Range Anxiety Is All Perception, but Still a Major Hurdle
The adoption of electric vehicles might seem to have major hurdles in front of it, but in reality, it is being stifled by a false premise. Range anxiety, the idea that electric vehicles don’t have enough charging points to adequately service their driver base is a major sticking point for the average consumer. We believe this doesn’t require a major technological advancement to solve, just a change in perception.
Taking a Note from History
When the Model T was arriving in the early 1900s, there weren’t 115,000 gas stations to refuel at like we have today. Instead, those original buyers had to fill their own containers at the local market and transport that to the vehicles themselves. Out of concern of safety, convenience, and general ease, that system transitioned to curbside pumps which ultimately turned into service stations opened by early oil giants like Texaco and Shell.
These companies were opening stations because they saw the transition and knew there was a need to be filled, even if the driver base was limited at the time. Although the current EV driver base is also limited, we see this transition as inevitable. Building out charging networks (to a limited extent) isn’t as big of a risk today and would be a boon to expanding the demand for EVs.
Perception Is Reality
With 6 in 10 consumers claiming the reason they haven’t bought an EV is because of a lack of charging points or the fear of running out of battery, range anxiety is a major issue for consumers (and, therefore, automakers). This perception fuels the argument that EVs are not yet a viable option. However, we see a few reasons why the perception of range anxiety will dissipate in the coming years:
- A new generation of consumers will be more energized about purchasing EVs (63% of millennials consider an EV as their next vehicle vs. 38% of baby boomers).
- Battery ranges will steadily increase at around 5% each year with the potential for larger jumps with new releases.
- Networks will be expanded from both independent brands like Tesla and destination charging spots like ChargePoint.
Tesla’s Early Advantage
Tesla has been the only automaker to heavily invest in their own charging network, and we see a few reasons why this is a benefit. First is the fact that they have an extensive network of over 1,500 supercharger stations that can get you anywhere in the US. We think of this more as a prerequisite for demand or a marketing expense than a long-term competitive advantage, but the supercharger network has contributed massively to Tesla’s early lead. Second, Tesla has an advantage in both speed and options, with supercharger stations that can fill your battery to 80% in a half hour and home chargers that can easily be installed and fully charge a car overnight. Lastly, the proprietary ability within a Tesla to map out a trip and have it optimize for where, when, and how long to stop and recharge is a unique advantage to having their own network.
When to Stop Building
Gas stations have swelled to massive numbers over the last century, but we don’t think EV charging networks should come close to that magnitude. This is due to the fact that most charging will be done at home. This is another issue of perception where people believe they are driving more than they really are when in reality the average commute for a US driver is 29 miles per day. Additionally, a study by MIT indicates that 87% of car usage on the road today could be replaced by an existing EV (2016 study so with increased range and charging locations that this is higher now).
We only see the necessity to build out around 20,000 fast charging stations to fulfill demand. Home charging will be accessible in most homes of EV owners, with workplace and residential hubs fulfilling the rest. Other stations should purely be to bridge longer-distance trips (which are few and far between).
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.
Gamer Survey: Low Initial Interest in Cloud Gaming
Google Stadia and Microsoft’s xCloud gaming services are coming later this year. These are major events for how games will be distributed and played in the future. To get a better sense of consumer interest in game streaming, we surveyed 26 gamers about their gaming habits.
- On average, gamers have spent $81 in the last three months, $167 in the last six months, and $367 over the last year. This includes money spent on gaming content, online services, in-game purchases, etc. (ex-hardware).
- 77% of respondents are paying for at least one console online multiplayer service.
- 31% of respondents are paying for Twitch Prime subscriptions. (It’s likely that some of these respondents are utilizing a Twitch Prime subscription included with Amazon Prime).
- We did not have any survey respondents that are currently utilizing any game subscription services.
- On average, respondents ranked their excitement about cloud gaming and game subscription services a 4 on a scale of 0-10.
We’re bullish on cloud gaming because it solves a core problem of high initial hardware costs. The upfront cost of a console or PC can range from a few hundred to a few thousand dollars. That asset also depreciates in performance over time. Cloud gaming platforms eliminate the upfront cost in favor of a subscription to a service that will offer consistent performance regardless of the game. Given this cost dynamic, cloud gaming services make sense for two groups of gamers: those who need to upgrade old hardware and those who don’t have any hardware but want to play more games. We likely didn’t capture the latter segment in our survey.
Our guess is that the muted response to cloud gaming in our survey has to do with uncertainty around what kind of content gamers will have access to on streaming services. Some cloud gaming platforms, like Google Stadia, will offer libraries themselves, while game publishers are also launching access to their own libraries separately. This is the same model we’re seeing networks move to on the video streaming side.
Leading up to E3, Google Stadia announced launch pricing of $9.99 a month, which includes access to the service and a limited library of games. Ubisoft recently announced UPlay+, which gives users access to 100+ games for $14.99 month. Microsoft has its own game subscription service which they’re bundling with Xbox Live for $14.99 a month. Similar to UPlay+, Microsoft’s game subscription library offers over 100 titles but doesn’t include many of the latest releases. As Microsoft expands further into cloud gaming with its next-generation console, the company will likely increase the price for its bundled offering.
