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Cleantech magazine, a Cleantech Investor publication

GREEN VAN MAN

Jamie Borwick, founder of electric van manufacturer, Modec

Entrepreneur Jamie Borwick founded electric van manufacturer, Modec, in September 2004. He is also Chairman of and investor in battery technology company Oxis Energy Ltd. Jamie, who is Deputy Chairman of the British Lung Foundation, discusses his views on the future for electric vehicles and for his investments with Anne McIvor.

First published in Cleantech magazine May 2008. Copyright Cleantech Investor 2008

Q - What motivated you to invest in an electric vehicle company?

A - It became clear to me a long time ago that we need an alternative to the traditional internal combustion engine. The challenge of dealing with air pollution – a major contributor to lung diseases – is important, as well as the question of climate change.

Mechanically, an electric vehicle is simple – much more straightforward than the internal combustion engine. A diesel engine has around 300 moving parts, while the Modec EV engine has just three moving parts. The simplicity of an EV appealed to me (in truth, I’ve never been a lover of engines) – and an EV has no emissions of pollutants.

Q - Why did you decide at Modec to focus exclusively on electric vehicles, rather than hybrid vehicles?

A - I was an early driver of the Toyota Prius – my first Prius was shipped over from Japan ahead of the official launch in the UK. The Prius changed the world – partly because it was perceived as unthreatening to the petrol heads, but also because it looked different and appealed to those consumers with a desire to take positive action on environmental challenges.

I remain a fan of the Prius. However, hybrid vehicles still add to pollution. A fully electric vehicle, like the Modec van, running on green electricity, is responsible for no emissions – the only CO2 comes from the driver.

Q - Why did Modec decide to focus on vans rather than cars?

A - The electric cars on the market today can run on small batteries because they are predominantly two seaters: short range, lightweight vehicles, designed for city use. Some are not even classified as cars – for example the G-Wiz is classified as a quadricycle in the UK. However, for a battery – based on existing commercial technology – to run a sizeable vehicle, it needs to be very large. The Modec battery weighs almost one tonne. A large battery can be hidden away within a van, but would be difficult to fit into a saloon car. There are companies working on larger cars – but the car closest to market which is more than a city run-around is the Tesla, a two seater sports car.

At Modec we intend to focus on the van market, at least for now. The potential for this market is huge. Within the ‘back-to-base’ segment – i.e. vans used within a specific area (for example, for deliveries within a defined radius) – some 70,000 vans are sold annually in the UK alone.

Q - What will be required for electric vehicles to become widely adopted?

A - Battery sizes will come down and power levels will rise as battery technology develops. The ability to run a vehicle for a respectable range on smaller batteries will help to develop the EV market. However, in the meantime, the core markets will be the small city car segment and the electric van segment.

Q - What is underpinning the prospects for the electric van market?

A - Within the 320,000 or so vans sold annually in the UK, the ‘base to customer’ segment is growing rapidly due to the increase in deliveries for online shopping, and the growth of online supermarkets. There is considerable potential for transforming a large proportion of these to pure electric drive due to a number of factors such as the introduction of curfews on deliveries to shops (within which quiet electric vans like ours can potentially operate), congestion charges, low emission zones and the desire of companies to be seen as good corporate citizens. With diesel at well over £1 per litre, electric vans are becoming a logical choice. A Modec van will run for 100 miles at a speed of up to 50mph, carrying a load of up to two tonnes. To do this requires just 87kWh of electricity – which costs in the region of £4. There are additional savings in other areas: an electric van does not pay the congestion charge; no operator’s licence or road licence is required; and parking is free on meters in Westminster and the City of London. Pure economics underpin the market, irrespective of concerns about the environment or pollution!

Q - What are the biggest challenges to the roll-out of electric vans?

A - Acceptance of new technology in an established market is the first priority. The availability of batteries used to be a major issue. At Modec, we were forced to slow down production due to a lack of batteries. The availability of the software has also been an issue for Modec. However, these challenges are being overcome and the prospects for growth in the industry are significant.

Q - Who are Modec’s main customers?

A- Tesco is presently our largest customer. Tesco launched the vans at its environmentally friendly store in rural Shrewsbury. Despite the fact that the vans are primarily designed for urban use, the feedback was very positive – they performed better than a diesel van on country hills! We are now working on a prototype for the next generation of vans for Tesco and we expect to supply them with 200 of this model once it is released.

Other Modec customers include Islington Borough Council, Accord, Amey (part of Ferrovial, along with BAA) Carlsberg (in Switzerland), Hildon Water, Pods, Speedy Hire, Center Parcs, and Oyez Straker. We have just received our first order from UPS, the package delivery service with the brown vans, which we are very excited about.

Q - How does the Modec van compare with the Smiths Electric Vehicle/Tanfield van?

