decades, we've seen transitions from incandescent bulbs, to compact fluorescents and now more recently to LEDs, you know, there there, there has been something to replace them with. And the price of each of those new technologies has come down substantially. And, you know, we're seeing reductions in prices for EVs, they will get more affordable ICs are inherently going to get more expensive over the next decade as emission standards continue to climb. And you know, there will probably be some people that want to continue using their ICS well into the 2030s and beyond. And we have a very, we have a much larger fleet of ICS today than Cuba had in 1959 You know, here in the US, you know, it's it's close to 290 million registered vehicles on the road. So those will undoubtedly be in, in many in use, many of those will be in use for many decades to come. But I think that the scare tactics about about what's going to happen if we ban sales of new ICs are probably a bit off the mark, you know, relative to, to what's actually likely to happen. Any thoughts on this guys?

Ryan Citron  50:35  
Oh, yeah. Yeah, there's a lot to unpack there. My take would be the comparisons to Cuba are ridiculous. I don't even really talk about that. It sounds like the author is kind of making these judgments, almost with the assumption that EVs and 2035 in terms of what's available, the specs of the vehicles and capabilities of vehicles are will be what they are today. My sense is by 2035, there'll be very few people that actually want to buy an ice vehicle based on how much better EVs will be when you look at the deployment roadmaps of all these automakers are really refocusing their, their money into EVs to make them really compelling higher performance vehicles. There's also a really interesting study that just came out from clean energy Canada, which is a nonprofit here, it's called the true cost. And it compares the price of EVs to gas cars today. And it found that every single electric version of every car that was analyzed was cheaper over the total cost of ownership today, than the gas equivalent. So if you look at, for example, the Hyundai Kona electric, which is the most second best selling Evie in Canada, after the Tesla Model, the model three, it's $15,000 cheaper to own this vehicle than the gas power Corona over the lifespan. So even though the electric version costs $46,000, to buy, and the gas version cost 24,000. Over the total, the total ownership cost is only 56. For the electric, Corona and 71 for the gas, Kona. So even though those upfront purchase prices are quite different, still, the total cost is much cheaper. And that assumes an eight year ownership driving 20,000 kilometers a year. So really, the key here is gas prices, too. So I mean, the the model assumes $1.35 per liter and gas, which is about $5 A gallon us for gas. So that's maybe expensive in the US relatively, but $1.35 per liter in Canada is not that expensive. And here in BC, we've been seeing $2 per liter come up with the latest spike in gas prices. So you know, the the analysis shows that right now the electric cone is $15,000 cheaper to own than the gas powered version with $1.35 liter gas, if gas prices were to average $2, a leader, as we've been seeing lately, the electric car would be $24,000 cheaper to own than the gas powered one. So the idea that in 2035, they're going to be drastically better vehicles. And you know, if they're the same price up front and much cheaper to operate, it's just a picture. I think that the author's painting in a pretty unrealistic way.

Scott Shepard  53:18  
Yeah. And I would add to that, I mean, you know, besides costs, there's also the the challenge of infrastructure. For for EVs right now that I think a devil's advocate would would come back at you and say, Well, what if you can't charge it up or whatever. And I think even to that point, you, you will probably respond that, once again, the technologies that are available in 2035, are going to look so much different than they are today. That that if if you're basing your perspective on infrastructure that's available today, you're you're completely off on on whatever assumption you're making. Simply put, there are just so many innovations happening in the sector that that your that your prediction would need to account for. So So yeah, it just seems a bit silly.

Sam Abuelsamid  54:12  
Yeah. And yeah, to what your follow up on what you're saying, Scott about infrastructure, you know, the the author of this piece, references, you know, that there are about 6800 charging stations, public charging stations in, in Canada right now, which is quite a bit less on a proportional level relative to the population than we have here in the US, is well over well over 100,000 Now, in the US, but and Canada, you know, is even compared to the US is even, you know, more vast, you know, in terms of some of the distances across the middle part of the country. But I think if government policies, you know, do To provide incentives to help build out that infrastructure and make that more accessible, then, you know, that's that's certainly something that can be overcome in the next 13 years until this proposed ban.

Scott Shepard  55:14  
Yeah, certainly, and, and, you know, even just besides the the things that governments can do with the existing technologies, there's also so many innovations happening in the sector around, you know, don't want to say this is going to be the the solution that that closes the gap. But automakers are putting solar panels on on roofs of vehicles. Now, there are remote charging stations being developed that can operate off the grid, so they can just be deployed at random battery swapping is taking off in China, it's taking off and they're starting in Europe. So there are, there are a lot of innovations. And I can just imagine that the momentum of those innovations alongside government support is going to is going to change the sector dramatically over the next 12 years. 13 years.

Ryan Citron  56:07  
Yeah, that's nothing to say also of charging speeds being dramatically improved, presumably over the next 13 years as well. Exactly.

Sam Abuelsamid  56:15  
Yeah, that's that's a good example to run with charging speeds, you know, today, you can now buy the Hyundai ionic five, and key V six, that will charge from 10 to 80%. In 18 minutes, if you have a 350 kilowatt charger, and those, those are going to also increase, you know that those those speeds are going to get faster still, in the next decade. So

Scott Shepard  56:41  
yeah, I wonder if there's actually, you know, and a different angle to this, too. But it has nothing to do with electrification. But more so with automation. And the development of, of business models, ride hailing business models using Robo taxis, enabling people to do not need a car in more situations than they do now. And this is something we looked at a while ago. But, you know, theoretically, by 2035, maybe you have more Robo taxis on the road. People don't need a car as much. Maybe in that environment, the used car price value actually declines on behalf of that trend. Now, yeah, combustion engines. But

Sam Abuelsamid  57:31  
yeah, I think that's a very valid point. You know, there may well be some declining demand for those those used ICS by the mid 2030s.

Sagie Evbenata  57:43  
Yeah. And also also, I think the the impact of, of local and national policy will also make it more painful to Amina and ice vehicles so that the increased taxes and the restrictions on access will just make it and potentially increased parking charges will just make it a lot more inconvenient for owning a nice.

Scott Shepard  58:06  
Yeah, it's yeah, definitely more practical way, in predictable way, I think.

Sam Abuelsamid  58:16  
All right. Well, with that. Let's wrap it up for this week. And thanks, everybody, for joining us, and we'll talk to you again in two weeks. Bye.

Sagie Evbenata  58:24  
All right. Thank you. Thanks,

Ryan Citron  58:26  
everyone. You