Transcript Supplier Risk Point of View

Gaining Traction
A Customer View of Electric Vehicle Mass Adoption in the
US Automotive Market
January, 2010
This study provides a customer view of electric vehicle mass adoption
in the US automotive market

Why do we care about EVs?

Who will buy EVs?

What are the barriers to mass adoption?

What is the 2020 volume forecast?

What are the implications for customers and the OEMs?
-1-
Contents
Recent activity and excitement are a testament to the promise that
EVs hold for the US automotive market
EV Opportunities and Activity Drivers
Government Incentives
and Policies
 Clean subsidies and loan
guarantees
 Consumer tax credits
 CAFÉ standards
 CO2 emissions
Technology Advancements
 Battery technology
 Lighter body composites
 Smart grid
EV Opportunity
• Energy independence,
security and reliability
• Vehicle style and performance
• Automotive industry
Exogenous Variables
Industry Investments
innovation, growth
and restructuring
 Energy prices
 Automotive technology R&D
 Global recession and automotive
 Battery provider R&D
industry restructuring
 New vehicles (e.g., Leaf, Volt)
 Environmental concern
Customer adoption remains an industry concern
-2-
Background
This study focuses on electric vehicles and plug in hybrids in the
US market
Scope
 The focus of this study is electric vehicles, specifically
vehicles whose primary source of power is an electric motor
powered by on-board battery packs, ultracapacitors, or fuel
cells, including both fully electric vehicles, range extenders,
and plug-in hybrid electric vehicles
 This does not include vehicles with a majority portion of
power derived from an internal combustion engine (including
but not limited to: non plug-in hybrids, hydrogen, bio-diesel,
ethanol, and natural gas powered vehicles)
BYD E6
 This study is focused on the US market
Mitsubishi I MiEV
Tesla Roadster
Nissan Leaf
-3-
Chevy Volt
We have combined Deloitte proprietary primary research and secondary
research with our Demand Driven analytics
Research
Approach
Analysis
Voice of the customer analysis:
Conducted analysis on survey responses,
including cluster analysis and regression
analysis
Primary customer research: Two
surveys with over 1,700 participants
Primary industry research: Twelve
interviews with leaders of five major
OEMs, four clean technology/electric
vehicle start-ups, energy companies and
car dealers
Cost analysis: Operational cost analysis
of EVs vs. ICVs based on battery cost,
gasoline cost, and government incentives
Secondary research: Reviewed latestthinking from government agencies, EV
consortiums, banks, and consultancies
Volume analysis: The scenario driven
volume forecast is based on insights
received from customer survey and
industry benchmarks for adoption
-4-
Several industry organizations, financial institutions, and consultancies
have forecasted the growth of the EV market
EV Forecasting Approaches
Background
Generic Technology Adoption Curve
Early Adopter
Previous growth methodologies have relied on the
following variables and inputs:
Early Majority
1,100K
 Exogenous factors, e.g., global energy prices,
overall automotive demand
 Potential changes to government policies and
incentives
 Technology advancement and cost predictions
e.g., improvements in battery technology and
cost reductions
Citi (1,050K)
Traffic Safety
Administration
(750K)
Credit Suisse
(335K)
0
 The adoption of hybrid gas-electric vehicles in
the US
2010
It is time for a customer driven perspective
Source: National Highway Traffic Administration, Citigroup Global Markts, Deloitte Interviews and Analysis
-5-
2020
This Deloitte study has improved upon the existing body of work by taking
a customer-centric approach to the future of the EV market place
Background
Customer Adoption Framework
Consumer Awareness
Desirability
Adoption
High/Yes
Yes
Awareness?
• How familiar are you
about various EV
technologies?
• How accurate is your
understanding?
Desirable?
Low/No
Yes
•
•
•
•
•
Brand/Product
Price/Cost
No
Technology
Range
Charging/Infrastructure
Interested to
Learn?
Adopter
• Probability
• Volume Est.
Non-Adopter
No
•
•
•
•
•
Different Technologies
Price/TCO
Range
Charging/Infrastructure Needs
Implications to my Lifestyle
Our consumer survey reveals
current consumer awareness and
purchase barriers
-6-
Our cost and volume
analysis estimates the rate of
adoption over time
Target Customers
EV early adopters will be eco-enthusiasts
Early Adopter Profile: 2011 - 2020

Similar to early adopters of hybrids, early adopters of EVs
will be young, very high income individuals – adoption
is already being popularized by high-profile celebrities

Average incomes are expected to be in excess of $200K
HHI who already own one or more vehicles

Early adoption will be concentrated around southern
California where weather and infrastructure allow for ease
of EV ownership
Non-Adopters



