INTRODUCTION
What is, and when do you use, Scenario Planning?
– You’ve experienced too many costly surprises in the past
– Your organization does not generate new business opportunities very often
– Your strategy lacks value innovation thinking
– Your businesses are generally looking at:
– Multiple possible futures, or
– Complete ambiguity about what the future holds
OUR GOAL:
Share with you a case study that shows how you can use Scenario Planning with Value Innovation tools to address your critical long term challenges.
THIS CHALLENGE:
Tony Seba, in his 2014 book Clean Disruption, predicts that by 2030, no major auto manufacturer will manufacture or sell a car powered by an Internal Combustion Engine (ICE).
Is Tony right? What are the driving forces? How will they play out?
If you are a major Auto Dealer, how would this affect you? What areas should you invest in to take advantage of this major disruption?
SOME KEY QUESTIONS:
– What will be the consumer’s acceptance of Electric Vehicles (EVs)?
– What commitments will auto manufacturers make and when will they produce EVs in large volumes
– When will they phase out ICEs?
– How will the UAW support the manufacture of EVs?
– Will auto dealers support the sale and service of EVs?
– What will the C footprint be for electricity by 2030?
– What US States will have the lowest C footprint for electricity by 2030?
– How will Big Oil respond to this Clean Disruption?
WHAT DO WE KNOW ABOUT EVs?:
They are not new. In 1919, Harrods was delivering products sold to customers in their department store in Knightsbridge, London using electric powered delivery vans.
Nearly 100 years later, the best-selling EV in history is the Tesla Motors S Sedan:
Here’s the S Sedan Value Curve compared with the BMW 7 Series:
It shows you exactly why the Tesla S is the best-selling luxury car in the US today. (Note: A Tesla S Sedan owner in San Diego, CA calculated that his fuel savings over the first 9 months of ownership was 37%/mo.)
WE DEVELOPED A STRAWMAN LIST OF SOME KEY TRENDS AND DRIVING FORCES INFLUENCING THE SUCCESSFUL, LARGE SCALE ADOPTION OF EVs.
Consumer(s):
1. The purchase price of an EV will be less than its equivalent ICE powered vehicle by 2021.
2. Consumers have range anxiety, especially in Europe – what has to happen, by when, to reduce this?
3. Innovators and Early Adopters readily accept EVs and have lower fuel & maintenance costs than ICEs. The Early and Late Majorities do not.
4. Early and Late Majorities believe that hybrids are a better choice than EVs.
5. Have concerns about driverless car accidents.
Auto Manufacturers:
1. Have a large installed investment in the production & testing of ICEs .
2. Their relationships with auto dealers will be increasingly strained as they shift from ICEs to EVs.
Infrastructure:
1. Members of the UAW have concerns that adoption of EVs translates to job loss.
2. Auto dealers see a serious erosion of their most profitable business, service, and push back on the adoption of EVs.
3. Auto Dealers aggressively fight the sale of cars Online.
4. Quick oil change stations see their business dying.
5. Charger stations replace gas stations.
Oil Companies:
1. Are heavily invested in upstream oil production & the downstream distribution & sale of gasoline.
2. Do not understand, and are skeptical about, renewables which are not their core business.
3. Will do all they can do, as they have in the past, to stand in the way of the acceptance of EVs.
Regulatory:
1. Will the Paris “Clean Air Agreement” survive? 2. Development and enactment of regulations for EVs and Autonomous Vehicles (AVs) will move slowly.
3. Will Norway adopt a law banning the use of ICE powered cars effective 2025??
4. Will Germany by successful in enacting legislation across the European Union banning the sale of new ICE vehicles by 2030?
5. What will the Trump administration do to influence all of this?
Technology:
1. The production of Li-on batteries will improve and drive battery cost to <$100/Kwh no later than 2025.
2. Technology advances will yield energy density improvements of at least 2X by 2030
Tier 1 and 2 Auto Parts Manufacturers:
1. Sales of replacement parts that are integral to the maintenance and repair of ICEs will start to decline in 2030. The rate of decline will accelerate in later years. The average # of replacement parts will decline from 1,800 in an ICE, drivetrain and transmission to 18 in an electric motor.
2. The need for engineers and machinists will decline and be replaced by a need for programmers and software designers.
CASE STUDY:
We have developed for you a scenario looking at this challenge through the eyes of a major auto dealer with multiple dealerships across the US (for e.g., see table below).
Stay tuned, we plan to share “Visualizing the Future – Part II” in our next Blog.
