Navigant Research Blog

Consumer Survey Indicates Core Audience Needs Expansion

— December 12, 2017

Automakers are introducing new EV models that will appeal to a broader audience of car buyers. Yet, understanding the demographics of consumers with the greatest potential to buy plug-in EVs (PEVs) remains a formidable industry challenge. Navigant Research conducted a survey to understand consumer preferences and demographics when considering a vehicle purchase. Overall, survey results indicated that electric powered vehicles were the first choice of vehicle for their next purchase for 14% of respondents, while 74% indicated gasoline powered as their first choice. When combined, diesel, hydrogen, natural gas, and propane autogas powered vehicles accounted for 12% of respondent’s first type fuel choice.

First Choice Fuel Type for Next Vehicle Purchase

Source: Navigant Research

The gap between electric and gasoline powered vehicles is large for consumers considering a vehicle purchase, but the number considering an EV jumps to 58% of respondents when their second and third choice of fuel types are considered. So, what can the EV industry do to convince that 58% to prioritize emissions-free driving?

To best distinguish who may purchase a PEV, results of respondents who were favorable toward PEVs (ranked electric as their first fuel type preference) and who owned a PEV were compared to focus on any key differences between the two groups. According to the survey, an average PEV owner is likely to be under 40, live in a single-family home, have a 4-year college degree, and make above $50,000 in yearly income.

Consumers with access to parking at their residence are more likely to purchase PEVs due to the ease of access to charging—having an electrical outlet near the dedicated parking increases this likelihood. Therefore, consumers with garages, largely found in single-family homes, are the most likely to own a PEV. A lack of home charging requires a consumer to rely on public charging infrastructure, which in many areas is still insufficient, and discourages adoption.

Observed Consumer Trends

Overall, the demographics of PEV owners and those interested in purchasing a PEV were similar, but two differences stood out. Younger age groups are more likely to own a PEV and be favorable toward a PEV as their next vehicle purchase. There is also a widening gap in the older 45-64 demographic between those who are favorable toward PEVs and those who own them. The 45- to 64-year-old demographic made up 10% of the PEV ownership population, but 21% of those who were likely to purchase a PEV. This data points to a demographic that has unrealized potential for PEV adoption.

The second trend of significance is the disparity between those living in single-family homes and those in multi-family units, such as apartments, lofts, and townhouses. Lack of access to charging is a major barrier to PEV adoption, and those who do not live in single-family homes are less likely to own or be likely to purchase a PEV, as shown in the chart below. No major differences in housing types stand out between the two groups, suggesting that more charging options are necessary to entice multi-family dwellings to buy electric.

EV Consumer Survey: Housing Type

Source: Navigant Research

The Road Ahead

While the consumer survey shows many with positive attitudes toward PEVs, market challenges need to continue to be addressed to make an all-electric transportation future possible. The announcement of longer-range and lower priced battery EV models, charging infrastructure investments, and purchasing incentives indicate that PEVs are here to stay. Market stakeholders should take advantage of this upward momentum to target a wider audience of individuals purchasing vehicles, and promote PEVs to those outside of the current core target demographic.

For more information, see the recent Navigant Research report, Market Data: Electric Vehicle Charging Equipment.

 

Automotive Subscription Services May Aid in EV Adoption and Software Updates

— October 19, 2017

When Karl Benz went for his first test drive in 1886, the automobile changed the way that we live in ways that were unimaginable. Over the course of the 20th century, motor vehicles expanded our horizons, making travel easier and more affordable than it had ever been. The need for vehicles to keep pace with always advancing technologies like automation and connectivity will probably end personal vehicle ownership for most of us in the coming decades, but only after manufacturers create business models that replace individual sales. One increasingly popular approach is vehicle subscriptions.

Pro and Cons of Auto Subscriptions

The idea of getting customers to subscribe rather than purchase products outright has been an appealing one for companies in many markets. From the provider’s perspective, creating a recurring revenue stream is good for business and helps to add some predictability for planning purposes. For certain businesses such as software, recurring subscription revenue can be hugely important to help fund ongoing development and product improvement.

For automakers that have endured some spectacular market cycles over the years, the prospect of stable monthly revenue is particularly enticing. As automobiles become more software-defined, the prospect of continuous recalls to update bugs and security vulnerabilities is something of a nightmare scenario if automakers can’t charge customers for those fixes.

