Recent interview published on cityfix:

France wants to take the lead in the new electrified vehicle industry. The 2007 Grenelle Environnement (a multi-party roundtable to define public policy in France) helped to shape the country’s sustainable development strategy. The stimulus plan at the end of 2008 emphasized this effort by establishing an 800 million-euro fund for sustainable development grants, partly to help create a greener automotive industry

Now, global industrial leaders such as the Renault-Nissan alliance and EDF, the French electric utility, want to define what could be the future of the country’s Electric Mobility Operator (EMO), which would supply customers with the infrastructure needed to recharge and manage electric vehicles. At the same time, technology- or service-driven companies are emerging as innovators. What we can call not only an electrified vehicle value chain but, more broadly, a sustainable mobility constellation is changing the way we sell cars.

To paraphrase François Mitterrand, natural selection will occur between business models, not between technologies. Among all models emerging, we can  divide them into three extensive categories: the carsharing model, the battery leasing model, and the EMO model (Better Place, for example.)

Carsharing is well-known and is becoming a mass market solution, especially inSwitzerland, Germany and even the United States. Even though operators are trying to purchase low carbon vehicles, it is still internal combustion engine cars that are offered in that kind of service. In 2010, a new kind of carsharing service will be in place for the Parisian people with Autolib’.

Autolib’ — short for “automobile” and “liberté” — is supposed to be the next generation of mobility service, following the great success of Vélib’, the first large-scale implementation of a public bicycle rental program. Vélib’ was a breakthrough business model: an urban furniture company, JC Decaux,  took charge of system operations, in return for the City of Paris paying for a substantial part of on-street advertising, a much more lucrative business. The point is that Velib’ is not only good for the city and the environment but also for the client.

From an economic standpoint, sharing an electrified vehicle through a service like Autolib’ is like sharing more fixed costs with 10 to 20 other users. Therefore, the price of such a service could be, in medium terms, competitive in comparison to the internal combustion engine carsharing equivalent.

What’s more, 80 percent of the electricity in France is generated by a carbon-free nuclear park, and consumers are used to buying small, fuel efficient cars, making France the ideal cradle of the early adoption of electric vehicles. This niche market could be a perfect test lab for the infrastructure, information technology, consumers demand databases, and battery technology companies that are needed to build 1,400 recharging stations and deploy 4,000 electric vehicles by the end of 2010.

If you think about selling sustainable mobility, you think about other stakeholders willing to enter the market, such as SNCF, the leader in high-speed trains, or Véolia, a transportation operator and environmental service company. Paris envisions itself as a more ambitious multi-modal city, linking TGV, metro, commuter trains, buses, and now, electric vehicles.

From a more practical perspective, after numerous delays, Autolib’ is finally moving forward. One key obstacle is the juridical form of the operating company and investment vehicle. One major challenge is creating a intergovernmental city council to oversee the business scheme, since several cities around Paris will host the charging stations. The project will be likely to be operated under the classic form of public-private partnership.

A consortium of companies, including SNCF, RATP, the metro operating group, andAvis, the car rental company, poses as a serious candidate to operate the 4,000-car service. The EV manufacturer is still unknown, even though Renault-Nissan and Daimlerhave officially expressed interest. Finally, the economics are to be clarified, but according to the most recent study of the Mairie de Paris, customers would have to register for Autolib’ in advance of paying a monthly subscription fee of about 15 to 20 euros.

For much of the past decade, policy-driven demand in a series of champion markets has driven the growth of the global PV industry. Successively, Japan, Germany and then Spain fueled the PV market growth. Now, secondary markets such as the French one are poised to take off.

Specificity of this market is its uncertainty. Uncertain markets throw out a steady stream of opportunities and threats. In these environments, companies succeed to the extent that executives and the organization are able to respond to shifting circumstances. Analysing the speed of market growth, the ever changing competition structure and regulatory framework, French PV market possess everything of what we saw in numerous industries in China this last decade. Here is what we can learn from them:

Double digit growth entails an interesting development: every single type of player can not sustain the growth and different business models are emerging. From the pure player/retailer 100% dedicated to PV to the large home furniture distribution company entering the business as well, several models are finding their own substantial market share.

One of the key characteristic point for the French Solar market is that it is structured by downstream part, on contrary of German market, upstream-structured by key players, relying on large specialized wholesalers and atomized installers network. In France, solar PV market is still an end-customer game, a situation on the verge to change with the middle size and large scale power plant markets ready to take off. From here, different strategies are emerging: those who bets on leveraging on their B2C brand awareness to enter the more attractive mid size market and those who prefer to stay focused on the larger scale power plant, securing their cost base, mostly with strong sourcing capabilities.

Regulation is still changing almost from one quarter to another. Striking example is the regulation loophole found with agricultural roof eligible to the most attractive feed-in tariff, a policy about to change with “non-natural”agricultural warehouses or facilities mushrooming in the country.

The key lies in how a company moves through an iterative cycle of translating uncertainty/speed of change into action. In the so-called SAPE cycle introduced by the work of Donald Sull, managers sense the overall situation, anticipate emerging threats and opportunities, prioritise actions, execute on these priorities in a timely and effective manner, and close the loop by revisiting their original assumptions.

