Rising concerns surrounding climate change have forced governments and companies alike to push for a faster adoption of Electric Vehicles (EVs).
Governments across the world have deployed robust incentives to help manufacturers develop EV technology and ramp up national infrastructure resources. Tax breaks benefiting both OEMs and consumers are also being provided.
Depending on the source, most projections predict that more than 20% of automobiles will be fully electric by 2030, before a sharp rise to 50% in 2035. Until then, 2021 could set the stage to completely reshape the industry.
We live in a world where disruptions are happening frequently, even the stalwart companies now understand that they need to roll with the tide or become the next Blockbuster.
After a decade of innovations, favorable regulations, and an increase in demand, 2021 is on track to become the tipping point for EVs and the future of retail.
The first decade of the 21st century was marked with the rise of hybrid cars. Towards the end of the first decade, we started to see plug-in hybrids, slowly approaching pure EVs.
In December 2010, Nissan announced the Nissan Leaf, the first mass-produced electric car from a major automotive manufacturer that could go as far as 73 miles. Granted, Tesla’s EV roadster model came out in 2011 and could drive up to 244 miles, but its price range wasn’t as accessible to the mass market.
Between once-resistant incumbent automakers shifting to the production of EVs, exclusively EV-focused automakers catapulting to new heights of market value like Tesla, and new EV brands being introduced to the market like Polestar, the entire industry is trending towards investing in EV technology.
More so than just light vehicles, EVs are even extending to SUVs (Nissan Ariya), trucks (Ford F150) and buses (BYD) and commercial trucks and delivery vans.
While the current trends are encouraging, OEMs must ramp up their efforts to meet the goals set out by the government and the industry.
Global Internal Combustion Engine (ICE) transportation is responsible for about 12% of global CO2 emissions. But unlike marine and air transportation, the automotive, equipment and road transportation industries have the ability to reach a goal of zero emissions thanks to EV technology.
In addition to lower battery prices, regulations, and ambitious plans by OEMs, several other key components must come together to help speed up the transition to EVs.
The current challenges facing the general acceptance of EVs is the lack of infrastructure (power stations) and the cost of battery prices (between 20%-30% of EV total cost).
Thankfully, the markets are quickly starting to adapt, and these changes are likely to reshape the industry:
The next challenge will rest on the shoulders of the EV supply chain as the production of battery cells and their key raw materials, such as lithium and nickel, will need to increase tenfold by 2030.
As three of the most developed regions in the world, Europe, China and the US are in pole position to drive this change.
According to BCG, sales of plug-in hybrid (PHEVs) and battery electric vehicles (BEVs) were especially strong in 2020: their share of the light vehicle market rose to 2.2% in the US, 5% in China, and a remarkable 9.3% in the EU, where sales of PHEVs in the fourth quarter surged by 230% over the comparable period in 2019.
Japan, far ahead of the curve in terms of emission-free ways of transportation, is set to double down in the automotive sector to reach full EV adoption and ban pure ICE vehicles by 2035.
Other developing countries are also marching along such as India, who has introduced regulatory support such as its Bharat Stage VI emission standards and subsidies for electric cars, buses and two- and three-wheelers. While most of the country is still overly reliant on compressed natural gas due to a lack of power stations infrastructure and EV options from OEMs, BCG projects electric car sales will account for 10% of market share, while electric two- and three- wheelers, where sales are five times greater than cars, will account for around 25% of market share by 2030.
While the price point of EVs is still fairly high, it is rapidly decreasing; in 2011 an electric car with a range of 244 miles cost $250K. Today a similar vehicle can be found on the market for $40K.
The abundance of EVs flooding the market will only make those more affordable and accessible in the mass market. The momentum is such that traditional OEMs who used to resist this change are now scrambling to put their own EVs in the market.
2021 looks to become a tipping point in the industry, where automobiles become not only electric but also very tech-heavy and look like computers on wheels. As they become more mainstream, EVs will reshape the way consumers look at cars, which will be less mechanical and more like a prized piece of technology, e.g., smartphones, tablets and watches.
Innovation in technology is at the forefront of EVs as a product but should also extend to retail.
Incumbent OEMs will need to adapt and transform the way their network of retailers operate, including dealers’ infrastructure, employing tech-savvy service personnel qualified to tend to software-related issues, and new ways of engaging with customers.
The large majority of OEMs have defined EV specific sales targets and incentive plans to ensure dealerships’ focus on EV sales. However, as EVs are projected to cost half as much to maintain there is a unanimous consensus that the EV business will adversely affect the profitability of fixed operations in dealerships.
Some other challenges include:
A suite of solutions to improve the effectiveness of the Retailer Network and its collaboration with Field Operations teams can help:
In order to accommodate this ever-changing landscape, reliable technology tools must be employed to help manufacturers with integration of different data sources, flexibility to grow with ever-changing business needs and the ability to support omni-channel optimizations.