For customers, on the other hand, the thought of a perpetual monthly car payment is significantly less appealing. Thus, automakers have to strike the right balance between what customers have to pay and what they get in return.

Early Movers

Enter the car subscription model. In the United States, Porsche is the latest company to announce a subscription service, joining Cadillac, Volvo, and Atlanta-based startup Clutch. Porsche Passport and Cadillac Book are the most similar. For a flat monthly rate that includes insurance, registration, taxes, and maintenance, subscribers can choose to drive any of the vehicles available from those brands. Porsche offers two price tiers. The entry-level $2,000 per month plan gives access to the Boxster, Cayman, Macan, and Cayenne, while the $3,000 tier lets subscribers pick any current Porsche.

Clutch is similar, but rather than being restricted to a single brand, the company works with dealer groups to build local fleets of a broader range of vehicle types from multiple brands. Clutch currently offers three price tiers, each with more expensive vehicles. Care by Volvo is structured more like Apple’s iPhone upgrade program. Rather than allowing drivers to swap cars at any time, the Volvo plan is similar to a lease that includes maintenance, insurance, and registration but allows customers to switch vehicles annually.

Promise for the Future

These early subscription models are aimed at more affluent premium customers who are more likely to stomach a relatively high monthly fee. However, if these models prove popular, mainstream brands are likely to follow suit with similar programs. Regardless of the price point and brand, the recurring revenue provides an opportunity to fund continuing software updates. The inclusion of maintenance and regular vehicle swaps will provide an opportunity to keep vehicles fresh. Once over-the-air software updates become common, shop visits for those updates will become unnecessary.

Window to Increasing PEV Use

In addition to regular updates, the subscription model also provides automakers with another opportunity to increase plug-in EV (PEV) use. Customers that might not otherwise make a multiyear commitment to a PEV may be more willing to try one as part of a subscription, especially if they can skip a traditional dealer in the process. The transportation business is changing, and we’ll see plenty more experiments before everything settles out.

 

Taking the EV Mainstream

— September 19, 2017

The plug-in EV (PEV) is rapidly evolving to become a viable mainstream option for almost every car buyer. As ever with automobiles, there is no silver bullet solution. This year there are several unique variations on how best to serve the needs of drivers seeking to minimize energy use as the PEV landscape matures. Navigant Research’s EV Geographic Forecasts report projects 50% growth in North American PEV sales this year and market share of between 7% and 11% by 2026.

Design is always a matter of balancing priorities. Priorities can depend on the target market, how the vehicle will be used, and budgets.

Tesla’s Approach

Tesla is trying to build on the premium brand image it has cultivated while creating the impression of going mainstream. The Model 3 has been promoted as an affordable long-range EV with a price starting at $35,000. That will yield a spartan car. Most customers will actually be paying far more to include current options, bringing the price to at least $59,000, with additional performance options to be added later.

GM

General Motors (GM) took a different approach with the Chevrolet Bolt, opting for maximum possible electric range and utility while keeping the base price under $30,000 (after federal incentives). Even including all options, the Bolt is still less than $44,000 before incentives. While some reviewers have criticized the hard plastic interior, the vehicle’s real-world range, handling, and utility have garnered very positive feedback.

Hyundai and Nissan

Hyundai and Nissan, by contrast, have veered even harder toward trying to maximize the value proposition of their respective EVs. The Hyundai Ioniq Electric and Nissan LEAF both have starting prices before incentives below $30,000 and even highly equipped models will still only hit about $36,000.

The Ioniq, built on a dedicated electrified platform with hybrid, plug-in hybrid, and battery-only flavors, went for maximum efficiency with a slick five-door hatchback body strongly reminiscent of prior-generation Toyota Priuses and a moderately sized battery. Hyundai aimed to keep both cost and weight down with a 28 kWh battery, less than half the capacity of the unit in the Bolt. With its modest weight and low drag, that’s enough for 124 miles of driving range and a leading efficiency of 136 MPGe combined.

