Us Automotive Gaining Traction FINAL 061710

8/8/2019 Us Automotive Gaining Traction FINAL 061710

1/20

Gaining tractionA customer view of electricvehicle mass adoption inthe U.S. automotive market


2/20

2

Opening

Is this the time or the electric car? Who is likely to buy

these vehicles? (I we build them, will buyers come?)

What will Original Equipment Manuacturers (OEMs)

need to do to make these vehicles acceptable or the

mass market? These are challenging questions given the

substantial investments automakers and suppliers will have

to make in order to bring electric vehicles to the mass

market. To answer these questions and others, Deloitte

recently completed a proprietary market study that includesprimary and secondary customer research and interviews

with executives rom major automotive OEMs, clean-tech

start-ups, dealers, and energy companies. Our fndings are

presented in this report.

As the industry begins to recover rom the eects o the

2008/2009 recession, quite a ew actors are converging

to make the idea o an electric vehicle (EV) more attractive

than ever. Government tax credits, emission regulation

and uel economy standards, and unstable oil prices are

contributing to a shit in both ocus and attitude among

industry leaders. Most o the major global OEMs have

announced plans or vehicles powered by an electric motorwith an on-board battery pack. Also, several start-up

companies have announced their intentions to bring

pure electric vehicles to market in the next

12 to 18 months. These announcements have generated

great enthusiasm in the media and at recent auto shows.

Indeed, the uture o the electric car looks good.

But there are challenges. So ar, most EVs have been

powered by internal combustion engines (ICE) with

supplemental electric motors and battery storage in

other words, they are not the true electric cars o the

popular imagination. As a result, the size o the market

opportunity has been dicult to gauge. How big is the

potential demand? Who are the likely buyers o the

electric car? At the same time, certain barriers need to beovercome beore market adoption could achieve critical

mass. These topics were the ocus o our research:

Market opportunity

Target customers

Barriers to adoption

Market orecast

As used in this document, Deloitte means Deloitte Consulting LLP, a subsidiary o Deloitte LLP. Please see

www.deloitte.com/us/about or a detailed description o the legal structure o Deloitte LLP and its subsidiaries.


3/20

Gaining traction 3

About our study

The analysis presented in this report comes rom original

primary and secondary research, including interviews with

executives rom major automotive OEMs, clean-tech start-

ups, dealers, and energy companies, as well as a survey o

nearly 2,000 current vehicle owners.

To this qualitative and quantitative data we applied

Deloittes Demand Driven Analytics Methodology (Figure

1) to assess the consumers perspective about the uture oelectric vehicles in the U.S. market.

Figure 1. Deloittes demand driven analytics methodology

Assessing uture demand or electric vehicles was

somewhat challenging since it meant testing consumer

preerences or a product with which they are largely

unamiliar. For this reason, we ocused on uncovering

consumers amiliarity with EV technologies and products;

with their opinions around price, brand, range, charging,

the inrastructure, and the cost o ownership; and with the

consumers imagined t o an EV in his or her liestyle

given a range o demographic parameters.

Awareness? Desirable?

Interested to

Learn?Non-Adopter

Adopter

High/Yes

Low/No

Yes

Yes

No

No

Brand/Product

Price/Cost

Technology

Range

Charging/Infrastructure

Different Technologies

Price/TCO

Range

Charging/Infrastructure Needs

Implications to my Lifestyle

Probability Volume Est.

Consumer Awareness Desirability Adoption

How familiar are youabout various EVtechnologies?

How accurate is yourunderstanding?

Our consumer survey indicate current

consumer awareness and purchase

barriers

Our cost and volume analysis

estimates the rate of adoption

over time

Our consumer survey indicates current

consumer awarensss and purchase

barriers


4/20

4

Electric vehicles present a tremendous opportunity or

the struggling, established automotive industry (Figure 2).

