Electric Vehicle Industry:
A Market Analysis
April 21, 2012
Group Members:
Don Picciano, Jr.
Christopher Johnson
Kevin Bryant
TABLE OF CONTENTS
Introduction to Electric Cars…………………………………………………………………………………………….4
Customer Segments………………………………………………………………………………………………………...5
Buying Motives…………………………………………………………………………………………………………………7
Unmet Needs…………………………………………………………………………………………………………………...8
Competitor Analysis……………………………………………………………………………………………………..9
Direct Competitors…………………………………………………………………………………………….10
Indirect Competitors………………………………………………………………………………………….17
Substitute Products…………………………………………………………………………………………...18
Strengths and Weaknesses………………………………………………………………………………..19
Strategic Perspective & Market Shares……………………………………………………………..20
Industry Perspectives……………………………………………………………………………………………………21
Distinguishing Characteristics of Industry…………………………………………………………..21
Industry Size and Growth…………………………………………………………..……………………….22
Historical Information……………………………………………………………………………22
Future Projections………………………………………………………………………..……….22
Industry Structure……………………………………………………………………………….………………23
Barriers to Entry……………………………………………………………..………………..…..23
Potential Entrants and Threats from Substitute Products………….………….23
Bargaining Power of Suppliers and Customers………………………………………24
Cost Structure……………………………………………………………………………………………………..24
Life Cycle Position………………………………………………..……………………………...……………..25
Key Success Factors…………………………….……………..………………………………………………..25
Environmental Analysis………………………………………………..……………………….…………………..….26
Trends and Potential Events……………………………..……………………..……………………..…..26
Description of Trends…………………………………………….……………………………….26
Strategic Implications……………………….……………..…………………………………..…26
Time Frame…………………………………………………………………………………………….26.
Importance for the Industry…………………………………………………………….……..27
Future Scenarios…………………………………………………………………………………………..………27
Marketing Perspectives…………………………………………………………………………………………………..27
Product Differentiation…………………………………………….……………………………..27
Branding………………………………………………………….……………………………………….33
Technological Changes……………………………………………………………………………..36
Services Required………………………………………………………………………..……………37
Price……………………………………………………………………………………………….……………………...38
Trends……………………………………………………………………………………………………...38
Margins…………………………………………………………………………………………..………..39
Discounts…………………………………………………………………………………..……………..40
Distribution………………………………………………………………………………………..…………………..41
Major Channels…………………………………………………………………………………………42
Sales and Dealerships………………………………………………………………………………..42
Channel Conflicts…………………………………………………………………………………..….43
Promotion……………………………………………………………………………………………………..….…….43
Expeditures: Historical Information and Future Projections………..…….………43
Positioning of Major Brands……………………………………………………….…….………..44
Promotion Trends…………………………………………………………………….…….………….44
Issues Affecting Strategy Choice……………………………………………………………………..…….…………..45
Works Cited………………………………………………………………………………………………………….……………46
Introduction to Electric Cars
An electric vehicle (or EV), uses an electric motor for propulsion rather than being powered by a gasoline-powered motor. While it is uncertain who invented the EV, several inventors have been given credit as early as 1828 by ÁnyosJedlik who invented a small-scale model car powered by an electric motor that he designed. Others credited with their inventions include Robert Anderson, Professor Stratingh, and Thomas Davenport. It was not until the late 1800s that Americans began to devote attention to these innovations and interest in motor vehicles increased greatly. William Morrison built a six passenger wagon in 1891 and his design with a capacity for passenger is often considered the first practical EV. Then, in 1897, the first commercial EV was used as a fleet of New York City taxis built by the Electric Carriage and Wagon Company of Philadelphia (Bellis,n.d).