Concerned about
EV
Top Purchase HHI
Gender
Location Garage
Miles per
Perception
Influencer
week
foreign oil
“Expensive” Price
$54K 49% Male
Suburban 36% no
600
dependency but
and Rural garage &
highly insensitive
power
to environmental
considerations
These individuals are drivers of larger vehicles – trucks and SUVs – who wouldn’t be willing to give up
on a large vehicle
This group is not politically active and is highly price sensitive
Source: Deloitte Survey, Interviews and Analysis
-7-
Target Customers
There is a sizeable (1.3M) segment of early adopters
Early Majority Profile

Highly concerned
about foreign oil
dependency, as
well as
environmentally
conscious
EV
Perception
“Green and
Clean”
Top
Purchase
Influencer
Reliability
HHI
Gender
Location
$114K
67%
Male
Urban and
suburban
Garage
Miles
per
week
88% have garage 100
& power

These are relatively high income individuals in multi-vehicle households who have garages and the
ability to home charge; they currently drive sedans and small vehicles

This group is HIGHLY motivated by tax breaks and also very politically active

Individuals are convenience sensitive and willing to pay a premium for convenience
Early Majority Population & Volume Potential


Given a few key demographic and psychographic attributes of the mass
adopter segment we can approximate the segment’s population size
− Men represent 49% of the total population and 67% of this
segment
− 13.4% of men have an income of $100Kor more
− 12.3% of Households have an income between $100K to 150K
− 44.9% of men vote, 44.5 % of women vote
There are 1.3 million men and women in the US who have the
demographic characteristics in the Early Majority segment
Source: U.S. Census, Deloitte Interviews and Analysis
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Barriers to EV
Adoption
Customers tell us that six key barriers prevent mass EV adoption
Factors Driving Purchase
Factors Preventing Purchase
Question: What would be your main
considerations when purchasing an EV?
Low
Question: What is the top factor that would prevent
you from purchasing an EV (% of respondents?
High
2%
Vehicle price
2%
More expensive
Have a limited range
Reliability
8%
Cost to charge
Convenience to charge
32%
10%
Don't know anything about them
Fuel costs
Gov. incentives
Don't perform as well as
traditional vehicles
Difficult to charge
11%
Style and appearance
Environmental impact
12%
Foreign oil dependence
Don't want a small car
Option to lease battery
Larger vehicle availability
Popularity
22%
Safety concerns about battery
and electrical system
The abiltiy to avoid or survive a
crash
Six Adoption Barriers
1.
Familiarity
2. Brand
4.
Charging
3. Range
Source: Deloitte Survey, Interviews and Analysis
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5.
Infrastructure
6. Price and
Ownership
Cost
EV Adoption
Automotive industry insiders confirm the customer view …
Drivers of EV Adoption Success
Automotive Perspective
Least Significant
Category
9
8
7
Clean Tech Perspective
Most Significant
6
5
4
3
2
Least Significant
9
1
8
7
Most Significant
6
5
4
3
2
1
Reliability
Sticker Price / TCO
Quality
Charging Convenience
Performance
Utility
Styling
Resale and Trade-In
Battery Swapping
Current Auto
Future Auto
Current Clean
Tech


Automotive executives believe that
charging convenience will become less
significant in 5 years due to a more
extensive charging infrastructure
They are relatively aligned with
customers



Clean Tech companies are less concerned
about charging convenience than
automobile companies
They believe performance , utility and
styling will be key drivers of mass adoption
They are less aligned with customers
… but Clean tech executives are not aligned
Source: Deloitte Interviews and Analysis
- 10 -
Customers are largely unfamiliar with alternative fuel technologies other
than hybrids
1. Familiarity
Customer Familiarity
Question: How familiar are you with the following clean technologies?
Hybrid
Plug-in Hybrid
Pure Electric Vehicle
Biodiesel Vehicle
Flex-Fuel Vehicles
Vehicle Charging Stations
Fuel Cell Vehicles
Hydrogen Vehicle
Battery Swapping Stations
Range Extender
EV (non pure hybrid)
Clean technology
0.0
Low Familiarity
1.0
2.0
3.0
4.0
5.0
High Familiarity
Key Takeaways

Customers are unfamiliar with clean technologies
other than hybrids

Customers will be hesitant to use technologies
that they are not educated on or aware of

Lack of awareness could mean both “not
knowing” as well as “wrongly knowing” –
consumers’ preconceived notion needs to be
clarified and overcome

