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Charging towards an electrified future

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ANDREW DITTBERNER, Chief Investment Officer at Old Mutual Private Client Securities, explores the vast investment opportunities in the electric vehicle value chain.

As vehicle manufacturers continue to face unprecedented challenges, due to disruptive technology and a higher level of environmental consciousness, the growing list of countries that have committed to going electric-only is a good indication that the demand for electric vehicles (EV) is set to boom. 

As such, the automotive industry is in the midst of a significant transition – one that offers a promising investment opportunity. Just as the internal combustion engine (ICE) displaced horses as the means to propel vehicles in the late 1800s, the electric engine is set to be the largest disrupter in the automotive market 120 years later.

This promising outlook for the electric car has already had an impact on many industries, shining a spotlight on potential investment avenues such as lithium-ion batteries and the elements used in their production. For example, with an increasing list of countries now introducing bans on petroleum and diesel-fueled cars, the rise of electric vehicles has contributed to the soaring price of cobalt – a key ingredient in the lithium-ion batteries used in electric vehicles.

According to Bloomberg, Samsung has joined Apple in taking an unprecedented step by reportedly negotiating directly with a mine in the Democratic Republic of Congo to secure cobalt supplies. “The element is an essential component in the rechargeable batteries used in smartphones, but increasing competition — mainly from electric car manufacturers — has made an already-scarce element even more valuable.”

Companies that we see as offering investment potential in this respect include Glencore – a large producer of copper, nickel, and cobalt, all of which are critical elements in the manufacturing of electric vehicles – as well as Anglo American Platinum, the world’s largest primary producer of platinum.

Earlier this month, Glencore Plc agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd. Currently the largest purchaser of cobalt in the world, China is vying to be the leading manufacturer of electric vehicles. The deal between Glencore and GEM will see China purchase 50% of the global supplies of cobalt by the end of 2018.

While there may be questions around the relevance of platinum with the onset of EVs, the mass adoption of pure EVs is still many years, if not decades, away. As a result, platinum and its derivatives will remain critical in reducing carbon emissions through their use in catalytic converters, in both the ICE as well as in hybrid EVs that make use of both fuel and batteries.

Other stocks to watch that may not necessarily be obvious candidates to benefit from the ongoing transition in the automotive industry include Alphabet (Google) – who are currently investing large amounts of capital in the autonomous vehicle market and Continental – who produces technologically enhancing products ranging from electric mobility and automated driving components to vehicle infotainment systems.

The onset of electric vehicles, however, has not happened overnight. Although their origins can be traced back long before the invention of the internal combustion engine, it was only in the 1960s following the need to reduce exhaust emissions along with our dependency on crude oil, that the electric vehicle came back into vogue.

A significant driver of the more recent push for EVs is the Electric Vehicle Initiative (EVI) – a body that was established in 2009 with the purpose of bringing together representatives from member governments and partners bi-annually to share knowledge on policies and programmes that support EV development. Ten countries are currently members of this initiative – including China, the United Kingdom, the United States and South Africa, among others – representing the vast majority of the global EV market.

This initiative recently launched the EV30@30 campaign, which set the ambitious goal of 30% market share for EVs in the member countries by the year 2030. 

Although some motor vehicle manufacturers have committed to phasing out petrol and diesel-only vehicles by a specific date, we believe that investors should treat the transition as a longer-term, global megatrend, as opposed to an overnight development. Abandoning traditional motor vehicles in favor of elective vehicles will happen, but it may occur over a much longer timeframe than originally anticipated. 

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Meet Aston Martin F1’s incredible moving data centre

The Aston Martin Red Bull Racing team faces a great deal more IT challenges than your average enterprise as not many IT teams have to rebuild their data center 21 times each year and get it running it up in a matter of hours. Not many data centers are packed up and transported around the world by air and sea along with 45 tonnes of equipment. Not many IT technicians also have to perform a dual role as pit stop mechanic.

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The trackside garage at an F1 race is a tight working environment and a team of only two IT technicians face pressure from both the factory and trackside staff to get the trackside IT up and running very fast. Yet, despite all these pressures, Aston Martin Red Bull Racing do not have a cloud-led strategy. Instead they have chosen to keep all IT in house.

The reason for this is performance. F1 is arguably the ultimate performance sport. A walk round the team’s factory in Milton Keynes, England, makes it abundantly clear that the whole organization is hell bent on maximizing performance. 700 staff at the factory are all essentially dedicated to the creation of just two cars. The level of detail that is demanded in reaching peak performance is truly mind blowing. For example, one machine with a robotic arm that checks the dimensions of the components built at the factory is able to measure accuracy to a scale 10 times thinner than a human hair.

This quest for maximum performance, however, is hampered at every turn by the stringent rules from the F1 governing body – the FIA. Teams face restrictions on testing and technology usage in order to prevent the sport becoming an arms race. So, for example, pre-season track testing is limited to only 8 days. Furthermore, wind tunnel testing is only allowed with 60% scale models and wind tunnel-usage is balanced with the use of Computational Fluid Dynamics (CFD) software, essentially a virtual wind tunnel. Teams that overuse one, lose time with the other.