Once the electric starter became common in the 1930’s, the electric car became almost obsolete and gas-fueled vehicles became the conventional vehicle of choice. As America's (and the world's) love affair with the automobile grew and decades passed, the dependency on oil slowly increased and gas prices rose. In the last 15 years, gas prices have increased so much that the demand for alternative fueled vehicles became not only a public cry, but also governmental policy. As Americans, we send more than $1 billion for oil overseas every day, mostly to fuel our vehicles. In 2000, the world consumed 77 million barrels of oil per day and by 2010, the consumption jumped to 87 billion barrels(Coplon-Newfield, 2012). Due to this significant oil consumption, the Environmental Protection Agency revealed the plan to reduce this dependencywith the requirement that vehicle fleets achieve a 35.5 mpg average by 2012-2016 and a 54.5 mpg average by 2017-2025(Coplon-Newfield, 2012). President Obama has proposed new programs to dramatically boost the market for electric vehicles in order to break free from this dependency and reduce emissions. These proposals will make electric vehicles more affordable, accessible, and convenient. President Obama recently said in a speech at a Daimler manufacturing plant that he plans to promote an "EV Everywhere" experiment to make EVs "as affordable and convenient as gasoline-powered vehicles for the average American family within a decade"(Coplon-Newfield, 2012, para. 2) . Grant programs will aid American scientists, engineers, and businesses to conduct research and development that will lower the cost of EV batteries, increasedriving distance range, and advance the technology for EV fast-charging. These significant improvements will allow EVs to become mainstream (Longley, 2012). In addition, the president’s proposed programs will help cities become EV ready (i.e., have charging stations, become prepared for increased electricity usage, and educateits residents about the benefits of electric vehicles). President Obama also proposes to make electric vehicles more affordable by raising the tax credit on purchasing an EV, allowing the tax credit to be available at the dealership, and removing the cap on the number of vehicles per manufacturer eligible for the credit (Berman, 2012; Coplon-Newfield,2012).
Customer Analysis
Segments
It appears that with any product, there are a number of customer segments developing in this new market. There are four distinct segments that have been identified, including the eco-friendly “green innovators,” the budget conscious “cost shoppers,” the risk adverse “laggards,” and the high end “2.0 Premium Customers” (Steinhubl Leis, 2012). These four groups have four distinctly different desires in the market and in some cases it can be difficult to make a product that fits a combination of these needs.
The green innovator is the group of people that are environmentally motivated and are looking to use their electric vehicle to better the planet. Green innovators will look at the efficiency of the vehicle and be less cost adverse than other groups. This group is familiar with alternative fuel products and will not be afraid to go all in on the plug in electric vehicle (Steinhubl Leis, 2012).
The cost shopper is the group not currently being well-served by the existing selection of vehicles. The cost shopper will look at the benefits of owning an electric car. This group will likely consist of city drivers that hope to save money with a combination of government rebates on the front end and savings at the pump on the back end. This group will fall into what is sometimes considered the “city driver” and will thrive on advertisements like Myers Motors claim that its vehicle will run for 1,000 miles on $20 worth of electric fuel (Steinhubl Leis, 2012).
The laggards are a group that is going to wait and see what happens in the market. This group of people is generally risk adverse and they are going to wait to see the “proof” that electric vehicles are going to be a viable transportation alternative. This group will often look for what the catch is and be quick to bring an objection(Steinhubl Leis, 2012).
Bain & Company believe that it will be the 2.0 Premium Customers that initially begin to push this technology into the open market. This is generally a market group that will endure the glitches and challenges of new technology to be the first people to drive the car. Bain & Company predict that there are about 350,000 consumers worldwide that will fit into this unique segment and about half of them are believed to be in the US(Steinhubl Leis, 2012). Although it is believed to cost an average $12,000 higher than a similar “conventional” vehicle, this is the only group that is willing to take on the extra cost. This group will not only have a large impact on how these vehicles are marketed, but also, in how these vehicles are designed (Steinhubl Leis, 2012).
Buying Motives
There are numerous reasons why people buy electric vehicles, similar to any other product that hits the market. Four buying motives seem to have emerged for the electric vehicles: economic, personal, psychological and social. These four motives tend to encompass and represent the four segments that we have discovered for buyers(Beach, n.d.).
Economic buying motives are likely to be considered towards the end of the process and have a tendency to not to be as much of a motivator to buy. Rarely do people buy things just because they can afford them, nor does this proposition guarantee that someone will buy the least expensive product available. The price conscious shopper is not a segment that we have seen truly emerge in the electric vehicle market as there are very few “reasonably priced” alternative to choose from(Beach, n.d.).
