Andy Grove: PEV Retrofit of Cars Winning Strategy


Case for Electric Miles

Foreign dependence on oil is the triple threat: economic vulnerability, killing the planet, and inciting traditional, terrorist, and religious wars. We need a Manhattan Project slash Go to the Moon by the End of the Decade-like commitment to attack this problem. It’s gotten lip-service and the occasional ineffective government initiative for the past 40 years. We haven’t moved the dial at all. What we need is an aggressive yet realistic program to get energy independent. Now I’m not sure about the math or the pitfalls of the proposal but Andy Grove has an interesting article in the latest edition of McKinsey Quarterly. In it Mr. Grove makes a convincing, concise argument for retrofitting existing cars with batteries as the most practical and expedient method of getting us off our dependence on foreign oil.  He makes some really interesting points:

  • 80% of cars in the U.S. drive daily distances that wouldn’t make any use of gasoline in a hybrid engine,
  • Replacing existing U.S. cars with new hybrids would take too long. If 10 auto makers did as good a job as Toyota in rolling out hybrids, in 10 years they would still only account for 5% of all cars on the road,
  • The $10 billion cost of a pilot program is peanuts given everything else we are throwing money at,
  • We’d have an opportunity to grow a strategic industry – battery technology

Again, I haven’t looked into the math so I’m taking Mr. Grove’s word for it. But it makes for an interesting discussion.

Battery technology versus alternative fuels is a really interesting dynamic in reducing our foreign oil habit. It’s similar to the disk storage versus high-bandwidth downloads for digital distribution. Storage improvements drive down the alternative cost of just-in-time delivery. In the case of cars, increasing battery technology will drive down costs across the board for powering cars even if batteries themselves aren’t employed widely. However, electric/battery-powered cars are inevitable as we move the technology forward. Witness the recent advance by a Korean research team in solving silicon degradation problems that prevent silicon from replacing graphite in batteries as an example of the progression. Battery technology, in cars and elsewhere, is not there just yet but it’s just a function of time.

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One Comment to “Andy Grove: PEV Retrofit of Cars Winning Strategy”

  1. Boy, picking a fight with Andy Grove is tricky business, but here goes. Andy Grove is wrong. Here’s why:

    1) Comparing fleet replacement rates to Prius is the wrong benchmark. A better benchmark would be the catalytic converter, airbag or unleaded fuel. All of these were required by mandates that were enforced (and would have taken much, much longer if penetration were by market forces alone). The problem is externalities are not solvable by the market, i.e. I want everyone to have a catalytic converter, it’s just the *I* don’t want to pay to have one on my car. The introduction of these technologies by mandate resulted in 100% penetration within 10 years. A similar penetration rate of new PEV could be achieved.

    2) Retrofitting vehicles is a tough business and I’d be surprised if the numbers add up (the article by Grove doesn’t include any numbers that are helpful to the retrofit case). Retrofits are artwork, not science. Each car (even of the same model) will have issues to deal with. A retrofit invalidates the warranty. It’s like buying a computer from Dell and then installing a new OS you bought used on eBay…who do you call for service? If there ever were a case of voodoo economics it’s this.

    3) Grove’s data are misleading. He starts by citing the fact that 80% of *all* cars drive less than 40 miles per day. Later he says that retrofitting *all* cars is a bad idea and instead wants to focus on 6 types of large trucks used in fleets. Any data on what *their* average miles per trip are? I bet it’s more than 40…

    4) For the government to invest money in retrofitting a durable good with a useful remaining life of 5-7 years makes no sense. Better to spend those “retrofit dollars” on building efficiency which can have a useful remaining life of 40+ years. Instead, money should be invested in developing technology for building new plug-in EVs. Hybrids are a joke and are at best a bridge technology. Let the market pursue hybrids if they’re deemed necessary. Any government money should be invested in the final solution and accelerating it’s delivery to market as soon as possible.

    5) The argument that “it takes to long” so we can’t get started now is specious. Governor Schwartzenegger was on 60 minutes telling a story about how he met with the auto industry executives in 2000 and asked about electric vehicle technology and was told that the return on investment wasn’t there and that it would take 5-10 years to see the cars hit the road. Woops.

    Ok, that’s it. I’m stepping down from my soap box!

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