The era of mainstream electric vehicles (EV) is gaining momentum, as evidenced by the number of auto manufacturer announcements touting plans to introduce new, high-volume EV models. If EVs are on the verge of moving into the mainstream, the measure of success for automakers and suppliers will lie in whether they are fully prepared for the most significant industry shift in 150 years.
Buoyed by new research that, for instance, projects more than half of all new cars sold will be plug-in models by 20401 or suggests that EVs could become cheaper than conventional cars without government subsidies between 2025 and 2030,2 the industry is becoming galvanized in its efforts to make the transition.
Here at Accenture, our research has identified several domestic markets that could potentially generate strong EV sales by 2020. These include Canada, France, Germany, Japan, Norway, Sweden and the U.K., in addition to the U.S. and China. The findings, for example, show that while 2015 EV sales were only 0.3% of the global market, an increase by just 3% would equate to 2.7 million EVs on the road.3 But are carmakers and auto suppliers truly ready for this monumental transformation?
In recent years, with a few exceptions, the industry’s green-focused determination was not the case. Automakers were adding a conservative number of alternative vehicles to their traditional product lines as a hedge against the uncertainty of long-term EV viability. This strategy did not seem unrealistic given that there were projections of all-electric vehicles reaching less than 2% of global sales by 2020.4
But now, fueled by enthusiasm, a stronger business case, and the prospect of new competitive pressures, several auto companies are beginning to line up at the proverbial eMobility starting blocks, ready to sprint into a totally new realm that will require much greater eMobility experience than that gained through limited EV offerings.
For these companies, being fully prepared will mean having the will to reinvent their organization to be aligned with the new eMobility reality so they can respond quickly to the rapid changes it will bring. Reinvention will be particularly critical to gaining a competitive advantage in an uncharted automotive world that will be unlike any that have come before.
High-volume EVs will be only part of a complex eMobility market that will include autonomous vehicles (AVs), car-sharing services and self-driving vehicle rental fleets — all connected and powered by electric engines. The boost in EV demand will be driven by both vehicle ownership and growing interest in using EVs solely as a mode of transportation to get from point A to point B. Our research shows that traditional auto sales will generate an estimated $2 trillion in revenues by 2030, and the “mobility-as-a-service” segment will produce an additional $1.2 trillion.5
Some auto manufacturers and suppliers have begun to reinvent their organization to align with the new eMobility reality. But those that have not will risk losing considerable market share at a time when a wealth of new opportunities will inarguably emerge.
Moreover, those that have been able to stay on the fence regarding EV viability will no longer be able to do so and remain competitive. The industry is entering a period that, in essence, is a window of decision. Not only must auto companies be prepared for the transition, but they must be prepared to act on it now. Time is running out.
Forward-thinking automakers will begin to put the same energy into building compelling EV brands as they did when marketing internal combustion engine-powered cars; enhance their EV value chain; and increase business alliances with car-sharing innovators to capitalize on the emerging ride-sharing segment. Dealers that want to succeed will accept the shift and focus on educating and understanding what consumers truly want in an EV model, especially since the low maintenance associated with EVs will impact traditional repair and service.
And entrepreneurial auto suppliers will shift their focus from gasoline-only powered drive chains to helping carmakers produce electric engines, batteries and battery management systems software. They also will gear their efforts toward developing technologies specific to AV production, such as touch interface; voice recognition; location and motion tracking; short-and long-range sensors; software development; and advanced collision warning systems.
Technology has a way of creating change faster than anticipated, not unlike an EV surprisingly quiet and unassuming as it moves through traffic. This seems an appropriate metaphor to describe how technology is rapidly changing the auto industry. Because of it, sales of traditional cars likely will peak and slump in the next few years.6 And by 2030, nine out of 10 new cars will be self-driving,7 contributing to car-sharing services as part of a new auto industry. It is in this business environment that auto manufacturers and suppliers must reinvent themselves to win or end up losing out in a new global auto market that is already taking shape around them.
Brian Irwin is managing director and industrial practice lead at Accenture USA.
1. Bloomberg New Energy Finance report from Bloomberg.com article, “The Power Consumed by Electric Vehicles is About to Surge 300-Fold,” July 6, 2017.
2. Bloomberg New Energy Finance report from New York Times Op-ed, “A Brighter Future for Electric Cars and the Planet,” July 18, 2017.
3. Accenture Point-of-View “Electric Vehicle Market Attractiveness – Unraveling Challenges and Opportunities,” Copyright 2016
4. JD Power and Associates article, “Drive Green 2020: More Hope Than Reality?”, November 2010
5, 6, 7. Accenture Research