Customers are likely unaware of rapid
progress in technology – may still be thinking
about EV-1 and other previous product
attempts
Source: Deloitte Survey, Interviews and Analysis
- 11 -
2. Brand
Toyota, Honda, and Ford have brand power to launch EVs
Brand Preference
% of people
Question: From whom would you be most likely to purchase an EV?
18% 17%
15%
16%
14%
12%
12%
10%
8% 7%
7%
8%
5% 5%
6%
4%
3% 3% 3% 2% 2%
4%
2% 2% 1%
1%
2%
0%
Companies with current models
or models launching in next year
Other companies
1% 1% 1% 0% 0%
Key Takeaways

Automotive purchases are brand driven –
consumers will not buy EVs from a brand they
do not trust

Toyota, Honda, and Ford have the opportunity
to offer products in the EV space with a higher
likelihood of success than their competitors

Toyota, Honda, and Ford have brand
“permission” in this space due in part to the
green brand equity they built through hybrid
sales

Nissan and Chevrolet will face challenges in
their upcoming EV launches and will bear the
burden of educating consumers
Source: Deloitte Survey, Interviews and Analysis
- 12 -
Even though EVs meet the daily range requirements of most drivers,
range anxiety is pervasive
% of people(Cumulative)
Question: Driving Distance (per day)
98%
88% 94%
85%
100%
80%
66%
60%
40%
20%
Travel Distance
99% 100%
On weekdays and weekends, few consumers
travel more than 100 miles per day
EV’s with a range of 50 miles could meet the
daily needs of 66% of drivers on weekdays, and
70% on weekends

Weekday
(per day)
70%

Weekend
(per day)
18%
15%
Range Anxiety
0%

< 10 < 50 <100
< 200
Miles (per
day) < 500 > 500
Question: Required range (miles)
1 2
100%
% of people
3. Range
3

4 5
80%
60%
40%
20%
0%
50
100
200
300
>400
Range (miles)
70% of people surveyed would expect an electric
vehicle to travel 300 miles before they would
consider purchasing one
Current pure electric vehicle range capabilities do
not meet consumer requirements:
–1 Nissan Leaf: 100 miles (electric)
–2 Ford Focus: 100 miles (electric)
–3 Tesla Model S: 160 miles (electric)
–4 Chevy Volt: 40 miles (electric ) + 300
(combustion)
–5 Fisker Karma: 50 miles (electric) + 300
(combustion)
Battery technology advancements (currently improving 12% a year) combined with
charging improvements are required
Source: Deloitte Survey, Interviews and Analysis, Hybridcars.com
- 13 -
Customers want to be able to charge at home and have the convenience
of rapid charging stations (i.e., have the same experience as buying gas)
Question: Would you rather charge your vehicle at
home or at work?
19%
4. Charging
Charging Location
81% of people would prefer to charge from home,
but 61% don’t have access to home charging
capabilities such as a garage with an electric power
source
 Increasing public and private infrastructure is
necessary for wide adoption:
– 54% of surveyed consumers would not consider
purchasing an EV until charging locations were
widely available and as easy to locate as a gas
station is today
Charging Stations
Currently, less than 500 charging stations exist in the
US, with over 80% in California
 Cost to set up new location is substantial:
– Home Level 2 Charging: $500-$1,500 ($2,500 if
upgrade is required)
– Public Level 2 Charging: $2,000-$3,000
 However, infrastructure is predicted to expand
– Pike research predicts that there will be 5.3
million charging locations by 2015 (globally)

Home
Work
81%
Highest Population Density
The economics are not strong enough to attract enough private investment
Source: Deloitte Survey, Interviews and Analysis, Electrification Coalition, Pike Research
- 14 -
Customers are unwilling to pay a premium for rapid charging
Question: How do you feel about charging at home for
the following amount of hours?
40%
Charging Time

% of people
34%
30%
20%
17%
I would be willing to
do that

10%
0%
8 hours

4 hours
% of people
Question: How much would you be willing to pay to
reduce your charge time from 8 to 4 hours?
50% 47%
40%
30%
20%
10%
0%

7%
5%
3%
1%
1%
Only 17% of consumers are willing to charge
from home when it takes 8 hours
– People are twice as likely to consider charging
from home when it takes 4 hours
Fully recharging depleted PHEV/EV batteries
can take 2-8 hours, depending the type of
charging equipment and battery size
According to an auto executive interviewed:
“You need an electric car that can recharge
in 5 minutes- that’s how a gas station works”
Cost to Reduce Charge Time
22%
14%
4. Charging
0%
Most people are not willing to pay over $1K to
significantly reduce their charging time.
– A rapid charge station that that can service
100 customers in a 24 hour period at 50kWh
per charge would cost $1.8 to $3.0 million
– $2K federal tax credit for home installed units
lowers home charging cost
Cost ($)
Widespread rapid charging stations are a key enabler
Source: Deloitte Survey, Interviews and Analysis, Electrification Coalition, Pike Research, Edmunds
- 15 -
Customers are willing to consider battery swapping … automotive
industry insiders cite challenges
4. Charging
Willingness to Swap Batteries
Question: Would you consider battery swapping as an
alternative to charging your vehicle at a charging station?
79% of surveyed consumers would consider
battery swapping as an alternative to charging
their vehicle at home
21%

