Leveraging Automotive Scale to Solve Electric Boat Techno-Economics

Key Quotes

"Mitch's problem is this: How do you build competitively priced electric boats? On today’s show, Mitch explains why water makes electrification so hard, the techno-economic puzzle of building giant battery packs, and how Arc’s high-end wake sport boat opened the door for a new generation of hybrid-electric tugboats."

This quote introduces Mitch Lee and his core challenge: creating affordable electric boats. It highlights the inherent difficulties of electrifying marine applications due to water's density and the complex economics of large battery systems. The description also foreshadows how Arc's initial success with consumer boats paved the way for commercial applications.

"The challenge is that boats consume a lot of power. Water is a thousand times more dense than air, which means that if you want to sustain a full day's worth of activity out on the water, you need to store a lot of energy on board. If you're going to go electric, that means really big battery packs."

Mitch Lee explains the fundamental physics that make electrifying boats difficult. He points out that water's high density requires significantly more energy to propel a boat compared to air, necessitating large, energy-dense battery packs. This quote establishes the primary technical hurdle Arc Boats faces.

"What we do is we go to automotive suppliers, people that are operated in insane scale and have incredible quality standards because automotive operates at a much higher quality standard than than marine. So we get to take advantage of all of those and then bring them into the marine industry."

Mitch Lee describes Arc Boats' strategy for sourcing battery components. He highlights that by partnering with automotive suppliers, who operate at a much larger scale and adhere to higher quality standards, Arc can leverage existing advancements and cost efficiencies. This approach allows them to overcome some of the challenges in the marine industry's supply chain.

"So step one, build really big battery pack. It's heavy, it's expensive. Now step two is go build the boat around that and have it compensate for the weight, for the price, for the volume of it in a way that isn't just not compromising on the experience, but is actually making the experience better."

Mitch Lee outlines the two-step process for developing their electric boats. He explains that after addressing the challenge of creating large, cost-effective battery packs, the next critical step is designing the boat's structure to integrate this heavy component. The goal is not just to accommodate the battery but to use its presence to enhance the overall boating experience, similar to how electric vehicles have benefited from battery integration.

"The marine industry is interesting for a variety of reasons and in this market in particular one of the things that you see is that well you look at your sedan market and you have your Honda Civics, your Nissan Ultimas, but then you have your Mercedes S-Class, your Model S, whatever it is and you see the volume it really favors that economy class sedan and then it's a smaller peak of demand at that premium sedan class. In boating it's the opposite."

Mitch Lee contrasts the market dynamics of the automotive industry with the marine industry. He notes that while car sales are dominated by economy models with a smaller segment for luxury vehicles, the boat market sees the opposite trend. The demand in boating, particularly for premium segments, is higher, which influences pricing strategies and product development.

"So environmental regulations like emissions regulations have made diesel tugs in this country more expensive, which is also good for you."

Mitch Lee explains a factor contributing to the viability of electric tugboats. He points out that increasingly stringent environmental regulations in the U.S. have driven up the cost and complexity of diesel engines. This makes the total cost of ownership for diesel tugs less competitive, creating a more favorable market entry for electric alternatives like those Arc is developing.