Maybe REM weren’t thinking of the last days of mass-produced internal combustion engines when they wrote that lyric but it’s prophetic all the same. As with all revolutions, the inevitable shift to electric vehicles will create winners and losers. Existing players are working hard to be on the right side of that line, while new entrants are gearing up to realise the opportunities this change will bring.
The Calm Before the Storm.
There’s a common misconception that the move from internal combustion engines (ICEs) to electric vehicles (EVs) is evolutionary, like the change from petrol to diesel. However, if you ask the experts studying the potential impacts of EVs on society, they’ll tell you it’s seismic, more like the shift from horse-drawn vehicles to motorised cars. If you want to understand what that means in terms of opportunities and challenges, think about blacksmiths, wheelwrights, petrol stations, and the last time you had a Starbucks at a motorway service station.
The move to EVs is neither optional nor part of the distant future. It’s inevitable and it’s happening now. Climate change has created a growing sense of urgency and we seem to be reaching a tipping point with more than 17 governments across Europe and the Americas having published roadmaps for banning the sale of new ICEs (commercial vehicles as well as cars) by 2030. The EU is currently working on Euro 7, the latest and strictest version of its emissions standards, designed to accelerate the phasing out of fossil fuel vehicles. Car manufacturers have seen the writing on the wall. The combined investment in EVs pledged by VW, Tesla, Daimler, GM, Renault-Nissan, BMW and Ford exceeds $200 billion. In a July 2020 report, McKinsey estimated 450 new EV models will be released by 2022 (on top of the 143 new models launched in 2019).
An analysis of the EV market by charging platform company Virta, showed that half of the world’s EVs are currently driving the streets of China (2.3 million) – a fact that mirrors that country’s supply-side investment. At last count, China had over 700 EV start-ups. Many are still on the drawing board but some, like NIO, BYD and Xpeng, will flourish and move into Western markets. NIO is already taking substantial market share in Australia. Although China is ahead of the curve, the increase in sales volumes is worldwide. In January of this year, Swedish consultancy EV-volumes.com reported that global sales of EVs had “accelerated fast in 2020, rising by 43% to more than 3m, despite overall car sales slumping by a fifth during the coronavirus pandemic”. In Norway, 56% of vehicles are EVs.
Looking at cost of ownership, Delta-EE estimates the average EV driver spends 61% (€69.36 per month) less on charging than an average ICE driver spends on fuel. If that’s not persuasive enough, Octopus Electric Vehicles has launched a new EV leasing service in the UK. Built around a salary sacrifice scheme and utilising the extremely low Benefit in Kind tax rates on electric cars, it’s estimated to save employees an average of £14.5K over three years if they sacrifice some pre-tax salary for a new EV.
This is not a fad. It’s not going to go away. This isn’t even the future. This is today.
Understanding the New Landscape – Learn Fast. React Faster.
The ramifications of the move from ICE’s to EVs are far reaching and profound but they bring opportunities as well as threats. I believe the single most important thing that will differentiate between winners and losers during this period of change is a company’s ability to let go of its old assumptions, mental models and, possibly even its business models and understand what will drive (no pun intended) car owners in this new EV world. As we think about the changes EVs will generate, we need to think much wider than the cars themselves.
Let’s think about charging. EV’s will need a whole new “refuelling” infrastructure, fundamentally different to the one required to refuel an ICE. Manufacturers used to think potential buyers suffered from what they called range anxiety and indeed there’s a lot of research indicating one of the most common consumer questions is “How far will this car go before the battery’s flat?” However, I believe manufacturers will revise that opinion. After all, when buying an ICE vehicle, how many of us asked how big the petrol tank was? No, the real problem is charge anxiety – “Will I be able to recharge my car when I need to and how long will it take?”
EV charge points are opportunity magnets and they’ll change consumer behaviour. Shops, offices, hotels, car parks, even tourist attractions with charge points will be more attractive to EV drivers than those without. You can see the start of the change today. The owner of a winery in Australia was quoted as saying installing charge points in his tasting room car park was “a no-brainer” because it attracted customers. If drivers have to break a long journey for 20 or 30 minutes to top up their car’s battery, it’ll create opportunities for businesses able to offer them ways to use that time productively and enjoyably. One UK hotel chain is planning to install fast chargers, not to cater for overnight guests, but to lure additional customers to the gym and the restaurant. Video streaming giants are not only thinking about ways of delivering content to drivers and passengers waiting for their power gauge to hit the optimum 80%, but also considering actually entering this growing service market.
