Powering the future is now! Electric vehicles (EVs) and self-driving cars (AVs) are two of the most innovative technologies in the history of the automotive industry. On October 29, 2019, Mark Aiello and James De Vellis of Foley & Lardner LLP along with SERES co-hosted 70 executives, engineers, entrepreneurs, and counsel to hear insights from Keynote speakers James Taylor and Carlos Bhola, and three distinguished panels on technology innovation in the EV and AV space, battery technology, and the regulatory impact. The event took place at SERES Headquarters and Showroom in Santa Clara, California. Here are the highlights from these discussions.
Industry Overview by James Taylor, Co-CEO of SERES
Electrification, connected and autonomous vehicles, and mobility-as-a-service (“Maas”) are disrupting the way people and goods move. By 2040, 57% of passenger vehicle sales are expected to be electric, which is close to 60 million plug-in hybrid and battery electric vehicles. All global OEMs are electrifying their portfolio, some more aggressively than others.
However, while the global market share of electric vehicles is growing, it is still averaging only 3%. The factors resulting in the current low market share include the high cost of batteries, low availability of EV models, a price premium to non-EVs, limited range of EVs, limited charging stations, and charge times. That said, James Taylor, Co-CEO of SERES, laid out four key factors affecting future EV adoption.
First, regulations related to fuel economy and emissions standards have had, and will continue to have, a big impact on EV adoption. The United States’ EV regulatory policies generally incentivize EVs as follows:
- Rebates, tax credits, and grants for charging infrastructure
- Rebates and tax credits for vehicles
- Zero-emission vehicle mandates
- Free HOV lane access
- Fleet acquisition requirements
- Licensing fees
- Emissions testing fee exemptions
While there are various technologies that reduce CO2 emissions (e.g., start/stop engines, belt starter, or hybrid vehicles), the only technology that provides zero-emissions is all-electric vehicles, according to Taylor. The current administration’s relaxation of the EPA’s corporate average fuel economy (“CAFE”) mandate has introduced uncertainty into the market, which may negatively impact the electrification timeline.
The second factor impacting EV adoption is the number of choices available to consumers. Currently, the number of electric vehicle models is relatively low. Of the 600 vehicle models available in the United States, only 60 are electrified in any way, including PHEV (plug in), BEV (all EV), and HEV (mild hybrid). The current lack of non-luxury EV models and pickup truck EV models pose a major hurdle to mass-market adoption of electric vehicles. But, according to Taylor, there will be a five-fold increase in the number of models by 2021.
Third, the cost of batteries must continue to drop to increase EV adoption. It is estimated that in 2010 batteries cost close to $1,200/kWh, and have dropped to under $200/kWh in 2018. Based on this trend, Taylor estimates that batteries will cost under $100/kWh by 2024, and about $60/kWh by 2030. This 20-fold reduction in battery cost in 20 years will no doubt increase EV adoption by lowering EV costs.
Fourth, and finally, EV adoption is impacted by EV range, the number of plug-in stations, and charge time. Despite the fact that the average person drives only 40 miles/day, the breakpoint for EV adoption is a 300-mile range. Indeed, according to Taylor, surveys indicate that 57% of consumers would not hesitate to buy an EV with a 300-mile range per charge, which is a 30% increase relative to an EV with only a 250-mile range.
For EV penetration to go from the current 3% to 50%, what is needed is continued regulatory incentives, more EV options, cheaper batteries, longer ranges, and more charging stations with faster charge times. While not insignificant, these challenges around EV adoption pale in comparison to the challenges surrounding L4/L5 autonomous vehicle deployment. Taylor emphasized that the complexities surrounding L4/L5 autonomy are off the chart, so OEMs should focus on deploying in the short-term a complete, automotive grade, AI based, L2+ system that can later scale to fully autonomous vehicles in the future - an example of which attendees of the event had the opportunity to ride in!
Technology Innovation: Automation
The rate of innovation in vehicular Automation technology has been astounding, but there are key challenges impacting further innovation. Steve Hilfinger, Partner at Foley & Lardner LLP, and the distinguished panelists delved into challenges such as safety, public trust, and regulations, as well as common misconceptions related to this technology innovation.
