Electric vehicles (EV; here we focus on automobiles) have  reappeared  in  the  market  for  7  years, marketers,  though,  are  still  perplexed  about  the positioning of this product, thus, the success factors.  The key question that commonly arises is – what do the  customers  think  about  EV?  Has  EV  been successful  enough  to  persuade  customers  so  far?  The  answers  to  this  would  shed  light  on  the category\’s  strengths  and  weaknesses,  whether correctly or wrongly perceived.

Targets to Know

At the moment, the adaptation of EV in the market is deemed as slow. Marketers have to well understand whom  to  target in  order to  grasp  the  great  potential to expand the business in this category.  By far, we have identified at least three groups:

First movers: they are the first ones to try EV when everyone else is reluctant. They are the trendsetters, for  instance,  they  are  often  attracted  by  the perception  of  environmental-friendly,  or  being  the pioneer  of  state-of-the-art  technology.    Of  course, most  of  them  have  to  be  at  least  middle  class  (or even  upper  class)  due  to  the  price  premium  over traditional internal combustion engine (ICE) vehicles.  Therefore,  their  behaviours  may  resemble  today\’s luxury car market.

Early  adopters:  they  are  the  followers  of  the  first movers  and  they  will  leap  in  the  market  once  the benefits  start  to  become  apparent.    Despite  their  willingness  to  try,  they  are  more  conservative,  and therefore,  it  is  very  likely  that  they  own  more  than one  vehicle  –  they  would  try  using  EV  if  they  need extra cars.  That also implies that reliability is among the key concerns of purchase.

Mainstream  consumers:  they  wait  until  the  market and  technology  are  mature,  look  for  cues  from  the first  movers  and  early  adopters,  and  require assurance from trusted peers.   Being less informed about  the  EV,  though,  they  are  curious  about  the actual  benefits  offered.    The  fact  that  the  fuel  price keeps  rising  is  an  effective  catalyst  to  their consideration.

Expectation and Reality

We  know  whom  to  target,  but  EV  is  still  not persuasive  in  the  market  because  there  exists  a considerably  large  gap  between  the  consumer\’s expectation  and  what  is  being  offered  in  reality.  Klaus Paur, the Managing Director of Automotive for Ipsos  (formerly  Synovate),  hit  the  point  with  this analogy:

\”When  the  automobile  entered  the  market  more than  100  years  ago,  it  offered  quite  a  few advantages  compared  with  horse  carriages,  then common  means  of  transportation.    It  was  faster, more  reliable  and  durable,  more  comfortable  and \’cleaner\’.    For  a  higher  purchase  price,  car  buyers were  rewarded  with  an  overall  better  quality.    The EV  offering  today  in  general  is  perceived  to  offer less  to  car  buyers  than  incumbent  conventional vehicle  technology:  driving  range  is  shorter, recharge  is  uncertain  as  recharge  stations  are scarce  and  the  recharge  operation  takes  longer, maintenance  and  repair  costs  are  xpected  to  be more elevated, and, by the way, the purchase price is  much  higher.    Its  green  proposition  alone  is  not able to make up for its shortcomings.\”

Driving  range:  most  consumers  actually  expect driving  ranges  much  longer  than  their  typical weekday driving distances.  They generally expect a daily  range  of  around  300  km  for  an  EV  (though most  people  just  travel  80  km  daily!),  while  the technology  of  recent  EV  can  only  reach  about  160 km  daily  –  a  large  expectation  gap  here.  Consumers  simply  do  not  want  to  take  the  risk  of losing mobility on the road, nor do they want to limit their road planning.

Charging  convenience:  another  expectation  gap  is present  here.  We  know  that  it  takes  around  eight hours  for  a  complete  charge.    It  is  too  long  for consumers!    To  them,  less  than  two  to  three  hours is  totally  a  reasonable  requirement.    In  fact,  an automotive  study  last  year  showed  that  53%  of Hong  Kong  consumers  had  indicated  concerns  of difficulty to recharge the vehicle (Synovate, 2011).

Purchase cost: the cost for EV is too high and thus hinders consumers from entering the market.  They know  that  in  the  long  run  they  would  have  cost benefits  on  fuel  –  the  total  oil/petrol  cost  is  way higher  than  that  for  electricity  power,  since  the efficiency  for  a  battery  electric  vehicle  (BEV)  is  as high  as  80-90%,  while  that for  an  conventional  ICE cars  is  just  around  20%-30%.  However,  the consumer\’s  expectation  of  breaking-even  on  the high purchase price within three years can hardly be met in reality.