All those charge points will need to be installed somewhere and that represents another opportunity. People lucky enough to have off street parking are likely to charge their cars at home with preferential green energy tariffs but those who don’t (and that’s probably most people living in a city or large town) will need to use on-street or community recharge points. Maybe they’ll be provided by the local council. Maybe they’ll be provided by a private company. Either way, the repurposing of certain types of urban real estate is another great example of a new revenue stream that might well increase in the coming years. Also office blocks, schools, and shops with charging bays could generate additional revenue by making them available outside core hours.
Refilling a petrol tank is a single solution problem. You can only do it at a petrol station or maybe a large supermarket. The upside is it only takes a few minutes to fill the tank. EV charging points can be located at your destination and used while you’re doing whatever you went there for. I believe EV drivers will quickly see the benefits of this. The companies who anticipate the changes in consumers’ needs and behaviours, and create innovative solutions to cater for them, will thrive. I believe recharging will give rise to a rich array of solutions spanning home, street, business premises, car parks and public spaces. Charging time won’t be seen as wasted. Instead you’ll have a meal or watch a movie or go to the gym or do some work. It might even become something you delegate – at least one company is offering to take your car to be charged while you’re at work and bring it back at the end of the day.
An EV’s battery offers another set of opportunities over and above getting you from A to B. Vehicle to grid technology means EV owners could charge their batteries using cheap night-time tariffs and then use them to power their house rather than use expensive day-time tariffs – or they could sell their stored power back to the grid. Suddenly your car isn’t just a car, it’s a power bank on wheels.
The current market for EV charging infrastructure reminds me of the early days of the mobile telephony industry. Back then, operators regarded network coverage as a key competitive advantage. Today, they share networks and instead differentiate themselves on services and customer experience. I think charging networks will undergo the same cycle of consolidation and commodification, and consumer value will come from eco-systems that allow drivers to find, book and pay for a recharge point – and a constellation of adjacent services designed and realised through innovation and collaboration to add real consumer value and with an underlying desire to make things simple.
However, change brings threats as well as opportunities. Mass adoption of EVs represents a crisis for some parts of the existing ICE eco-system and they need to consider how they will prepare for change on this scale. Today, aftersales servicing is a significant revenue stream for most car manufacturers and their dealers. How will they adapt when cars need much less servicing and are more likely to receive software updates over a 4G or 5G network than to take regular trips to a garage? What will happen to petrol stations? Real estate that works for a five-minute refuelling stop might not be suitable for cars stopping for longer to recharge.
The shift to EVs isn’t going to go away, any more than climate change and the legislation intended to mitigate it will. Change at this scale can seem daunting, especially when you’re at the sharp end of it. The first step is to recognise it. The second is to embrace it and see it as rich with opportunity if you’re resilient, adaptive and creative. The ability to collaborate and adopt a customer-centric approach will differentiate winners from losers in the emerging future of automotive.
So What’s Your Plan?
The end of the world as we know it doesn’t need to be a bad thing, as long as you know how to grasp the opportunity offered by whatever replaces it. Love or loathe Telsa’s CEO, it’s undeniable Elon Musk is redefining the business models underpinning the automotive industry and he’s changed the way people look at EVs (and Formula-E and Extreme E racing have the potential to change attitudes even more). However, Musk isn’t an outlier anymore! There are many less headline-grabbing entrepreneurs who are building new businesses around the inevitable shift from ICEs to EVs.
What will you do to turn change to your advantage and be one of the winners as mass adoption of EVs becomes a reality? We are working with a number of clients to help them answer that very question. If you’d would like to talk about your options, please get in touch.
Here at changemaker, we support organisations and individuals in delivering sustainable and lasting change, especially during pivotal times of transformation. Our 5 Step change model allows us to help identify the changes that need making then bring a structured process to change that fully engages your people and makes change predictable so you can be certain of realising your goals in an increasingly uncertain world.