Podcast episode #4: eMobility and the drive to electrify

ZARI VENHAUS: Welcome back to the Making of What Matters. We've taken a little bit of a hiatus, but I am excited to welcome 2021 back, and to welcome Scott Adams, the president of our eMobility business for a discussion on vehicle electrification. Hi, Scott.

SCOTT ADAMS: Hi, Zari, how are you?

ZARI VENHAUS: I'm good. How are you?

SCOTT ADAMS: Great.

ZARI VENHAUS: I'm excited to have this conversation, because I think moving into 2021 we're seeing a lot more discussion about electric vehicles, about charging infrastructure. And we've got a really unique position to be able to talk about this. Can you tell me a little bit about the eMobility business?

SCOTT ADAMS: Yeah, certainly. We were formed in early 2018. And it was great. We took elements of the traditional vehicle group as well as parts of electrical sector that were participating already in the vehicle electrification space, brought these different parts of the business together to form the business unit.

ZARI VENHAUS: And so we're really in a unique position, right, having all of this really deep vehicle knowledge and electrical knowledge. There's not a lot of people who can say that they can bring those who disciplines together.

SCOTT ADAMS: That's right. You know, Eaton has over 100 years of experience in the vehicle market. One thing that is very unique for us is being able to put those two things together. So you certainly need to understand the customers, the expectations of the customers in any market you plan, and we bring that in the vehicle group.

And then the knowledge that we have from the electrical sector on managing electrical power safely, distributing that power, using that power, it's something that's very unique in the industry.

ZARI VENHAUS: So when we start talking about the market or the industry, how are OEMs, vehicle OEMs thinking about electrification now?

SCOTT ADAMS: They're all thinking about it. And the reason is because of the regulatory drive. Regulations, whether it be across the region like in Europe, or federal regulations like in the US, regional regulations that could be in state or local levels, whether it's the US, Europe, China, and many other countries as well, there is this push towards reduce CO2 and reduced emissions.

And what that leads to is the OEMs, the car companies and the truck companies, have to produce vehicles that have reduced emissions. And these regulations are so stringent and the penalties are so stiff that they have to have a portion of the vehicles that they produce be pure battery electric, or at a minimum, plug-in hybrid.

They cannot achieve the limits without having some degree of electrification. So what we see with the customers is they are putting the bulk of their investment dollars into developing and releasing electric vehicles.

ZARI VENHAUS: How are customers thinking about EVs? Are we starting to see more people getting comfortable with the idea of electric vehicles?

SCOTT ADAMS: That's a great question, Zari. I'd say it's a mix. For those who have an electric vehicle, they become more accustomed to it and they understand how to use it, where to charge. You know, that's one of the biggest questions as a consumer we have.

Am I going to be able to charge my vehicle? I'm accustomed to be able to go to the gas station on the corner. I know how to do that, they're all over the place. I don't have a concern. There's a fear with electric vehicles that, how am I going to charge and how long is the charge going to take? What you need--

ZARI VENHAUS: --you have to rethink how you think about charging. Because you're so used to going to the gas station to charge. Now you have to think about going to wherever you're trying to go to charge, and doing it as a part of your day versus a separate activity.

SCOTT ADAMS: And what's interesting is it doesn't have to be a separate activity. That's the thing that is missed in many cases. If you can charge at home and you can charge at the workplace, you've covered probably 90% of the use cases you need to make sure you have energy in the vehicle.

And that's the thing that's kind of hard for people to get their head around before they own an EV. I happen to have purchased a battery electric vehicle and I had some of the same reservations. But over time, I start to realize I charge every night. And when I wake up in the morning, I have a full battery charge.

If I go on a long trip, certainly you have to plan. And there are concerns with that. But from a day to day perspective, it's actually a convenience. There have been times where I've found I haven't stopped at the gas station for over a month. And sometimes I have to to go buy milk or something like that.

So it's really, from a consumer perspective, it's a mindset change, as you said. You're so accustomed to getting gas and stopping at the station. You don't need to when there's enough charging, and particularly when you can do it where you live.

ZARI VENHAUS: And then that, you brought up long distance. So as we're thinking about longer trips we're going to need to have the infrastructure in place too, to enable that. What are some of the things that utilities and infrastructure providers are thinking about?

SCOTT ADAMS: It's a good question. And it really spans from the utilities, to the states, and even to the car manufacturers. They know that it's a bit of a chicken and the egg question. They need to make sure that there's a strong charging infrastructure to be able to allow consumers to be comfortable purchasing.

So what we see is this constant march of more investments in what's called DC fast charging. So if you're on a long trip, you do want to be able to charge relatively quickly. And so what we see is a lot of investments along highways and corridors where people would normally stop for food, maybe to use the restroom and certainly to fuel internal combustion engine vehicle, we see more and more investments in those DC fast charging stations.

And if you think about it, once you've installed one, you don't have to install it again. So this is something that over time that infrastructure continues to grow.