They can enable the OEMs to respond to the growing

public clamor or energy independence, security, and

reliability since the grid is powered by multiple sources

including coal, natural gas, nuclear power, and renewable

sources. EVs are also introducing innovative body materials

and styling, and todays electric motors deliver high

perormance and torque over a wide rpm range, whichmakes driving the new EVs a satisying experience even

when compared to traditional ICE vehicles.

EV opportunity

Energy independence,security and reliability

Vehicle style andperformance

Automotive industryinnovation, growthand restructuring

Government incentives and

policiesTechnology advancements

Industry investments

Exogenous variables

Clean subsidies and loan guarantees Consumer tax credits CAF standards CO2 emissions

Energy prices Global recession and automotive

industry restructuring Environmental concern

Battery technology Lighter body composites Smart grid

Automotive technology R&D Battery provider R&D New vehicles (e.g., Leaf, Volt)

Figure 2. Electric vehicle and activity drivers

But electric vehicles also pose a threat to OEMs, as they

could lead to recongured value chains and massive

industry restructuring. The threat is a complicated

problem infuenced by a wide range o actors including

government policies and incentives, technology

advancements in components such as batteries, and

market orces including the price o gasoline.

Market opportunity


5/20

Gaining traction 5

Target customers

Similar to early adopters o hybrids, early adopters o

EVs will be young, very high income individuals

adoption is already being popularized by high-prole

celebrities

Average incomes are expected to be in excess o

$200K HHI who already own one or more vehicles

Early adoption will be concentrated around southern

Caliornia where weather and inrastructure allow

or ease o EV ownership

Figure 3. Early adopter prole: 20112020

Source: Deloitte survey, interviews and analysis

Figure 4. Non-Adopter prole

EV

perception

Top purchase

infuencer HHI Gender Location Garage

Miles per

week

Expensive Price $54K 49% Male Suburban and

rural

36% no garage

& power

600

Based on our research, we have created a prole o

consumers most likely to buy electric vehicles (early

adopters, see Figure 3) and those least likely to do so

(non-adopters, see Figure 4) in the oreseeable uture.

The early adopters will be a small number o buyers,

nowhere near the volume needed or mass adoption.

They will be young, high-income individuals who already

own one or more vehicles. We expect early adoptionto be centered in southern Caliornia primarily due to

inrastructure investments already made in the region (and

discussed later in this document).

On the other side o the spectrum are the non-adopters.

These consumers tend to be highly insensitive to

environmental matters and are rarely politically active.

They live predominantly in suburban and rural areas and

drive larger vehicles SUVs and trucks a relatively

signicant distance every week. Non-adopters are very

price sensitive; with low household incomes (HHI), they

view EVs as expensive. Since a relatively high percentage

do not have garages, charging an EV could be dicult.

These consumers would be poor targets or any EV

marketing campaign and are unlikely to want to buy an EV

unless prices dropped signicantly and ranges expand to

accommodate their typical driving distances.


6/20

6

Source: U.S. Census

The early majority

Eventually, mass adoption will be spurred by the development

o competitive oerings. We reer to consumers coming on

board at this time as the early majority and would include

those individuals who are the most likely to buy immediately

ater the early adopter wave.

These consumers have a very distinct prole (Figure

5), beginning with a much higher-than-average HHI at$114K. They tend to reside in urban or suburban areas,

but nearly 90 percent have garages with electrical power

Early Majority Population & Volume PotentialGiven a ew key demographic and psychographic

attributes o the mass adopter segment we can

approximate the segments population size

Men represent 49% o the total population and

67% o this segment

13.4% o men have an income o $100K or more

12.3% o Households have an income between

$100K to $150K

44.9% o men vote, 44.5 % o women vote

There are 1.3 million men and women in the U.S.

who have the demographic characteristics in the

Early Majority segment

(which resolves the challenge o charging the EV). Their

weekly mileage is low about 100 miles. Environmentally

sensitive, they perceive an EV as green and clean; they

are concerned about U.S. dependency on oreign oil and

are politically active. Finally, this group is willing to pay a

premium or convenience.

