Jumpstarting Electric Auto Sales And Experience

Tuesday, June 2, 2020

#Functional Safety    #Automotive SPICE    #Quality

What GM And Tesla Must Consider

General Motors GM bet the farm on electric vehicles.

So have Telsa, Rivian and a myriad of other start-ups.

Why? Simple. If the U.S. government’s Corporate Average Fuel Economy (CAFE) regulation climbs to a whopping 40.4 miles per gallon for cars and light-duty trucks in 2026, they must consider a step-function in vehicle technology. And before a politician blames it solely on California, the European Union has mandated the average equivalent of fifteen-seven (57) miles per gallon in 2021 and ninety-two (92) mpg by 2030. Even China has a zero-emission mandate for a percentage of the vehicles (albeit with significant consumer incentives).

These changes in regulations and associated business plans led Morgan Stanley    MS  to predict a “…tectonic shift to electric vehicles (EVs) … [which] could be valued at $25 trillion over the next few decades.” All that assumes, though, that buying patterns alter. And they haven’t sufficiently. Yes, 2019 was a record year for electric vehicles at 2.2 million vehicles sold, however that was only a 9% increase from 2018 and, oh by the way, it’s predicted to plunge 43% this year. Coronavirus will assuredly affect both sales and rollouts as evidenced by Ford and Rivian’s recent decision to scrap their joint EV and GM’s postponement of Bolt’s refresh. And for some of the brands, even the few sales they achieved were expensive to the corporation, e.g. Chevy Bolt has been offering discounts of $10,000 and Fiat Chrysler Automobiles has lost $20,000 on every Fiat 500e sold. Meanwhile, the best selling segments in the first quarter this year were Sport Utility Vehicles (SUVs) and trucks

So the question becomes, “How do the manufacturers create the shift in purchases that they need?” The simple-yet-complex answer is figuring out the customers’ end-to-end experiential needs and then delivering on them. That means working with the governments, dealerships, and supply chains to improve the touchpoints minimally at the beginning and end of the customer journey.

Touchpoint #1: “RESEARCH LRCX 

A Big Three’s Director of Business Planning (who requested to remain off-the-record) stated that, “Some small percentage – let’s say 5% — are the treehuggers and will automatically buy green vehicles to help the planet as a moral imperative, but the rest of the population thinks ‘What’s in it for me?’” And frankly the answer to that question has become even more difficult with gasoline prices dropping at times below $1 per gallon amidst a global price war. Not to mention, some of the utility companies are flirting with passing along the costs of network upgrades, which can cost upwards of $5,800 per vehicle. The good news remains the same: maintenance of a newer electric vehicle is approximately 1/3rd of the costs of its gasoline counterpart. 

However, the entire equation is abundantly unclear to a researching shopper. In fact, a previous Forbes article points out the complicated equation and says “… the bottom line: An electric vehicle may or may not save money, depending upon a host of factors, which will vary depending upon your location, driving habits, and choice of vehicle.” A buyer might type into a search engine “why should I buy a Chevy Bolt” and only find a host of non-GM websites listing pros and cons sans calculators or truly-trusted information. In fact, the share of cost-related searches for Battery-Electric Vehicles (BEVs) is either 10x or 20x that of gasoline-vehicle searches for Germany and U.S./U.K. respectively, which suggests both interest and confusion.

The research then becomes exponentially more difficult for charging stations. “Charging Anxiety” creates a series of complex questions. For instance, will there be well-placed stations between home and <insert remote location here>? How long will charging take? Will I need to create a complex scenario days in advance to various waypoints? Yes, maybe ”Range Anxiety is dead” as some argue given seriously impressive ranges (e.g. 370 miles), but his annoying half-brother, Charging Anxiety, is just as overwhelming.

If this crisis has afforded anything, it’s the reexamination of how to sell online. An independent study prepared for the National Automobile Dealers Association (NADA) earlier this year shows nearly 100% of customers researched and/or found their car online prior to completing the transaction at the dealership. That suggests creating a better online funnel specific to electric vehicles might improve the research touchpoint. 

Touchpoint #2: “BUY”

In the simplest terms, dealers are marketers that help to match customers and their associated needs with available products. If customers finish their online RESEARCH targeting a gasoline Ford F-Series pickup, they won’t arrive at the dealership and be coerced into an electric Mustang Mach-E sports car. Period. There are conspiracy theories that dealers are snake oil salesmen who nefariously lead Gullible Grandma towards the moneymakers, but the government(s) and marketplace wouldn’t allow that. It’s ten times (10x) more costly to acquire a customer than maintain one, and “pushiness” is the #1 turnoff. Dealership owners are savvy business[wo]men. They react to demand. 

Could dealers help when customers are on the fence? Certainly. Is that part of the issue? Potentially. As mentioned previously, a hurdle continues to be the knowledge gap. But the ability of consumers to acquire knowledge about the reality of owning an EV doesn’t automatically assuage every concern they may have. 

“Even as prices are coming down and other obstacles are being addressed, prospective customers continue to ask pointed questions about the practicality of owning an EV,” says Jaren Allen, Vice President, Communications at National Automobile Dealers Association (NADA). “There are especially questions about recharging access and recharging speed, because most Americans don’t have their own garage or a dedicated nightly parking spot.”

Allen went on to point out that while there are approximately 168,000 filling stations across America—many with 10 or more pumps that dispense 40 million fill-ups every single day— battery technology and infrastructure are simply not widely ready for fast charging. “[Gas-powered] vehicle owners can so quickly and efficiently extend their vehicle’s range almost infinitely such that they generally take it for granted,” Allen said. “Battery-Electric Vehicle owners simply don’t have that luxury at the moment. And that still matters to a lot of perspective buyers; particularly buyers who are looking for one-car-meets-all for their personal, professional and family needs.”

Touchpoint #3: “UPGRADE”

There has been a recent shift of buyers returning to gasoline engines. Is that because incentives ended January 1st? Maybe. Is that because of the chicken and egg dilemma of few charging stations? Maybe. Or the eight hours required to recharge most vehicles? Maybe.

Manufacturers should be doing a “failure mode analysis” of the users’ needs and arming the dealerships with the information to overcome these hurdles. 

The fascinating thing: these vehicles essentially have sensors everywhere and could collect, upload and download data with whatever frequency desired; upwards of 25 gigabytes per hour. Therein, the manufacturer and dealer could know under what conditions the vehicle was driven (via obscured data to protect privacy), the amount of maintenance done, and even the full, real-time Return on Investment, which would be a powerful reselling technique.

Regardless, if companies have bet the farm, it’s time to seed and harvest differently. That’s either creating an online funnel, structuring an infrastructure build-out (e.g. VW’s efforts with Electrify America), or finding a better solution to satisfying Wall Street’s thirst for innovation while meeting the customers’ needs for transport.

GM’s Chief Financial Officer (CFO), Dhivya Suryadevara, said last week that GM’s EV plans have “remained untouched.” Maybe they should touch the plans a little.

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