Su$tainable Mobility, Volume 4
This newsletter aims to separate the signal from the noise for making money in all things sustainable transportation: Electrification, mode shift, active and public transit, and mobility aggregation, across both people and goods movement.
Feedback is always welcome. Feel free to DM me on Twitter or send an email with your thoughts on what else you might like to see as content.
This week’s deep dive (at the bottom) is on the re-emergence of contract manufacturing in the EV era.
Disclaimer: This newsletter represents my own thoughts and not those of any employer. I will always disclose when I have a financial relationship with a company cited.
QUICK HITS: Fast takes on notable news from last week
The new IPCC report dropped this week.
The acceleration of climate change means an increased need for mobility systems that are broadly distributed, with redundancy and resiliency built-in.
The FRONTDoor Collective (FDC) launches a zero-emissions delivery service partner (DSP) network, with vans supplied by Canoo.
Many DSPs are small, independent operators who may lack the scale or financial resources to manage things like transitioning a small fleet of vans to electric. FDC appears to be a quasi-rollup of DSPs to have national scale and resources, independent of the day-to-day whims of Amazon or other customers.
“Cities can have flying cars if they start working on infrastructure today.”
It’s not clear that this guest contributor piece in TechCrunch achieved its aim. It’s hard to imagine city authorities allocating significant dollars for or policy attention to eVTOL infrastructure today when significant progress needs to be made on no-regret investments in public, shared, and active transit, such as protected bike lanes and improved bus service. It’s all the harder to justify when eVTOL still appears to be a service for the wealthy with an unpredictable deployment timeline.
The Overton window increasingly includes the notion of dismantling the oil and gas industry.
If we care about reducing GHGs, there’s a big difference between a nationalized oil & gas industry and a scenario in which oil and gas assets end up in the hands of dozens or hundreds of private investors, shielded from the transparency requirements of public markets.
DHL has stopped drone delivery via its “Paketkopter.”
A sobering reminder that DHL has been at drone delivery since 2013 and we are still far from having a firm grasp on viable use cases and markets for drone delivery.
It is still a very long game for hydrogen, especially in sectors like maritime and aviation.
E-cargo bikes are a cleaner AND faster way to deliver last-mile goods in cities.
One of the lynchpins to scaling e-cargo bikes even further will be city willingness to price the curb. Smaller objects parked at the curb, such as bikes, should pay less for curb access than vans.
Bloomberg New Energy Finance (BNEF) thinks we’ve hit peak internal combustion engine (ICE) vehicle sales globally.
“Peak auto”, like “peak oil”, is the notion that global auto sales will eventually peak and decline. With much of the remaining global auto sales growth coming from emerging markets (India, Southeast Asia, Nigeria, North Africa, etc.), when we hit peak ICE is partly up to policymakers in emerging markets.
McKinsey just launched a good overview on the future of shared mobility.
Take note of the market size estimate for robo-taxis by 2030. We may end up perpetuating some of the challenges we’ve had in ride-hailing with deadhead miles, pick-up and drop-off congestion, etc.
STARTUP WATCH: Sustainable mobility startups (generally pre-seed or seed) to keep an eye on
Arc (California, USA): Electric leisure boats
Aviant (Norway): On-demand medical drones
Cache (California, USA): Automated dark stores
GetHenry (Germany): E-bike rental services for couriers and fleets
MetroRide (India): Zero-emissions shared mobility for first/last mile connectivity
Moja Ride (Côte d’Ivoire): Mobility-as-a-service platform targeting emerging markets
mTap (Poland): IoT LED street lighting
Nash (California, USA): Aggregator of same-day fleet delivery services
Ollo (New York, USA): Peer-to-peer goods delivery
Orkid (Colombia): Autonomous drones for last-mile goods delivery
DEEP DIVE: The re-emergence of contract manufacturing in the EV passenger car era
Historically, passenger car manufacturers (OEMs) treated their factory operations as one of the very few sources of competitive advantage in an industry that otherwise trends towards commodity margins. Toyota arguably achieved superior enterprise value via a manufacturing system that was the envy of the world.
For decades, though, contract manufacturing existed as a niche business in passenger cars. Enterprises like Magna and Valmet offered what we might now call “factory as a service.” For OEMs, this was a solution to a few classic manufacturing conundrums:
Insufficient capacity, especially for finite periods where it wouldn’t make sense for an OEM to build an additional factory
Production for vehicles with inherently smaller volumes (e.g, convertibles)
Over the last few decades, contract manufacturing has decreased as a practice, especially as OEMs have figured out how to integrate more flexibility into their own manufacturing practices and as OEMs have killed off convertibles in favor of yet another SUV.
Despite the historic decline, we may be about to witness a huge resurgence of the notion of contract manufacturing as the EV era scales:
The barriers to industry entry in the auto space are dramatically falling, as evidenced by the breakthrough success of Tesla, Nio, and others. For new entrants, getting product 1.0 right can be hard enough without simultaneously trying to get manufacturing 1.0 right.
As EVs become “smartphones on wheels”, competitive advantage for OEMs will shift somewhat away from factory operations and more towards R&D capability in software. Apple’s relationship with Foxconn is a great example.
Asia. Although contract manufacturing in autos has traditionally been centered in Europe, Asian companies such as Foxconn are in the process of creating an unbeatable capability in contract manufacturing, along with supply chain proximity to the battery market. Yes, building cars and building iPads are different, but companies like Foxconn will fight tooth and nail to build competency in automotive contract manufacturing.
So what’s old will soon be new again, but this time with a focus on EVs.