Electric vehicles unplugged: the industry gets serious
By: Dr Peter Wells, Wednesday, June 30, 2010, AutomotiveWorld.com
Under starters orders
The 2010 Frost & Sullivan conference on Electric Vehicles Unplugged, held in London on 22nd and 23rd June, gave a real sense of an industry making serious plans to go beyond prototypes and demonstrators, and into providing real vehicles for real customers. For that reason alone, it was an intriguing event.
More importantly though, the transition to market has started to expose some very real differences of perspective of the appropriate business model for the industry OEMs, and indeed for the growing complex of related companies fighting for market share. Not least, the role of OEMs themselves is up for challenge.
The easy bit: where the automotive industry agrees
It is not difficult for the automotive industry and its supporters to agree on the main features of government policy. In essence, there is widespread support for three areas of intervention:
- Government subsidy of the purchase and / or use of electric vehicles such that the early (low) volumes can be made more competitive with existing internal combustion engine vehicles;
- Government support for and help with the provision of infrastructures in the widest sense, including changing items such as planning regulation to require electric vehicle re-charging points to be mandatory on new developments;
- Government promotion of the broader supporting industry by whatever means allowable, from R&D to advance factory provision.
The industry remains concerned at the long design cycle times, and the large investments needed for the transition to production, which demand greater clarity and certainty from government policy in all aspects. While this may be the case, such concerns also emphasize the advantages for the OEMs and their suppliers in achieving faster time to market and lower investment costs. Government in the UK and elsewhere too is keen to participate for many reasons, but as ever concerns remain over the willingness to continue support in the face of challenging economic circumstances.
Yet even in these areas there were distinct signs of disagreement. One prominent OEM representative asked the astute question: When are we going to stop the subsidies? No clear answer was forthcoming, yet the question remains crucial to the long-term health of the industry and its independent status.
The concern has to be that subsidies distort the market, and most importantly make it difficult to understand the true level of demand
Business models that are premised on subsidy are inevitably vulnerable to policy change; a fact exposed by the concerns expressed over the future prospects for the UK subsidy for electric vehicles announced by the outgoing Labour administration and not absolutely confirmed by the incoming coalition administration. Moreover, the level and type of subsidy available varies enormously across national markets, a fact that makes coherent forward planning of volumes and prices more difficult than it should be. The concern has to be that subsidies distort the market, and most importantly make it difficult to understand the true level of demand.
The emergent differences
Notwithstanding the inevitable politicization of events such as this, and hence the relatively guarded nature of some comments, it was also readily apparent that clear differences are evident between the various OEMs in terms of strategy towards the electric vehicle segments, and between the OEMs in general and some of the other organizations involved. These differences can be understood along two inter-related dimensions; the technologies used and the customers targeted.
In terms of technology there remains a fundamental difference of view between the battery swap school of thought, and those supporting on-board charging. Very different markets or customer types are envisaged.
The battery swap approach, most overtly associated with Better Place, is clearly aimed at high-mileage users whose daily trip is greater than the comfortable range of a single charge. Unanswered questions remain over issues such as battery standardization. It is evident, for example, that a battery swap station would have to support different battery designs and shapes, which in turn implies a rather large warehouse if a diverse fleet of models is to be serviced.
On-board charging virtually guarantees city car applications given contemporary battery range limitations, which in turn places emphasis on the need to create public and private recharging infrastructures.
The battery swap approach, most overtly associated with Better Place, is clearly aimed at high-mileage users whose daily trip is greater than the comfortable range of a single charge
The city car application is also, for many in the industry, one with a defined and rather small scope in terms of market volume. It is a second car perhaps, or one used by a fleet operator whose business is inside the urban area. It is a niche market only, albeit perhaps a stepping-stone to bigger volumes.
In terms of customers targeted the differences were also apparent. For some, the initial electric vehicle customers are going to be "conspicuous minimalists" who are prepared to pay a premium but very clearly want to be seen to be different. Hence vehicle design and styling for this segment needs to be distinct from the prevailing language for cars. For others, the market is simply for a "normal" car that happens to be electric and customers do not want to be alienated by "wacky" styling.
Differences were also apparent in how electric cars should be positioned. Are they rather range-compromised and expensive (but green), or do they offer unique and very positive advantages such as near silent operation and seamless acceleration against which a traditional petrol or diesel car looks crude (but with the advantage of long range between fill-ups)?
Moreover, the OEMs are evidently well advanced in terms of their plans for offering customer propositions. Again, major differences in strategy can be expected to be observed as the market for electric vehicles becomes a reality.
An interesting example described at this conference was the Peugeot Mu concept, a form of mobility card that would mean that the buyer of an electric car would also be able to go to a Peugeot dealership and make use any vehicle in the range, from a bicycle to a mainstream diesel sedan. Clearly this approach speaks to the historic capabilities of Peugeot in producing bicycles, scooters, cars and vans with electrification still progressing across all types of vehicles.
Future prospects
It is no accident that this conference was essentially about business models rather than technology per se. The reasoning became evident from the presentations, given that there is a palpable sense of movement from the laboratory and the field trial to the deployment of vehicles to customers.
In this respect, uncertainty and excitement are combined to equal degree but the search for viable business models and the diverse approaches outlined by companies such as Ford and PSA Peugeot Citroen suggests that commercialization is posing new and unprecedented challenges. What appears beyond doubt is that the nascent electric vehicle industry has survived the global financial crisis and is now ready to emerge as a genuine force.
Dr Peter Wells is a Reader at Cardiff Business School, where he is a Co-Director of the Centre for Automotive Industry Research and leads the automotive industry research programme within BRASS, also in Cardiff University. Dr Wells is also a director of AutomotiveWorld.com's sister website AWPresenter.com. He can be contacted on wellspe@cardiff.ac.uk.
Published on Wednesday, June 30, 2010
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