Personal buying motives are generally related to individual and demographic information. An example of this is that in northeast Ohio, we value four wheel drive vehicles due to the weather. In Texas, four-wheel drive is often viewed as an unnecessary luxury because they are more interested in the size of the vehicle than its capability in inclimate weather. Products are often marketed differently to different types of people, such as young versus old or men versus women. This buying motive can often be mistaken as a company attempting to market its product; thus, a great amount of market research is required to make sure you are on point. For example, until now, the electric car market has often focused on performance (0 to 60 time and top speeds) and therefore, the general target for these products has been men. Recently, products have moved more towards an economical sense and have discussed cost savings and efficiency, which in car marketing is a target towards women(Beach, n.d.).
Psychological consumer motivations fall into the area of a need or a perceived need of a person or group of people. Psychological motives generally include things like safety, self-esteem, love and belonging. This buying motivation also tends to prey on psychological characteristics like compulsiveness, ambition, or competitiveness. This group absolutely captures a large portion of our buying segments. Whether the consumer is the premium 2.0 buyer who is concerned about his image or the go green buyer who is concerned about making the world a safe place to live, these motivations are an important part of making a decision to buy(Beach, n.d.).
Social motivations are generally influenced by a person’s peer group or an overall societal requirement. The greater social requirement may fall into a cultural group an individual believes that they belong to or their opinions of leaders or celebrities. Through the advertising, we can see that this is a buying motive that the high end electric vehicles, specifically, have attempted to target. Most sites proudly list a celebrity who is one of the proud owners of their product and virtually all of them invite you to join in on the prestigious ranks of their ownership(Beach, n.d.).
Unmet Needs
The electric vehicle (EV) industry appears to have a number of unmet needs that must be addressed before the industry can truly take off. Cost is a huge problem in this market, as the availability of cost effective, good value vehicles is significantly lacking (Hodson & Newman, 2009). Other unmet needs include consumer confidence and education, which is somewhat difficult to quantify, and long range vehicles, as well as family-friendly, multiple seat vehicles.
The value proposition is one that is being addressed; however, it is an unmet need to date. The average electric car costs about $12,000 more than a similar conventional vehicle (Hodson & Newman, 2009). The most popular all electric vehicles include the Nissan Leaf (MSRP $35,200 before tax credit) and the Volt (MSRP $39,145 before tax credit). This is a substantial investment for a budget conscious consumer and has a very direct impact on the market share that this product has the ability to capture.
Consumer confidence is an issue that takes many shapes. Questions about where the vehicles can be plugged in, the availability of charging stations, and the length of the buyers’ commutes are very real concerns for many. Another major issue is the actual life of the battery in the vehicles. It is reported that the batteries have a useful life of between five and eight years depending on use. The problems associated with them are unlike a normal car battery. The cost to replace the batteries ranges from $10,000 to $40,000, meaning that there is little or no residual value to these vehicles. (Stanton, 2012) This has a huge impact on the financing of these vehicles as well as the overall cost of ownership.
The desire for cars to be family friendly and have a long range has been attacked recently by both Tesla and Chevy. The upcoming Tesla S sedan boasts seating for 7 (5 adults and 2 children) with an approximate range of 100 miles. The Chevy Volt navigates the mileage restriction by having an onboard gas-powered generator that pushes the 35 mile range of the Volt into a normal 400 mile range (Stanton, 2012).
Charge times and locations are other concerns. Most plug-in vehicles require six to eight hours to fully recharge; therefore, consumers may have to plan their days around being able to be without their vehicle for a period of time. Most true plug in vehicles have a range of somewhere between 50 and 100 miles. The “down time” for these vehicles to charge can take away the convenience of traditional gas-powered cars (Stanton, 2012).
Competitor Analysis
Competitor Identification/Major Competitors
As with any emerging market, numerous direct and indirect competitors exist. While there are a substantial number of manufacturers entering the market, many less are actually in the market. With vehicles being held to much higher standards in gas efficiency, as well as a long trend of other alternative fuel vehicles, this is a much more competitive market than people realize. Currently the projections are that plug-in electric vehicles (PLEV’s) will take over about 5% of the total market for vehicles worldwide by 2017 (greenretaildecisions.com, 2011).
