Periodic Reporting for period 1 - iPHEV (Advanced Plug-in Hybrid Electric Drive System for Commercial Fleet Trucks)
Reporting period: 2015-09-01 to 2016-02-29
ELINTA drafted a feasibility study for the business innovation project “Advanced Plug-in Hybrid Electric Drive System for Commercial Fleet Trucks (iPHEV)”. The short-term aim of the project is to develop and deploy a cutting-edge and cost-efficient iPHEV system in the European market. The long-term goal is to provide a scalable iPHEV system for expanding its application range.
The introduction of our innovation to market will have a beneficial outcome for the commercial fleet customers in European market, as well as the innovation will increase the competitiveness of the company in the supply chain and leverage European know-how and will have an impact on the future electric vehicle technology trends.
The objective of the feasibility study was to further verify the technological and practical as well as commercial viability of the iPHEV product and, after that, to give the project stakeholders a complete and substantiated picture of whether the project seems viable enough to justify more detailed analysis on the respective European levels. The study included the following spectrum of planned activities: Risk assessment for key risks minimization; Tech-study of system development for the vehicle up to 12t; Study of homologation on the product development; Market study of hybrid-electric trucks for target market demand and market potential assessment; IP assessment to patents analysis and to identify strategy for IP management; Partners search to establish strategic partnerships with OEM partners; Business planning to estimate growth potential and payback of business viability and targeted investments of the project.
On the base of the feasibility study, it is possible to conclude that with the adequate market growth and along with funding from the EU fund and venture capital, the iPHEV product business will be sufficiently profitable and the investment costs will be rapidly recouped. The costs of the planned iPHEV production infrastructure, including pre-work and development is estimated to be around EUR 7.1 million. The beginning of the iPHEV series production is intended to be at the end of the year 2018.
With regard to the positive recommendations received from the feasibility study activities, we are going to submit a proposal under H2020 SME Instrument Phase2. We have drawn up an elaborated business plan including a detailed pre-work plan for our iPHEV system development, demonstration and modelling.
The following outputs are included throughout planning activities by the work programme Horizon 2020 SME Instrument Phase 1:
• Risk assessment analysis. Technical, commercial and management risks have been identified and ranked according to the severity of influential factors. Preventive and corrective actions have been established for the key risks.
• Technical study for 12t vehicles using iPHEV driveline. In this study, we have showed the possibilities of iPHEV driveline adaptation for 12t trucks, using the same components as in 3.5t segment with minimal changes. Each component has been examined separately and suggested changes (if any) has been considered. The development stages, terms and cost resources necessary have also been defined.
• Regulation and homologation impact reach. All regulatory requirements for the iPHEV system development have been defined.
• Market research of hybrid/electric trucks. We identified, quantified and segmented our market, early adopters and the best value proposition fit for each market segment. Updated market data has been included, xEV technological solutions analyzed and the European dimension defined. We defined hypotheses regarding features and our business plans that have been validated by potential customers and the end users as supporters of this business plan.
• Intellectual Property (IP) assessment. An in-depth patent search and analysis has been carried out to confirm our “freedom to operate” and the IP strategy of protection for our innovation.
• Search for partners. OEMs have shown great confidence in the iPHEV project development and co-operation. As a result, the iPHEV benefits from a wide range applications and growing number of partnerships, which include strategic partnership for the company with Iveco, Altas Commercial Transport. The application range of the iPHEV system will be expanded in the medium-duty truck segments and will be supported by strategic partner Ginaf. New contacts with body builders, such as Forveda, Integralia and Buspresitige, have also been initiated.
• Business planning. The business plan has been prepared that presents the estimation of growth potential and financial payback of business viability and targeted investments of the project. We formulated and identified strategy and business model. We also analyzed and compared existing solutions, quantified market potential, projected sales and costs, as well as prepared financial model and risk analysis by developing our value proposition for customers.
• Detailed work plan for a Horizon 2020 SME Instrument Phase 2 application. The work packages, objectives, tasks and resources necessary have been defined.
Taking into account the positive recommendations received from the feasibility study activities, we are going to continue implementation of the iPHEV project. The company’s shareholders agree with the iPHEV product strategy and business model defined in the business plan.
We have detailed the project objectives and formulated our company’s vision:
• The overall iPHEV business innovation project goal is to develop and deploy in the European market a cutting-edge and cost-efficient iPHEV system for light truck’s electric mobility in short-term, and to find new application for innovation in long-term. This includes the medium truck’s applications to seize market opportunities. For this short-term objective, we will leverage our previous experiences, accumulated knowledge and our partner and client networks by targeting light trucks electrification as a first market segment. The long-term goal is to provide a scalable iPHEV system for expanding application range.