If a gamer wants to utilize Stadia and access UPlay+, they’re looking at roughly $25 a month, or around $300 per year, which is close to what gamers in our buzz survey are spending a year on content ($367). This may be a difficult early value proposition for gamers because those two services would only enable access to select libraries of titles and prior releases rather than buying new titles as they come out. Also, as gamers do this simple cost analysis for their own habits, they are likely not factoring in the savings they would have on the hardware side.
When Netflix launched streaming, its monthly fee of $7.99 was a small portion of what viewers were spending on content at the time (cable subscription, movie theater tickets, DVDs, rentals, etc). According to Centris, the average cable bill was $75 a month in 2010. $7.99 for Netflix seemed like a bargain. For cloud gaming, the cost may end up a much more significant part of a gamer’s budget. Additionally, access to the right games will be important for the streaming services given how social gaming has become, and many of these will be flagship popular titles.
Of the three largest entrants in the space (Microsoft, Google, Amazon), each brings their own unique position and perspective. Microsoft has the best portfolio of proprietary games, Google has strong infrastructure and history with mobile gaming, and Amazon’s Twitch investment is valuable for customer acquisition. Cloud gaming is an exciting evolution in how consumers will play games, but for providers, it’s worth remembering the old adage that content is king.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.
Mid-Year Update on Our 2019 Predictions
Apple will be the best performing FAANG stock in 2019
As of the close on July 2nd, Apple is up 29%, Google 6%, Facebook 43%, Amazon 26%, and Netflix 41%. Apple sits in the middle of the pack, but we still believe they will finish the year as the top performer. Apple’s privacy-first approach shelters them from most headline risk around consumer data practices, we expect the growing Services narrative to lead to multiple expansion, and a good quarter in China would restore confidence in their second largest market (which has damaged the stock year-to-date).
Reducing Technology Use Will Be a Top 10 New Year’s Resolution
The collective concern about device usage and social media addiction seems to have cooled off in the first half of 2019. However, the current attitude toward big tech and potential government regulation may re-escalate interest in reducing tech use and addiction to social and content services. We still think it’s a real problem, and have experimented with ways to change behavior. We also started our own movement to reduce tech addiction, the Good Phone, which outlines a minimalist iPhone setup. In reality, the Good Phone movement is about helping people feel superhuman, which should be the point of all good movements — to empower those who embrace it.
At Least Four $10B+ Tech Unicorns IPO
This prediction may not have been ambitious enough. So far, six $10B+ tech unicorns, Slack, Zoom, Pinterest, Chewy, Lyft, and Uber, have gone public in 2019. While the companies have been a mixed bag with regards to performance, it is clear that the appetite for tech IPOs is high. We expect several more this year, including Airbnb, Palantir, Robinhood, and WeWork.
Legislation to Regulate Tech Company Data Usage Will Be Introduced and Passed
Formal regulation has yet to be introduced at the federal level, specifically with regard to regulating data usage. The California Consumer Privacy Act (passed in 2018, implementation in 2020) remains the best example of data regulation in the US. However, the federal government is taking steps to regulate Big Tech outside of data concerns. Last month the DOJ and FTC announced antitrust investigations into Apple, Google, Amazon, and Facebook. Additionally, Sen. Josh Hawely introduced a bill that would open companies like Facebook and Youtube to lawsuits about the content on their sites.
Apple’s New Streaming Service
In March, Apple announced a slew of new services, headlined by Apple TV+, the home for the company’s original content, which now has over 40 shows in the works. Here is a list of the planned shows. Alongside Apple TV+, Apple TV Channels will house third-party subscriptions in a friendly UI. While Apple’s video content has successfully been transitioned out of the Music app, the organization of Apple’s content (music, original video, thrid-party streaming, podcasts, audiobooks, etc.) is still messy under the new umbrella of expanded services.
Despite Increased Competition, Tesla Will Maintain Its 50+% Market Share in the US
Tesla recently reported a record quarter for both production and deliveries, delivering 95,200 total vehicles. According to the InsideEVs sales scorecard, Tesla has sold 57% of the EVs in the US so far in 2019. Tesla’s market share lead may last longer than we anticipated, as competition seems to be taking off slower than expected. As a point of reference, the highest volume EV, Tesla’s Model 3, has sold 128,478 this year. The highest non-Tesla vehicle, the Chevy Bolt, has sold 8,281. The Audi e-tron has sold 1,835 and the Jaguar I-Pace has sold 1,073, both of which were high-profile entrants made by established automakers.
Oculus Quest Will Be the First VR Headset Ready for the Mainstream
Since its May 21st launch, the Oculus Quest has been selling well and earning raving reviews from users. In its first week, the Quest sold out on Amazon, Best Buy, and Walmart. While unit sales have been encouraging, ownership of VR headsets is far from “mainstream.” That said, the Quest is undoubtedly suited for a mainstream audience, as it is by far the most accessible and affordable way to have a compelling VR experience. Read our thoughts on how the Quest changes the industry here, and our review of the device here.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.