After trying out a slightly futuristic design with the original LEAF, Nissan decided it needed a more conventional look in order to get an audience beyond early adopters. While the five-door hatchback configuration and basic dimensions are carried over, the LEAF now incorporates contemporary Nissan design cues both outside and in the cabin. Aside from the propulsion system, it’s now just an ordinary compact hatchback. With a more efficient drivetrain and battery that has grown from 30 kWh to 40 kWh, the LEAF is now expected to go at least 150 miles on a charge, double what it did when it debuted in 2010.

Chrysler

Fiat Chrysler, which has long derided EVs, has now opted to build on one of its core strengths with the Pacifica Hybrid. Like Nissan, FCA is focusing on the ordinariness of the driving experience with its plug-in hybrid minivan. The key distinguishing feature is that it has 35 miles of real-world electric driving range, enough to meet most daily commuting needs without burning any gas. But as a family hauler that might be used for road trips, no additional planning of where to stop and charge is required.

Buyers of vehicles that burn fossil fuels have long had choices ranging from tiny sports cars to full-size trucks. We’re now reaching the stage where those that want to avoid gas stations have choices at increasingly affordable price points as well.

 

Diversity of EVs to Power Sales Growth

— May 23, 2017

Plug-in EV (PEV) sales have climbed by more than one-third thus far in 2017, and the plethora of new models coming out will continue to drive sales even higher during the next decade. Despite gasoline selling for less than $2.50 per gallon in much of the United States, PEV sales increased by 39% during the first 4 months of the year, according to data from HybridCars.com.

PEVs have been available in only a limited number of segments and have appealed primarily to middle- to upper-income buyers, which has constrained sales volumes. However, by 2020, the number and variety of PEV models for sale will grow dramatically. As seen in the table below, more than 30 new or updated PEV models will be on offer within the next 4 years from both established and aspiring auto companies.

More battery EV (BEV) than plug-in hybrid vehicle (PHEV) models are expected, as improvements in battery technology are prompting automakers to push all-electric driving. PEV sales in the United States are expected to surpass 2.1 million annually by 2030, according to Navigant Research’s Transportation Forecast: Light Duty Vehicles report.

Announced PEV Models

(Source: Navigant Research)

A Range of Options: Hyundai, Kia, and Honda

While most auto manufacturers are focusing on increasing the driving range of their BEVs, Hyundai, Kia, and Honda this year instead announced cars that focus on value and efficiency.

Hyundai and Kia each announced a trio of models based on the new IONIQ platform: a hybrid, PHEV, and BEV. The Hyundai IONIQ BEV is estimated by the Environmental Protection Agency (EPA) to go 124 miles on a charge, which is superior to many of today’s BEVs—except for the Tesla Model S and X and Chevrolet Bolt. Comparable to the Ford Focus Electric and Nissan LEAF, Hyundai’s BEV is priced competitively (under $30,000) while offering greater range, but well below the Bolt and other upcoming 200-mile BEVs. Kia is using the same platform and propulsion systems with a taller crossover body style called the Niro, which will be slightly less efficient but may be better suited to the current market trends.

Hyundai challenged its engineers 11 years ago to produce the most fuel efficient hybrid vehicle available, and the design was used for the six new variants from the two brands. According to fueleconomy.gov, the IONIQ BEV is the most efficient of all vehicles, earning a 136 combined mpg equivalent rating. The car also won the greenest vehicle award from the ACEEE.

During an extended test drive earlier this year, the IONIQ was a pleasure to steer through turns and had quick acceleration and a comfortable interior. It is a very competitive offering. The company is developing a longer range BEV, but the added battery mass means it won’t be as energy efficient, according to Hyundai.

Honda’s upcoming Clarity EV is expected to travel around 80 miles on a single charge, which is well below the standard of 110 miles or more for current BEVs. The company has taken some heat for announcing a car that is “uncompetitive” from the start in both range and price, as it is expected to list for more than the LEAF or Fusion and near the price of the longer range Bolt.

EVS Conference

The international EV community will be gathering in October at the 30th EVS Conference in Stuttgart, Germany. Billed as the largest trade fair and conference event for electric mobility, EVS features manufacturers of EVs, charging infrastructure, and mobility software and solutions, as well as researchers presenting papers on the latest innovations. Navigant Research will be discussing the latest EV innovations during a presentation at the conference.

 

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