EYES ON THE EV PRIZE

Electric Cars: A Wide-Open Race; Warren Buffett has invested in China's BYD, but columnists Anil Gupta and Haiyan Wang caution against putting too much faith in its early-mover advantage
Anil Gupta and Haiyan Wang, October 19, 2009 (BusinessWeek)

"The electric car is likely to emerge as one of the most transformational products of the current era, as important, perhaps, as the personal computer and the Internet. Given the effect of the auto industry on the rest of the economy, mass commercialization of the electric car will fundamentally transform not just that industry but others such as petroleum, electricity generation and distribution, steel, nonferrous materials, and chemicals. By reducing the world's dependence on crude oil, the electric car will reshape the structure of global trade. Importantly too, because electric cars have zero emissions, they also could dramatically reset the debate on global warming.

"…PCs, mobile telecommunications, and Internet services were invented and launched in the West…But this time, Asian companies are among the leaders in the electric-car race. The Chinese company BYD, for instance, is determined to roll out its all-electric E3 and E6 models this year and has announced plans to bring the E6 to the U.S. in 2010. Japan's Mitsubishi Motors has already launched its electric car, the i MiEV…[Nissan will bring out an EV] with Renault, the boldest promoter of electric cars. Tata Motors (TAMO) in India has announced that it will introduce its all-electric Indica Vista EV in Norway this year…"

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"In predicting the future of this emerging industry, it is critically important to guard against two fallacious assumptions. No. 1: Leadership in battery technology will be the primary determinant of who emerges as the leading electric-car maker of tomorrow. No. 2: Being the first company to launch an electric car will bestow a strategically important first-mover advantage on the pioneer…

"Intel dominates the world of microprocessors, the brains of PCs. Yet Intel is not a player in the PC industry…Along with fellow chipmaker Texas Instruments (TXN), Intel was once an early entrant in a very different industry: electronic wrist watches…Intel and TI briefly attempted to be players in watches but realized rather quickly that, while semiconductors and wristwatches had now become related businesses, they are very different…"

True, but necessarily the very first one. (click to enlarge)

"Toyota has emerged as the undisputed leader in the global auto industry. People who have analyzed Toyota give many explanations as to why it has achieved this dominance…However, no serious observer has argued that either Toyota's dominance—or GM's weakening position—in the car business has much to do with those companies' global positions in engine technology…Simply put, a car is much more than just an engine or a stack of batteries. Winning or losing in the car business depends on many factors—performance, safety, reliability, comfort, styling, dealership network, service quality, and price, to name just a few…

"Toyota was not the first company to introduce an automobile. IBM, Dell, and HP were not the first companies to launch a PC. Microsoft did not launch the first Internet browser…Google was not the first [search technology] company…Clearly, there are severe limits…of a first-mover advantage…Even the most optimistic projections indicate that electric cars may constitute just 20% of all auto sales by 2020. This will give almost every car company plenty of time…Equally important…there will be several large companies that specialize in the design and manufacture of batteries for cars. Thus, in-house leadership in battery technology will become increasingly unimportant for leadership in the car business. Just as a car is much more than an engine, it will remain much more than a stack of batteries. Thus, winning or losing the electric-car race will depend on many factors besides battery technology."