Electric Vehicle Industry:A Market Analysis

April 21, 2012

Group Members:

Don Picciano, Jr.

Christopher Johnson

Kevin Bryant

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TABLE OF CONTENTS

Introduction to Electric Cars…………………………………………………………………………………………….4

Customer Segments………………………………………………………………………………………………………...5

Buying Motives…………………………………………………………………………………………………………………7

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 Perspectives……………………………………………………………………………………………………21

Distinguishing Characteristics of Industry…………………………………………………………..21

Industry Size and Growth…………………………………………………………..……………………….22

Historical Information……………………………………………………………………………22

Future Projections………………………………………………………………………..……….22

Industry Structure……………………………………………………………………………….………………23

Barriers to Entry……………………………………………………………..………………..…..23

Potential Entrants and Threats from Substitute Products………….………….23

Bargaining Power of Suppliers and Customers………………………………………24

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.

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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 Channels…………………………………………………………………………………………42

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

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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 Ányos 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 1930’s, 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

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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 president’s 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

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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).

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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 motives generally include things like safety, self-esteem, love and

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belonging. This buying motivation also tends to prey on psychological characteristics like

compulsiveness, ambition, or competitiveness. This group absolutely captures a large portion of our

buying segments. Whether the consumer is the premium 2.0 buyer who is concerned about his image

or the go green buyer who is concerned about making the world a safe place to live, these motivations

are an important part of making a decision to buy (Beach, n.d.).

Social motivations are generally influenced by a person’s peer group or an overall societal

requirement. The greater social requirement may fall into a cultural group an individual believes that

they belong to or their opinions of leaders or celebrities. Through the advertising, we can see that this is

a buying motive that the high end electric vehicles, specifically, have attempted to target. Most sites

proudly list a celebrity who is one of the proud owners of their product and virtually all of them invite

you to join in on the prestigious ranks of their ownership (Beach, n.d.).

Unmet Needs

The electric vehicle (EV) industry appears to have a number of unmet needs that must be

addressed before the industry can truly take off. Cost is a huge problem in this market, as the

availability of cost effective, good value vehicles is significantly lacking (Hodson & Newman, 2009).

Other unmet needs include consumer confidence and education, which is somewhat difficult to

quantify, and long range vehicles, as well as family-friendly, multiple seat vehicles.

The value proposition is one that is being addressed; however, it is an unmet need to date. The

average electric car costs about $12,000 more than a similar conventional vehicle (Hodson & Newman,

2009). The most popular all electric vehicles include the Nissan Leaf (MSRP $35,200 before tax credit)

and the Volt (MSRP $39,145 before tax credit). This is a substantial investment for a budget conscious

consumer and has a very direct impact on the market share that this product has the ability to capture.

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Consumer confidence is an issue that takes many shapes. Questions about where the vehicles

can be plugged in, the availability of charging stations, and the length of the buyers’ commutes are very

real concerns for many. Another major issue is the actual life of the battery in the vehicles. It is

reported that the batteries have a useful life of between five and eight years depending on use. The

problems associated with them are unlike a normal car battery. The cost to replace the batteries ranges

from $10,000 to $40,000, meaning that there is little or no residual value to these vehicles. (Stanton,

2012) This has a huge impact on the financing of these vehicles as well as the overall cost of ownership.

The desire for cars to be family friendly and have a long range has been attacked recently by

both Tesla and Chevy. The upcoming Tesla S sedan boasts seating for 7 (5 adults and 2 children) with an

approximate range of 100 miles. The Chevy Volt navigates the mileage restriction by having an onboard

gas-powered generator that pushes the 35 mile range of the Volt into a normal 400 mile range (Stanton,

2012).

Charge times and locations are other concerns. Most plug-in vehicles require six to eight hours

to fully recharge; therefore, consumers may have to plan their days around being able to be without

their vehicle for a period of time. Most true plug in vehicles have a range of somewhere between 50

and 100 miles. The “down time” for these vehicles to charge can take away the convenience of

traditional gas-powered cars (Stanton, 2012).

Competitor Analysis

Competitor Identification/Major Competitors

As with any emerging market, numerous direct and indirect competitors exist. While there are a

substantial number of manufacturers entering the market, many less are actually in the market. With

vehicles being held to much higher standards in gas efficiency, as well as a long trend of other

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alternative fuel vehicles, this is a much more competitive market than people realize. Currently the

projections are that plug-in electric vehicles (PLEV’s) will take over about 5% of the total market for

vehicles worldwide by 2017 (greenretaildecisions.com, 2011).

Direct Competition

Aptera Electric Cars Audi Electric Cars BW Electric Cars BYD (Build Your Dream) Electric Cars Chevrolet Commuter Cars Electric Cars Fisker Automotive Ford Honda Infinity Mazda Mercedes-Benz Myers Motors Electric Cars Mini Electric Mitsubishi Electric Nissan Smart Electric Cars Tesla Th!nk North America Toyota Wheego ZAP Electric Vehicles

Although there are a high number of vehicles on the list of automobiles offered as electric

vehicles, very few of them have actually been brought to market (Eziquiel-Shriro, 2012). While our list is

very inclusive, we will keep our analysis of the competitors to vehicles that have actually hit the market

at this time.

BYD Electric Cars is a Chinese based company that has seen over a half of a million vehicles

delivered to date in Asia. The majority of BYD’s market share in this region is based on their gas

platform; however, it is a company that has substantial resources to bring to the development and

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marketing of their vehicle. According to Wang Chuanfu, the company’s president, the manufacturer will

only focus on electric cars in North America (Shirouzu, 2011). BYD has launched the E6 in China where

the vehicle is used primarily for taxi service. BYD will have its first shipment of vehicles in the US by the

end of 2012, with some of the vehicles already promised to the Los Angeles Metro Government.

Although the vehicle is rumored to be relatively sluggish and generic, BYD states that the vehicles driven

were only prototypes and the vehicles that are actually delivered will be of higher quality (Shirouzu,

2011).

Chevrolet has become one of the most recent entrants into the electric vehicle market with the

release of the Volt. The Volt is largely aimed at making the electric car a more user-friendly vehicle and

taking market share away from vehicles like the Toyota Prius. The Volt is not, however, a true plug-in

electric vehicle. The Volt has a plug-in range of about 35 miles (Chevrolet.com, n.d.), but with its

onboard gasoline generator, the range stretches to a much more reasonable 400 miles. The Volt arrived

at the 2011 Auto Show as the most technologically advanced vehicle brought to market this year and

ended up taking home the 2011 North America Car of the Year Award. (Eziquiel-Shriro, 2012).

The Volt has not lived up to its initial expectation. With only about 10,000 vehicles sold thus far,

GM is far below its projected figures. The Volt boasts a sticker price of a little under $40,000 and

dealerships have had a limited availability. GM has largely designed this shortage as they shut down

production of the Volt from March into April due to lack of consumer demand. GM has restarted

production after posting a better than expected March, with 2,289 Volts delivered. (Conway, 2012)

Commuter Cars Electric Cars was one of the first publicly available electric vehicles. The Tango

T600 was introduced in 2006 and is built on a tandem seat platform. The vehicle was designed,

somewhat, for the rich and famous who commute through the streets of Los Angeles. Boasting a

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prestigious group of owners, including George Clooney, the Tango T600 achieves a 0 to 60 time of about

4 seconds and also has a top speed of 130 mph. (Eziquiel-Shriro, 2012) The Tango T600 is offered with

an option of a lead acid battery with a range of 40 to 60 miles or a lithium ion battery with a range of

200 miles. The vehicle is somewhat price restrictive, with the base model being priced at $108,000.