A - The main difference is that Modecs look distinctive. There are two ways to enter into a new vehicle market. The first is to change an existing model – as Honda did with its first hybrid cars. The second is to develop an entirely new model – as Toyota did with the Prius. I would argue that Smiths has followed the Honda route, while Modec has followed the Toyota route. You can be green in a Smiths van, for sure, but you can be green and get some credit for it in a Modec.

On the technical front, Modec vans are built from the ground up around a large, centrally mounted, removable battery cassette. Our cassette system enables us to fit about double the battery capacity of an equivalent converted vehicle. In addition, the battery cassette can be replaced easily – an important advantage in an industry where battery technology is moving fast (batteries will change dramatically over the typical 10-12 year life span of a van)..

Q - Who supplies the Modec batteries?

A - Our vehicles are designed to be ‘battery agnostic’, enabling us to introduce and retro fit different battery sizes and chemistries – it takes just 15 minutes to change the battery! Our early vehicles were powered by MES-Dea ’Zebra’ batteries. At the moment we are fitting lithium iron phosphate batteries from Axeon, an AIM traded UK company, and later this year we plan to supplement the Axeon model with an alternative supplied by Valence, which is listed on NASDAQ. The battery market is fast moving and we are continuously monitoring developments to ensure we have the best available technology for our customers.

In the longer term, I hope that Oxis will supply us with lithium sulphide batteries.

Q - Who are your other important suppliers?

A - We are very fortunate to have a world class supply base and all our suppliers are important to us. Some of our components come from the other side of the world, but many are locally sourced as, despite appearances, the UK maintains a solid base of automotive system and component suppliers. Perhaps our best known supplier is Zytek who, when they’re not making motors and controls for us, are building engines and bodies for racing cars.

Before you founded Modec you were Chairman of Manganese Bronze, the leading manufacturer of hackney cabs (the London black taxis). Why has an electric taxi not been launched on the market yet?

Again, the problem is battery capacity. Although the average London taxi driver will usually cover only 100 miles in a day, this is just an average. The nature of the taxi business means that many drivers will need to be able to do a long journey at the end of the day, if a customer has a need to go somewhere distant, and then to drive home afterwards. So the taxi would need to carry 200 miles’ worth of battery power (and weight) for the entire day in order to ensure that it can fulfil the needs of such a customer. This is obviously not economical. For now, the best option for a taxi would be a plug-in hybrid vehicle. Maybe in the longer term, when battery technology moves on, then electric taxis will become viable. I should note that our friends at Tanfield have a different view and they recently announced a partnership with Manganese Bronze to build electric taxis.

Q - When will battery technology reach the stage where large cars or taxis can run on electric only? Does Oxis have the solution for next generation batteries?

A - Oxis is developing next generation lithium sulphide batteries. Lithium and sulphur are the best two solid elements from which a battery can be manufactured because they are as far apart from each other on the periodic table as possible. Manufacturing a battery from lithium and sulphur has historically proven a challenge. However, the research by Oxis is approaching a point where lithium sulphide batteries can become commercial. The Oxis scientists work with a technology developed in Russia to remove sulphur from oil. The battery they are working on will potentially have a capacity around twice that of existing battery technology (offering a vehicle range of 200 miles instead of 100 miles), will work over a range of temperatures and – also important – will be easily recyclable.

Q - How is the international market for electric vans?

A - In terms of players, there appear to be few companies outside of the UK focused on pure electric commercial vehicles, although I am sure others will jump on the bandwagon as time goes by. Modec and Tanfield are typically the only companies with a product to demonstrate at the industry’s principal international events. I am proud to say that earlier this year Modec won the Most Innovative Product of the Show award from a field of 530 exhibitors at the Work Truck Show in Atlanta, USA

We have seen considerable demand for electric vans internationally, often for innovative purposes. For example, the City of Amsterdam will introduce a freight tram system which runs between passenger trams: the freight is offloaded at a city centre depot, from where a Modec van makes local deliveries. The project has been formally authorised by the City Government following demonstrations and is expected to significantly reduce freight road traffic and its attendant air pollution in the inner city

Q - Can you discuss the Modec finances?

A - Modec made 100 vehicles in its first year. We have been held back by component shortages until recently, but we now expect to deliver around 400 vans this year. A fully configured Modec van costs around £40,000 – which implies potential turnover of £16 million.

The price we quote excludes the battery, because the customer rents that from GE Capital. After all, when you buy a conventional van you don’t pay for all your diesel upfront, you have a running cost, and this system means that the customer doesn’t have to worry about battery life. You save money on the Congestion Charge, the Low Emission Zone and on Road Fund licences.

Q - Do you plan to list Modec on the stock market?

A - A stock market listing will become appropriate at some stage. A significant strategic investor is likely to join me as a Modec shareholder this year, as we gear up gradually for a listing.