Direct Competition
- Aptera Electric Cars
- Audi Electric Cars
- BW Electric Cars
- BYD (Build Your Dream) Electric Cars
- Chevrolet
- Commuter Cars Electric Cars
- Fisker Automotive
- Ford
- Honda
- Infinity
- Mazda
- Mercedes-Benz
- Myers Motors Electric Cars
- Mini Electric
- Mitsubishi Electric
- Nissan
- Smart Electric Cars
- Tesla
- Th!nk North America
- Toyota
- Wheego
- ZAP Electric Vehicles
Although there are a high number of vehicles on the list of automobiles offered as electric vehicles, very few of them have actually been brought to market (Eziquiel-Shriro, 2012). While our list is very inclusive, we will keep our analysis of the competitors to vehicles that have actually hit the market at this time.
BYD Electric Cars is a Chinese based company that has seen over a half of a million vehicles delivered to date in Asia. The majority of BYD’s market share in this region is based on their gas platform; however, it is a company that has substantial resources to bring to the development and marketing of their vehicle. According to Wang Chuanfu, the company’s president, the manufacturer will only focus on electric cars in North America (Shirouzu, 2011). BYD has launched the E6 in China where the vehicle is used primarily for taxi service. BYD will have its first shipment of vehicles in the US by the end of 2012, with some of the vehicles already promised to the Los Angeles Metro Government. Although the vehicle is rumored to be relatively sluggish and generic, BYD states that the vehicles driven were only prototypes and the vehicles that are actually delivered will be of higher quality (Shirouzu, 2011).
Chevrolet has become one of the most recent entrants into the electric vehicle market with the release of the Volt. The Volt is largely aimed at making the electric car a more user-friendly vehicle and taking market share away from vehicles like the Toyota Prius. The Volt is not, however, a true plug-in electric vehicle. The Volt has a plug-in range of about 35 miles (Chevrolet.com, n.d.), but with its onboard gasoline generator, the range stretches to a much more reasonable 400 miles. The Volt arrived at the 2011 Auto Show as the most technologically advanced vehicle brought to market this year and ended up taking home the 2011 North America Car of the Year Award. (Eziquiel-Shriro, 2012).
The Volt has not lived up to its initial expectation. With only about 10,000 vehicles sold thus far, GM is far below its projected figures. The Volt boasts a sticker price of a little under $40,000 and dealerships have had a limited availability. GM has largely designed this shortage as they shut down production of the Volt from March into April due to lack of consumer demand. GM has restarted production after posting a better than expected March, with 2,289 Volts delivered. (Conway, 2012)
Commuter Cars Electric Cars was one of the first publicly available electric vehicles. The Tango T600 was introduced in 2006 and is built on a tandem seat platform. The vehicle was designed, somewhat, for the rich and famous who commute through the streets of Los Angeles. Boasting a prestigious group of owners, including George Clooney, the Tango T600 achieves a 0 to 60 time of about 4 seconds and also has a top speed of 130 mph. (Eziquiel-Shriro, 2012) The Tango T600 is offered with an option of a lead acid battery with a range of 40 to 60 miles or a lithium ion battery with a range of 200 miles. The vehicle is somewhat price restrictive, with the base model being priced at $108,000. Safety is a Tango hallmark, featuring a roll cage built to race car standards, a 4-point safety harness, and more protective steel in each door than a typical SUV (Commutercars.com, n.d).
The Tango 100/200 is scheduled to hit markets in the near future and is more in line with other affordable mass-produced cars. Commuter Cars began taking orders and is listing the base price for the T100 at $19,000 and the T200 at $40,000. Some are not sure if these vehicles will ever actually see the light of day (Eziquiel-Shriro, 2012).
Fisker Automotive was founded when designers HenrickFisker and Bernhard Koehler decided to join forces and design an automobile that pushed the limits. The first thing that the new partners did was survey the automotive landscape and they realized that it was based on a history defined by limitations(fiskerautomotive.com, n.d.). The new partners brought a combined 51 years of automotive design experience, and in 2007 they literally started with a blank piece of paper. Five years later,Fisker has established itself as a player in the electric car market and possess what Car and Driver calls the most attractive looking electric vehicle on the road. Born out of their combined vision, the Fisker Karma was born (Robinson, 2012).