Safety is a Tango hallmark, featuring a roll cage built to race car standards, a 4-point safety harness, and

more protective steel in each door than a typical SUV (Commutercars.com, n.d).

The Tango 100/200 is scheduled to hit markets in the near future and is more in line with other

affordable mass-produced cars. Commuter Cars began taking orders and is listing the base price for the

T100 at $19,000 and the T200 at $40,000. Some are not sure if these vehicles will ever actually see the

light of day (Eziquiel-Shriro, 2012).

Fisker Automotive was founded when designers Henrick Fisker and Bernhard Koehler decided to

join forces and design an automobile that pushed the limits. The first thing that the new partners did

was survey the automotive landscape and they realized that it was based on a history defined by

limitations (fiskerautomotive.com, n.d.). The new partners brought a combined 51 years of automotive

design experience, and in 2007 they literally started with a blank piece of paper. Five years later, Fisker

has established itself as a player in the electric car market and possess what Car and Driver calls the

most attractive looking electric vehicle on the road. Born out of their combined vision, the Fisker Karma

was born (Robinson, 2012).

The Fisker Karma is a four door sport-based platform that has been in development since 2007.

The Karma features exciting stats of achieving 0 to 60 MPH in just 6.3 seconds and also has a top speed

of 125 MPH. The Karma does borrow a bit of technology from Chevrolet it features a GM-designed

onboard gas generator that stretches the range of the Karma to an adequate 300 miles. The Karma can

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run on a plug-in capability with a range of 50 miles. The Karma’s base model is priced at a steep

$102,000. The Karma does have a “stealth mode” allowing the vehicle to run virtually silently; however,

during the other times, the vehicle actually has an exterior sound system that pumps out the growls and

purrs that car enthusiast love about sport cars (Robinson, 2012).

Ford has become one of the newest and, quietly, one of the most highly anticipated entrant to

the electric vehicle market. Ford launched the 2011 Ford Focus-E to lead its charge into the consumer

electric vehicle market. Ford has had the Transit Connect EV available for a number of years; however,

this vehicle is mainly used as a fleet vehicle for transporting goods (ford.com, n.d.).

The Ford Focus-E comes to market directed at taking market share from the Nissan Leaf. Unlike

the Volt or Prius, the Focus-E boasts a 100% electric operated vehicle. Part of Ford’s marketing pitch for

the Focus-E is “Never use a drop of gas again.” The Focus-E comes equipped with onboard navigation

on all models pre-programmed to help the driver find the closest charging station. The Focus-E also has

an all-electric range of between 90 and 100 miles and comes with a cell phone app to help monitor the

vehicle at a distance. The Focus-E is a relatively new competitor in the market, but it is priced at

$39,200, still making it a bit expensive for your average consumer (ford.com, n.d.).

Myers Motors is an Ohio based manufacturer that claims it is one of the only all-American made

electric vehicles on the road. Myers Motors is the first company to produce an unsubsidized, sub-

$30,000, lithium battery powered, all-electric, highway speed vehicle. In addition, it aims to be the first

to break the $20,000 price hurdle (myersmotors.com, n.d.)

Myers produces the Myers Motors NmG, which is a single passenger 3 wheel vehicle. The target

market for this vehicle is the short commuter. The NmG has seating for one and is described as having a

spherical body design (like a motorcycle helmet). The driver of the vehicle is fully enclosed and the

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vehicle will travel at speeds up to 70 MPH with a range of 60 miles. Myers’ advertising pitch is their

claim that you can drive 1000 miles on $20 of electric fuel (myersmotors.com, n.d.). While producing a

more affordable version of the vehicle, the only design offered is a single seat vehicle, which can be a

concern for many consumers. Myers is scheduled to launch the new two seat Duo in the near future,

but specifications are not yet released (myersmotors.com, n.d.).

Mitsubishi has entered the US electric vehicle market with their 2012 of the MiEV. Mitsubishi

prides itself in having over 40 years of electric vehicle experience, mostly in Asia. Positioned strongly

based on the infrastructure and in the fact that they have been selling all electric vehicles globally since

mid 2009, Mitsubishi brings a very strong offering to the market. The MiEV is set up to be a very strong

competitor for the Leaf (Roy, 2011).

Mitsubishi beefed up the MiEV a bit before bringing it to US markets, adding 4.3 inches to the

width and reducing its weight to about 2500 pounds for its curb weight. The MiEV is still about 2 inches

narrower than the compact Fiat 500. About 9 inches of length is added, but none of this impacts the

interior as it is all crash safety additions. The MiEV is priced from $29,125 and features a realistic range

of about 80 miles between charges. Much like the Leaf, the MiEV is an all-electric plug in and Mitsubishi

claims that this vehicle can travel 15,000 miles for only $495 (excluding the price of the vehicle) (Roy,

2011).

Nissan became on a major player in the electric vehicle market with the introduction of the

Nissan Leaf in 2010. The Leaf quickly became the first mass available consumer electric vehicle and

actually managed to outsell the more anticipated Chevrolet Volt in 2011, the first year that the vehicle

competed in the market (Harper, 2011). Nissan has taken a bit of a gamble, but at the same time, is

looking at a large rewarding pay off with the launching of the consumer electric car market. According

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to Bloomberg, this could result in distribution of several hundred thousand Nissan Leafs worldwide

(Harper, 2011).

The Nissan Leaf was released in late 2010 (the 2011 model year) to decidedly positive reviews.

The winner of the 2011 World Car of the Year award, the vehicle is poised to continue to capture market

share. The Leaf boasts a 100% electric drive train and a range of 100 miles per charge. Nissan claims

that the vehicle is rated to 99 gasoline miles per gallon, which is a bit misleading because there is no

onboard gas engine (Harper, 2011). With a base price of $35,200, the vehicle is more affordable then its

high priced competitors. Nissan claims that with the government rebates, the buyer could see a realized

value of $27,700 if he or she actually qualified for all the rebates (Nissanusa.com, n.d.). Even in the

wake of the Japanese Tsunami that halted production, Nissan delivered 11,000 Leafs in 2011 (Eziquiel-

Shriro, 2012).

Tesla was launched in Silicon Valley in 2003, with the mission to accelerate the world’s transition

to electric mobility with a full range of increasingly affordable electric cars. Tesla founds its first success

in 2008 with the release of the all-electric Roadster. Since its inception less than 10 years ago Tesla has

grown to employ over 1,400 employees and have 21 retail locations worldwide (teslamotors.com, n.d.).

The Tesla Roadster has become one of the most recognized all-electric sport vehicles currently

on the road. To date, Tesla has put 2,100 Roadsters into the hands of enthusiasts who now occupy the

road in 32 countries (teslamotors.com, n.d.). Tesla ended production of the Roadster in late 2011 with

eyes on creating a more consumer friendly vehicle that would have mass market appeal. With a price

tag of $109,000 and performance rivaling that of race cars, the Tesla roadster was never going to

position the company to be a player in the mass market. For that reason Tesla, has begun production of

the Tesla S, which is the first all-electric vehicle to feature seating for 7 people (5 adults and 2 children).