When it comes to safety and gaining public trust, there is no doubt that AVs will have to be safer than human drivers. However, Dr. Fan Wang, director of Autonomous Driving at SERES, pointed out that it is difficult to evaluate safety, let alone determine whether AVs actually are safer than humans in any given situation. While companies tout how many miles their AVs have driven without an incident to make a claim regarding safety, it is a misconception to believe that all miles are created equal. Rather, Dr. Ophir Samson, director of Automotive Partnerships at Aurora Innovations, indicated that from a technology innovation standpoint, the more useful metric is the total number of “interesting” miles driven by AVs. Simply put, driving 100,000 miles on a highway is just not as valuable as driving 100,000 miles in a crowded city.
Simulations, contrary to popular belief, can actually be more useful than test-driving on a physical road. At both Aurora and SERES, simulations are critical for developing AV technology and are used extensively to explore how the AV system performs under vastly more conditions than can be tested in the physical world. As Dr. Wang noted, it is not possible to introduce the level of randomness needed to hone AV technology without the use of simulations to train and test AI that is a hybrid of rule-based logic and neural network-based models. Once AVs can operate safely, the public can begin to trust AV technology. Indeed, Aurora’s approach to winning over public trust has included publishing a comprehensive safety report, and launching a non-profit educational entity to educate the public regarding AV technology and its safety, according to Dr. Samson.
The regulatory framework not only impacts what vehicle can be sold to consumers, but also plays a major role in a company’s ability to develop a safe AV by impeding or facilitating the testing of vehicles in a real-world environment. Bryan Casey, a Fellow at the Center for Automotive Research at Stanford, focuses on the intersection between industry, engineering, and governmental policy. At the event, Mr. Casey noted that the biggest challenge facing AV technological innovation is the patchwork administrative framework resulting from regulations put forth by different federal agencies, different states, and even different cities within a state. Each regulatory agency has its own focus and perspective, posing challenges to AV development that is inherently multidisciplinary and touches on aspects ranging from road safety, insurance, data privacy, cybersecurity, fleet ride sharing, taxi services, etc. Universal compliance is a challenge when there are 29 different states with 29 different AV-specific regulations, on top of state-specific basic rules of the road.
Another common misconception relates to assigning liability. People often think that AVs will introduce novel liability issues, but according to Mr. Casey, the reality is that even when it is not certain exactly how an AV’s deep learning algorithm performed, it may be a straightforward determination that the manufacturer of the deep learning algorithm in the AV will be liable. Thus far, according to Casey, there have been 100 crashes involving an AV in California, but 90% of them were due to a human driver crashing into the AV. State accident laws do a good job of allocating liability, and Casey expects that state laws will continue to be suitable to handle AV-related incidents.
Although humans are excellent drivers when they are not distracted, they tend to be terrible drivers when they are distracted, which results in tens of thousands of deaths per year. AVs, therefore, present incredible opportunities for improving transportation safety.
Electric Vehicles: The Battery Challenge
Battery capacity, longevity, charge time, safety, cost, and recyclability all pose challenges to EV mass-market deployment and adoption. Addressing these challenges requires a multidisciplinary approach encompassing data analytics, chemistry, charging, and performance management and control. While EV consumers may not appreciate all the technical battery challenges, it is clear that battery charge times and reliable EV range under all driving scenarios are palpable pain points preventing mass-market adoption. James De Vellis, Partner at Foley & Lardner LLP, explored battery technology and challenges with the second group of distinguished panelists.
Everyone wants faster charging. However, as Saeed Khaleghi Rahimian, a Technical Lead and Senior Battery Engineer at SERES, pointed out, fast charging negatively impacts battery performance and safety. An EV battery pack includes battery cells that each contain an anode, cathode and a separator between the anode and cathode. Charging Li-ion cells at high rates particularly at high states of charge and low temperatures can cause lithium plating on the anode and potentially damage the separator to the point where the anode and cathode contact one another. This lithium plating not only degrades battery performance, but also causes safety concerns due to fire hazard. Accordingly, Aditya Velivelli, a Senior Thermal Applications Engineer at SERES, is working on better thermal management for fast charging to ensure that all cells within the battery pack have a uniform temperature within an optimal temperature range during the charging cycle.
