A. AUTO DEALER CAPABILITY REQUIRED TO TRANSITION TO SELLING AND SERVICING EVs
We’ve developed a strawman list of capabilities we think are needed in an auto dealership as the mix of new car sales transitions from ICEs to EVs and estimated the capability level in place today and where it will need to be in the near future (see capability curve below).
If these Capability Curves are correct, US Auto Dealers are ill prepared to effectively compete as new automobiles powered by electric motors replace internal combustion engines.
B. INDICATORS IN PLAY IN DECEMBER, 2016
There are a number of indicators leading to the conclusion this transition will be in full swing by 2030, less than 14 years from now.
1. GM plans to start selling the Chevrolet Volt, an EV priced at $37,500, in early 2017. It’s range, 238 miles. From a private conversation, we believe GM plans to manufacture and sell 30,000 Bolts in 2017.
The Volt is available for sale in CA and OR, despite the fact that GM is losing $9K/vehicle (David Welch and John Lippert, Bloomberg, November 30, 2016). It will be rolled out in China, Europe and the rest of the US States during 2017.
2. Several major auto manufacturers are producing and selling EVs today. This list includes: Audi, BMW, Mercedes Benz, Nissan, Toyota and VW (see pictures below):
BMW expects 15 to 25% of its fleet (2.2 million vehicles) will be EVs in 2025; Toyota does not expect to sell any gasoline powered vehicles by 2050; VW expects to sell 1 million EVs in 2025.
3. Tesla Motors will sell 100,000 EVs in 2016 and projects it will manufacture and sell 400,000 Model 3s in 2020. The Model 3 (see below) will be priced at $35,000.
4. Other major auto manufacturers with at least one EV offering are: Fiat (500e) Ford (Focus Electric), Honda (Clarity [the Fit EV was discontinued in 2014]), Jaguart (IPace – see below) and Hyundai (Ioniq Electric).
5. Manufacturers who appear to be behind in EV adoption include Chrysler, Land Rover and Volvo.
6. Tesla Motors, in collaboration with Panasonic and the State of Nevada, is constructing the world’s largest factory (>6 million sq. ft.) to manufacture Li-on batteries for EVs. It is expected to have a capacity of 1.5 million batteries/y and should be fully operational by 2021. Investments in solar and wind are designed to make this a Zero C footprint facility.
7. Tesla Motors continues to invest in building Supercharger Networks in Australia, China, Europe (see below), New Zealand, and the United States (see below). A supercharger station typically has four or eight charging bays. A 30 minute charge will bring the car’s battery back to 80% of capacity.
8. Tony Seba in his book Clean Disruption predicts that:
a. No cars powered by an internal combustion engine will be sold starting in 2030.
b. The purchase price of an affordable EV will be lower than an equivalent ICE by 2025. c. The cost of Li-on batteries will decrease at a rate of 15%/annum and will reach $100/Kwh by 2021.
8. CARB (California Air Resources Board) continues to act as the ballast, as the center of gravity, for Clean Air and Climate Policies in the US (Levi Tilleneous, “The Great Race”).
9. Norway is contemplating legislation that will prohibit cars powered with an ICE to be driven in Norway starting in 2025.
Norway’s Dagens Næringslivnewspaper reports that four of the country’s major parties have reached agreement on a proposal to ban the sale of new gasoline and diesel-powered cars starting in 2025. The proposal is not yet law.
10. “Innovators” and “Early Adopters”, 13% of all consumers, are most likely to purchase EVs.
The “Early Majority” and “Late Majority” (68% of all consumers) are less likely to purchase EVs and there maybe a delay (“crossing the chasm”) before they do purchase (See Appendix 1).
11. The maintenance costs of an EV are significantly lower than the ICE powered equivalent (See Appendix 2).
12. The cost to fuel an EV is at least 50% lower than an ICE powered equivalent.
C. STRATEGY AND TACTICS REQUIRED TO DEVELOP THE CAPABILITIES DEFINED IN A ABOVE.
Prepare for the full conversion of the sale and service of ICE powered cars to EVs for each major auto manufacturer:
1. Appoint a Team Leader for each auto manufacturer. Team leaders report to the auto dealer COO
2. Establish a five-person team that includes the team leader, head of sales, head of digital marketing, head of service and a hi level executive from the auto manufacturer
3. Review and revise the strawman Capability Chart
4. Define and complete transition plans by 6/30/17.
5. Start transition training 7/1/17.
Technology Adoption Lifecycle:
Innovators are the first 2.5 percent of customers to adopt a new product and buy. Yes, there’s risk but they’re in.
Early Innovators (13.5%) are encouraged there are people buying the product and are the next customers in.
The Chasm is the period of time where there are very few new customers. The Early Majority are sitting on the sidelines waiting to see what happens.
The Early Majority (34%) follow the Early Adopters. There can be a significant time lag before the Early Majority buy in.
The Late Majority (34%) are the last group to buy.
Laggards (Skeptics, 16%) may never buy.
Source: Geoffrey A Moore, Crossing the Chasm, Collins Business Essentials – 3rd Edition, January 28, 2014
Comparison of Luxury EVs and ICE Powered Cars’
Repair & Maintenance Costs (excluding tire replacement)
Erring on the conservative side, annual Repair and Maintenance costs for a Tesla S Sedan are at least 50% lower than other luxury cars with the exception of Lexus.
Warrantees for new BMW’s and Audi’s for the first three years discount what real Repair and Maintenance costs are to the consumer.
Tesla Motors S Sedan.
When the S was introduced in 2012, Tesla Motors required a maintenance event after 1y or 12,500 miles for the first 4 years. The cost was $600/y and if an owner did nor elect to sign up for the plan, their vehicle warrantees would be voided. The company backed away from this (in 2014?).
The Tesla Motors website provides the following table showing maintenance and repair costs for the first 4 years:
David Nolan, a Tesla S owner, did not sign up for the Tesla program. His maintenance and repair costs in the first two years were $0 but he did purchase 4 new tires after 26,277 miles for $1,131. (http://www.greencarreports.com/news/1095209_life-with-tesla-model-s-at-last-some-maintenance-needed-new-tires )
Internal Combustion Engine Powered Cars
1. YourMechanic.com on 6/1/16 provided average annual Repair and Maintenance Costs for a number of luxury cars:
2. Kelley Blue Book publishes Annual Repair and Maintenance Costs for the first five years of ownership. See two examples below:
BMW’s warranty covers Repair & Maintenance costs for the first 3y. The OEM reimburses auto dealers for these costs.
Audi’s warranty covers Repair costs for the first three years. The OEM reimburses auto dealers for these costs.
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