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The Tesla S will see a price tag of $49,900 and have a range of 160 miles. Those who wish to increase

their range can get an all-electric Tesla S with a 300 mile range for about $20,000 more

(teslamotors.com, n.d.).

Recent news in the electric vehicle market has involved the Tesla, specifically raising questions

about the life of the vehicles. These reports state that the life of the “permanent” lithium ion batteries

being used in the electric vehicle platform likely has a more limited life than initially anticipated. This

study goes on to warn that there may be trouble on the horizon for Tesla as the life of their onboard

battery is being reported to be as short as 5 years and carries a replacement cost of $20,000 to $40,000

(Stanton, 2012). There is fear that once this information becomes publicly known that it will shake the

already unstable consumer confidence in these vehicles.

After years of leading the hybrid market with the Prius, Toyota is the next manufacturer

prepared to have a huge launch when they introduce the Rav4 EV. Toyota has already seen success in

Asia with the all-electric Rav4 EV and is poised to launch the vehicle in US markets in late 2012.

Interestingly, Toyota has maintained a small fleet of Rav4 EV’s since 1997 to test the feasibility of

bringing this vehicle to market (Eziquiel-Shriro, 2012).

There is high initial consumer expectation of the Rav4 EV that it will be noted to be the first

“high seat” crossover vehicle offered as an all-electric option. It is believed that the battery will be

located near the middle of the frame which will cause the Rav4 EV to “sit heavier” on the road and will

actually improve the ride quality over the gas conventional model (Eziquiel-Shriro, 2012). The Rav4 EV

boasts a range of 100 miles and it is assumed that the initial move into the market for this vehicle will be

as a fleet vehicle.

Indirect Competition

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The alternative fuel market has been a “hot button issue” for the last 30 years. In that time,

there have been a variety of alternative fuels developed along with the electric vehicle platform and all

of them compete with that platform (consumerenergycenter.org, 2012).

Biodiesel is a fuel that can be mass produced using waste products from other processes that

actually require little to no modification of existing diesel engines. Fuel sources for this include soybeans

and used restaurant fryer grease. These products can be used independently or combined with

petroleum. This is actually the only alternative fuel source that has completed the health effects testing

under the Clean Air Act (consumerenergycenter.org, 2012).

Compressed natural gas is another attractive alternative and is produced both nationally and

worldwide. It is a fuel that has been used for a long time, especially in fleet areas. Compressed natural

gas is a fossil fuel; however, it shows an 80% reduction in ozone forming emissions over gasoline based

engines (J. Larson, personal communication, April 8, 2012).

Gas to Liquid Fuels (GTL Fuels) are made from coal, natural gas, or biomass using a Fishcer-

Tropsch chemical reaction. This fuel tends to operate very efficiently and similarly to compressed

natural gas, it reduces dependence on petroleum based fuels. This gas does show a minor positive

environmental impact, but it is less than other alternatives (consumerenergycenter.org, 2012).

Hydrogen & Fuel Cell Vehicles are the most realistic competition to electric based vehicles in the

market. Hydrogen is the simplest, lightest, and most plentiful element in the universe and is

compressed into a usable fuel source with a process call reforming. The vehicle is in the test phase, but

there are currently 95 pilot vehicles on the road in California. Tests have shown a reduction in emissions

and increase in efficiency. Ford has developed an internal combustion engine made to run on pure

hydrogen (consumerenergycenter.org, 2012).

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Liquefied Natural Gas is, to a certain degree, a byproduct of learning how to more safely

transport natural gas. By cooling the gas to a liquid state, the fuel more stable to transport. This fuel

source is currently in use; however, it makes more sense for large class 8 or large vehicles. It is not

expected to be a true competitor in the consumer market (consumerenergycenter.org, 2012).

Liquefied Propane Gas is one of the oldest forms of alternative fuel in use. This fuel was

adopted long ago for use in smaller equipment like forklifts ad farm equipment. There is little research

available for modified use into consumer automobiles, yet, it is widely available

(consumerenergycenter.org, 2012).

Substitute Products

The most real competition to the all-electric vehicles of today and tomorrow likely come from

hybrid style vehicles. Many manufactures possess a model that has been road tested and many have

been on the road for a number of years. Some of the vehicles that are being marketed today as electric

vehicles more closely resemble hybrids.

Honda has a hybrid vehicle that is not that talked about but may be a very real player in the

future of the market. The Honda FCX Clarity is an electric/hydrogen hybrid that has been available since

2008. The model uses a hydrogen fueled generator, which is the same concept as the gasoline fueled

generator of the Volt. The Clarity boasts a range of 240 miles per tank of hydrogen and the vehicle is

offered for lease at $600/month for 36 months. Honda is expected to announce the future of its electric

division by the end of 2012 (Honda.com, n.d.).

Possibly the most recognizable go green vehicle today is the Toyota Prius. The Prius has been

available since 2000 (the 2001 model year) when Toyota began taking orders online for the vehicle.

Toyota sold a total of 1,800 in the first year of sales with an MSRP of $19,995. Since then, Toyota has

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seen significant growth and tremendous success with the Prius, especially with the second generation

model launched in 2004. There were 12,000 orders placed for the second generation Prius before it

even hit markets and has won 4 cars of the year awards in 2004 alone (Toyota.com, n.d.).

Strategic Groups

Strengths and Weaknesses of Competitors in Each Group

Overall, the strengths and weakness of each perspective brand is currently difficult to identify.

The major reason for this is that the electric car industry stands to be a much different market than the

conventional car industry. Mr. Wang, the CEO of BYD has said “It’s almost hopeless for a latecomer like

us to compete with GM and other established auto makers with a century of experience in gasoline

engines,” said Mr. Wang. “With electric vehicles, we’re all at the same starting line” (Shirouzu, 2009,

para. 6 ). With so many people coming to the new market it actually turns strengths into weaknesses.

In his book Killing Giants, Stephen Denny touches on the idea of a small start-up brand

competing with the major players in the industry. Two of the components that Mr. Denny talks about

include placing your competition on “Thin Ice” and also the “Speed” of products. These two concepts

are important issues for late comers joining the market and also for major manufactures and their

difficulty in competing in certain circles (Denny, 2011).

The “Thin Ice” Mr. Denny is referring to is taking the competition into a place that they are

uncomfortable and unwilling to compete. This is a concept employed by the start-up companies Fisker

and Tesla Motors. Both have leveraged the “luxury” brand hybrid to gather small chunks of market

share, while at the same time developing technology so they are competitive on a larger market (Denny,

2011). Later this year, Tesla is poised to place the more affordable Tesla S into market. Commuter Cars

is set to transition from the performance oriented Tango 600 to the release of the Tango 100 & Tango

19

200 which will also enter the more affordable consumer market (teslamotors.com, n.d.;

commutercars.com, n.d.).

Using this same concept, weaknesses of some of the larger players in the market are shown.

While companies like Chevrolet, Ford, and Nissan possess a large number of resources, they need to

take a substantial portion of the market share in any given product for it to be worth their time. For

companies like these who are already producing vehicles, completely changing direction requires new

expertise, new or retooled factories, and a large commitment to see the project through (Denny, 2011;

Shirouzu, 2009).