One approach to solving these battery design challenges leverages complex data analytics. Sangwoo Han, a Senior Battery Engineer at SERES, stated that while large amounts of data is currently collected, accurately using the data in computer models is often times too computationally intensive for real-time applications in an EV. The challenge is to simplify the models while maintaining their accuracy so they can be used in an online scenario that improves battery performance during operation of an EV.
In addition to battery design and performance modeling challenges, the industry faces challenges relating to sourcing raw materials for manufacturing, as well as what to do with batteries at the end of their life. EV batteries contain cobalt, which is sourced from Congo and is relatively expensive. Al Prescott, Deputy General Counsel and Director of Regulatory Affairs at Tesla, highlighted that Tesla has reduced its use of cobalt substantially and the trend is to use more nickel instead of cobalt due to cost. From a business strategy standpoint, companies need to decide how vertically integrated they want to be; whether they want to buy the battery from a third-party, build the battery themselves, or even own the mine from which the raw materials are sourced.
Once a battery’s capacity falls below 80%, it is no longer suitable for propulsion, raising end of lifecycle considerations. Mr. Velivelli advocated for secondary uses for the battery, such as a battery backup for residential or commercial electricity. At the moment, the cost of recycling the material in the battery exceeds the cost of the raw material itself, which is not in shortage, so recycling is not yet financially viable. As EV batteries reach the end of their lifecycle, the industry will have to implement an environmentally friendly and economical recycling process.
While great progress has been made to date, the industry is feverishly striving to improve all aspects of batteries and charging throughout the battery lifecycle, while at the same time proving to the public that EVs are the safest vehicles on the market.
Fireside Chat - The Big Picture
In a wide ranging and thought-provoking fireside chat, Carlos Bhola, Managing Director of Celsius Capital, and Dave Kantaros, Partner at Foley & Lardner LLP, touched on the four drivers causing disruption in the AV / EV industry, a new vision for the transportation system, and what will separate the winners from the losers.
Carlos’ four drivers causing the AV / EV industry to be disrupted are:
- Movement from owned to shared economics, i.e., mobility-as-a-service
- Movement away from fossil fuels
- Movement away from human-based navigation, i.e., autonomy
- Next generation vehicular experiences
For most of these drivers, software plays a key role in expanding a vehicle’s capabilities. According to Bhola, the best automotive software is currently coming from high tech companies in Silicon Valley, such as Google, Apple, and Aurora. To take advantage of the new and enhanced functionality provided by this software, big auto manufacturers should transition from locking down the vertical stack of vehicular devices to having layered technology vehicles with operating systems, middleware, software and services. As a result, next generation vehicles will go from closed box entities to connected, intelligent platforms that leverage edge computing and cloud computing to communicate and process vast amounts of data in real-time.
Bhola further opined that software has the potential to enable groundbreaking next generation vehicular experiences, but the progress thus far has been disappointing. Vehicular experiences can be categorized as 1) the experience brought in upon entering the vehicle, 2) the experience when inside the vehicle, and 3) the experience taken out upon exiting the vehicle. For these next generation user experiences to achieve market penetration, they need a must-have feature akin to the multi-touch gestures Steve Jobs introduced that catapulted the smartphone market. Imagine this: when a user streaming music on their smartphone enters a vehicle, the vehicle seamlessly begins playing the music on the vehicle’s sound system without skipping a beat; when the user exits the vehicle, the music seamlessly transitions back to playing on the smartphone. No car on the market does this right now, and if big auto passes on it, then a Silicon Valley tech giant will develop it.
If the entire transportation system was going to be rebuilt, Bhola said he would do a deep dive into how people and things move in order to understand journeys. Indeed, 60% of automobile journeys are less than two people travelling less than five miles. Cars are not practical for these types of journeys, but personal light electric vehicles, like e-scooters, might be optimal. Depending on a geographic area’s climate, public transportation options, and population’s proclivities, micromobility solutions have the potential to eliminate up to 60% of automobile journeys.
