Show vehicles or all-in: Differing electric vehicle strategies emerge

The other day I had the pleasure of sitting on a panel to discuss the future of electric vehicles (EVs). Mostly our audience was in the financial sector, rather than ICCT’s standard research and policy community. So this pushed us toward a broader discussion on industry investment and strategy. Green Car Reports’ John Voelcker moderated an excellent exchange in the panel, including Chelsea Sexton (of Who Killed the Electric Car?), myself, Jacob Harb of Volkswagen, and Doug Skorupski of BMW.

The discussion especially highlighted the very different approaches by automakers to roll-out their new plug-in electric vehicle models. On one hand, there was Volkswagen, which is one of the last major automakers to bring an electric vehicle to the US market. In model year 2015 they are bringing out an “e-Golf”, which is largely based on one of Volkswagen’s global best-selling Golf but “different, sorta.” The Volkswagen focus with the e-Golf is to try to make the electric version very closely approach what customers expect of non-electric versions in terms of cost, range, and utility.

On the other hand, there is BMW. BMW has undertaken previous demonstration-scale experiments with the earlier ActiveE and MiniE electric vehicles to understand the customer experience. As Jacob Harb put it, at this point BMW is now “all in” on their strategy to roll out their new award-winning i3 EV, saying that the “i” program is “a way to future-proof our business”. Their clean-sheet vehicle engineering and design approach pushed innovation in lightweighting, materials, vehicle manufacturing, electric motor, and batteries. This from-the-ground-up approach allows great benefits over simply converting existing internal combustion vehicles for electric drive. The company has used its past experiences to hone how they think about the customer, from marketing, creating a community, tightly managing the supply chain, engaging dealers – in fact, incorporating many of Chelsea Sexton’s high priorities and lessons learned from past false starts on EV programs. The latest news is that BMW plans to manufacture up to 20,000 units this year.

Many automakers, very simply put, generally fall into paths like the more conservative VW-style approach (tweak existing model, smaller scale, slower) or like the more aggressive BMW-style approach (purpose-built EV, larger volume, sooner). Companies like Volkswagen-Audi, Chrysler-Fiat, Honda, Hyundai-Kia, and Mercedes are walking a more slow and cautious EV path, committing only to low volumes at this point. Companies like Nissan, General Motors, Tesla, and now BMW have made more dramatic EV investments, including decisions to push through to larger manufacturing scales, toward broader EV deployment in multiple major world auto markets. Not quite fitting in either category, Ford and Toyota have scaled up to stronger plug-in hybrid-electric vehicle strategies, because of their more mature hybrid programs (together selling 82% of US hybrids in 2013). The following gives a snapshot of US sales in these very early days of plug-in electric vehicle deployment:

Plug-in electric vehicle sales in the United States (Source: hybridcars.com)

Whose strategy on EVs will pay off most handsomely? Well, I’d bet that a number of different technology and deployment strategies will each be successful and serve diverse consumer demands. I’d speculate that those that have already made bigger investments and those that get past their low-volume phases (including consumer research, demonstration, manufacturing) most quickly will retain early-mover advantages and have much greater success in the long run. Getting beyond low-volume demonstration phases and beyond minimum-mandated compliance levels of EVs (e.g., in California) represents a major milestone. Higher manufacturing scales will be critical in getting costs down, meaning that EV sales in the tens of thousands per year in multiple markets (e.g., in US, Europe, Japan, China) will be necessary. BMW appears to be very clearly stepping up to this next level this year. Sustained policy is a required element in all this, but the automakers’ global strategies are surely critical too.