Strategic Perspective & Market Shares

The overall market share of current competition is difficult to quantify at this time and is frankly,

too new, to have reasonably developed. Currently, the market share of the electric vehicle industry is

about 2% of the total automobile market, or about 260,000 units (Arbeje, 2012). Nissan sold around

11,000 Nissan Leaf vehicles and Chevrolet sold about 10,000 Volts in 2011. While these numbers are

slightly behind projections, it is expected that this market share will grow to about 5% of total vehicle

sales in the next 5 years (Arbeje, 2012).

Strategically, it is expected that the international market for Electric Vehicles will grow faster

than the domestic market. With companies like BYD and Mitsubishi already having a footprint in Asia,

these markets are expected to grow more quickly. BYD has already sold around 500,000 vehicles in

China which suggests that they already have a very strong infrastructure in these areas (Shirouzu, 2011).

BYD has already placed a large number of all electric vehicles in major Chinese cities to use primarily as

taxi cabs. This is a market that is still very much in its development phase and has yet to find itself.

Industry Perspectives

20

Distinguishing Characteristics of Industry

Electric and Hybrid vehicles bring distinguishing characteristics to the automobile industry. In

2010, the first mass produced electric vehicles hit showrooms and dealerships. This new electric option

offers buyers new and interesting options in comparison to the traditional gas powered combustion

engine offerings to date. Electric cars offer performance, safety, and versatility, and can be charged from

the electric grid, providing convenient, low- cost, at-home charging. At the U.S. national average price of

11.5 cents per kilowatt-hour, buying electricity is approximately equivalent to buying gasoline at $1 per

gallon. Displacing gasoline with electricity also lowers emissions and decreases petroleum use (Electric

Power Research Institute, 2011). The electric automobile industry has three main types of offerings in

the electric market. These three offerings (Hybrid, Plug-in Hybrid Electric, and Electric) offer buyers

unique differences.

Hybrid vehicles: Hybrid vehicles are powered by a gasoline engine and one or more electric

motors. The battery is charged as the vehicle drives, so the vehicle is powered ultimately by gasoline.

Hybrid vehicles cannot be recharged from the grid. Hybrids operate like conventional vehicles and are

fueled with gasoline. Generally they are more efficient than conventional vehicles since they use

technologies that turn off the gasoline engine at a stop and capture braking energy for battery power

instead of turning it into heat (Electric Power Research Institute, 2011). Examples are the Toyota Prius

and Ford Fusion Hybrid.

Plug-in Hybrid Electric Vehicles: Plug-in Hybrid Electric Vehicles are powered by a gasoline

engine and electric motor, but they have a larger battery pack than a hybrid vehicle which can be

recharged from the grid. This combination allows the vehicle to use electricity, and enables the vehicle

to continue driving indefinitely after the battery is discharged. Plug-in hybrids operate like hybrid

21

vehicles but can be charged from the grid. Grid energy is consumed first, using up to 70% less gasoline

than a hybrid vehicle if it is plugged in each night. Plug-in hybrid electric vehicles do not have to be

plugged in, but if they are not they will not save additional gasoline compared to a hybrid vehicle

(Electric Power Research Institute, 2011). The Chevrolet Volt is an example of a plug-in hybrid electric

vehicle and the typical charge time for 35 miles of range is 8-10 hours with a conventional wall outlet.

Electric Vehicles: Electric vehicles are powered by an electric motor and battery alone. Electric

vehicles can travel farther on electricity than plug-in hybrids, but their range is more limited. Electric

vehicles never use gasoline and most models are designed to travel up to 100 miles between charges.

This is greater than the distance driven by average Americans on over 90% of driving days, but it could

be a limitation for some drivers who frequently drive long distances (Electric Power Research Institute,

2011). The Nissan LEAF is an example of an electric vehicle.

Industry size and growth

Current -There are approximately 13 million cars and small trucks are sold in the United States

each year. Of that 13 million, only 2% are EV or Hybrids (260,000). The Leaf, with more than 27,000

units sold worldwide through March 2012, and the i-MiEV, with global sales of more than 17,000 units

through October 2011, is the world's top-selling highway-capable electric cars (Arbeje, 2012).

Future Projections- Menahem Anderman, arguably the country’s leading lithium-ion battery

analyst, projects that the global EV market in 2015 will be modest. Anderman estimates that 250,000 in

sales will be predominantly generated by German and Japanese automakers. The game changer could

be if batteries decrease in cost, and get 50% more, or higher, in energy capacity; if this happens, then

EVs will be on an even playing field with gas vehicles. As a point of reference, over the past 4 years,

batteries have improved by 40% (Arbeje, 2012).

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Industry Structure

Barriers to Entry

The traditional gas powered combustion engine producing giants like GM, Ford, and Toyota

have enormous barriers to enter their market; however, electric vehicles have changed that. Few

products are as complex to develop and produce as gasoline powered automobiles, which are

assembled with thousands of precisely engineered parts. But electric cars use only basic motors and

gearboxes, and have relatively few parts. Aside from perfecting the battery itself, they are far easier and

cheaper to build and that makes for a level playing field.

Potential Entrants/Threats from Substitute Products

The shift from combustion engines to electric engine technology has not only lowered the

barrier to entry, it has also encouraged many small company start-ups to threaten the dominance of the

large automakers. This opportunity has opened the door for small companies like Tesla Motors to

capitalize.

Bargaining Power of Suppliers and Customers

The bargaining power of the suppliers is greatly diminished due to the cost of new battery

technology in comparison to what people are willing to spend on a typical new car. “J.D. Power and

Associates claims that about 50 percent of U.S. car buyers are not willing to spend more than $5,000 on

23

a green vehicle above the price of a petrol car despite their concern about the environment (J.D. Power

and Associates, 2010).

This position has caused the industry to sell their cars at or below cost causing little bargaining

power for suppliers. Pike Research Firm believes that $23,750 is the optimal price range to inspire more

mainstream adoption, but most of the EV models that consumers will consider in 2012 will all be priced

at more than $30,000 (Clancy, 2011).

These high prices have also left the average car buyer very little bargaining power; however, the

one exception to this is the high price buyer. If you are in the market for a car and willing to spend

$50,000-$100,000, there are electric car options that may appeal to you. This market position is ideal for

high end luxury buyers and sellers, but has not taken off on main street USA.

Cost Structure

The current cost structure is dominated by the cost of the electric vehicles batteries. As battery

technology improves their prices will drop and have an impact on the overall cost of purchasing an EV. A

study published in 2011 by the Belfer Center, Harvard University, found that the gasoline costs savings

of plug-in electric cars over the vehicles’ lifetimes do not offset their higher purchase prices. This finding

was estimated comparing their lifetime net present value at 2010 purchase and operating costs for the

U.S. market, and assuming no government subsidies. According to the study estimates, a PHEV-40 is

$5,377 more expensive than a conventional internal combustion engine, while a battery electric vehicle

is $4,819 more expensive. The study also examined how this balance will change over the next 10 to 20

years, assuming that battery costs will decrease while gasoline prices increase (Lee & Grant, 2011).

Life Cycle

24

Electric vehicles had popularity during the early 1900’s. This popularity put electric

transportation on par with the combustion engine until the invention of the electric starter. Once the

electric starter became common in the 1930’s the electric car was removed from most markets. The

resurgence of electric cars has been accelerated and welcomed due to the high cost of petroleum. This,

in combination with the last decade’s progress in lithium based batteries, has reintroduced the EV into

the introduction stage of the product’s life cycle. It is widely estimated that in the next 5-10 years the EV

will enter the growth stage if improvements continue at their present rates (Alger , 2011).