Among the U.S. population, about 1.3 million people all

into this segment. Among these, the most likely earlymajority are men and women ages 40 to 44. This group is

the most likely target or electric vehicles.

Figure 5. Early majority prole

EV

perception

Top purchase

infuencer HHI Gender Location Garage

Miles per

week

Green and

clean

Reliability $114K 67% Male Urban and

suburban

88% have

garage & power

100


7/20

Gaining traction 7

Our research indicates that a sizeable demographic segment

o U.S. consumers would consider buying an electric vehicle;

however, we also identied barriers to mass adoption.

In our survey we asked consumers which variables would

encourage them to buy an electric car (Figure 6) and which

Figure 6. Factors encouraging Survey Respondent EV purchase Figure 7. Factors discouraging Survey Respondent EV purchase


would discourage them rom doing so (Figure 7). The top

our actors in the pro column are price, reliability, cost

to charge, and convenience to charge. I these our are

avorable, the consumers attitude toward the EV would be

positive. The top three variables in the con column are

price, range, and size o the vehicle.

Question: What is the top factor that would prevent

you from purchasing an EV (% of respondents?

32%

22%12%

11%

10%

8%

2% 2% More expensive

Have a limited range

Don't want a small car

Don't know anything about them

Don't perform as well astraditional vehicles

Difficult to charge

Safety concerns about batteryand electrical system

The abiltiy to avoid or survive acrash

Vehicle price

Reliability

Cost to charge

Convenience to charge

Fuel costs

Gov. incentives

Style and appearance

Environmental impact

Foreign oil dependence

Option to lease battery

Larger vehicle availability

Popularity

Question: What would be your mainconsiderations when purchasing an EV?

Low High

Govt.


8/20

8

We also interviewed executives rom major automotive

OEMs, clean-tech start-ups, dealers, and energy companies.

In these inquiries, we noticed an interesting trend: at this

time, the leaders o traditional automotive OEMs seem to

have a closer, clearer understanding o customer surveyed

concerns than do executives rom clean-tech start-ups

surveyed (Figure 8).

For example, clean-tech executives surveyed think thatquality and charging convenience are less important than

perormance and styling to consumers. But, our research

indicates that, potential buyers arent concerned with those

actors at this point; right now, their concerns are more

basic. Auto executives surveyed realize something clean-

tech executives do not: U.S. consumers are accustomed to

a certain type o automotive experience. For EVs to become

popular, they must mimic the experience and perormance

that drivers have become accustomed to.

9 8 7 6 5 4 3 2 1Category

Reliability

Sticker Price / TCO

Quality

Charging Convenience

Performance

Utility

Styling

Resale and Trade-In

Battery Swapping

Current Auto

Future Auto

Current Clean

Tech

9 8 7 6 5 4 3 2 1

Least Significant Most Significant Least SignificantMost Significant

Automotive Perspective Clean-Tech Perspective

Clean-Tech companies surveyed are less concerned

about charging convenience than automobilecompanies

They believe performance, utility and styling

will be key drivers of mass adoption

They are less aligned with customers

Automotive executives surveyed believe that

charging convenience will become lesssignificant in 5 years due to a more

extensive charging infrastructure

They are relatively aligned with customers

Figure 8. Respondents Perceptions o actors driving EV adoption

Synthesizing all this quantitative and qualitative data, we

have identied six potential barriers to the mass adoption

o electric vehicles:

Familiarity

Brand

Range

Charging

Inrastructure

Price and cost o ownership


9/20

Gaining traction 9

Figure 9. Customer Surveyed Familiarity


A. Familiarity

We discovered that customers are largely unamiliar with

alternative uel technologies other than hybrids (Figure 9).

Its natural that they would be hesitant in their enthusiasm

or something they know nothing about. Furthermore,

their amiliarity (and subsequent comort) with hybrid

vehicles comes rom massive education eorts by a ewautomobile manuacturers eorts already 10 years

underway at a cost o more than $1 billion.

