So far, electric vehicles have not been profitable for the automotive industry. While battery development is advancing rapidly, there is still much to be done to reduce the high manufacturing costs. The aim is to achieve economies of scale in production, reduce total operating costs and improve range and charging infrastructure. Only then will e-cars be able to catch up with combustion engines. Despite all the challenges, electromobility offers automobile manufacturers and energy providers great opportunities to increase customer benefits and customer acceptance.
Costs As The Biggest Obstacle To Buying
According to the consumer study “The Digital Life Index” , Total Costs of Ownership are the biggest obstacle to buying an electric vehicle. It is not about the price of the car alone but factors such as the installation and operation of a charging station at home, public charging, taxes, insurance, and the residual value. In many large markets, demand is stimulated by subsidies and purchase incentives to make the supply of an electric vehicle attractive. However, these buying incentives are often complicated and require a lot of paperwork when applying. Also, not all tax breaks apply equally to all buyers. In addition, not every e- or hybrid vehicle and not every used car qualifies for subsidies. However, subsidies are generally not a long-term solution to promote sales and customer acceptance. As long as the total operating costs of an e-vehicle are not competitive or better than those of a combustion engine, it will take time for it to become broadly established.
The high production costs of electric vehicles are mainly due to the battery. In 2010 the price for energy storage was still at 600 euros per kilowatt-hour. By 2025, however, the cost of lithium-ion batteries is forecast to drop to 83 euros per kilowatt-hour. The race is in full swing. The rapid advances made by Tesla and General Motors are likely to lead to affordable EV models even sooner. Another elementary factor that consumers need to consider when deciding on an electric car is its depreciation. Batteries are becoming more and more powerful, more durable, and cheaper. Therefore, the residual value of the old or current electric vehicles is likely to fall more quickly if new models with a more extended range come onto the market at lower prices. The bottom line is that leasing makes more financial sense for many drivers than buying a BEV (battery electric vehicle, plug-in hybrid, etc.).
With United Forces Against The Fear Of Range
Worldwide, the limited range and the limited charging infrastructure are causing consumers to be reluctant to buy electric vehicles. Even in European countries with a higher supply of charging stations, these factors, along with costs, are at the top of the list of concerns. In 2020, the average battery range of electric vehicles worldwide was 375 kilometers. It is expected to increase to over 750 kilometers by 2025. But the charging infrastructure still needs to be expanded, especially for longer distances. As the pandemic means that people are more likely to travel longer distances by car than by public transport or by plane, the holey and inconsistent charging infrastructure discourages buying an e-vehicle.
There are various efforts to alleviate consumer fear of range. Ionity, for example, is a joint venture between different automobile manufacturers, including the BMW Group, Ford Motor Company, Mercedes Benz AG, and the Volkswagen Group with Audi and Porsche. The aim has been to make European long-distance journeys with electric vehicles possible. The initiative created an extensive charging network along the most critical European motorways. In addition, all participating car manufacturers offer their customers free or discounted access to the stations. Projects like this can make a significant contribution to alleviating consumer fear of reach.
In the last three years, sales of e-vehicles in Europe have more than doubled, but the number of charging points has only increased by 58 percent to just under 200,000. Despite this slow development, there has been positive progress on the part of energy companies. Ubitricity, a Berlin start-up for charging stations that Shell recently took over, is working on a charging network for e-vehicles in residential areas. To keep installation and maintenance costs low, street lights are converted into charging points. Suppliers such as Fortum, Octopus, and Shell Recharge also offer their customers simplified access to charging at thousands of public charging points – with plans to expand to charging points at home and work.
Digital Helpers In The E-Mobility Jungle
Digital tools can help consumers reduce the complexity of buying and owning an electric vehicle. Assistance can also be provided with the fundamental decision on whether an electric car is a suitable choice for individual requirements.
For example, the EQ Ready app from Mercedes monitors the user’s driving behavior over several days to create an individual assessment of the EV readiness of the respective person. The app records the user’s routes, registers whether destinations are within range of an electric vehicle, provides information on the energy requirement, and advises on the available infrastructure.
With the Nissan cost calculator, for example, the cost of owning the electric model “Leaf” can be compared directly with the cost of a gasoline vehicle owned by a customer. The calculator considers the location of the driver, the daily commute, the local gasoline prices, the average consumption per kilometer, the duration of the planned ownership of the e-vehicle, and the electricity tariffs to calculate the potential savings in gasoline consumption. At Tesla, on the other hand, there is some helpful information on the website regarding available subsidies and incentives, depending on the region. The car manufacturer Chevrolet links to external sources, which means that the topic remains complex.
To counter consumer uncertainty, it is essential to establish a reliable source of information. This should provide a better understanding of whether and which subsidies or incentives are possible when buying a specific model and how they can be used.
Focus On Seamless Customer Experience
The customer experience when buying and owning an electric vehicle is currently highly fragmented. Finding a suitable model, buying or leasing a car, applying for subsidies, taking out insurance, installing a charging station, purchasing an energy tariff, and accessing public charging infrastructure requires the customer to interact with many companies, apps, and websites documents. All market participants must focus on optimizing the individual customer experience and simplifying it through possible collaborations.
Tesla is very successful in relieving much of this complexity for its customers. The company offers additional services such as charging points, insurance, and access to supercharger stations. Other players like Volkswagen are getting involved in new industries to close gaps in the customer journey. The green electricity provider Elli is VW’s foray into the field of energy supply. Elli offers household electricity, access to charging points at home, and access to thousands of charging points at work, home, and VW dealerships. Elli should be as omnipresent as the smartphone. VW wants to create an ecosystem that addresses the fears and questions of electric car owners and potential customers.
Convincing customer offers will often not be possible without partnerships. Car manufacturers and utilities need to work together to attract customers and develop new sources of income. Energy suppliers can, for example, offer an e-vehicle together with a contract for household electricity, similar to how telecommunications companies provide their customers with new smartphones when they switch providers. Cross-industry partnerships with third parties can also offer points of differentiation. The Turkish automotive company TOGG, for example, is a joint venture of five partners, including a telecommunications company and an energy supply company.
The global market for electric vehicles is currently being driven mainly by government regulations aimed at reducing emissions. Electric cars are one of the most viable options for reducing the environmental impact of traffic. For electromobility to become broadly established, however, improvements in the customer experience are required, especially in price, range, and convenience. Simple access and uncomplicated use – fully integrated and connected – are decisive for success. Automobile manufacturers and energy providers alike have an obligation here.