Key Success Factors

The rise and or fall of electric car market will most likely coincide with the development of their

battery technology. According to Craig Shields, “I predict 10% penetration by 2020 – a $250 billion

market, but batteries are critically important”. Shields continued, “As we achieve scale here, as we

experience ongoing technology innovation, establish design standards, and remove cost from the supply

chain, we’ll have battery costs at $300/kWh, which will enable EVs to be offered at terrifically attractive

prices” (Alger, 2011, para. 6). These are not the only hurdles for EV growth, but if the battery improves

as expected EV’s could penetrate the market.

Environmental Analysis

Trends and Potential Events/Industry Trends

Description of Trends25

Fleet sales will dominate the early market. Major companies looking to burnish their green

reputations are likely to be less reluctant to jump into the market. General Electric’s Jeffrey Immelt has

committed the company to buying 25,000 EVs, including at least 12,000 Chevrolet Volts. Hertz and

Enterprise are making major commitments to EVs in their rental and car-sharing fleets (Clancy, 2011).

Strategic Implications

EV buyers will have far more choices. Pike Research predicts that unit sales of plug-in electric

vehicles will reach 257,000 units globally next year. The pioneering technologies found in the Chevrolet

Volt and Nissan Leaf will be joined by models from BMW, Ford, Honda, Toyota, and Volvo, as well as the

newcomers Coda and Fisker. North America will account for about 66,000 of those unit sales (Clancy,

2011).

Time Frame

Prices will remain high for electric vehicles. Pike Research notes that even though the Chevrolet

Volt will have a price tag that is $1,000 less in 2012, its stripped-down feature set will turn off many

potential electric vehicle buyers. In fact, prices for the Nissan Leaf will be higher for 2012 than they were

for 2011 (Clancy, 2011).

Importance for the Industry

Businesses will install chargers. A number of high-profile companies (Adobe, GM, SAP, Google)

have started installing chargers in office parking lots and this trend will continue. Additionally, one of

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the nation’s largest parking-lot operators announced plans to invest in technologies that will bring

charging to local city parking garages (Clancy, 2011).

Safety Issues

EV’s have risks associated with electricity. This has caused widespread concerns for the public

and triggered the National Highway and Transportation Safety Administration (NHTSA) to do extensive

testing on potential fire hazards during impact. This testing along with public perception have prompted

the manufacturers to issue extensive instruction on safe handling techniques of EV’s during

maintenance and in emergency situations. Extensive training to public emergency personnel such as fire,

EMS, and police will prepare them for EV in the mass market (Clancy, 2011).

Future scenarios

These environmental, social, and political trends tend to point a society that is rapidly beginning

to prepare for and embrace the growth of the electric vehicle in the near future. This market shift is

expected to happen slowly and only if car prices become more affordable and gas prices remain high.

Marketing Perspectives

Product

Electric Car Product Differentiation

Electric car product differentiation is the process of distinguishing each company’s electric cars

from competitors’ products, as well as from each company’s own product offerings in order to make

them more attractive to a particular target market (Wikipedia, 2012). Electric cars have numerous

benefits compared to conventional internal combustion automobiles, including significant reduction of

air pollution, harmful tailpipe pollutants, and greenhouse gas emissions. In addition, it requires less

dependence on foreign oil, and the driving efficiency of an electric car is much higher. The efficiency for

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a Tesla Roadster, for example, is 88% compared to 20-25% for traditional gas-powered cars

(teslamotors.com, n.d.).

It is the generous size and comfort of the BYD e6 that sets it apart from other electric vehicles.

In addition, it boasts a powerful drive-train, adopting BYD's revolutionary new EV battery, the Iron-

Phosphate or "Fe" battery. The 75kW motor and Fe battery help it to power to a range of 187 miles on a

single charge in the city. This makes it one of the longest-range, pure EVs in the world. The projected top

speed is 87 mph. BYD's internally developed Fe battery is resistant to high temperatures, high pressures,

and severe impacts and has excellent reliability and a 10-year warranty. In addition, charging the e6 is

convenient and fast and it only takes 40 minutes to fully charge the e6 using the 100kW fast charging

cabinet, while it takes 6-8 hours with a standard 10kW standard charging pole (byd.com, n.d.).

The Chevrolet Volt is unique among electric vehicles because you have two sources of energy.

You have an electric source, a battery, which allows you to drive gas–free for an EPA–estimated 35 miles

and an onboard gas generator that produces electricity so you can go up to a total of 400 miles on a full

tank of gas (chevy.com, n.d.). In addition, the Volt is programmed to respond with a choice of three

driving modes. Normal mode enables Volt to drive like a conventional car, only more efficiently. Sport

mode gives drivers more aggressive feedback and heightened response. Mountain mode maintains a

power reserve for climbing long, steep grades (chevy.com, n.d.).

Commuter Cars Tango is differentiated from other electric vehicles by speed, agility, safety, size,

and charge time. The Tango accelerates from 0-60 mph in under 4 seconds and reaches a maximum

speed of 130 mph. It has four time more side protection bars than the largest SUV, has a race car roll

cage, a 4-point harness, low center of gravity, and with 2,000 pounds under the floor, it achieves the

rollover threshold of a sports car (youtube.com, 2012). Another significant difference is that the Tango

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is also 5 inches narrower than many motorcycles, therefore can get through traffic easily and be parked

easily. The Tango can be charged to 80% in about 10 minute with a 200-amp off-board charger, is

charged overnight with a 110-volt outlet, and a dryer outlet will give most of a charge in an hour or a full

charge in less than 3 hours (consumercars.com, n.d.).

The Fisker Automotive Karma is the world's first premium hybrid electric vehicle. It differentiates

itself from others due to the creation of the world’s largest and most powerful solar panel

(fiskerautomotive.com, n.d.). That contribution translates to the power equivalent of up to 200 miles of

driving, at no cost and with zero emissions, over the course of an average year (fiskerautomotive.com,

n.d.). In addition, despite the challenges of a solar-power installation, the Karma is the only electric car

with a sunroof. While the Karma has both gasoline engine and electric motors, it is a “series hybrid”

with the wheels always driven by the electric motors. When fully charged, the Karma will cover about 50

miles on battery power alone, depending on speed and conditions. The gasoline engine never stirs, and

the car’s hydrocarbon and greenhouse-gas emissions are zero (fiskerautomotive.com, n.d.). In addition,

Fisker engineers designed a first for a touch screen in an automobile, called tactile feedback. The screen

delivers a gentle flutter to the fingertip along with sounds and color changes to confirm activation of a

control (fiskerautomotive.com, n.d.).

The Ford Focus Electric Car has numerous reasons it differentiates itself from other electric cars.

The 2012 Focus Electric is the first vehicle from Ford to be powered by electricity alone from a state-of-

the-art battery system and is projected to be the first five-passenger all-electric vehicle with a combined

fuel efficiency rating of over 100 MPGe with a combined rating of 105 miles per gallon equivalent (Ford,

March 2012). Also, it offers more power, passenger room, and standard features than the Leaf ,

introduces new features and technologies (a unique version of the MyFord Touch), and is the most

maintenance free Ford ever as it eliminates more than two-dozen aspects of the vehicle that require 29

services (Ford, January 7, 2011; Ford, February 9, 2011). In addition, a full recharge is expected to take

three to four hours at home, which is half the charge time of the Nissan Leaf (Ford, January 7, 2011;

Cooper, 2012). According to Sherif Markakby, director of Ford’s electrification programs and

engineering, “It shares many of the same premium components and features as its gasoline-powered

counterpart, while delivering distinct efficiencies and a uniquely exciting driving experience” (Ford, Jan.

