Electric Vehicle Industry:

A Market Analysis

April 21, 2012

Group Members:

Don Picciano, Jr.

Christopher Johnson

Kevin Bryant

TABLE OF CONTENTS

Introduction to Electric Cars.4

Customer Segments...5

Buying Motives7

Unmet Needs...8

Competitor Analysis..9

Direct Competitors.10

Indirect Competitors.17

Substitute Products...18

Strengths and Weaknesses..19

Strategic Perspective & Market Shares..20

Industry Perspectives21

Distinguishing Characteristics of Industry..21

Industry Size and Growth...22

Historical Information22

Future Projections...22

Industry Structure.23

Barriers to Entry......23

Potential Entrants and Threats from Substitute Products..23

Bargaining Power of Suppliers and Customers24

Cost Structure..24

Life Cycle Position.......25

Key Success Factors.....25

Environmental Analysis......26

Trends and Potential Events........26

Description of Trends..26

Strategic Implications.....26

Time Frame.26.

Importance for the Industry...27

Future Scenarios..27

Marketing Perspectives..27

Product Differentiation...27

Branding..33

Technological Changes..36

Services Required..37

Price....38

Trends...38

Margins....39

Discounts....40

Distribution....41

Major Channels42

Sales and Dealerships..42

Channel Conflicts...43

Promotion....43

Expeditures: Historical Information and Future Projections...43

Positioning of Major Brands....44

Promotion Trends...44

Issues Affecting Strategy Choice.....45

Works Cited.46

Introduction to Electric Cars

An electric vehicle (or EV), uses an electric motor for propulsion rather than being powered by a gasoline-powered motor. While it is uncertain who invented the EV, several inventors have been given credit as early as 1828 by nyos Jedlik who invented a small-scale model car powered by an electric motor that he designed. Others credited with their inventions include Robert Anderson, Professor Stratingh, and Thomas Davenport. It was not until the late 1800s that Americans began to devote attention to these innovations and interest in motor vehicles increased greatly. William Morrison built a six passenger wagon in 1891 and his design with a capacity for passenger is often considered the first practical EV. Then, in 1897, the first commercial EV was used as a fleet of New York City taxis built by the Electric Carriage and Wagon Company of Philadelphia (Bellis, n.d).

Once the electric starter became common in the 1930s, the electric car became almost obsolete and gas-fueled vehicles became the conventional vehicle of choice. As America's (and the world's) love affair with the automobile grew and decades passed, the dependency on oil slowly increased and gas prices rose. In the last 15 years, gas prices have increased so much that the demand for alternative fueled vehicles became not only a public cry, but also governmental policy. As Americans, we send more than $1 billion for oil overseas every day, mostly to fuel our vehicles. In 2000, the world consumed 77 million barrels of oil per day and by 2010, the consumption jumped to 87 billion barrels (Coplon-Newfield, 2012). Due to this significant oil consumption, the Environmental Protection Agency revealed the plan to reduce this dependency with the requirement that vehicle fleets achieve a 35.5 mpg average by 2012-2016 and a 54.5 mpg average by 2017-2025 (Coplon-Newfield, 2012). President Obama has proposed new programs to dramatically boost the market for electric vehicles in order to break free from this dependency and reduce emissions. These proposals will make electric vehicles more affordable, accessible, and convenient. President Obama recently said in a speech at a Daimler manufacturing plant that he plans to promote an "EV Everywhere" experiment to make EVs "as affordable and convenient as gasoline-powered vehicles for the average American family within a decade" (Coplon-Newfield, 2012, para. 2) . Grant programs will aid American scientists, engineers, and businesses to conduct research and development that will lower the cost of EV batteries, increase driving distance range, and advance the technology for EV fast-charging. These significant improvements will allow EVs to become mainstream (Longley, 2012). In addition, the presidents proposed programs will help cities become EV ready (i.e., have charging stations, become prepared for increased electricity usage, and educate its residents about the benefits of electric vehicles). President Obama also proposes to make electric vehicles more affordable by raising the tax credit on purchasing an EV, allowing the tax credit to be available at the dealership, and removing the cap on the number of vehicles per manufacturer eligible for the credit (Berman, 2012; Coplon-Newfield,2012).

Customer Analysis

Segments

It appears that with any product, there are a number of customer segments developing in this new market. There are four distinct segments that have been identified, including the eco-friendly green innovators, the budget conscious cost shoppers, the risk adverse laggards, and the high end 2.0 Premium Customers (Steinhubl & Leis, 2012). These four groups have four distinctly different desires in the market and in some cases it can be difficult to make a product that fits a combination of these needs.

The green innovator is the group of people that are environmentally motivated and are looking to use their electric vehicle to better the planet. Green innovators will look at the efficiency of the vehicle and be less cost adverse than other groups. This group is familiar with alternative fuel products and will not be afraid to go all in on the plug in electric vehicle (Steinhubl & Leis, 2012).

The cost shopper is the group not currently being well-served by the existing selection of vehicles. The cost shopper will look at the benefits of owning an electric car. This group will likely consist of city drivers that hope to save money with a combination of government rebates on the front end and savings at the pump on the back end. This group will fall into what is sometimes considered the city driver and will thrive on advertisements like Myers Motors claim that its vehicle will run for 1,000 miles on $20 worth of electric fuel (Steinhubl & Leis, 2012).

The laggards are a group that is going to wait and see what happens in the market. This group of people is generally risk adverse and they are going to wait to see the proof that electric vehicles are going to be a viable transportation alternative. This group will often look for what the catch is and be quick to bring an objection (Steinhubl & Leis, 2012).

Bain & Company believe that it will be the 2.0 Premium Customers that initially begin to push this technology into the open market. This is generally a market group that will endure the glitches and challenges of new technology to be the first people to drive the car. Bain & Company predict that there are about 350,000 consumers worldwide that will fit into this unique segment and about half of them are believed to be in the US (Steinhubl & Leis, 2012). Although it is believed to cost an average $12,000 higher than a similar conventional vehicle, this is the only group that is willing to take on the extra cost. This group will not only have a large impact on how these vehicles are marketed, but also, in how these vehicles are designed (Steinhubl & Leis, 2012).

Buying Motives

There are numerous reasons why people buy electric vehicles, similar to any other product that hits the market. Four buying motives seem to have emerged for the electric vehicles: economic, personal, psychological and social. These four motives tend to encompass and represent the four segments that we have discovered for buyers (Beach, n.d.).

Economic buying motives are likely to be considered towards the end of the process and have a tendency to not to be as much of a motivator to buy. Rarely do people buy things just because they can afford them, nor does this proposition guarantee that someone will buy the least expensive product available. The price conscious shopper is not a segment that we have seen truly emerge in the electric vehicle market as there are very few reasonably priced alternative to choose from (Beach, n.d.).

Personal buying motives are generally related to individual and demographic information. An example of this is that in northeast Ohio, we value four wheel drive vehicles due to the weather. In Texas, four-wheel drive is often viewed as an unnecessary luxury because they are more interested in the size of the vehicle than its capability in inclimate weather. Products are often marketed differently to different types of people, such as young versus old or men versus women. This buying motive can often be mistaken as a company attempting to market its product; thus, a great amount of market research is required to make sure you are on point. For example, until now, the electric car market has often focused on performance (0 to 60 time and top speeds) and therefore, the general target for these products has been men. Recently, products have moved more towards an economical sense and have discussed cost savings and efficiency, which in car marketing is a target towards women (Beach, n.d.).

Psychological consumer motivations fall into the area of a need or a perceived need of a person or group of people. Psychological mot