The e-mobility landscape is full of complexities and paradoxes, which makes it difficult for (the types of vehicles collectively known as) EVs to crack the new vehicle market. In the first of a series of articles, we take a high-level look at some of the challenges … and promises.
When Toyota launched its Prius on the local market in 2005, it was the first mainstream hybrid-electric vehicle (HEV) to be offered in South Africa. It promised to revolutionise motoring but, more than a decade after its launch, HEVs and, more recently, BEVs (vehicles in which battery-driven electric motors solely propel the driven wheels), PHEVs (petrol-electric hybrids with batteries that can be charged via external electrical sources) and FCEVs (cars equipped with hydrogen fuel cells that generate electrical energy to power the motors that provide their propulsion), have failed to make a significant impact. For simplicity sake, I'll subsequently refer to these subtypes collectively as EVs, unless otherwise stated.
Electric or e-mobility holds major benefits for consumers and countries alike, encompassing both environmental and national security factors. For starters, the use of electricity significantly reduces CO2 emissions, noise pollution in urban areas and countries’ dependence on fossil fuels. Not to mention a claimed reduced running cost over conventional vehicles in terms of fuel bills and maintenance costs.
However, despite the benefits, the uptake of EVs globally (and in South Africa) has been less than spectacular. Annual global sales totals of all forms of e-driven passenger vehicles remain below 0.5% and, at just over 180 000 units (in 2012), EVs represent just 0.02% of the total passenger vehicle car park. This is true for most markets, including South Africa. Since the launch of the Cars.co.za Consumer Awards-lauded i3, BMW has only sold 124 units locally (Nissan has fared about the same with the Leaf).
The CRZ, Honda's hybrid-engined small sportscar, has not garnered the following some observers thought it might.
It is not all doom and gloom: Denmark (and a few other Scandinavian countries) have shown greater uptake (with just over 1% of total new-vehicle sales) and while 0.5% sounds very low it does represent exponential growth from 2010 levels. Conservative estimates by the EVI (a group of 15 countries with stated EV sales targets responsible for 90% of global EV sales) project a market penetration of 2% by 2020 (between 20 and 24 million vehicles).
So, things are bound to change. Considering that this will require a compounded growth of 72% until 2020, this will require great number things to happen. First, a much better understanding of some of the reasons why EVs aren’t selling in greater numbers and, most importantly, a better understanding of EV consumers.
Why aren’t EVs sparking?
First, it is important to note that despite being around since the early 1900s (with a failed resurgence in the early 1990s), the EV market is in its infancy. A young market is rarely predictable and, even more rarely, rational. But, global research along with my own research conducted at the University of Stellenbosch Business School (USB) do highlight some important reasons for the slow uptake:
South African consumers have been offered 3 iterations of the Toyota Prius, the latest one's interior is pictured here.
1. Lack of options
The limited number of EVs to choose from is a major drawback. For the past decade, buyers were restricted to quirky inner-city runabouts and, in effect, three "mainstream: vehicles: the Chevrolet Volt, which has ensured EV sales in the US, Toyota Prius, which has bolstered sales in Japan, and Nissan Leaf, which captured Europe and the BEV market in Japan.
This overreliance on singular models also explains the relative dip in sales growth experienced since mid-2014: These vehicles all approached model run-out at roughly the same time and, as with any conventional vehicle, their sales dropped off as a consequence.
2. Lack of charging infrastructure
This is especially pertinent to BEVs. The lack of public charging facilities and, for urban drivers in particular, private charging facilities, remains a problem. This is perhaps why sales of PHEVs are currently experiencing stronger growth compared with BEVs.
South Africa's most expensive EV is the Mercedes-Benz S500e, which costs a princely R1 875 000.
While fuel-cost saving is punted as one of the major benefits of using an EV, a major issue remains the higher purchase cost of EVs (predominantly due to the cost of the battery packs). This is why most governments offer some form of financial assistance for EV purchases (either in the form of tax rebates or incentives).
These incentives were justified as a means to bump-start the EV industry (to the benefit of the public and the environment), but lower sales figures are expected in the near future as most of these incentives programmes are coming to an end. For example, in some states of the US EV sales have declined by as much as 80% after local tax rebates were withdrawn.
4. Practicality and functionality
Most consumers still perceive EVs to be unpractical (most early models were compromised by a large and heavy battery pack, thus limiting cabin space and luggage capacity). Many consumers feel that EVs are difficult to operate (some claim they are afraid of being electrocuted or catching fire when they recharge their vehicles – that's blatant product ignorance).
5. Range anxiety
Earlier EVs suffered from limited ranges and this perception has stuck. Most modern BEVs offer driving ranges in excess of 150 km and PHEVs currently offer 30-50 km ranges before the conventional engine kicks in.