7, 2011).

The Myers Motors NmG is a popular single passenger car and costs somewhere between $0.01

and $0.02 in fuel costs, per mile. Thus, it differentiates itself by the ability to drive 1,000 miles on $20 of

electricity. In addition, it is America’s only 75MPH personal vehicle. The NmG conveniently plugs into

any 110 volt outlet. Consumer feedback on the single-passenger vehicle led the design process for

Myers Motors’ new two-passenger model, which will also cost less than $30,000 and will provide drivers

with a standard 60-mile range. The two-passenger model is also designed for easy overnight charging

and should only cost about 2-cents per mile to drive. (myersmotors.com, n.d.)

This year, the Mitsubishi i-MIEV claimed first place on this year’s list of “greenest” vehicles by

the American Council for an Energy-Efficient Economy, shortly after being named the EPA's fuel

economy leader. It is differentiated from others due to being the most efficient car in production, due

to the 112 combined MPGe. The Mistubishi is also the most affordable electric vehicle in the US (MSRP

$29,125) and has unique safety features and technology featuring roof-mounted curtain airbags and an

impressive battery warranty. In addition, the Mistubishi was engineered to look and perform the part of

eco-friendly driving, from the windswept front end to the efficient LED rear tail lamps

(i.mitsubishicars.com, n.d.).

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The Nissan Leaf differentiates itself from competitors by being built to go 100 miles on a single

charge. In addition, it is known for its versatility, roominess, high tech features, start-up sounds, unique

display, and numerous other amenities seen in a luxury car (nissanusa.com, n.d.). The Leaf is the best

selling US electric car at 11,000 units sold in 2011. In addition, The Insurance Institute for Highway

Safety awarded The Nissan Leaf the "Top Safety Pick" in 2011 (Wikipedia, 2012).

The Tesla Roadster differentiates itself by offering a significantly higher range than other electric

cars. Owners can drive their cars all day long, and then simply return home and plug their cars in. In

addition, it uses a single speed gear box, which means no clutch work is needed to achieve instant

acceleration and Tesla vehicles cut in half the CO2 emissions of their gas burning rivals. The Tesla

Roadster is also currently, the only electric car that qualifies for the full $7,500 tax incentive

(teslamotors.com, n.d.). The Tesla S model differentiates itself by delivering an “unprecedented range

and a thrilling drive experience” and has an all glass panoramic roof, being the only sedan capable of this

convertible like driving experience (teslamotors.com, n.d.). In addition, the Model S has a 50/50 weight

distribution, a low center of gravity, can seat 7 people, boasts more storage, and has a 0-60 speed of 5.6

seconds. With an 85 kWh battery, the estimated range is 300 miles and has a top speed of 125 mph.

The Model S suspension system was developed specifically for the architecture of Model S and works

with the Tesla platform to provide precision handling and comfort (teslamotors.com, n.d.).

When the RAV4 EV goes on sale in 2012, it may be the only all-electric SUV on the market;

however, some possible plug-in SUV models that may be hitting the market include the Mitsubishi PX-

MiEV, Ford Escape Plug-in Hybrid, and Tesla Model X (plugincars.com, 2012). The RAV4 EV was one of

the five finalists for the 2011 Green Car Vision Award and has an estimated range of 80 to 120 miles.

The RAV4 EV also benefits from having a handful of moving parts compared to a car with a combustion

engine and drivetrain, and also lacks emissions equipment, which can add up to saving significant money

31

for the owner over time, with no oil changes or mechanical failures (Toyota.com, n.d.; Wikipedia.com,

2012).

Summary of Vehicle Performance

Cars MSRP Top Speed Charging Time at 220 volts

Distance Per Electric Charge

Style

Ford Focus EV $39,200 84 MPH 3-4 hours 76 miles 5 door hatchback

Nissan Leaf $35,200 87 MPH 8 hours 100 miles Hatchback

Chevy Volt $39,145 100 MPH 4 hours 35 miles Sedan

Tesla Roadster

Tesla Model S

109,000

$49,900

125 MPH

125 MPH

3 ½ hours

4-5 hours

244 miles

160 miles or 300 miles for $20,000

SUV

2 door sports car

Fisker Karma $102,000 125 MPH 6 hours 50 miles Luxury sports sedan

BYD e6 $42,000 87 MPH 8 hours 187 miles 5 door hatchback

Commuter Cars Tango

T600-$108,000T200-$40,000

T100-$19,000

130 MPH 8 hours, but 3 hours with a dryer outlet

40-60 miles 2 door, 2 seat, ultra narrow sports car

Myers Motors NmG $36,000 70 MPH 3 hours 60 miles Single passenger, 3 wheeled personal electric vehicle

Mitsubishi i-miev $29,125 80 MPH 6-8 hours 62 miles 5 door hatchback

Toyota-Rav4 $50,000- 78 MPH 5 hours 80-120 miles 4 door SUV

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$55,000

Electric Car Branding

The definition of a brand is “the marketing practice of creating a name, symbol, or design that

identifies and differentiates a product from other products” (entrepreneur.com, 2012). In addition, the

brand also is how the company makes you feel. For electric cars, the branding may include the tagline,

the logo, name, and colors. The following are some examples of the branding of electric vehicles

discussed in this paper.

*BYD

“Technology Based, Innovation Oriented”

*Chevrolet Volt

“Electric when you want it, gas when you need it”

*Commuter Cars Tango

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“The World’s Fastest Urban Car”

“The revolutionary commuter vehicle that combines the speed and agility of a motorcycle with

the security and comfort of a sports car.”

*Fisker Karma

“URL-Uncompromised responsible luxury”

-The orange and blue in the Fisker logo represent a California sunset over the Pacific Ocean.

The vertical bars represent the designer's pen and the creator's tools. (fisker.com, n.d.)

*Ford Focus

”Gas free, 100% electric, and ready to be yours”

“Never use a drop of gas again.”

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*Myers Motors-NmG

“Transform your driving. Transform your world.”

*Mitsubishi i-MIEV

“Go on. Express your eco-self”

*Nissan Leaf

“100% electric, zero gas, zero tailpipe”

*Tesla Motors

“Take a new road”

*Toyota Rav435

“Moving forward”

Technological Changes

Some technologies in electric vehicles include batteries, electricity, motors, materials, and

charging stations. The improvements in battery technology over the past two decades, in particular the

advances in Lithium-ion battery technology and advances made through hybrid vehicles, have allowed it

to be possible to design and manufacture electric vehicles with better performance than their gasoline-

powered counterparts. One of the most important technologies in any electric vehicle is the battery

pack, which must be small and light for efficiency, but hold enough energy to allow for a reasonable

range before recharging. Another technology that electric cars need is a stable infrastructure of

electrical distribution as some towns may need to allow for additional demand on electricity. Also, while

batteries replace a fuel tank, electric motors replace the internal combustion engine and exhaust

system. These motors use electromagnetism to turn electricity into mechanical energy that passes

through a transmission and turns the vehicle's wheels. In addition, lighter cars require less energy to

drive. Cars have been made from plastics for decades, due its low cost and light weight; however,

additional materials, such as aluminum alloy, fiberglass, and carbon fiber also provide light, durable

materials for car parts and bodies. Another technology is the charging station. For electric cars to be

practical, owners need access to fast-charging stations. Charging stations can be installed in the home

using high-capacity power lines. Because they store large amounts of electricity and can fill the car's

batteries more quickly, recharging throughout the day is simpler (Hartman, n.d.).