Electric vehicles represent an even more radical departure

rom ICE vehicles than did hybrids; public acceptance will

require more education about issues such as charging,

ranges, and the driving experience itsel. Messaging will

need to ocus on educating and correcting because

many people have wrong preconceptions about EVs. For

these reasons, its highly likely that educating customers on

EV technologies will cost even more than it did or hybrids.

0.0 1.0 2.0 3.0 4.0 5.0

Range Extender

Battery Swapping Stations

Hydrogen VehicleFuel Cell Vehicles

Vehicle Charging Stations

Flex-Fuel Vehicles

Biodiesel Vehicle

Pure Electric Vehicle

Plug-in Hybrid

Hybrid

High Familiarity

EV Related

Other Clean technology

Low Familiarity

Question: How familiar are you with the following clean technologies?


10/20

10

Question: Driving Distance (per day)

Miles (per day)

18%

66%

85%94%

100%

15%

70%

88%98% 99%

0%

20%

40%

60%

80%

100%

< 10 < 50 500

Weekday(per day)

Weekend(per day)

%o

fpeople(Cumulative)

C. Range

Even though EVs meet the daily range requirements o

most drivers, range anxiety is pervasive amongst our survey

participants. Technically a 50-100 mile electric range would

meet the daily driving requirements o most customers,

a statistic that clean-tech executives ocus on. But our

research indicates that consumers arent comortable with

that range. Most expect a minimum range o 300 miles

beore they would consider an EV (Figure 11).

Essentially, consumers want the equivalent range o an ICE

vehicle on a tank o gas. This gap is important: customerswant the reedom and convenience they associate with a

ull tank o gas. They want the convenience and peace-

o-mind knowing they can make rom point A to point B

without the worry o running out o uel/energy.

Question: Required range (miles)

%ofpeople 0%

20%

40%

60%

80%

100%

50 100 200 300 >400Range (miles)

1 2 3 4 5

Figure 10. Brand preerence

Figure 11. Survey Respondent's Driving distance, per day and

required

B. Brand

Experience tells us that when it comes to automotive

purchases, consumers are brand-driven; we believe they

will buy EVs only rom a brand they trust (Figure 10). Our

study indicates that Toyota, Honda, and Ford have brand

permission in this space due in part to the green equity

they have built with their hybrid vehicles. We think that

EVs rom these three OEMs will have the highest likelihood

o success. As a corollary, Nissan and Chevrolet will likely

ace challenges in their upcoming EV launches. As rst-

to-market products, their vehicles will bear the cost and

burden o educating consumers.

17%15%

12%

8% 7% 7%5% 5%

4%3% 3% 3% 2% 2% 2% 2% 1% 1% 1% 1% 1% 0% 0%

0%2%4%6%8%

10%12%14%16%18%

Toyota

Honda

Ford

Chevy

Audi

BMW

GM

Lexus

Nissan

GMC

Cadillac

Hyundai

Mercedes

VW

Tesla

Volvo

Kia

Mazda

Infiniti

Lincoln

Mercury

Saab

Fisker

Companies with current models

or models launching this year

Other companies

Question: From whom would you be most likely to purchase an EV?

%

of

eole


11/20

Gaining traction 11

Travel distance

On weekdays and weekends, ew consumers surveyed travel more than 100 miles per day

EVs with a range o 50 miles could meet the daily needs o 66% o drivers on weekdays, and 70% on weekends

Range anxiety

70% o drivers surveyed would expect an electric vehicle to travel 300 miles beore they would consider purchasing one

Current EVS vary Considerably in their range

Nissan Lea: 100 miles (electric)

Ford Focus: 100 miles (electric)

Tesla Model S: 160 miles (electric)

Chevy Volt: 40 miles (electric ) + 300 (combustion)

Fisker Karma: 50 miles (electric) + 300 (combustion)

D. Charging

Our survey results indicate that consumers want to be

able to charge at home and have the convenience o

rapid charging stations. Eighty-one percent o surveyed

consumers would preer to charge rom home, but 61

percent dont have access to home-charging capabilities,

such as a garage with an electric power source.

