As someone who has always been obsessed with the economics and science behind electric vehicles, I have been following rideshare startup Revel since coming into college. Like other electric transportation startups like Lime and Bird, Revel’s goal is to help electrify transportation in major cities in the United States. While electric vehicle startups have notably struggled over the past year due to fundraising problems, higher interest rates, and quality issues, Revel has been doing really well as it has raised about $272 million in debt and equity financing since its inception, according to Pitchbook. After hearing CEO Frank Reig speak at a club meeting, I think it would be worthwhile to write an article about what he had to say about Revel and an analysis of the automotive landscape, with an emphasis on the headwinds and tailwinds electric vehicles face.
Passenger Vehicles and Electric Vehicles in Cities
To start, it is important to understand electric vehicles compared to internal combustion engine (ICE) cars on a basic level. For most electric vehicles, the motor runs on a lithium-ion battery because it has the highest energy density for weight as well as being able to charge faster and longer compared to other materials like cobalt -- not going to get too much into the science of how the battery works. With that being said, the range of an electric vehicle is not as long as an ICE, especially when you factor in cold temperature levels that limit the battery’s range even further. This is one of the biggest reasons why major automotive companies like Toyota have been able to succeed with its hybrid electric cars as customers are hesitant to buy EVs due to limited range concerns. Though when talking about the efficiency of energy usage between EVs and ICEs, EVs are a lot better. When stationary, an EV does not need to consume energy and is able to also offer regenerative braking to increase fuel efficiency. In addition, electric vehicles are ideal for those who want a quiet vehicle to drive in.
Finally, the big question that you are probably wondering and may already be considering as a buyer of one: which costs less? To answer this simply, it really depends on a wide range of factors, which a study that was published in the Journal of Industrial Ecology actually explores. For EVs, the battery is the largest upfront cost that comes with purchasing an EV, which is why ICE cars tend to be cheaper; through economies of scale, these EV battery prices should drop. In addition, it depends where the consumer is located and how he or she is charging the EV. For a city like Detroit, car insurance costs are extremely high, with them being at an average of $5,687 for annual coverage; this does not even take into account the 20% premium that EV owners must pay for insurance relative to an ICE owner due to higher purchasing cost and repair. In this scenario, it does not make economical sense to buy an EV, especially if located in an area of Detroit that does not provide lots of cheap charging. In addition, for someone who has the capability to build out home EV charging, the study reported lower lifetime charging costs of up to $26,000. Coupling that with being in a city that also offers low overnight charging rates should provide another tailwind for choosing an EV. Finally, there are the regulatory incentives for purchasing an EV that may help slightly decrease the cost of ownership, with the $7,500 EV credit from the IRA being the most well-known -- the number of EV models that apply for this tax credit has decreased over time, with it being about 18 now. While I can keep on going on and talk even more about the differences between ICEs and EVs, this is just a surface-level comparison of how to compare the two.
For large metropolitan areas that are trying to spur EV adoption like San Francisco and New York City, there are various things consumers consider that affect this, with what I may have mentioned already. For one, many consumers may see driving an EV in a city as more fuel efficient in a city, especially with the fact that there is regenerative braking (lots of stop-and-go traffic) and that energy is not being lost due to friction and heat as opposed to an ICE. In addition, EVs help with keeping city air cleaner and can be a quieter option for those who do want to contribute to the noise pollution that highly dense cities bring. While I am only familiar with NYC emissions law called Local Law 145 passed back in 2013, I would assume that other cities or states have similar laws in place and that more stringent measures could help with EV adoption. However, there is still a charging dilemma where even if there are enough accessible chargers to the public at a cost-effective rate in cities, the chargers may just be extremely slow. For example, there are three levels of charging speeds: level 1, level 2, and level 3. Below is one of the best infographics to explain the differences.
Level 1 chargers are included with EVs upon purchase, but can basically be rendered useless unless one has a hybrid car, at least in my point of view. Level 2 chargers are more practical for EV owners and cities like New York City have curbside Level 2 charging on public streets. Finally, level 3 or DC charging is the fastest type of charging, with its ability to charge an EV in under an hour. Other startups like Gravity have opened even faster charging, with it recently creating 24 EV charger systems in New York City, charging an EV 200 miles in five minutes. However, one problem with creating a citywide fast charging network is that you must create stations that have the different types of EV charging plugs; Level 3 plugs are not standardized for all EVS unlike the lower-level chargers. As an example, Hyundai IONIQ 5 and Kia EV6 are examples of cars that are unable to connect to Tesla Level 3 superchargers. In addition, the buildout of charging in garages in cities for individuals can prove to be difficult. If someone is at home or at the office, he or she wants to make sure the EV is charging while away. For families that live in a private residence, this is no problem. However, for others living in apartment complexes in Manhattan or driving in to work, it may be difficult. Private garages tend to be expensive with the parking fees and then some of the chargers may not have regular maintenance on them. It is far easier to install the charging during the construction of new garages or parking and even if the infrastructure is installed, this will cause finding parking a lot more difficult unless Level 3 chargers are all being installed at these sites. These are a few things to touch on when looking at what cities are thinking about when spurring EV adoption -- it really is a chicken-and-egg problem where there is hesitancy to switch to an EV due to the lack of charging and because of the lack of charging, there is very little EV ownership.