Services Required

36

Very little maintenance is required for these cars, due to the electric motor. The motor has

roughly half a dozen moving parts, as compared to the hundreds of working parts in a gas-generated

engine. There are not many parts in an electric car motor that can wear out, and when they do, they are

relatively simple to replace. Regular maintenance will consist of little more than checking the air

pressure in the tires and keeping the windshield wiper reservoir topped up. Long term, the car’s brake

pads and shocks may need replacing, along with tires (Ford, February 9, 2011). For example, one

manufacturer, Tesla, recommends a standard service and diagnostic inspection once a year or every

12,000 miles (teslamotors.com). Estimates suggest that maintaining an electric car will cost much less,

about one-third the current cost of maintaining a gas-powered car, until the battery begins to wear out

(Lampton, n.d).

Even though electric car batteries do not require much day-to-day maintenance, the battery will

gradually lose its ability to hold a charge like a laptop or cellphone. The longer the electric car is used,

the shorter its driving range will become and this will start happening from as soon as the car is driven.

The process will be slow and the battery will not stop working all at once. Most estimates predict that

the typical lithium-ion electric car battery will be good for more than 100,000 miles, while still

maintaining a decent charge during driving range however, the battery will begin to need to be

recharged more often and then may need replaced at the dealership or a battery specialty shop;

however, currently, these batteries are very cost-prohibitive and replacement batteries range from

$15,000 to $40,000 (Lampton, n.d). The U.S. Department of Energy has set a goal of bringing down the

cost of electric car batteries 70 percent by the year 2014; however, according to the Wall Street Journal

many experts don't think this will be possible (Lampton, n.d). Consumers may be able to get some

trade-in value for your old battery, since the parts can be reused and people with minimal driving needs

may be satisfied to buy a secondhand battery with a reduced range (Lampton, n.d).

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Price

Prices for electric cars are significantly higher than their gas-powered counterparts, due to the

price of battery packs. Pricing shown includes the MSRP for base-price vehicles.

-Mitsubishi-$29,125

-Leaf-$35,200

-Myers Motors-$36,000

-Volt-$39,145

-Ford-$39,200

-BYD-$42,000 (http://xorbot.org/2012-byd-e6-for-us-market.html)

-Tesla Roadster-$109,000 and Tesla Model S-49,900

-Toyota Rav4 EV-These will cost approximately $50,000-$55,000. Because this model is not out yet, this is only an approximate price based upon the price of a gas-powered Rav 4, the price of the hybrid models, and the size of the battery pack for the Rav4 EV (plugincars.com, 2012).

-Karma-$102,000

-Consumer Cars Electric Cars-The first model is the luxury Tango T600, which costs roughly US$108,000. The T200 model is expected to be eventually released at $40,000, while the T100 is expected with a $19,000 price tag. Both of these higher-production models remain to be developed and are awaiting funding (consumercars.com, n.d.).

Price Trends

Electric vehicles are expensive, mostly due to the cost of the batteries. Although costs will

come down due to the drop in cost of the batteries in the future, prices will remain high for electric

vehicles. Battery packs are an expense of $10,000 to $40,000 for EVs, and although costs will come

down with volume, it will be a slow decrease (Clancy, 2011). Creating cheaper, more efficient batteries is

one of the biggest engineering challenges. The White House recently released a report titled "A

Blueprint for a Secure Energy Future: Progress Report" that explains how the cost of electric vehicles will

go down considerably around 2015, with the main reason being the drop in price of electric vehicle

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batteries. This will help the U.S. reduce its dependence on foreign oil, dramatically, as a cost of a 10

kilowatt battery that gives a car a 40-mile range will likely drop to $3,600 by 2015 (whitehouse.gov,

2012). Although $23,750 is the optimal price range to inspire mainstream adoption, most of the models

that consumers will consider in 2012 will all be priced at more than $30,000 (Pike Research Firm, 2011).

Most of the batteries for the 2012 models were ordered before increased production helped bring down

prices. So, battery availability won’t help with pricing until 2013 or 2014 model years, Pike Research

predicts (Pike Research Firm, 2011).

Public charging will also cost more because companies are starting to see electric car charging as

a business and are trying to make a profit. The Car Charging Group (CCGI), for example, which is putting

in chargers in Florida, New York and Connecticut, is planning to charge 50 cents a kilowatt hour. This is

more than four times the national average of 12 cents per kilowatt hour consumers currently pay at

home (Clancy, 2011).

Price Margins

Typically, new car margins are very thin. At most, new car sales have a margin of between $750

and $1,000 per car. Used car sales margins can range vastly by how much a dealer or seller has invested

in that car and what they can sell it for. Margins can be as low as new cars sales and as high as the

perceived value set by the seller and agreed on by the buyer and seller. Kelley Blue Book Value is a good

rule of thumb to estimate a vehicle's value (kbb.com, n.d.). It is still really early in the life cycle of

electric cars to access the resale value of these cars.

Discounts

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The government has initiated tax incentives in order to help overcome the cost barrier, to

promote the sales of electric cars, to give car companies an added incentive to get zero-emissions

vehicles on the market, and to fund further development of electric vehicles and more cost-effective

batteries (Boyer, 2011). The U.S. has pledged US$2.4 billion in federal grants, China has announced it

will provide the US $15 billion to initiate an electric car industry within its borders, and several national

and local governments have established tax credits, subsidies, and other incentives to reduce the cost of

electric vehicles. While developing new battery technology is expensive, applying federal funds will help

decrease those start-up costs and help car companies to increase production, which will help cars to be

more affordable to produce and purchase (Boyer, 2011).

To accomplish this, the U.S. is offering a $7,500 federal tax credit toward the purchase of zero-

emissions cars and smaller tax breaks on low-emissions vehicles, as well as up to 50 percent of the cost

of a home car charger installation. In addition, a bill introduced in Congress earlier this year proposes

offering grants of up to $800 million toward the construction of public charging stations. "Tax incentives

are an effective tool that helps make the upfront price equation for the consumer more attractive and

can help spur early adoption of new technology," says GM spokesman Greg Martin (Boyer, 2011, para.

2). Under Obama's new budget, the rebate could increase to $10,000 for Fiscal Year 2013 (Silke Carty,

2012). Currently, the only electric car that qualifies for the full $7,500 tax incentive is the Tesla

Roadster. The incentives can amount to about a 22% discount on the Nissan Leaf and more than $1,000

on the car charger. Local and state governments offer even more incentives. States such as California,

Illinois, Utah, Colorado, Tennessee, Pennsylvania, Maryland, and West Virginia, and Hawaii are also

offering rebates. (Bird, 2012). Ohio doesn't offer any additional rebate. Many cities across the US are

also offering incentives like cash rebates, free charging, lower utility rates during off-peak times, home

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charging incentives, insurance and parking incentives. In addition, many manufacturers, such as Ford,

provide employees and friends and family with employee discounts up to 3%.

Free-market economists argue that government tax incentives will not help jump-start the

electric car industry and are not beneficial because they create false demand and hurt competition.

