The New Vehicle Revolution


January 14, 2019

There has been a lot of talk over the last few years about the upcoming boon in electric vehicles.  The theory is great: no more trips to the gas station, quick re-recharging capabilities at home and work, and a clean, cheap, and widely available source of fuel, electricity.  These are all lofty goals that should be worked towards, but the journey ahead will be like a good road for driving, both long and full of turns.

The most prevalent brand of electric vehicle of today is the Tesla.  Teslas come in a few distinct models, currently a sports car, sedan, and SUV, with more on the way.  The next iterations are expected to include a pick-up truck and a semi tractor.  While the current production models have been fairly successful in terms of sales, Tesla will need the next two to be even bigger.  This should be possible as well, as Tesla is one of the world’s leading companies in terms of self-driving capabilities.  This will prove most useful in the industrial shipping sector where one of the largest expenses is labor.  It will be a difficult task to fully automate the US trucking sector, but doing so can free up valuable human capital.  On the other hand, there are approximately 3.5 million truck drivers in the US who would be out of work until they can be retrained in a new industry.  Given that the average salary of these workers is $40,000 per year, the economy may have a tough time adjusting to this new reality.

The next biggest obstacle, and the one most ready for economic profit, is the infrastructure required for large scale adoption of electric vehicles.  Tesla and other companies have done a decent job of providing charging stations in urban centers, but the majority of US travel infrastructure is built around the gas powered internal combustion engine.  In order to be of practical, everyday use the charging network must be expanded exponentially.  This means not only adding charging ports to office building parking decks, home garages, and apartment parking lots, but also Pilot and Flying J Travel Centers on the nation’s highways that could make long distance travel in an EV a potential reality.  Currently this market is somewhat fragmented with commercial and residential properties electing to provide charging as a tenant service.  Though this serves as a benefit for those that do use EVs (yay free electricity!) it acts as an implied incentive for EVs and an implied deterrent for their gas based counterparts (you mean I’m paying for their electricity and my gas!?).  There are a few providers of pay-by-the-charge services, but until these become more commonplace the burden of charging will continue to be placed on landlords and individuals.

One final thought on the green side of the debate.  It is commonly assumed that electricity is more “green” than gasoline.  While this is true in the relative sense, it depends on where you live as to the true carbon impact of EVs.  The US electricity infrastructure is making strides in renewable energy, but it should not be forgotten that 77.6% of the electricity here is still generated by natural gas, oil, and coal.  EVs are definitely less pollutive than their counterparts, but after accounting for electricity and battery production they are in no way emission free.

The goal of transitioning the US to a majority EV based transportation system is a noble one. Even though there will be significant hurdles along the way it could prove to have a strong positive impact on the economy.  Workers will be freed up, maintenance costs will be brought down, and less overall pollution would be created.  It will be a long road, but the destination should be worth the drive.

Carey Blakley


Apples on the Dark Side of the Moon?


January 7, 2019

Last Wednesday was an interesting day in the news and maybe even a harbinger of the future. Two news items caught my eye.

First, the Chinese successfully landed Chang’e 4 on the dark side of the moon: a first for any space program. There have been numerous missions in recent years to the Moon, but few have actually landed. The last crewed landing was Apollo 17 back in 1972. Chang’e 4 was carrying instruments to analyze geology, and materials to set up biological experiments. Six plants (cotton, rapeseed, potato, fruit fly, yeast and a flowering plant called Arabidopsis) were transported with the plan of forming a mini biosphere. The landing is seen as a major milestone in space exploration. Kudos to the Chinese!

The other news that caught the world’s attention was Apple’s sales guidance on their upcoming Q1 2019 quarter. Apple now expects first-quarter revenue of $84 billion which is well below previous expectations of $89-$93 billion. The surprising announcement caused Apple’s shares, and the whole stock market, to plunge the next day. Apple CEO Tim Cook sought to explain the reduction by reference to a slowing Chinese economy and reduced demand for high-end items like iPhones. It seems the smartphone business is quickly maturing. Global smartphone shipments have declined for four successive quarters.

What’s most interesting about Apple’s remarks was what Cook did not say. For example, he did not mention that Chinese smartphone maker Huawei shipped more smartphones in China than Apple for the second consecutive quarter. Moreover, Huawei smartphone shipments in China for Q3 2018 were 30% higher than the same period in 2017, while Apple’s were pretty much the same. The Chinese smartphone market is the largest in the world, and accounts for one third of global sales, so much is at stake for the top three players: Samsung, Huawei and Apple.

The news about Apple and the moon landing was very vivid to me as I am reading “AI Superpowers” by Kai-Fu Lee, who was formerly head of Google China. The book explores the role Chinese innovation and entrepreneurialism will play in tomorrow’s artificial intelligence wars. No longer are Chinese engineers copying our innovations but creating their own. In his book Lee explains the “then” versus “now” of Chinese entrepreneurship and engineering. Twenty years ago, top Chinese engineering students paddled hard upstream with used, out-of-date textbooks and 8 pm “lights out” dormitory rules. Lee argues that the Chinese engineers of today have quickly caught up to our engineering caliber and are poised to compete head on. He further argues why Silicon Valley is not well prepared to battle the Chinese “gladiator trained” entrepreneurs.

The development of Chinese innovation and entrepreneurial prowess is real. With the Chinese stock market now at more reasonable valuations, perhaps we should be thinking less about the FAANGs (Facebook, Amazon, Apple, Netflix, Google) and focus more on the Chinese BATS (Baidu, Alibaba, Tencent), and the role these Chinese entrepreneurial companies will have in shaping the future.

Gary Martin