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Electric car: Is it a failure or a future pot of

gold?

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Electric car Background

Analysis

Reasons for Slow adoption

Industry structural issues

Supporting Literature and framework

Will Electric car be re-born?

Suggestions

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B

ackground REVA Electric Car Company Private Ltd. (RECC), based in

Bangalore to manufacture environment-friendly & cost-

effective electric vehicles.

Established in 1994 as a joint venture between the MainiGroup India & AEV LLC, California USA.

7 years ofR&D earned RECC recognition in the form of 10

patents and a globally accepted product.

REVA, India's first zero polluting Electric Vehicle for citymobility

Commercialized in June 2001.

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K

ey Points REVA Indias first electric vehicle -most innovative

and high technology product of the year 2001.

Onboard charger to facilitate easy charging.

Intelligent low battery warning light and a fuel gauge for

easy estimation of driving range

Requires extremely low maintenance - the latest on-board

diagnostic tools that store three years data and enable

prompt service. On-board computers for Energy Management and Data

Acquisition for quick diagnostics and extend range by 15 %

and battery life by 25%.

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K

ey Points Commercially viable at an offer price significantly

less than that of EVs globally.

Current models offer a top speed of 80 kmph and

a range of 80 Km

REVA is easy to drive and most ideal for stop-

start traffic conditions without a clutch and gear.

Won awards globally for innovation. PowerShift has recognized the REVA as the most

energy efficient electric vehicle in the U. K.

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Key points

International Foray

REVA is currently being commercially sold in 9

countries, being tested in 5 :United Kingdom, Italy,

Malta, Cyprus, Norway, Spain Ireland, Japan, Srilanka,and being test marketed in Australia, Switzerland,

Germany, and Austria, Nepal etc.

Manufacturing

RECC has a capacity to produce 3000 REVAs perannum.

plans to expand its to 30000 cars per annum

Expansion plan is in line with the expected increase in

demand both domestic as well as the export market.

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R

easons for Slow growth Product related issues

Customer perception issues

General awareness and customer education

issues

Behavioral change related issues

Industry structure and maturity stage issues

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4Ps

Product

Environment friendly, easy to drive, noise free

Battery cost Total ownership cost actually > Alto, Nano

Price Deemed price, creates dissonance

Promotion

Hardly any advertising, promotional education is done

Mostly PR and personal selling

Place

Poor distribution 1 or 2 Dealers in 5-6 select cities each

Online in Kolkata

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Compatibility with user behavior and usage

pattern

A Long haul game

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Economic advantage for buyer

EV economically attractive when Battery cost at $500/KwH

and oil above $130. (battery costs moving there slowly)

This equation hasto be valid over a

longer duration to

make an impact

Economic

advantage for

buyer over long

term running costs

no immediate cost

benefits

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Analysis for slow adoption

Performance to cost ratio

Doesnt give superior returns either in terms of performance

or in terms of price

Positioning

Positioned as a second house hold car

For elite, environment conscious customer (premium price)

Car to run for household errands (grocery, picking kids etc)

Societal advantages for buyer

Seen as environment friendly, conscious buyers, adopters of

latest technology

Also too much money to waste

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Consumer Psychology of Gain and Losses

Consumers evaluate Reva on perceived value notobjective value

A normal car (Alto, Santro) is always the reference pointfor comparing Reva

So, lower running cost, easy drivability, easy parking and eco friendlyappeal are treated as gains

But shortcomings like less speed, difficulty to recharge, less spaceand safety concerns are now treated as losses.

Losses have a far greater impact than gains

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9x effect

Totaleffect 9x

Firmbias 3x

Consumers

irrationally= 3x

Customers overvalue their cars

over Reva by a factor of three

endowment effect

Company overvalues the benefits

of their car by a factor of three not

considering the behavioral change

required

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Buyer Utility Map for Reva

Purchase Delivery Use Supplements Maintenance Disposal

Customer

Prodcutivity Low Low Low Low Low

Simplicity Low Low High High Low

ConvenienceL

owL

owL

owL

owL

owRisk High Low High Medium NA

Fun and image Medium High Low High Low

Environmental

Friendliness NA High High High High

The

SixUtility

Levers

Six Stages Of Buying Experience Cycle

Most columns are red implying overall customer utility is very low

Utility in purchase is lowest implying greater consumer inertia tobuy the product

Utility in disposal and supplements is also low implying post-

purchase dissonance

Utility in use and maintenance is higher than other stages

implying a reasonable product experience

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Will Electric car be re-born?

Early History Contrary to popular perception, electric cars are more than 100 years old.

Quite popular in the late 19th century till the advent of gasoline-poweredvehicles in early 20th century

Primary reasons for popularity were

-Shorter travel distances due to limited road network and smaller cities

-Comfort and convenience of driving an electric car compared to gasoline

vehicles of that time

Lost to gasoline powered vehicles because

-Mass production techniques of FORD lowered cost

-Improvements in engine technology and growth of petroleum

infrastructure

-Need to travel longer distances due to larger cities and improved road

network

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Will Electric car be re-born?

21st century

Revival of interest fuelled by

-Climate change

-Multiple oil crisis in past few decades

Consumer Problems

-Low KM range of electric cars, aggravated by lack of battery

charging

infrastructure

-High cost of battery replacement.

-High cost/benefits ratio compared to other cars in its segment.

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Factors that can help

Climate Change

-Increased pressure on international community to implementclimate change prevention measures.

-Imposition of carbon emission norms on countries, forcinggovernments to enforce stricter emission norms.

Government Policy influenced by climate change measures

-High oil prices, either due to high taxes or economic reasons.

-Cross-subsidization of input materials for electric car and

batteries by making electricity cheaper.-Collecting differential road tax (This is already being done).

-Easier financing options for electric car related industries.

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Factors that can help contd

Technology Improvements driven by government policy

-Improvement in battery and battery charging technologies

leading to shorter charging times, longer battery lives and lower

battery costs.-Reduction in battery production costs.

-Cleaner and efficient ways of producing and distributing

electricity.

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D

ealing with structural issues Cheaper Li-Ion batteries. Lithium Ion batteries would ultimately

make the electric car Travel farther , Charge faster , Live longer

Battery charging infrastructure in the form charging stations and

charging points in parking areas Change battery ownership model. Batteries should be leasable

Further improvement in technology can entail that battery

becomes a plug and play component and discharged batteries

can be replaced with the already charged ones at chargingstations

Tax breaks for auto companies who invest in electric car and

related industry

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Suggestions for improving take off

Work on making product more attractive

Battery technology needs to support EVs

Li-ion batteries are step in the direction

Build charging infrastructure withgovernmental legislation and support

Target corporate, companies with big

campuses Infrastructure easy to implement

Costs divided over a larger car base

Depreciation incentives (80% WDM)

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Suggestions for improving take off

Technology innovation

Merge technology : Solar panels

petrol engine to charge battery (Volt)

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Newer business models

Battery leasing

Separating cost of car ownership from battery

ownership Joint/Shared ownership model

People around apartment complexes can share

a car, this will bring down individual cost ofownership significantly.

Being second car by default car is parked 75%

of the times.

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Government Support

Incentive

Tax breaks, road tax, registration, VAT, subsidy (Delhi

Govt has given 15% and total 29.5% rebate)

Dis-incentive models like in London, UK

Normal fuel cars are charged congestion charge, not

allowed in main city areas/central areas.

Electric cars are allowed