Others indicate that buyer incentives on electric cars amount to regressive tax subsidies because they

take taxpayer money to help buy toys for the wealthy. On the other hand, some people believe that the

federal government isn't doing enough to encourage increased production and buying of electric

vehicles. Proponents of federal incentives argue that the most effective way to attract more buyers

would be to raise the price of gasoline, which would not only help stimulate sales of electric cars, but

would also discourage drivers from using gasoline-powered cars more than necessary (Silke Carty,

2012).

Distribution and Projection

Part of Obama’s plan is to put one million electric and hybrid vehicles on the road by 2015;

however, manufacturers are not mass producing these vehicles as of yet due to the infancy of demand,

so they have a limited release to certain states just beginning to trickle out. For example, Ford only

projects to sell about 5,000 in the first couple of years (Silke Carty, 2012). So, it's clear that projections

from the manufacturer and the White House do not line up, yet, as the White House’s goals are

significantly more ambitious. Currently, as distribution increases, dealerships are only getting about a

half dozen depending on their market, and as they sell one, the manufacturer will send another one

from the assembly plant.

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Major Channels

The channels for distribution begin at the manufacturing stamping and assembly plants and

moves to the automaker's dealerships across the country and globe. The major auto manufacturers like

Chevy, Ford, Chrysler, Toyota, Honda, Nissan and have thousands of dealerships combined, whereas

smaller manufacturers like Fisker and Tesla have under 50 dealerships each (fiskerautomotives.com,

n.d.; teslamotors.com, n.d.). New vehicles can also be purchased online directly from the manufacturer's

website or over the phone. Examples of this include Myers Motors and Commuter Cars. With

consumer's confidence increasing with online purchases, the amount of sight unseen purchases will

gradually increase over time. Any significant increase in online purchasing straight from the

manufacturer will further downsize the need for auto dealerships across the country.

The RAV4 EV will be assembled in 2012 at Toyota's facility in Woodstock, Ontario along with the

regular gasoline version. Tesla will build the electric powertrain at its plant at Palo Alto, California, and it

will ship them to Canada. The U.S. market launch is scheduled for late 2012 and initially will be sold only

in California. Production will be limited during the first three years (Wikipedia, 2012).

Sales Centers and Dealerships

*Ford-3,131 dealerships

*Nissan-1,100 dealerships

*Chevy-3,084 dealerships

*Tesla-17 dealerships in North American dealerships

*Fisker-44 dealerships

*BYD-Dealerships Coming soon. Opened US headquarters in LA in late 2011 with a showroom for prototype vehicles for prospective dealers to visit. Currently not open to public. Interested customers can make their inquiring via phone.

*Consumer Cars Electric Cars-Most new customers complete their transaction using email, phone, and the order form on the website. It requires a $10,000 deposit

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*Myers Motors-Most new customers complete their transaction using email, phone, and fax. Once your NmG is built, it is sent directly to your home or office.

*Mitsubishi-more than 500 dealerships

*Toyota-1,445 dealerships

Channel Conflicts

Currently, for example, Ford is having a supply chain issue with the transmission, which has

delayed distribution. The Focus was supposed to arrive at dealerships by March, but as of right now

they have not. Chevy had similar delays with the Volt (M. Swinarski, personal communication, April 9,

2012). These channel conflicts with the transmission has left the expected delivery date behind schedule

with an undetermined date of delivery to the dealerships.

Promotion

Expenditures: Historical Information and Future Projections

The increase in advertising is a sign of a rebound in the auto industry, which has struggled amid

the prolonged recession and weak consumer confidence. Of the top 20 product categories in U.S.

advertising spending, the largest growth in the first half of 2010 was seen in automotive as auto sales

began to improve. Although information is available regarding advertising money spent in the

automobile industry as a whole, the relative newness of the EV category makes it somewhat prohibitive

to get accurate and complete advertising money spent. According to Nielsen, in the first six months of

the year, more than $42 million was spent in the U.S. advertising the Chevy Volt and Nissan Leaf brands.

Nissan Leaf bought a one minute commercial for the 2011 Super Bowl for $6 million. In addition, a

commercial spot for the 2010 Winter Olympics cost between $360,000 and $490,000 per commercial.

Overall, $3.5 billion was spent on auto advertising in the first half of 2010, up 27% over the previous

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year. The increased automotive advertising was driven largely by spending by Chevrolet parent

company, General Motors, which was up 95% over 2009. (http://blog.nielsen.com, 2010).

Positioning of major brands

In marketing, positioning is “identifying a market niche for a brand, product or service utilizing

traditional marketing placement strategies (i.e. price, promotion, distribution, packaging, and

competition)”. Effective positioning depends on communicating a brand's uniqueness, differentiation,

and value (Wikipedia, 2012, para. 6). Some examples of effective positioning include Nissan, Ford, and

Chevrolet.

The Nissan Leaf has firmly positioned their brand as the eco-friendly vehicle. Their commercials

titled ‘What if everything ran on gas?’ and ‘Polar Bear’ capture the position of an environmentally

conscious vehicle and company. Their website also reinforces this position with the imagery on the site

(youtube.com, 2010).

Although the Ford Focus has not begun their TV commercial campaigns yet, Ford is positioning

the Focus EV as the all-electric vehicle with features for the tech savvy consumer.

Chevrolet has taken an educational approach to the Volt’s positioning. The Chevy Volt’s

website, and their commercials ‘Aliens’ and ‘Gas Station’ attempt to educate consumers that EVs are the

future and explains how the Volt works on electricity initially before switching over to gas (youtube.com,

2012).

Promotion trends

Because of the novelty of EVs in the marketplace, it is useful to view promotional trends of

alternative fuel vehicles like hybrids, diesel fueled vehicles, and E85 fueled vehicles. As gas costs have

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steadily risen over the last 10 years, auto manufacturers have promoted their vehicles’ fuel economy

and their environmental virtues. As gas prices rose, more consumers have looked to trade-in their gas

guzzling SUVs for smaller, more fuel efficient vehicles. Auto manufacturers capitalized on that notion by

engaging in a MPG war to gain market share. The recession, paired with rising gas costs, enabled the

auto manufacturers to focus on the lowest common denominator of MPG.

Issues Affecting Strategy Choice

Despite their potential benefits, there are a few good reasons why gas-free vehicles are slow to

move off the lot, including cost, lack of recharging stations, range anxiety, and service issues. As of

2011, electric cars are significantly more expensive than gas-powered vehicles and hybrid electric

vehicles due to the cost of batteries; however, battery prices are coming down with mass production

and expected to continue to fall. In addition, lack of charging stations and range anxiety are hurdles for

consumers. Drivers fear that the batteries will run out of energy before reaching their destination due

to the limited range of existing electric cars and the uncertainty about where the closest charging station

will be. While some charging stations are out in trial phases most charging still needs to be at home,

which can take up to ten hours to get a full charge. That means that people who live in shared housing

or use street parking will likely have the hardest time charging (Deaton, n.d.). Also, many of these cars

are very narrowly distributed and if the car needs serviced, there will be very few places that will be able

to fix it. For example, Tesla has just 10-15 service centers and having a Tesla service center nearby when

you need them are slim. Even if these cars are under warranty, when the warranty runs out, there are

only a limited amount of technicians trained, certified, and have the experience to service the cars, thus

leaving a scarcity and cost concern (teslamotors.com, n.d.).

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