Relatively ew (only 17 percent) would be willing to spend

eight hours charging their vehicle at home (ully recharging

depleted PHEV/EV batteries can take 2 to 8 hours,

depending on the type o charging equipment and battery

size). However, i the charging time is reduced rom eight

hours to our, consumer willingness doubles. Sixty-nine

percent would be willing to pay up to $1,000 or a vehicle

that charges aster (Figure 12), but no more than $1,000.

Further, 54 percent o surveyed consumers would not

consider purchasing an EV until charging locations are

widely available and as easy-to-locate as a gas station

is today. Currently, there are ewer than 500 stations in

the United States, with more than 80 percent o these in

Caliornia (Figure 13). Clearly, increasing public and private

inrastructure will be necessary beore the EV can be widely


12/20

12

Figure 12. Charging time Survey Responses

47%

22%14%

7% 5% 3% 1% 1% 0%0%

10%

20%

30%

40%

50%

$60K

Question: How much would you expect to pay for an EV?

Cost ($)

%o

fpeople

Figure 20. Operating benet over ICV

$1,070

$940$810

$680

$550$510 $470

$0

$200

$400

$600

$800

$1,000

$1,200

2009 2010 2011 2012 2013 2014 2015

Projected Li-ion Battery Cost per KWHkWh

Battery cost / kWh ($)

GasPrice

($)

Sensitivity o operating benets or EV

to key costs and gas prices

Note: the base line values or the analysis are: Battery cost /KWh =

$1100, Gas price = $3.00 per gallon), and Govt. Subsidy = $4000 per EV

7%

23%

47%

Govt. Subsidy (20%

increase)

Gas Prices (20% increase)

Battery Cost/KWh (20%reduction)

kWh

kWh

EV has anOperatingBenet over ICV

$1,000 $900 $800 $700 $600 $500

$ 3.00 -$1 ,6 75 -$1 ,1 75 -$6 75 -$1 75 $325 $825

$3. 25 -$1,525 -$1,025 -$525 -$25 $475 $975

$3.50 -$1,375 -$875 -$375 $125 $625 $1,125

$3.75 -$1,225 -$725 -$225 $725 $775 $1,275

$4.00 -$1,075 -$575 -$75 $425 $925 $1,425

$4.25 -$925 -$425 $75 $575 $1,075 $1,725

$4.50 -$775 -$275 $225 $725 $1,225 $1,725

$4.75 -$725 -$125 $375 $875 $1,375 $1,875

$5.00 -$475 $25 $525 $1,025 $1,525 $2,025

Approx. 2010Battery Cost


16/20

16

Figure 21. Purchase unnel analysis or 2020 market

Purchase Price Low ($25K) Med ium ($35K) High ($45K)

Range High (350 miles) Medium (200 miles) Low (100 miles)

Gas Price High ($4.5/gal) Medium ($3.5/gal) Low ($3/gal)

Opinion

Consideration

Purchase

26%

19%

13%

N/A

Aggressive Probable Conservative

93%

55%

44%

5.6%

83%

44%

24%

3.1%

75%

28%

14%

1.9%

2010 PurchaseFunnel

Scenario Analysis: Purchase funnel in 2020

Awareness

Adoption Barriers

Familiarity

Brand

Range

Charging

Infrastructure

Price andOwnership

Cost

NOTE: 1) Analysis considered BEVs and PHEVs only. 2) Current unnel is derived based on the customer

survey. The 2020 purchase unnel is based on sensitivity o consideration to purchase price and range within

customer clusters and the purchase unnel metrics or Hybrid adoption 3) The U.S. light vehicle volume or

2020 is assumed to be 15 million.

Sources: Deloitte analysis, primary research; GK Automotive Purchase Funnel Benchmarks, Jan 2010

Market forecast

Based on our research, we estimate that in 2020 electric

vehicles will account or 3.1 percent o total automotive sales

in the U.S. market (Figure 21) or approximately 465K units.