Quick Overview of Revel and Thoughts from CEO Frank Reig
Now that I have talked about electric vehicles, I want to dive into Revel. Started in 2018 by a previous chef at Gramercy Tavern -- you read that right -- and later on as a consultant at GLG, Frank Reig created Revel that has now become the largest rideshare startup in the New York City Metropolitan area. At first, it started out as an electric moped startup with 68 mopeds; however, the threat of new, safer entrants into the New York City transportation ecosystem like Citibikes as well as the costs of moped charging infrastructure caused Revel to switch to electric vehicles. The switch has been so far successful, with Revel having more than 500 taxis and numerous fast charging stations throughout New York City; in fact, Revel plans to have more than 300 chargers by the end of 2024, which would represent 90% of the city’s fast-charging capacity. For its rideshare business, all employees are full-time employees with hourly pay and benefits; therefore, Revel can not be classified within the gig economy like some of its competitors. In addition, it has 24/7 supercharging stations that claim to charge vehicles 100 miles in under 20 minutes of charge. Most recently in the news, Revel partnered with Uber to allow Uber drivers to charge at any of Revel’s fast charging stations at a discounted price, a big boost to not just its brand image but its attempt at bringing charging demand to its stations. Given that the company is supposedly supposed to be profitable by the end of this year and that Eric Adams recently announced that New York City’s rideshare fleet must all be EVs by 2030, it seems clear that Revel is on a strong trajectory for growth.
During a club meeting from one of the entrepreneurship clubs at my university, Frank Reig gave a lot of insight into startup culture, how he thinks about the electric vehicle industry, and what makes a great company. In the beginning, he talked about how he came up with the idea of Revel by just googling the space of shared mopeds. Seeing the growth that has occurred in Europe and Asia, he saw an opportunity to bring it to the United States, more specifically New York City as it is where he was born and raised. As he was creating Revel, it was interesting to note that it was not technological or regulatory barriers that hindered scale, but actually finding a warehouse that could build the charging infrastructure for the mopeds. He mentioned a plethora of problems such as finding rational landlords to give him good terms, zoning laws, land development and environmental regulations (ex. the charging wires built underground can not touch the soil), and finding buildings hooked to an electrical grid that can obtain 2-5 MW of electrical power as some of the barriers. This was quite a surprise to me and really showed the nuances behind building out fast charging hubs in large cities as opposed to areas with more lenient regulations.
Later on, he talked more about building startups. When talking about finding the best mentors, he said that the first 30 seconds are key when pitching to investors; therefore, making sure you instill confidence from the beginning and explain your unique story of why you created the business is foundational. In addition, he talked about the negative side of raising debt as a business and suggests to always opt for issuing equity early on as a company until you have the financial luxury of being able to pay off over the long-run. He made an interesting remark on the dangers of venture debt specifically, talking about how financial covenants may screw a startup early on, which is why to be wary of who you decide to receive funding from. Finally, there was a question asked by someone in the room about the effects of the Inflation Reduction Act (IRA) on Revel and Frank said that while there is a lot of upside for Revel because of it, it is hard to have foresight and be optimistic of these types of regulatory tailwinds. The reason being is that the IRA can easily be repelled by a new administration in the federal government as an election looms and hinging a business's success based on regulatory drivers exposes the business model to too much systematic risk. Overall, I could tell the passion he showed for Revel as he was not only very knowledgeable of how to go about startup funding, the politics of management, and the electric vehicle space, but also how well-spoken he was when asked questions. It was definitely one of the most insightful events I have been to in recent memory and will be interesting to see how Revel does in the near future.
Thank you for taking the time to read my article on electric vehicles and Revel!
Sources
Askew, Mike. “How to Charge a Non-Tesla at a Tesla Supercharger: Electrifying.” Electrifying.Com, 8 Aug. 2023, www.electrifying.com/blog/knowledge-hub/how-to-charge-a-non-tesla-at-a-tesla-supercharger.
Detroit, Scripps News. “This City Still Has the Highest Car Insurance Rates in the Country.” Scripps News, Scripps News, 9 Feb. 2024, scrippsnews.com/stories/this-city-still-has-the-highest-car-insurance-rates-in-the-country/.
Doll, Scooter. “Google-Backed EV Charging Startup Gravity Opens Fastest Public Chargers in the US.” Electrek, 4 Mar. 2024, electrek.co/2024/03/04/google-ev-charging-startup-gravity-fastest-public-chargers-in-us/.
Garza, Alejandro de la. “Revel’s CEO Wants to Solve the Urban EV Charging Challenge.” Time, Time, 26 July 2023, time.com/6298181/revel-frank-reig-city-ev-charging/#:~:text=Over%20the%20past%20two%20years%2C%20the%20company%20has%20built%2040,by%20the%20end%20of%202024.
“How Lithium-Ion Batteries Work.” Energy.Gov, 28 Feb. 2023, www.energy.gov/energysaver/articles/how-lithium-ion-batteries-work.
Hu, Winnie. “Why Revel Shut down Its Moped Service in New York.” The New York Times, The New York Times, 18 Nov. 2023, www.nytimes.com/2023/11/18/nyregion/revel-mopeds-nyc-e-scooter.html.
Lewis, Michelle. “New York Is Now the World’s First City to Mandate EV Rideshare Fleets by 2030.” Electrek, 16 Aug. 2023, electrek.co/2023/08/16/new-york-ev-rideshare-fleets-2030/.
“Venture Capital, Private Equity and M&A Database | Pitchbook.” Pitchbook, pitchbook.com/. Accessed 22 Mar. 2024.
No comments:
Post a Comment