Maxwell Stakes its Claim in a $2.7 Billion Niche Market
Last Wednesday Maxwell Technologies (MXWL) announced the launch of a new ultracapacitor product that insures reliable engine starting for commercial trucks and other heavy vehicles. According to the Energy Information Administration, the existing US fleet includes 4.2 million heavy-duty diesel trucks. All of these vehicles are subject to strict anti-idling laws and regulations that strain their battery systems and increase the risk that the engine won't be able to start when it needs to. While a dead battery is a pain for the average consumer, it can cause a world of problems for a commercial truck that has to stay on schedule and can't afford the lost time or the out-of-pocket costs associated with a roadside service call.
The Maxwell solution is simple, but effective. They've packed twelve of their 3,000 Farad BoostCap ultracapacitors into a standard Group 31 battery case along with the necessary control electronics. Since heavy trucks frequently use four or more lead-acid batteries to power starting, lighting and accessories, the ultracapacitor pack is swapped for one of conventional batteries, wired directly to the starter and then connected to the rest of the electrical system. The installation is simple and can be done in less than an hour. Once the ultracapacitor pack is installed, it will assure trouble-free starting for the life of the truck even if the batteries get severely depleted. With an expected retail price of $1,299, the product should pay for itself in a couple of years by reducing the frequency of battery replacements, avoiding service calls that can cost up to $600 each and reducing downtime costs including late deliveries and spoilage of perishable products.
While Maxwell has not released specifics on its expected revenue per ultracapacitor pack, I'd have to guess that something on the order of half the retail price should flow back to Maxwell. With a national fleet of 4.2 million trucks and a revenue potential of $650 per vehicle, the addressable market works out to $2.7 billion. It's a niche market, but a very attractive opportunity in a transportation sector that truly needs a better energy storage solution for starter systems.
Maxwell was kind enough to share their preliminary marketing presentation with me and it clearly lays out the advantages. The ultracapacitor pack draws its energy from the other lead-acid batteries with a trickle charge that takes about 15 minutes and draws about 36 watt-hours of energy from batteries that have a combined capacity of roughly 3,000 watt-hours. When it's fully charged the ultracapacitor pack can deliver up to 1,900 amps of starting current and support up to three cold cranking events per charge. Since the system is ultracapacitor based, temperatures as low as -40° F will not impact performance.
While the product is an important milestone for Maxwell, it's also a great object lesson in how economies of scale work. The ultracapacitors Maxwell will use in the system are part of its K2 series. These are the same basic devices that Maxwell uses for its hybrid bus and wind turbine products. Each of the 12 ultracapacitors is roughly the size of a soda can, which makes integration into a compact starter pack relatively straightforward. The biggest reason Maxwell could afford to develop this product for the trucking industry is that it's already making millions of the basic ultracapacitor every year and the new starter solution is simply another use for a proven product that's already being manufactured at scale. As a result Maxwell was able to develop the product in-house and plans to take it directly to end-user and OEM markets without bringing in another manufacturer as a partner. It should enjoy a significant first mover advantage, retain a higher degree of control over its own destiny and enjoy higher long-term margins than it would if the product had been developed in cooperation with somebody else.
Last fall Maxwell's stock price ran from $12 to $17 in response to an automotive design win that will involve the installation of $50 BoostCap modules in up to a million new passenger cars over the next three years. When I compare the relative value of the two products and the fundamental end-user benefits of the two solutions, I have to believe the starter solution for heavy trucks will be an order of magnitude more important to Maxwell's top and bottom lines over the next few years.
This is a very important product announcement that the market seems to have missed.