In order to maximize performance within uniquely difficult logistical and regulatory conditions, the Aston Martin Red Bull Racing team has had to deploy a very powerful and agile IT estate.

According to Neil Bailey, Head of IT Infrastructure, Enterprise Architecture and Innovation, their legacy trackside infrastructure was “creaking”. Before choosing hyperconverged infrastructure, their “traditional IT had reached its limits”, says Bailey. “When things reach their limits they break, just like a car,” adds Bailey.

The team’s biggest emphasis for switching to HPE’s hyperconverged infrastructure, SimpliVity, was performance. Now, with “the extra performance of SimpliVity, it means it doesn’t get to its limits,” says Bailey. HPE SimpliVity has helped reduce space, has optimized processing power and brought more agility.

One of the first and most important use cases they switched to hyperconverged infrastructure was post-processing trackside data. During a race weekend each car is typically fitted with over 100 sensors providing key data on things like tyre temperature and downforce multiple times per second. Processing this data and acting on the insights is key to driving performance improvements. With their legacy infrastructure, Bailey says they were “losing valuable track time during free practice waiting for data processing to take place.” Since switching to HPE SimpliVity, data processing has dropped from being more than 15 minutes to less than 5 minutes. Overall, the team has seen a 79% performance boost compared to the legacy architecture. This has allowed for real time race strategy analysis and has improved race strategy decision making.

Data insights helps the team stay one step ahead, as race strategy decisions are data driven. For example, real time tyre temperature data helps the team judge tyre wear and make pit stop decisions. Real time access to tyre data helped the team to victory at the 2018 Chinese Grand Prix as the Aston Martin Red Bull cars pitted ahead of the rest of the field and Daniel Ricciardo swept to a memorable victory.

Hyperconverged infrastructure is also well suited to the “hostile” trackside environment, according to Bailey. With hyperconverged infrastructure, only two racks are needed at each race of which SimpliVity only takes up about 20% of the space, thus freeing up key space in very restricted trackside garages. Furthermore, with the team limited to 60 staff at each race, only two of Bailey’s team can travel. The reduction in equipment and closer integration of HPE SimpliVity means engineers can get the trackside data center up and running quickly and allow trackside staff to start work as soon as they arrive.

Since seeing the notable performance gains from using hyperconverged infrastructure for trackside data processing, the team has also transitioned some of the factory’s IT estate over to HPE SimpliVity. This includes: Aerodynamic metrics, ERP system, SQL server, exchange server and the team’s software house, the Team Foundation Server.

As well as seeing huge performance benefits, HPE SimpliVity has significantly impacted the work patterns of Bailey’s team of just ten. According to Bailey, the biggest operational win from hyperconverged infrastructure is “freeing up engineers’ time from focusing on ‘business as usual’ to innovation.” Traditional IT took up too much of the engineers’ time monitoring systems and just keeping things running. Now with HPE SimpliVity, Bailey’s team can “give the business more and quicker” and “be more creative with how they use technology.”

Hyperconverged infrastructure has given Aston Martin Red Bull Racing the speed, scalability and agility they require without any need to turn to the cloud. It allows them to deliver more and more resources to trackside staff in an increasingly responsive manner. However, even with all these performance gains, Aston Martin Red Bull Racing has been able to reduce IT costs. So, the users are happy, the finance director is happy and the IT team are happy because their jobs are easier. Hyperconvergence is clearly the right choice for the unique challenges of Formula 1 racing.

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Body-tracking tech moves to assembly line

Technology typically used by the world’s top sport stars to raise their game, or ensure their signature skills are accurately replicated in leading video games, is now being used on an auto assembly line.

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Employees at Ford’s Valencia Engine Assembly Plant, in Spain, are using a special suit equipped with advanced body tracking technology. The pilot system, created by Ford and the Instituto Biomecánica de Valencia, has involved 70 employees in 21 work areas. 

Player motion technology usually records how athletes sprint or turn, enabling sport coaches or game developers to unlock the potential of sport stars in the real world or on screen. Ford is using it to design less physically stressful workstations for enhanced manufacturing quality.

“It’s been proven on the sports field that with motion tracking technology, tiny adjustments to the way you move can have a huge benefit,” said Javier Gisbert, production area manager, Ford Valencia Engine Assembly Plant. “For our employees, changes made to work areas using similar technology can ultimately ensure that, even on a long day, they are able to work comfortably.”

Engineers took inspiration from a suit they saw at a trade fair that demonstrated how robots could replicate human movement and then applied it to their workplace, where production of the  new Ford Transit Connect and 2.0-litre EcoBoost Duratec engines began this month.

The skin-tight suit consists of 15 tiny movement tracking light sensors connected to a wireless detection unit. The system tracks how the person moves at work, highlighting head, neck, shoulder and limb movements. Movement is recorded by four specialised motion-tracking cameras – similar to those usually paired with computer game consoles – placed near the worker and captured as a 3D skeletal character animation of the user.

Specially trained ergonomists then use the data to help employees align their posture correctly. Measurements captured by the system, such as an employee’s height or arm length, are used to design workstations, so they better fit employees. 

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