What other industries can learn from automotive electrification
Mark Anand | Electrification | April 26, 2021
Electrification is a foregone conclusion if we’re going to get serious about limiting climate change and live in a more sustainable way.
The transport sector is leading the charge, as electrification is vital for countries to meet their goals for decarbonisation and energy security. Transport accounts for 25% of carbon emissions in Europe, but widespread electrification could cut emissions to at least 60% below 1990 levels by 2050.
A lack of viable green options for the aviation and shipping industries – at least before about 2030 – means that the onus is on the automotive industry to make the change.
Established automakers around the world are ripping up their business models in the hope of adapting to a new world in which electricity replaces gasoline and diesel.
Factories are being overhauled to produce electric cars, and automakers are snapping up all the batteries and raw materials they can find. For the first time, manufacturers are getting involved in deal making with mining companies directly, as they compete to secure the metals and other ingredients their battery suppliers need to meet orders.
Electrifying the transport system is not only the right thing to do for the environment – it limits dependence on fuel imports, increases diversity in the fuel mix, reduces the total cost of ownership, creates price stability, and strengthens national security.
Driving change in the automotive industry
The automotive industry is undergoing its most radical transformation since the invention of the Ford Model T. There are now more electric vehicles on the road than any time since the early 1900s. Did you know they accounted for about 30% of all cars in the US more than a century ago?
The established automakers – the likes of Volkswagen Group, Volvo, Ford, etc. – were initially slow to respond. But they were prompted to act by the carrots and sticks of strict new government regulations and financial incentives. And perhaps a sense that the writing was on the wall.
Volkswagen in particular is remaking itself as a “software-driven mobility provider”. The company said in March that it expects all-electric vehicles to exceed 70% of its European sales and 50% of its Chinese and US sales by 2030. “In the coming years, we will change Volkswagen as never before,” said CEO Ralf Brandstätter.
The world’s largest automaker is eager to accelerate its move away from the diesel emissions scandal that cost it more than $30 billion. It has said it will use some of its profits from selling fossil-fuelled cars to produce its own batteries and build EV charging networks.
And, in China, which quickly established itself as the world’s largest EV market, the government has a system of subsidies and regulations that require automakers to produce a number of EVs to offset the fossil-fuelled cars they produce, or purchase credits for the carbon emissions from those cars.
The traditional automakers were also pressured by the emergence of a new crop of manufacturers, the likes of Tesla, Nikola and Rivian, that saw the opportunity they were slow to take up. Volkswagen, Ford and GM are now chasing Tesla to catch up with its 1 million cars produced.
EV purchases have so far been the province of tech enthusiasts, the environmentally conscious and gear heads. But a tipping point is approaching where mass EV adoption will become unavoidable because of falling battery costs, wider access to charging points, pressure from regulators and generous government subsidies.
What can other industries learn?
The experience of the automotive industry offers lots of lessons for other industries looking to go to market with a new climate-friendly electrical product.
There’s a disruptor advantage
If you’ve identified an opportunity for a new product, be brave and feel free to disrupt. Look at how Tesla has led the way with cars, and Rivian is doing the same with trucks.
Tesla took advantage of the initial lack of interest from traditional automakers, using its first-mover advantage to build a brand that has become synonymous with EVs. It became the first car company to go public since 1956.
While most of the EV market is focused on passenger cars, Rivian has identified a market for premium “electric adventure vehicles” and will produce a limited number of vehicles at its US factory. It has raised $8 billion since 2019 to bring its trucks and SUVs to market this year, showing the investor interest is there.
Distribution networks are vital
You can’t go it alone as a manufacturer. You can either follow the Tesla model – create your own route to market, your own branded showrooms and online sales systems. Or you need to engage, educate, train and reward your channel partners. This is crucial as your sales channel is how customers will access your products.
Partnerships can also help you gain access to new markets that might otherwise be closed. In China, the government has required foreign companies to partner with local manufacturers to be able to sell their products there.
Educate consumers to overcome objections
The car industry still has to overcome “range anxiety”, the concern among consumers that electric vehicle batteries will run out of power on the road. These concerns persist even though the technology has evolved and EVs can travel long distances on a single charge.
Education of customers (and staff) is vital to overcoming these concerns. Increasing access to fast charging points is giving consumers the confidence to make the switch, showing the importance of building an infrastructure around electromobility and other forms of electrification.
The big manufacturers are not far behind
With the impetus for entire industries to get involved, the grace period that comes with first mover advantage can be limited. In 2017, Tesla led global EV sales, but by 2025 Volkswagen expects to rack up three times the sales of Tesla.
General Motors, Ford, Audi, etc. have all announced increasingly bold strategies to accelerate their electrification plans, closing in on Tesla’s lead. If you’re onto a winner, don’t expect to be able to monopolise the market for long.
Consumers are pushing for change
Industries with an environmental impact are seeing change being led by the pull of consumers rather than the push of brands trying to get them to respond.
There’s a new generation of socially-conscious consumers with different attitudes and beliefs and a lower tolerance for pollution that will tip the balance.
A recent Deloitte survey found that 43% of UK consumers that have chosen environmentally sustainable brands are concerned with their carbon footprint and 19% of respondents opted for low-carbon or shared modes of transport in 2020.
Not surprisingly, respondents from Generation Z are adopting more sustainable behaviours than any other age group -- 45% stopped buying certain brands and 50% are buying less because of ethical or sustainability concerns. This trend will only become more important as younger generations increase their buying power.
Electrification promises an exciting future
The world is at a crossroads as electrification gets underway in earnest; we’ve only scratched the surface so far.
There are exciting developments ahead in the integration of electromobility with energy. Automakers are exploring bidirectional and vehicle-to-grid (V2X) technologies to send electricity to the grid and help stabilise renewable output – imagine powering your house with your car battery!
At Blueprint we’re experts in creating and delivering go-to-market strategies for the electric revolution. Get in touch with us today if you need help with your team, your channel and your customers.