ZARI VENHAUS: So I want to circle back a little bit to the regulatory environment. So we've mentioned a couple of times that regulations are changing, manufacturers, auto manufacturers, vehicle manufacturers need to have electric vehicles as part of their portfolio in order to meet those regulations. What do you think are some of the drivers behind those regulations, and are OEMs prepared to make the decisions they need to make in order to meet those regulations?

SCOTT ADAMS: Sure. I answer the question kind of at two levels. When we talk about federal and regional, a lot of times that's the CO2 regulation. So, again, we see that with the European Union. We see it in China, and even in North America, in the US.

So that's really about CO2. It's about global warming and continuing to reduce the impact of the vehicle markets on that trend of unfortunately increasing CO2 in our atmosphere. When it comes to more local requirements, things where sometimes we see zero emission zone requirements in cities, in urban areas, a lot of that is related to air quality.

Mayors of cities, particularly large cities, Paris, Los Angeles, Shanghai, you can kind of go around the world. They have an interest in making sure that the air quality for their citizens is better than it is. And we know that there's been a long march in many areas to improve that.

So you have these local regional requirements that are, in some cases again, driving zero emission zones. Even in trucks, where we've got diesel emissions that still create a lot of health and quality of life issues. And then you've got the CO2. So it's this combination of, I'd say the CO2 tends to be the broader, federal, regional type regulations. And then you get into air quality concerns when you get more local.

ZARI VENHAUS: So why don't we talk a little bit-- we're going to shift gears a little bit. Tell me what's unique about Eaton when it comes to our approach, our technology, how we're thinking about vehicle electrification.

SCOTT ADAMS: I would say, there are different areas that we participate in our portfolio. One area I'll talk about is on the circuit protection side. It's an area that our pedigree with electrical sector is really strong. We have great expertise and understanding how to manage electric power safely.

And what I see when our team engages with the customers is an ability to add unique value beyond the basics. You know, we talked about Bussmann fuses on a circuit protection. But we can also go in beyond just the fuses and help them design their system.

There are certain situations where a fuse works, but there are other components in the system that also have to be coordinated with the fuse. And if you don't do that properly, you can have issues. If you make the fuse too robust, then something else could go. If you make the fuse too sensitive, the fuse goes too early.

And we bring a lot of that value and the customers really recognize that. So that's something that I think is unique that we bring. Another thing I'll say on the commercial vehicle side when it comes to our transmissions, we started very early. And we have created tailored transmissions for EVs.

Where in some cases, people are just taking a normal commercial vehicle transmission and trying to adapt it, but it doesn't really work. An example is, you don't need reverse gear on an EV truck because the motor can go in reverse. So you don't need to have a reverse gear, where a diesel engine can run in reverse.

We've done things like taken that reverse gear out to be more cost effective, and really to have a purpose-built and designed transmission for the market that's a medium duty application. And we have a heavy duty application in development. And we're on a lot of prototype trucks because we're one of, if not the only company who has that heavy duty product right now.

So there are some areas like that are very unique, things that our team has had the foresight to work on early. And it's starting to pay dividends as we see with our customers.

ZARI VENHAUS: I want to spend just a minute talking about a recent report that has come out, a collaboration between Eaton and IHS Markit around the electric vehicle industry, and specifically around the infrastructure that's needed to support the growth in the electric vehicle market. Can you tell me a little bit about this report?

SCOTT ADAMS: Yeah, sure. I definitely encourage anybody watching the video and interested to read it. As you said, Zari, it really focuses on what's needed for the continued adoption and growth of electric vehicles. And certainly, you need the cars. But the report talks a lot about the infrastructure.

And we've already had some discussions about how important it is for a consumer to know I can charge, I'm going to be able to charge where I need to charge. And the report gets into the details on that. And it looks at different countries. And it looks at the infrastructure that already exists.

It looks at the trends that are required to continue to grow the infrastructure to make sure that this balance-- it's a bit of the classic chicken and the egg. You need the cars, you need the infrastructure. So the report really gets into the details around that. it Looks at the current state around the globe, and also where we see things going over time.

ZARI VENHAUS: What are some of the biggest challenges that the report uncovered?

SCOTT ADAMS: When we think about investing in the infrastructure-- it doesn't matter where it is, again, North America, Europe, or China-- there's a lot of coordination that has to happen. You've got the utilities that supply the power, and in certain regions and countries are a big part of selling and distributing electric power.

You've got municipalities, states, countries, cities, that have, usually have some regulatory requirements and other factors that are needed to install and distribute electric power. So the report gets into some of those interdependencies between the different organizations, if you will, whether they be government or non-government that really have to be coordinated and work together to get this infrastructure built out.

ZARI VENHAUS: Thank you so much for the time. I appreciate. And like I said, always fun to chat.

SCOTT ADAMS: Yeah, sure. Thanks a lot.