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The EV Opportunity for OEMs and Utilities

Electric Vehicles: Accelerate Customer Value to Drive Adoption

Matthias von Alten Craig Gosling
Matthias von Alten Craig Gosling

Electric vehicles haven’t become profitable yet. While battery development is advancing faster than expected, there is still work to be done to bring down unit costs, achieve economies of scale in production, decrease total cost of ownership and improve range and infrastructure to achieve parity with traditional combustion engine vehicles.

While long-standing challenges remain, there are significant opportunities for original equipment manufacturers (OEMs) and energy utilities to accelerate customer value and achieve broader customer adoption.

 

Cost is number one barrier to purchase

According to Publicis Sapient’s consumer research, The Digital Life Index, drivers report total cost of ownership (TCO) as the biggest barrier to EV purchase, beyond just the price of the vehicle, including at-home chargepoint setup, public charging, taxes, insurance and residual value. Many major markets offer subsidies and purchase incentives to offset the high cost of EVs, but they are complicated to navigate, require a lot of paperwork and not all tax credits are available to all buyers. In addition, not every EV or hybrid qualifies and neither do preowned vehicles. In short, subsidies are likely not a long-term solution to sustain sales and customer adoption.

Until the TCO of an EV is competitive or better than that of a combustion engine, adoption will be slow, industry watchers predict. The high cost of EVs is driven primarily by the battery. However, since 2008, the price of batteries has dropped 80 percent to $160 per kilo-watt hour and the race is on to push the cost of battery packs below $100 per kWh. While a cheaper battery wasn’t expected until 2025, advancements by Tesla and GM may result in more affordable EV models as soon as 2021. Depreciation is also a factor consumers take into account when considering an EV. As technology improves, batteries become more powerful, longer lasting and less expensive. Residual values of existing EVs are likely to drop faster as new models with higher ranges and lower prices enter the market. For many drivers, leasing will make more financial sense than purchasing.

To help navigate the complexity of buying and owning an EV, digital tools can help consumers better understand the costs associated. For example, Nissan’s cost calculator compares the cost of owning its Leaf EV with a customer’s existing gas-powered vehicle. It takes into account a driver’s location, daily commute, local gas prices, average miles per gallon, duration of planned EV ownership and electricity rates to calculate potential savings on gas. When it comes to subsidies and incentives, Tesla provides some information on their website by region and Chevrolet links out to government resources, but this is a space that remains complex. A reliable and accurate resource that provides consumers with a better understanding of whether they and the vehicle they’re interested in purchasing are eligible for certain incentives (and how to claim them) will help drivers feel more confident in making the switch.

When it comes to making a purchase decision, Mercedes’ EQ Ready App monitors a consumer’s driving behavior over a period of days to provide a personalized “EV readiness” score. The app records a user’s routes, shows whether destinations are within reach of an electric powertrain, provides information on energy requirements and advises on available infrastructure.

Matthias Von Alten

Transportation & Mobility Global Strategy Lead

Craig Gosling

Director, Utilities

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Alleviate range anxiety

Globally, drivers also regard battery range and limited charging stations as a top barrier to purchase. Even in European countries where there’s a higher concentration of charge points, these concerns top the list next to cost. However, our research indicates that consumer perception is beginning to shift, as more than  a quarter of people cite improved battery range and increased availability of charging stations as reasons for considering an EV.

By the end of 2020, the average battery range of EVs in the U.S. will be 254 miles. Even without Tesla models that inflate the numbers, average battery range will still remain over 200 miles – well over the usual trip. When it comes to longer hauls, however, the infrastructure still has to catch up. Per mile of road, the Netherlands has more than 14 charging stations, China has 2.5, the the UK and Japan have less than two, and the U.S. less than 0.6 charge points per mile of road. And with people driving more often and for longer distances in lieu of public transportation and air travel as a result of the pandemic, the lack of charging infrastructure may be a deterrent for those considering an EV.

Ionity, a joint venture between automakers (BMW Group, Ford Motor Company, Mercedes Benz AG and Volkswagen Group with Audi and Porsche) have set out to make European long distance travel with EVs possible – and anxiety-free. Not only has the venture created a charging network along Europe’s major highways, automakers, as part of the venture, provide free or discounted access to their customers. Ventures like this one can help take the anxiety out of EV travel by assuring drivers that the next charging station is not far off.

As it stands, sales of EVs in Europe have more than doubled over the past three years, but the number of charging points has grown by only 58 percent to just under 200,000. Despite this slower rate of infrastructure development, energy businesses continue to make headway. Ubitricity, a German charge point business, is rolling out a network of residential on-street charging points for EVs, retrofitted into existing streetlights to keep installation and maintenance costs low. Fortnum, Octopus and Shell Re-Charge provide simplified access to charging for their customers through thousands of public charging points – with plans to expand to home and work charging locations.

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Fix the disconnect in customer experience

The current customer experience of buying and owning an EV is fragmented – researching which EV to choose, buying or leasing the vehicle, claiming subsidies, purchasing insurance, installing a charge point, acquiring an energy tariff and accessing public charging infrastructure all require a plucky consumer to interact with a plethora of companies, apps, websites and paperwork.

Tesla has found success by absorbing much of this complexity for customers and offering additional services such as charge point installation, insurance and access to supercharger stations. Others like Volkswagen have made the jump to new industries entirely to address gaps in the customer journey. Elli is VW’s foray into energy utilities, providing domestic energy, home charge point access, as well as access to thousands of charging locations at work, home and VW dealerships. Elli aims to become as ubiquitous as the smartphone, creating an ecosystem that alleviates the anxieties and answers the questions raised by electric car owners and potential owners.

Additionally, compelling customer propositions often won’t be possible without partnerships; OEMs and utilities will need to collaborate to attract customers and tap into new revenue streams. For example, utilities can offer an EV along with a contract for home energy, much like telcos provide customers with new smartphones when they switch providers. Or, partnerships with third parties can also provide points of differentiation like Togg, a joint EV venture founded by five organizations including a telco and utility company.

The global market for EVs is currently driven by government regulations with the goal of driving down emissions. EVs are one of the most viable options for reducing the environmental impact of transportation, but there are improvements that must be made in order to be viable in the long term when it comes to customer experience across price, range and convenience.

The EV Opportunity for OEMs and Utilities

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Matthias von Alten
Matthias von Alten
Transportation & Mobility Global Strategy Lead
Craig Gosling
Craig Gosling
Director

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