6. Paradoxical market
Besides these relatively straight-forward issues, it must also be noted that the EV market is filled with paradoxes and contradictions. It is a new and changing market. For instance, environmental considerations play a negligible role in the car-buying decision making for most consumers. In fact, research has found that, even among drivers who have opted for a "green" car, the true "green credentials" and "green performance/efficiency" of that vehicle are of little importance.
So, the motivation to buy green is not motivated by the "compulsion to go green" at all. Rather, for the most part, it boils down to cost saving. The issue of cost highlights the biggest paradox of EVs: Due to the limited driving ranges offered by BEVs combined with consumer range anxiety, most marketers are quick to highlight the benefits of EVs for young, hip urbanites. These consumers are most likely to adopt new tech (such as EVs) and drive short daily distances. The perfect combinations, right?
Well, not necessarily. The problem with this is that most young urbanites cannot afford expensive EVs, at least not yet. The second issue is that most studies have found that the true cost benefit of running an EV (over a conventional vehicle) only kicks in at about 50 km per day and that's hardly a typical urban commuting distance.
So, even if marketers manage to quash consumers' range anxiety, justifying the asking prices for these vehicles is a far harder task.
How do we fix it?
1. More is better
Yes, having a greater variety of EVs to choose from will help, but it is not that simple. Firstly, there are numerous types of EVs and, secondly, the uptake of these has a great geographic dispersion. For example, the largest PHEV markets are the US (due to the Volt) and Japan (Prius), while the BEV market is led by the Leaf in the US, China and France.
In other words, the biggest-selling type of EV is predominantly driven by the first-mover in a market. Thus, different countries prefer different types of EV, making development and distribution problematic (manufacturers cannot just focus on the development of a single type of technology). It is expected that South Africans will prefer PHEVs, due to the longer distances we travel in this country. The market is divided, but hopefully not conquered as a consequence.
Thankfully, the number of EVs available in the market has begun to increase significantly (recent additions in South Africa include the BMW X5 xDrive40e, Mercedes-Benz S500e and Volvo XC90 T8 Twin Engine). Studies have found a direct and strong correlation between cumulative EV sales and model availability, which bodes well for a market rolling out e-mobility across numerous vehicle ranges not only limited to quirky, micro or super-sized vehicles.
The key here would be for manufacturers to offer entry-level e-mobility as soon as possible – opening up offerings to a greater number of consumers.
Although suburbanites with garages can conveniently charge their BEVs at home, inner-city charging infrastructure is still in its infancy.
2. Get plugged in
The same applies to the roll-out of infrastructure.
Charging can take place at numerous locations: residential, office, fleet, retail, street, etc. And, charging can also be defined as "slow" or "fast". The general idea is to increase the availability of charging infrastructure in order to promote EV sales (Japan, for example, aims to have 2.4 million non-residential slow chargers and 6 000 fast chargers by 2020).
However, the relationship between charging infrastructure and EV sales are not as linear and direct as you may expect. And, again, this boils down to the prevalent EV used in the market and the preference of consumers. For example, public fast chargers will not be required by markets that rely on residential charging or PHEVs.
In general, most countries have realised that public fast chargers are not as widely needed as previously thought. However, where they are, will there be a market for charge retailers? What should the charge be for charging? Should EVs be charged for the time spent at the station or amount of electricity loaded? These are all questions that cannot be answered yet, but will be crucial in the effective development of an EV market.
This again makes the development of an efficient EV market very problematic for a growing and changing market, with a lack of detailed and rich consumer data.
3. EVs need to be more affordable
Regardless of all of these issues, at the core lies a need to reduce the cost of EVs. Since nearly 50% of an EV's production cost is its battery, it is crucial for batteries to become cheaper and more efficient. Thankfully this has already started: according to the US Department of Energy (DOE) battery costs have decreased from $1 000/kWh in 2008 to $485/kWh in 2012. This reduction is in line with those of laptop batteries between 1997 and 2012, and the roll-out of second and third-generation EVs will see this trend continuing.
So, where to from here?
Evidently, EVs are here to stay, but the question as to which type of EV will thrive (or at least gain popularity at the cost of its brethren) will greatly depend on market-specific conditions.
A concerted roll-out of charging infrastructure is an absolute necessity for the sustainability of BEVs, for example, but the biggest requirement from consumers is the need to save costs.
E-mobility offers significant R/km cost-savings... Given the prevailing fuel prices per litre and the cost of electricity, the rand cost of electricity consumed by the average EV (per kilometer driven) is less than the rand cost of fossil fuel consumed by the average conventional vehicle (per kilometer driven). Having said that, the high initial purchase prices of EVs effectively neutralise these purported savings. EV owners would effectively need to log excessive driving distances to recoup the upfront costs through lower running costs.
Do EVs make sense?
No, but at the rate of technological advancement in terms of battery capability and lower production cost, that statement cannot remain true for much longer.
So, ask me again... Do EVs make sense?
Any views or opinions expressed in this article are solely those of the author and do not represent those of Cars.co.za or its editorial content team.