It seems that not a week goes by without a major automaker announcing their future plans for electrification, battery partnerships, EV charging infrastructure and partnerships, new EV manufacturing plant locations, and more.
But often and upon further review and analysis of these announcements, we find that you need to add an asterisk to those statements. For example, we often hear that an automaker will only be making EV models available in certain markets such as China or California.
Or we hear that the automaker only has production plans of, say, 20,000–30,000 vehicles a year. Or we hear talk about battery supply limiting production volume. Or we see that plans for pickups and large SUVs are almost nowhere on the roadmap or get only lip service from US automaker executives.
“And then we’ll keep innovating,” Ford continued. “When it comes to building the best trucks in the world, we never rest. Whether they’re gas, diesel, hybrid – or when the time comes, fully electric. …”
— Bill Ford, Executive Chairman of the Ford Motor Company
Now, in fairness to the legacy automakers, we are still fairly early in the adoption curve in most markets in the world and electric vehicle costs remain well above those of comparable gasoline/diesel vehicles. And according to a recent study by Alix Partners, “by 2023 a whopping $255 billion in R&D and capital expenditures is being spent globally on electric vehicles, … some 207 electric models are set to hit the market by 2022, many of them destined to be unprofitable due to currently-high systems costs, low volumes and intense competition.”
“A pile-up of epic proportions awaits this industry as hundreds of players are spending hundreds of billions of dollars on electric and autonomous technologies as they rush to stake a claim on the biggest change to hit this industry in a hundred years. The winners in this free-for-all will be those who have the right strategies and, equally important, execute on those strategies to their fullest potential—as billions will be lost by many.”
— John Hoffecker, global vice chairman at AlixPartners and a 30-year automotive veteran
So, this raises the question: If you look beyond the press releases, what does commitment to a future of electrification by automakers actually mean?
For my biased purposes, “electrification” does not include mild hybrids, regular hybrids, or fuel cell vehicles. Those forms of powertrains will clearly play a role in electrification for the next 15 years or so, but I believe a true commitment to a future of electrification is fundamentally about pure battery electric vehicles and plug-in hybrid electric vehicles during the transition.
As such, the following is a list of criteria that to me shows that an automaker is truly committed to a future of these two powertrain technologies (BEVs/PHEVs):
Number of Planned EV Models: Has the automaker announced 1 or 2 BEVs over the next 5–7 years and several hybrids and PHEVs? Or is there a clear path to, for example, 3–4 BEVs over that time period along with multiple PHEVs and regular hybrids?
The reality is we already have several automakers — including Nissan, for example — that only have one EV (LEAF) currently available in the US market and no clear number of new models on the way. That does not back up a serious commitment to EVs.
And automakers like Ford have announced big electrification plans, but a large percentage of the planned models are hybrids and PHEVs, with only a few BEVs in the mix.
Dealer/Geographic Availability: In the US, many EV models are only available in California or a few ZEV states. That is probably a smart move at the current levels of EV adoption in the Midwest and South, but automakers that are truly committed need to expand markets and invest where there is at least a glimmer of sales demand and opportunity for growth. If an EV will only be available in a few states in the US, for example, that is not true commitment.
Globally we often see new EVs being targeted first for China, which makes sense because of the market size and government regulations driving automakers to produce EVs, but then they often have limited availability in Europe and the US 12–18 months later. This approach clearly makes sense for many models and automakers, but it also suggests that many companies’ EV strategies are still fundamentally driven by the force of government regulation, and not a belief in the powertrain and market appetite.
Other automakers — including GM, Renault, Hyundai, Mercedes-Benz, BMW, and VW — have seen demand exceed supply, typically a result of battery pack shortages. So, when an automaker announces a new EV model, we can usually tell how truly committed they are by noting whether their entire supply chain is geared to ramp up production if demand exceeds forecast. To date, however, it feels like many of the major automakers target a safe and small production volume, limit availability to certain regions, and then do little to promote the vehicles.
Dealer Training/Certification: Does the automaker have a significant dealer training and certification program that ensures that dealers can adequately support (onsite Level 2 charging, repair equipment, etc.) and sell (sales training) EVs. Do they have the training, tools, and content to adequately educate buyers on things like how and where to charge their EVs? Do dealers have access to a database of preferred and qualified vendors to install charging stations in buyers’ homes?
Marketing/Advertising: Is the automaker supporting the EVs with an appropriate level of local/regional marketing and advertising programs?
A recent study commissioned by the Northeast States for Coordinated Air Use Management, which looked at 2017 automotive ad spending, showed that six US automakers (General Motors, Fiat Chrysler, Ford, Nissan, Toyota, and Volkswagen) spent almost nothing to advertise their EVs. For many models, advertising on a national basis doesn’t yet make sense because many EVs are only available in certain states, but in those markets, is the carmaker actively promoting its EV models through events and advertising programs? Apparently not.
Battery Supply and EV Investment: Does the automaker have adequate battery production partners locked up and able to supply the needed battery pack volumes? Is the automaker pursuing strategies/partnerships to lower the costs of battery packs and develop solid-state and similar advanced battery technology improvements?
If demand outstrips estimated supply, can they scale up to meet demand?
Board/Management Buy-in: Are executives and board members all saying the right things and showing that they are true believers in the future of EVs? Or do we hear many of them at auto shows saying things like “consumers aren’t ready yet” and “we are still betting on fuel-cell vehicles and regular hybrids” and other comments that show that they still have their doubts about EVs.
Organizational Alignment: Automakers like Volvo and Volkswagen seem to be saying all the right things when it comes to EVs and appear to be aligning their organizations around a future of electrification. And GM recently announced new executive roles that suggest it is serious about EVs.
By contrast, in December 2016, Toyota established an in-house venture company responsible for developing electric vehicles. “The venture company, which will be a virtual organization consisting of four persons ― one each from Toyota Industries Corporation, Aisin Seiki Co., Ltd., Denso Corporation and Toyota Motor Corporation ― and which will be independent of other internal structural organizations.” Hmm. Toyota’s approach strongly suggests that they still look at EVs as a niche new product line — perhaps in the model of the Prius line — rather than as a coming transition of their entire fleet in the next decade or so.
Charging Partners/Infrastructure: Is the automaker investing in building out the necessary charging infrastructure either directly or through partnerships, including with other automakers?
Volkswagen, through its Electrify America charging infrastructure entity (required from the dieselgate settlement) is investing $2 billion in charging station infrastructure and EV education in the US through 2027. In Europe, Daimler, BMW, Ford and Volkswagen have partnered with IONITY to build out 400 superfast-charging stations. Porsche has launched its own EV superfast-charging initiative.
Price/Range Competitive EVs: Is the automaker producing and planning to launch EVs that are actually competitive in terms of battery range? Are they pricing them competitively with other similar EVs and similar gasoline/diesel vehicles?
Honda’s Clarity BEV, with only 84 miles of range, is somewhat of an embarrassment compared to the 150–250 miles of range available in most new BEVs.
In addition to launching new competitive EVs, is an automaker increasing the range/battery pack size every few years or every 4–5 years?
