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Industry News
January 14, 2011
IBM Study: Electric Cars Stir Interest But Face Obstacles
Many automobile industry executives believe that sales of traditional vehicles will peak before 2020 and are looking to electric-only vehicles (EVs) as one of the next hot products, but they will first have to address stringent consumer requirements about EV performance, recharging, and convenience, according to a new IBM survey of consumer attitudes and a recent study of auto industry executives.
Taken together, the two studies uncover significant differences between the automobile industry executives IBM spoke to and consumers on the factors motivating consumers to purchase electric vehicles, with auto execs placing greater emphasis than consumers on government incentives and oil prices. The executives were also skeptical of consumers’ willingness to pay a premium for green vehicles.
The insights, from IBM’s Institute for Business Value (IBV), are derived from a new survey of 1,716 U.S. drivers and interviews with 123 auto industry executives. The study indicates that, even in these early days, there is a potentially large market for EVs. Nineteen percent of drivers surveyed said that they were either "very likely" or "likely" to consider purchasing an electric-only vehicle when shopping for a new car. This is notable, given that 42% of drivers know only "a little" about EVs or have "only heard of them," suggesting that automakers could increase the pool of potential buyers with sustained educational campaigns.
Thirty percent of drivers surveyed said that they would consider switching to an EV that got 100 miles or less per charge. Current EVs get about 50 to 100 miles per charge. And 40% of drivers said they would pay up to 20% more for an electric-only vehicle compared with a similarly-featured gas-, diesel, or hybrid-powered vehicle, with 27% saying they would pay 10% more and 13% saying they would pay 20% more.
To drive the price of electric vehicles into this more affordable zone, the IBV research indicates that automakers should initially focus on sales to both consumers and commercial fleets, building scale and creating economic efficiencies in production. Automakers may also need to develop new business models for electric vehicles to overcome the higher initial price.
Nevertheless, price of the home charging installation often required to support an EV could pose an obstacle to EV adoption. Only 13% of drivers said they would consider spending more than $1,000 to retrofit their residence to support recharging of an electric vehicle. According to industry estimates, retrofitting to a 240V outlet accessible to vehicles averages between $1,000 and $2,000. In addition, two-thirds of consumers expect a price discount on their electricity for charging at home overnight. This expectation could place increasing focus on utilities for time-based pricing to encourage home charging, or more public charging will be required if an electricity discount is not available. Home charging is considered important to the success of EVs. Of the drivers surveyed, 83% said they park their primary vehicle in the driveway or garage of their private residence, as opposed to in a parking lot, on the street, in a shared garage or some other location.
Perhaps a reflection of America’s consumer culture, 62% of drivers surveyed said they most often parked in a mall or store parking lot when not at home or work. That’s substantially higher than any other location – "on the street" was number two at 17%.
"When deciding where to put charging stations, retail hubs like malls and shopping centers are good locations," said Kal Gyimesi, IBV automotive lead and co-author of the IBV study. "It’s easy to envision charging stations in these commercial locations coupled with an advertising and promotion-based business model for local stores - which will help make the economics more feasible." Partnering with large employers in target regions to create charging infrastructure in the workplace also makes sense, Gyimesi added.
The answers illustrate that the automobile industry executives IBM interviewed for this study place far greater weight than consumers on government incentives/regulations (73% to 41%) and significantly higher oil prices (76% to 51%). The executives also place less emphasis than consumers on green image/sustainability concerns (33% to 48%).
According to the IBV study, when asked executives how automakers could develop mobility solutions, 83% said that the best direction would be to shift their product portfolio from conventional vehicles to electrified vehicles (EVs). About half said they expect the annual sales of conventional vehicles to have begun to decline by 2020.
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