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Global rise of a Gateshead star

Friday 16 November 2012 6:00

Hidden behind the brick facade of Sevcon’s Gateshead factory is the engine room of the New York-listed firm’s global development as Andrew Mernin discovers.

The irony’s not lost on Matt Boyle when he says he’s got “a carbon footprint the size of Wales”.

As CEO of motor system and controls firm Sevcon, the majority of his business is making vital parts that help to cut vehicle emissions.

In contrast, his personal environmental impact comes from his role at the helm of a New York stock exchange-listed firm based on Gateshead’s Team Valley. “The corporate base is in Boston, Massachusetts, so the air miles are good. I spend a week to ten days a month over there.”

The group also has offices in France, Japan, Korea and China and recently appointed a new business development manager in Germany to target vehicle makers there. The core technology and products, though, are developed in its North East headquarters, as they have been for half a century.

The company makes motor controllers and system components for electrically powered vehicles ranging from forklifts to golf carts and high end hybrids. “Our tradition markets are forklift trucks and aerial work platforms – as well as vehicles for mining – and we continue to service them but using the same technology we’ve also moved into on-road applications, of which there are many.”

The varied nature of Sevcon’s workload is immediately apparent as we walk across a factory floor strewn with golf carts, motorbikes, sports saloons and a network of cables and chunks of metallic kit.

“There are 150,000 golf carts made every year and you wonder where they all go,” Boyle says as he describes the vast market for lawn care equipment in the States. “You can put a blade on the front of this for clearing snow. “You’ll see things like this running around on NFL pitches,” he adds.

Among various on and off-road markets the firm has a hand in the high performance sports car sector.

“I’ll be hung drawn and quartered,” he says on why exact details of which Sevcon technology is being tested in which finely tuned, roaring motor cannot be revealed.

Part of Sevcon’s involvement in the high performance sports market is due to impending emission standards coming into play in 2017 which certain manufacturers may otherwise struggle to meet. Much of the top secret technology used on the elite end of the car market tends to filter down into the commercial space eventually.

Boyle explains: “[Car companies] start hi-tech in a place where disaster doesn’t cost them anything. They can trial stuff and cost isn’t much of an issue to them. They trial the technology, improve it and then move it down to commercial vehicles. In motor sport there’s no liability for the technology. Because it’s an experimental test bed, the driver puts his own life at risk.”

Trundling along nicely for Sevcon in a slightly slower lane – given its 62mph max speed – is its work on the electric ‘city car’, the Renault Twizy. Boyle beams proudly as he recalls overtaking a Range Rover on the Team Valley on the day the Twizy was licensed for use on the road.

“Twizy has raised our game in engineering and helped us to learn how to deal with very large companies at much higher volumes than we used to. “It also allowed us to influence those people with our knowledge.” The firm supplies microprocessor-based controllers which manage the delivery of power from the car’s lithium-ion battery to the motor.

Sharp Twizy sales since its launch in March 2012 have surprised some analysts, with Germany, France and Italy proving particularly fruitful markets. The car was the highest selling plug-in electric vehicle in Europe in the first half of the year, selling close to 8,000 units by August. It has also had a significant impact on Sevcon’s status as the go-to firm for specialist components for the electric vehicle market.

“We had a great response to the Twizy when it was released. When people opened the covers and saw Sevcon, there was a ‘who are these guys? What are they up to?’ response. They also thought ‘good grief, they’re British’.”

Overall, on-road business remains buoyant for Sevcon, fuelled by growing demand for rechargeable cars and higher performing hybrid vehicles. “It’s been a large driver of our growth over the last 18 months, with new applications, customers and products, and I don’t see that slowing. What I am concerned about is whether or not the politicians will stick to their guns whenever the automotive guys start saying the emission targets can’t be met.

“If they do then it’s going to be a good run up, otherwise [our growth will more likely be from] top down technology rather than solely emissions.” Sevcon is already steeled for such a potential shift in the market and green appeal is not the only selling point the company targets with its low emissionscompatible technology.

“You can’t hang your hat on emissions. I’ve got to think whether I make the drive system cheaper than the alternative? Can I make it more reliable than the alternative? Can I make it lower maintenance? Can I make the technology so cutting edge that a supercar maker says ‘that’s the technology we’re after’? “So we’re attacking from various angles.