Like the EV / AV industry, the micromobility industry faces its own set of challenges ranging from safety to technology to economics. Most micromobility devices on the market have poor vehicle dynamics and are unsafe for the average human being. Notwithstanding safety, the current shared e-scooter business model, with a 90-day vehicle lifecycle and $500 cost of maintenance, is not economically sound according to Bhola.
While this may feel like the “MySpace era” of micromobility, Bhola stated that the “Facebook” of micromobility is inevitably around the corner. The Facebook of micromobility will provide devices that have vehicle dynamics that are safe for the average user, provide collapsible helmets, and provide devices that can automatically re-locate themselves so they are evenly spread throughout a geographic area. Companies that are in sync with their customers and provide high quality customer service, like the Ubers and Lyfts of the world, are well positioned to solve these micromobility challenges.
New technologies for moving people or, moreover, moving goods in e-commerce provide countless opportunities for existing companies and new entrants alike. As is typical for any new industry, there will be winners and losers in the end. Just as an OEM uses a single provider for hardware such as brakes, they are not going to use 20 different providers for software. Therefore, startups that are not tied to the supply chain for a big OEM may find it challenging to succeed.
Regulations Impacting Electric & Autonomous Vehicles
It is inescapable that regulations play a key role in the development and adoption of EV / AV technology. Chris Grigorian, Partner at Foley & Lardner LLP, led a panel discussion discussing how best to navigate the current regulatory framework to continue to make technological progress.
The current regulatory framework is fragmented. Ana Meuwissen, Director of Federal Government Affairs at Robert Bosch LLC, reiterated that there are disparate requirements set forth by multiple key regulators and lawmakers: AV Guidance issued by the Department of Transportation and NHTSA, statutes in 29 different states, executive orders in 11 states as well as developments stemming from individual cities, and even standards-setting bodies. This situation poses a challenge for the automotive industry and for technology developers that are now active in the AV space. One approach for OEMs and ADAS suppliers is to fully engage in the rulemaking and request for comment process by submitting comments to the relevant agencies with their perspectives and maintaining an active dialogue with these key parties. One significant positive development is the renewed effort in Congress to pass AV legislation with the relevant Committees of jurisdiction now working in a bicameral and bipartisan fashion to tackle the difficult issues at play and introduce a new bill.
In addition to companies, states are also facing challenges due to the regulatory framework. In particular, federal laws may seek to pre-empt state law. Kevin Biesty, Deputy Director for Policy at the Arizona Department of Transportation, believes that given the current federal environment and the early stage technology, it is best to keep the status quo with both the federal government and the states having a voice in regulatory matters for AVs. This division of labor should remain as it is today: Let the Federal government regulate the safety of the vehicle, but allow the states to regulate how the vehicle behaves on the road (e.g., state licenses and rules of the road). When enacting and evaluating AV policies for Arizona, Biesty looks to other states, national and international organizations and existing regulations and authority to ensure safe testing. Arizona’s position is that AV testing with a safety driver is no different than the vehicular testing that has been done for decades (e.g., testing automatic transmissions).
For AV products geared towards commercial, heavy vehicles, Holly Gordon, Head of Policy at Ike, looks to regulations promulgated by the Federal Motor Carrier Safety Administration (“FMCSA”). However, as long-haul trucking moves towards L4/L5 autonomy, certain FMCSA regulations, such as those related to road-side vehicle inspections, may need to be reconsidered when there is no human driver. NHTSA’s voluntary guidelines and future regulations related to autonomy will also have an impact on the development and deployment of automated trucking technology. Gordon noted that, to increase transparency and validate safety, Ike was one of the first companies to publish a Voluntary Safety Self-Assessment report before testing in autonomous mode on public roads. Ike’s report focuses on its approach to safety overall, which includes a combination of simulations and test track work for now.
While each of the day’s sessions focused on different aspects of the automotive industry, the program made clear that manufacturers, governmental agencies, and consumers are enthusiastic about the potential for improved safety, societal benefits, and convenience brought by advances in EVs, AVs, and micromobility platforms. All those involved are tackling cutting-edge technical and regulatory challenges to continue making technological innovations at a breakneck pace.