This is exactly what best companies are undertaking to win in this fascinating market. Though policy programs in pioneer countries have succeeded in building financial and consumer support for the PV industry, they have also created severe structural problems, partially precipitating the precarious state the industry finds itself in today. In the presence of rapidly falling module and system prices, collapsing margins, difficult financing conditions and uncertain subsidies in major markets, understanding the support programs, market structures and active players is a necessity for continued success.

Even if nuclear electricity generation will always be prominent, there is room for renewables in France. Specialists are more and more inclined to talk about the “nuclear program countries” as the most promising markets for large scale introduction of renewables in their energy mix. Nuclear to provide stable base load, renewables to complement with an home based, free-carbon energy production with enough flexibility to provide enough visibility thanks to storage technologies.

Sustainable development may ultimately be about the environment, but it is perhaps about economics first and foremost.

Electric vehicles are not new. They were first marketed in the early 1900s and then revived unsuccessfully in the 1990s. However, the situation at that time was very different: oil was cheap and abundant, and the downside costs of environmental impact largely ignored or unknown. Thus the internal combustion engine vehicle (ICEV) emerged as the dominant technology, since it was less expensive and not limited by battery capacity or recharging times. A century of infrastructural development based around the ICEV has created ‘lock in’, which has enabled the incumbent suppliers to prevent all disruptive technologies from emerging. No wonder then that nine of the ten largest corporations in the world are either oil companies or automotive manufacturers.

Time has changed and now that economies are committed to win the war against global warming, reduce foreign dependency and increase national security, industries are reconsidering the model.

Two huge industries are transforming: power and auto industries; a global new one is emerging. At crossroads of these trends, there are energy storage, smart grid, and electrified vehicle.

This vehicle electrification movement is relevant when you realize that whether the starting point is crude oil, natural gas, coal, or biomass, electric vehicles will emit fewer CO₂e emissions per kilometre travelled than their conventional mechanical rivals. The business case for electric vehicle is yet hard to play with. A TCO advantage is prerequisite for the mass production of electric vehicles. With a barrel at 80-100$ and a battery cost around 240€/kWh, TCO can be attractive but to reach the scale effect of mass production, industries need:

• Strong incentive from the government,
• Bold entrepreneurship skills like those found in the Better Place project (Israel), at BYD (China) or Elektromotive (UK),
• Consumer’s behaviour change.

Within a decade, the cost of energy for a single year of fuel supply for a combustion car should cost more than the cost of energy for an electric car’s entire life. Then, the electric mobility operator can be invented somewhere between France, Israel, US, China or Denmark. The hypothetical operator would sell e-mobility mileage instead of selling car or fuel. Electric car, like mobile phone will not be driven on our road without an infrastructure to connect, sustain and recharge it. Another value chain step will be created with the huge investment required in infrastructure.

The impact will be deeply felt for utilities. Energy suppliers should decarbonise their energy supplies and add value into their electricity-fuel offer, with a subscription-based business model, including battery leasing or after sales service.

Afterwards, utilities will take into account the emerging role of hybrid and electric vehicles in personal transportation, and will integrate this into their case to build smarter grid.

Auto makers will need to integrate in their portfolio the new deal of the vehicle electrification long term trend.  Competition pressure will force them to build cheaper car, with reduced vehicle maintenance, standardized to plug in different countries in the world.

Another important goal is to improve the cost and quality of battery technology. Advances in material technology, experimenting with different chemicals, and the use of nanotechnology may all play a role in this. Battery makers will need to seal global partnership with OEM’s and power companies, to move backward to ensure the raw material supply leading to a new geopolitics of resources sharing. They need to ensure the residual battery value and warranty in order to create a more credible business model.  

Government will take a predominant part in this new sustainable capitalism in establishing attractive schemes to attract investment and build competitive industries. If the government makes a significant commitment to a program of electric miles, the venture-capital industry would likely respond to this signal. The overarching aim should be to develop an equivalent to Moore’s Law in battery technology, and therefore the policies framework would revolve around these topics:

• R&D of basic research regarding materials and battery chemistry,
• Preparation for validation fleet tests: to ensure durability, convenience, environmental effects in real use,
• Arrangement of codes and standards, and/or other framework to accept new type of vehicles
• Financial support of early market introduction, e.g., tax exemption according to environmental loading, support for investment to decrease financial risk
• Arrangement of infrastructure
• Public education of environmental effects for broader market
• Other incentive creation for users, to reduce barriers
• Encourage new service business regarding battery maintenance.

Extensive international partnership will be the key success factor for this emerging industry. If China decides to take on the challenge of leading the new clean electron economy on a global scale it will inevitably create massive production capacity for all critical elements of the solution: electric drive trains, batteries, EV / PHEV, charging infrastructure. Locally China will benefit from its direct central direct economy and its need to drive for change at scale due to the urgency of a country running out of fuel and cities running out of breathing air. The most likely scenario is one where China starts by both supplying the needs of its immense local market needs, but will in parallel leverage its market size and scale to create multiple massive export industries.

We are approaching the inevitable decline of oil availability. Today, countries with richer natural resources have a strategic advantage but tomorrow the geopolitical spectrum in all likelihood will change drastically. The automotive ecosystem is in the midst of significant change, with increasing challenges in consumer demands, technology development, globalization, integration and collaboration. A new era is rapidly approaching in which the very definition of personal mobility will change.  

The best way to predict the future is to create it.