We also expect with volume increasing, many OEMs will

enter the market, and that consequently, the market share

per OEM will shrink: assuming ve OEMs in 2015 making

electric vehicles, each OEM will sell only 12,000 units a

year on an average. This volume does not appear to besucient to push the cost o the battery lower.

In 2020, even with the volume at 465,000 units, each OEM

will have only about 93,000 units (Figure 22). I each o

the fve OEMs has three models, then EV production per

model will be only 30,000. At this small volume OEMs will

be challenged in recovering the cost o their inrastructure

investments, and each OEM will ace signifcant cost

pressures.


17/20

Gaining traction 17

Figure 22. Market penetration and volume trends or EVs

0

100K

200K300K

400K

500K

600K

700K

800K

900K

2 01 0 2 01 1 2 01 2 2 01 3 2 01 4 2 01 5 2 01 6 2 01 7 2 01 8 2 01 9 2 02 0

Aggressive ScenarioProbable ScenarioConservative Scenario

S

Volum

e

Market share in 2020

5.6% (840K units)

3.1% (465K units)

1.9% (285K units)

Market share in 2015

0.5% (75K units)0.4% (60K units)0.3% (45K units)

AggressiveProbableConservative

Market Penetration and Volume Trends for EVs (BEVs and PHEVs)

Note: 1) Analysis considered BEVs and PHEVs only. 2) Current unnel is derived based on the customer

survey. The 2020 purchase unnel is based on sensitivity o consideration to purchase price and range within

customer clusters and the purchase unnel metrics or Hybrid adoption 3) The U.S. light vehicle volume or

2020 is assumed to be 15 million.

Sources: Deloitte analysis, primary research; GK Automotive Purchase Funnel Benchmarks, Jan 2010


18/20

18

Conclusions

Electric vehicles are attractive to customers, the automotive

industry, and the country. In the U.S., approximately 1.3

million consumers ft the demographic and psychographic

profles o potential early majority EV customers. The

challenge to the industry at this point is overcoming the

six barriers to adoption. We expect that mass adoption

will be gradual roughly 3 percent by 2020 and

that complementary technologies will continue to gain

acceptance.

Consumer perspective

EVs bring perormance and styling improvement

opportunities or automakers. However, range anxieties

will be a signicant barrier to adoption until technology

can address the issue. We conclude that the keys to

mass adoption are 1) a reduction in price and 2) a driving

experience in which the EV is equivalent to the internal

combustion engine vehicle.

Automotive industry

Clean-tech investments are accelerating, supported by

government incentives. Because o their investments in

hybrids, three OEMs Toyota, Honda, and Ford appear

to be well positioned in the emerging EV market. We

expect that new EV introductions will broaden awareness,

build excitement, and boost messaging/imaging. However,

given our orecasted volume o 465,000 units across 15

brands/models in 2020, we believe achieving proftabilityand manuacturing efciencies will be a challenge.


19/20

Gaining traction 19

Contact information

Craig Gif

U.S. Consumer & Industrial Products

Leader

Principal

Deloitte Consulting LLP

[email protected]

Mark Gardner

U.S Automotive Consulting LeaderPrincipal


[email protected]

Robert Hill

Principal


[email protected]

Masa Hasegawa

Senior Manager


[email protected]


20/20

This publication contains general inormation only and is based on the experiences and research o Deloitte practitioners. Deloitte is not, by means

o this publication, rendering business, nancial, investment, or other proessional advice or services. This publication is not a substitute or such

proessional advice or services, nor should it be used as a basis or any decision or action that may aect your business. Beore making any decision

or taking any action that may aect your bus iness, you should consult a qualied proessional advisor. Deloitte, its aliates, and related entities shall

not be responsible or any loss sustained by any person who relies on this publication.

Copyright 2010 Deloitte Development LLC. All rights reserved.

Us Automotive Gaining Traction FINAL 061710

Documents

Transcript of Us Automotive Gaining Traction FINAL 061710