Background information

The Battery

You have patented a new technology which can be used with a car battery. The battery can be used inside a hybrid vehicle or a purely electric vehicle. The technology involves the use of solar panels to charge the battery while the vehicle is in operation.

You have the option of creating a new battery from scratch or attaching your new technology to one of the existing types of car battery. Existing battery types are:

Lithium Ion Battery (Li-Ion)

made from carbon and highly reactive lithium

stores high amounts of energy

more horsepower than a typical hybrid-battery

weighs less (0.5kg)

150,000 miles/15 year battery Lifespan

recyclable

offers a 30 minute charge transmitted

best choice for hybrid vehicles

high cost (up to $5000), but will continue to decrease

larger batteries may experience overheating

need to produce large li-ion batteries necessary to power hybrid vehicles without reverting to the internal combustion engine

Nickel Metal Hybrid Battery (NiMH)

made from hydrogen, nickel and another metal such as titanium

on the market longer than Li-Ion batteries

more affordable ($1500) than Li-Ion batteries

offers 4-5 miles/kWhr

weighs 1kg

easily rechargeable but store less energy than lithium ion battery packs

NiMH batteries are less expensive and more predictable in performance

Both NiMH and Li-Ion batteries are both harmful to the environment when improperly disposed of

Lead Acid Battery

made from lead, sulfuric acid, and water.

most affordable battery ($500)

the oldest auto battery

least stored energy

weighs 1kg

recyclable

attractive for environmentalists

Question: which of the three above technologies do you think you should piggy-back your new technology? Why?

You can produce two types of batteries: and advanced enhanced battery, and a simple enhanced battery.

For the advanced enhanced battery, your new technology will double the price of each battery type but will also double the capacity of each battery type, depending on the availability of sunlight.

For the simple enhanced battery, your new technology will add 50% to the price of each battery type but will also add 50% to the capacity of each battery type, depending on the availability of sunlight.

Question: which of these two battery types should you piggy-back your new technology? Why? In determining which battery to produce, you might wish to look at the Tesla models as a baseline for the advanced enhanced and the simple enhanced batteries. Tesla models can be seen at Tesla Vehicles Compared. For instance, the Tesla Model S uses lithium-ion battery cells in 16 modules and has a range of up to 600km.

Question: how much are you going to charge for your battery? For production, you will need to purchase roughly $250,000 worth of equipment to build either type of enhanced battery. Since your enhanced battery (simple or advanced) will provide the cash flow, you need to determine the price for each and the profitability for each. In doing so, you will have to research the cost and profitability of the lithium-ion battery, the nickel metal hybrid battery, and the lead acid battery.

Financing

You had received $200,000 as inheritance from relatives which have passed on. You have skillfully invested this in stocks which give you 5% annual dividend and 5% annual growth. Your funds now amount to $400,000.

Bank loans are available to you up to $5,000,000 at 5% interest rate if they consider you a low risk customer, or 10% if they consider you a medium risk customer. The bank will not give you a loan if they consider you a high risk customer.

Investors are interested in financing your operation. They are willing to give you $2,500,000 but they want 50% ownership of your product and warehouse. They are also willing to lend you $2,500,000 at 3.5% interest rate.

The rate of inflation is 5%.

Question: at this point, do you feel you should go ahead with your plans to mass-produce the enhanced battery or should you simply keep your money in stocks? Why?

The Warehouse

You have three options for a warehouse: one by a lake, one by train tracks, or build a new one near train tracks.

The warehouse by the lake:

Can be leased for $2/square foot per year for five years, then the lease is negotiable.

Contains 10,000 square feet of empty space

Has access to shipping which can move produce at $0.10 per kilogram per kilometre.

Is situated 40km from a large urban center.

Is situated just 5km from a small town.

The warehouse by the train tracks:

Can be leased for $1/square foot per year for five years, then the lease is negotiable.

Contains 10,000 square feet of empty space

Has access to rail transport which can move produce at $0.20 per kilogram per kilometre.

Is situated in a small town.

The town is known for high crime.

Is situated 80km from a large urban center.

A new warehouse near train tracks:

Can be built for $200/square foot.

Can contain up to 20,000 square feet of empty space

Is situated inside a forest with road service.

Is situated just 5km from a small town.

Has access to truck transport which can move produce at $0.40 per kilogram per kilometre.

Has access to rail transport which is 10km away which can move produce at $0.20 per kilogram per kilometre.

Is situated 80km from a large urban center.

Question: Which warehouse are you inclined to go with and why?

Specifications

In preparing the specifications for your hybrid battery warehouse and your battery, please consider the following: See course notes from week 3 for details on each of these requirements.

Please write specifications for your warehouse. The specifications for your warehouse should mostly be taken from the manufacture requirements, acceptance standards, and disposal.

Please write specifications for your battery. The specifications for your hybrid battery should mostly be taken from the performance requirements and operation requirements.

Conclusion - The Business Case

At this point, you have much more information than when you were looking at batteries, financing and warehouse locations. Question: which warehouse is the best in the short term (1-5 years), the medium term (5-15 years), and the long term (greater than 15 years)? You might wish to write a computer program to calculate your profits for each term.

Question: Considering your new battery, do you feel it is worthwhile going ahead with the new technology, or a known and proven technology? Please justify your decision quantitatively (with numbers) and qualitatively (without numbers).

There is something called disruptive technology which is a technological advance that throws all planning into turmoil. In your case, the disruption comes from environmentalists. This could completely derail your project. Question: What are the environmental impacts of the mass production of batteries? Do this analysis in detail. Question: Do you agree/disagree with the points made in Joe Rogan's podcast on EV's? See Joe Rogan: "EV's Are A Disaster". Will Electric Vehicles Be Around For The Long Term?.