The  alternative  energy  vehicle  study  in  2011  shed some  light  on  the  price  perception  among  Chinese consumers.    As  figure  1  shows,  markets  should  be acknowledged  that  car  owners  would  just  accept  a 4%  price  increase  in  direct  comparison  with  their current ICE car (Synovate, 2011).  Besides, there is  an  interesting  observation  being  worth  mentioning: consumers tend to accept a more expensive plug-in hybrid  electric  vehicle  (PHEV)  than  a  BEV;  that reveals  a  possibility  to  introduce  PHEV  in  the market as a transition stage.

Narrow Down the Gap

To  persuade  consumers  switch  to  BEV,  the  key  is reducing  the  expectation  gap,  thus  instilling  the perception of \”not getting less than an ICE vehicle\”.  Table  2  (Synovate,  2011)  reveals  that  the  largest gap, thus hindering consumers from using BEV, lies on the difficulty of recharging the vehicle (53%); also, the  parts  price  exceeds  the  expectation  of  more than two-fifths consumers.

Think  about  that  –  a  battery  renting  scheme  is  one effective  way  out.    This  shortens  the  charging  time from several hours, to a battery changing time of 10-20  minutes;  this  also  reduces  the  unreliable  risk associated.    Not  to  mention,  the  standardisation  of the  charging  model  can  lead  to  a  completely  new leasing market of battery.

Regarding  the  expectation  gap  over  purchase price,  strategies  such  as  \”early-bird  discount schemes\”  are  definitely  viewed  as  attractive.  Moreover,  retail  prices  should  be  set freely  by  the dealers to widen the brand recognition.  A continual leasing  scheme  could  as  well  be  considered. Consumers  are  guaranteed  to  have  a  new  EV model  every  few  years,  thus  keeping  them  captive and updated with the latest technology.

There  is  another  hint  from  table  2.    40%  of consumers have stated that a major barrier for them was  that  they  have  no  product  experience.  Marketers: it\’s how easy to close this gap!  You can offer  test  drives,  showcase  your  models  in  car exhibitions,  open  an  experimental  store,  or  even, provide a certain length of grace period of purchase.  We need our consumers to feel and experience the product,  and  we  will  rely  on  them  to  spread  a positive message.

Educate Consumers about the Good

There  are  several  areas  where  the  perception  of BEV  outperforms  ICE.    Marketers  should  educate the consumers all these good things.  From figure 3, environmental-friendly  is  undoubtedly  the  top  of mind  association  (Synovate,  2011),  together  with advanced  technology,  improved  fuel  efficiency,  and owning  a  BEV  being  perceived  as  trendy.  Marketers  should  excite  the  brand  awareness  and positive brand image by acquiring and accumulating the  reviews  of  the  first  movers  and  early  adopters, especially  in  the  areas  above.   To target them,  you often need to emphasize your EV as a functional  and  green  vehicle,  in  a  stylish,  unique  and prestigious package.

The  study  also  shows  that  not  as many  consumers associate reliable after-sales maintenance with BEV; this  false  perception  is  best  clarified  by  \”word  of mouth\” from BEV users.

Some International Trends

Emerging trend of smaller cars arises in Japan due to  the  increase  of  single-person  and  two-person households.  Even for the same battery technology, theoretically  the  distance  range  for  a  smaller  EV should  be  longer  for  it  being  a  lighter  load.    Could this  be  promoted  and  possibly  narrow  down  the expectation gap?

Consumers  in  Korea  are  interested  in  home charging instead of public charging stations.  Those facilities are indeed not difficult to be integrated into new  buildings.   Could  this  be  a  selling  point  to  shift the  consumer  focus  of  long  charging  hours  to  the convenience of home charging?

There is a significant increase in wealthy middle-age population  of  luxury  consumers  in  China.  As  we have  earlier  mentioned,  the  first  movers  and  early adopters are always more wealthy; could this be an opportunity to advertise EV as a trendy, luxury icon? The  geography  of  the  Asia  Pacific  is  especially beneficial  to  the  growth  of  the  EV  market  since driving range required is always shorter than that in the  western  world.  Establishment  of  the  right business model or the launch of the leasing scheme would  be  stimulating  the market  effectively.  With  a lot of catalyzing policy and government subsidies, it is  definite  that more  and  more  people  would  like to try  EV  instead  of  ICE  vehicles.      Do  not  miss  the valuable chance of utilizing their word of mouth and personal  driving  experience  to  promote  the  brand image and clarify false concepts.  That is, ultimately, to  close  the  expectation  gap  of  the  mainstream consumers.

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About  The  Synovate  Alternative  Energy  Vehicle Survey

The  survey  was  conducted  online  in  2011  among 800  passenger  vehicle  (PV)  owners  and  purchase intenders  18  years  old  across  Greater  China, covering  respondents  from  the  major  vehicle segments  (small-,  lower  medium-,  upper  medium-, luxury cars, SUV).

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