The shift from pump to plug - Consumer readiness and EVs

Parul Chhabra argues that attaining mass scale potential of electric vehicles will be determined by satisfying consumer concerns which go beyond pro-environment government policies.

The buzz around electric vehicles (EVs) has been around for many years, however, their acceptance has come more recently. When tailpipe emissions from internal combustion engine (ICE) vehicles reached a level that was posing a sustainability challenge for the planet, push came to shove, and governments started devising policies to gradually deal with the issue of climate change; NGOs increased the awareness of consumers about the hazardous levels of pollution; manufacturers reacted to governments’ mandates, rolling out EVs to attract consumers and to stay relevant in a highly competitive automotive world.

History - the guide to the future?

If history is the guide to future, then this is not the first-time consumers are witnessing a change around mobility options. Back in the 19th century when horse carriages were the means of city transport, the problem of horse manure was disconcerting for city dwellers and coaxed governments to look for alternative forms of energy and transport in form of ICE vehicles.

The time scale of full energy transition from horse carriage to ICE has historically been more than half a century.  Inevitable questions around affordability, convenience, infrastructure, law, licensing and liability have been resolved over time and consumer acceptance came about gradually. The fact that there has been a shift from horse carriages to ICE vehicles gives us hope that a complete shift towards EVs is possible and is beckoned by a bright future.

Consumer attitude will eventually determine EV uptake and ensure the pace at which transformation to full electrification will take place.

Policy is not enough

In recent times as well, what is emerging clearly is government intervention in form of pro-environment policies and the response of OEMs to the policy mandate are necessary but not sufficient conditions to bring about a shift from ICE to EVs. It is consumer attitude that will eventually determine EV uptake and ensure the pace at which transformation to full electrification will take place.

The modern-day consumer has myriad of variables to assess when it comes to making a purchase decision about cars in general, and EVs in particular. While there are questions around electric vehicles’ affordability, driving range, charging time and availability of infrastructure, which are relatively easy to quantify, there are a plethora of qualitative issues that confound the decision making. Issues such as risk assessment of safety; modification in lifestyle; environmental beliefs; apprehension about missing out on limitless driving experience; no prior experience with EVs, are subjective evaluations that are based on personal perceptions and are difficult to quantify.  

Consumer perception

In this context, to say that consumer perception is the biggest barrier to mass scale EV uptake would not be a hyperbolic claim. As consumers are not a monolithic entity, innumerable but unique value propositions may be expected from the stakeholders across the EV value chain ranging from battery technology, EV models, charging infrastructure and even aftermarket services. A value proposition that creates perception of value for each consumer would be required to make a shift from pump to plug.

Regional and demographic differences in consumers are important considerations of the value proposition of electric vehicles.

Customer concerns regarding battery electric vehicles - source: Deloitte Global Automotive Consumer Survey 2018
Customer concerns regarding battery electric vehicles - source: Deloitte Global Automotive Consumer Survey 2018

While consumers in China regard EVs as acquisitions that provide affordable luxury, the early adopters in Japan are consumers who take a calculated decision based on combination of low energy cost per kilometer and attractive subsidies. For consumers in Europe, lower emissions and lower cost of operating are the main drivers behind owning an EV while not compromising on the range, even though daily driving requirements are relatively modest. In America, consumers are influenced by the price of the vehicle and gasoline, driving range and consider the opinion shared by family and friends important in shaping their attitudes towards EVs.

Issues around cost, range and charging as key factors behind EV uptake are well known and adequately understood. A deep dive into the consumer psyche would reveal that some of these issues are in fact interrelated - range anxiety would cease to exist if one would find charging points at every nook and cranny.

Product as a service

‘Seeing is believing’ holds so much more meaning for EV consumers, not only in terms of more visibility of charging infrastructure but also the number of EV models. Although simplicity of the electric powertrain is a unique selling point for EVs, consumers today view product-as-a-service (PaaS) which would entail new service requirements for EVs and demand adaptability from the automobile aftercare providers.

As EVs reach cost parity with ICE cars; range issues resolve as a result of high nickel battery technologies; charging time reduces; charging infrastructure becomes ubiquitous; a variety of EV models become available, the change in consumer perception will follow.

The initial success of the EV market will still be determined by a confluence of factors around government legislation, the reaction of OEMs to the legislation and how consumer attitude develops. However, the litmus test of EVs’ self -sustaining and attaining mass scale potential will be determined by ascertaining that these are vehicles of choice that appeal to consumers and convert them from one-time buyers to loyal, long-term, repeat customers irrespective of government stimulus.