“We will [supply parts] for hybrid technologies, but plan b is to come at it from the top through electrical power assist systems and that sort of stuff. In addition, we can also come through the hybridisation of traditional internal combustion engines on less glamourous applications - like the traditional industrial vehicles that we’ve been servicing for 50 years.”

The latter area of focus, in simple terms, benefits from a much more favourable pricing model than that of the car market. “The most complex and sophisticated vehicle in the world today is a combine harvester,” says Boyle.

“If you buy one today it’s got a GPS system that can tell you within feet of where you are, what you’ve just cut, how to optimise the harvesting of a field. It has self-drive technology and when you think about the technology that’s on a car, the GPS tells you to go down a road that leads you to the bloody sea because it uses commercially available technologies. The sort of stuff that you use on buses and combine harvesters is really cutting edge and it’s also expensive.

“So on a US$1m combine harvester, the fact that the control system costs US$3,000 its two tenths of bugger all. But when you put that controller into an e-class Mercedes, for example, then you’ve blown the profit margin. And that’s why we see our future not necessarily in high volume cars but in niche markets on and off road.”

As part of its ongoing expansion, the company is currently looking to “add more meat on the bones” to its activity in China – where it already has a presence through various distribution deals. Driving demand there, says Boyle, is the Chinese government’s desire to improve the country’s green credentials as well as keeping the nation ahead of the technology curve.

“The Clarkson of China is more likely to drive and extol the virtues of an electric vehicle than he is an internal combustion engine. Thank God for that. “There’s a lot of interest in China in the electrification of transportation and they have put investment into two wheel vehicles mainly. There are far more two wheel vehicles in China then there are four.

“So because of their size, the motors and batteries cost a lot less than through a four wheel combustion engine.

“The Chinese also have a lot of the natural resources that go into the more sophisticated motors. They also like to be at the forefront of technology and are early adopters. They are far more likely to embrace new technology than some of the petrol-heads of the West.” Boyle sees India, meanwhile, as a “good, emerging” market, although its poor electrical infrastructure is a major stumbling block. More developed markets can be equally burdensome though – including the US where commuters are required to cover far more ground than here in the UK.

Boyle says: “My personal belief is that range extenders make far more sense than pure electric vehicles. If you get to 60mph you can turn on the internal combustion system that will recharge your batteries so by the time you get to your destination you could have 75% more power in your battery system.

“That makes far more sense to me than a pure electric vehicle.” However the ‘big four’ car makers, he says, are driven by cost and also the opportunity to create their own unique selling point through technology which has led some to pursue pure electric first.

Despite its NASDAQ-listed status and network of offices in the US, most of Sevcon’s technology and other IP is developed in Gateshead. Boyle says this suits the company when it comes to managing its public persona, particularly in relation to keeping a relatively low profile in the American press.

“Americans like to see where the IP’s developed. If we could move all the IP to America we’d be a Siemens but because it’s here in Gateshead, the public face of the company never gets seen.

“Some people say we’ve got the worst of both worlds. I actually think I’ve got the best of both because I can do things quickly, get success and then tell people about it in my own time."

In contrast he points to the example of electric car battery maker A123 which recently filed for bankruptcy in the States amid a storm over the selling of IP and technology to the Chinese that had been developed with the backing of taxpayer dollars.

“They’ve been pilloried because the IP is now believed to be owned by the Chinese. That’s the flip side of [being a high profile firm in the US]. What I do is deliver, deliver, deliver. I keep my head down and get the job done.” IP is a part of Sevcon’s sector that is riddled with grey areas and dangerous liaisons. As a result, the company tends to steer towards product rather than project-based business.

Boyle says: “I try to avoid nonrecurring engineering work, which is when someone says, ‘will you do this job for me and I’ll give you £100,000?’

“One reason is that the IP ownership becomes confusing. They are paying us because we know how to fix a problem but at the end of it they’re not prepared to say ‘we’ll give you production of the solution in 100,000 units per year’. There are a few exceptions, such as the work we do with the Technology Strategy Board, or if someone throws a massive amount of money at a silly problem which is sometimes the case. I wouldn’t turn it away but the important thing for us is that we get a product out of it at the end and that we protect our IP.

“If we turned ourselves into a project company rather than a product one I’m certain we’d get to a debate with people who’d say ‘you developed that with our money’. But we can say that wholeheartedly we’re a product company not a project company.”