• The Elinta’s Vision 2020 is the European leading company in providing hybrid-electric drivetrains for the light and medium-duty truck fleets in Europe. Therefore, we have to be truck’s retrofitters in the innovation transition period in order to achieve long-term goal.
The concept of our iPHEV drivetrain for heavy vehicles will be a long-term market in the electric mobility trend. This growing sector encompasses a massive number of niche applications of huge economic potential in urban transport, for example, delivery of goods, service transport and construction and demolition traffic, reverse logistics for waste removal and for returns management, service vans, e.g. for maintenance and e-commerce deliveries. The project needs have emerged within the commercial fleets to add new relevant iPHEV functions for the urban and suburban mission such as top speed increased up to 90km/h that enables pure EV to use on highways or fast charging capability. Due to fast charging capability, a majority of users would cover all daily range in the pure electric mode at half of the standard pure electric van price.
In our approach we detailed the key factors for widespread deployment of hybrid vehicles:
• Advances in hybrid technology and production techniques will lead to greater efficiency and will result in lower costs. The increase in production volume will lead to an enhancement in the new economy sector. Business incentive programs can provide funding to cover some portion of the incremental cost to reduce the payback period of the hybrid vehicles.
• Performance and weight, are being aggressively pursued by manufacturers through research and development, which will lead to more hybrid vehicles meeting the performance requirements of trucking fleets.
• Another aspect of a wider hybrid acceptance and applicability is to inform fleet operators of the benefits of current heavy-duty hybrid technology through outreach and training efforts. For example, deployment stages should focus on informing fleet operators of the operational and maintenance savings hybrids can provide through reduced fuel consumption and reduced brake wear. Additional outreach would ensure that fleet operators will have the necessary data to make informed decisions on performance and duty cycles to achieve both operational requirements and attractive payback periods.
• Moving through the nine TRLs can take a significant amount of time and resources. In the technology demonstration/commissioning phase that includes TRLs 7 through 8, we have to begin the iterative process to validate the design, analyze the results, and reconfigure or optimize the design as needed.
• The technology developer needs to enlist the help of a transportation partner to conduct in-service tests on the truck. Updated trucks go back into demonstration and through the cycle until the design meets the performance requirements. Technical difficulties and setbacks are expected during this development phase.
Potential impact of the project:
• Collaborative customers, such as Scandinavian postal couriers, airports and service operators, have referenced their interest in the Elinta’s market focus. The first our market segment is the class N1 delivery and utility trucks up to 3.5t GWV with the intelligent PHEV drivetrains. By the year 2022, we project operating profit of EUR 26 million on iPHEV sales revenue, consisting of almost EUR 84 million.
• We estimate 428,000 annual units in the targeted vehicle markets that are expected to widen to 558,000 annual units by 2022. Our marketing plan reflects 6,000 units in 2022 and this represents around 1.1% share of our served market. The market potential for iPHEV in the Western Europe is about EUR 9.8 billion per year.
• The project will complete the pre-production, testing and installation of the new industry-leading technology. Eight engineering and ten technical work places will be created during the implementation of the project and the company's business plan predicts adding 200 more – highly paid jobs after the successful scaling up of their facility in the high-tech sector. With a high market penetration, the technology could eventually create as many as possible jobs in the EU, including assembly workers, technical and service staff, and sales and administration people.
• Our ‘EV’ business model will reduce capital investment, manufacturing risk, sale and service channel development needs. The implementation of the project of the iPHEV production will require capital investments and development costs of around EUR 7.1 million, which will be financed by external sources (EU funding and venture capital funding). The analysis of the financial model allows making a conclusion that, if the assumptions prove out, the activity of the projected business will be highly profitable with a fast return on investment. The payback time of project investments is 3.4 years.
The need for support:
For the development and full scale demonstration of the innovation project, we seek EUR 2.6 million to construct a demonstration infrastructure on a significant pre-work in our iPHEV system development, promotion and modelling. The technological and commercial risk of the iPHEV project is still very high. The iPHEV project cannot be implemented without the support of the EU funding. EU support brings the amount of aid up to EUR 1.9 million.
We need assistance to find venture capital funding and private investments. In the EU, the levels of venture capital funding and private investment available for Key Enabling Technologies remain comparatively low. The company that has been challenged in the innovation has also better prepared to address market sales and to attract external investment, such as venture capital funding. The ideal for us would be the private investor with long experience and interests in the automotive sector. The investor funding will make up to EUR 5.2 million for financing iPHEV manufacturing plant investments and start-up of the plant costs.