Yes
No
79%
Customers are open to new technologies to
improve driving range
Barriers to Battery Swapping
While consumers are open to battery swapping to
avoid charging (79% of people surveyed): there
are many limitations:

Cost: Each battery swapping station may cost
as much as $500K

Standardization: Battery Swapping requires
battery standardization

Tragedy of the Commons: Consumers will
have the incentive to treat their batteries poorly,
knowing they will swap with someone else
Improved battery performance will offset the need for battery swapping
Source: Deloitte Survey, Interviews and Analysis, Electrification Coalition
- 16 -
Customers are concerned about the grid…industry insiders believe that
improvements will be forthcoming
Question: Are you concerned about the capacity and
reliability of your local utility to support electric vehicle
charging?
5. Infrastructure
Grid Concern


No
38%

Yes
63%
Customers are anxious about the availability and
convenience of infrastructure to support electric
vehicles
Charging tends to be between the hours of 6:00pm
and 10:pm, which has the potential to place heavy
strain on the power infrastructure
The government has shown willingness to fund the
first $100 million of infrastructure, but to build out
extensively requires a much larger investment
Smart Grid and Customer Awareness

To overcome this anxiety, additional investments
are being made to build out the infrastructure and
educating customers on availability and
convenience
– Smart Grid with digital real time metering should
be ready by 2015
– Developments should be clearly communicated
to the customer
The energy industry needs to better job of increasing customer awareness
Source: Deloitte Survey, Interviews and Analysis, Electrification Coalition, Idaho National Laboratory
- 17 -
The greatest factor that will drive or prevent adoption is purchase price;
most people expect to pay less than $30K for an EV
Question: When you evaluate a purchase decision,
what are the main costs you think about?
Purchase considerations

Purchase price
69%
Gasoline costs

23%
Maintenance and repair
8%
Parking
0%
License and registration
0%
0%

20%
40%
60%
6. Cost
80%
69% of consumers consider purchase price the
most important factor in a vehicle purchase
23% of consumers consider gasoline costs the
most significant factor: Opportunity exists to
educate the consumer about total cost of ownership
“Customers will buy an EV if the cost is comparable
to an ICV, if it’s more they won’t buy it. People will
not sacrifice themselves to save the environment”
% of people
% of people
Question: How much would you expect to pay for an EV?
25%
20%
15%
10%
5%
0%

23%
15%
17%
18%

9%
7%
3% 3% 2% 3%

Cost ($)
Price Expectations
73% of people expect to pay between $8K and
$35K for an electric vehicle
Current EV prices / price projections:
– Nissan Leaf: $30K
– Chevy Volt: $40K
– Tesla Model S: $58K
– Fisker Karma: $87K
Federal tax credits up to $7.5K for EV’s may help
offset high purchase price
Government incentives will be required until economies of scale are achieved
Source: Deloitte Survey, Analysis, HyrbidCars.com
- 18 -
Reduction in battery cost is the most significant lever for increasing the
EV’s operating benefit over ICE vehicles
Sensitivity of operating benefits for EV
to key costs and gas prices
Projected Li-ion Battery Cost per KWH
$1,200
Battery Cost/KWh
(20% reduction)
Govt. Subsidy (20%
increase)
$1,000
47%
$1,070
$940
$550
$600
23%
$810
$680
$800
Gas Prices (20%
increase)
6. Cost
$510 $470
$400
$200
7%
$0
2009 2010 2011 2012 2013 2014 2015
Note: the base line values for the analysis are: Battery cost /KWh = $1100,
Gas price = $3.00 per gallon), and Govt. Subsidy = $4000 per EV
Source: Pike Research
Key Takeaways

Reduction in battery cost is most significant lever for increasing EV’s operating benefit over
ICV, followed by gas prices

Technology is driving lower battery costs albeit the decrease is slow
Source: Deloitte Analysis, Pike Research, HyrbidCars.com
- 19 -
Battery costs will have decrease to 40% for EVs to match the ICE’s total
cost of ownership
6. Cost
Operating Benefit of EV over ICV
Gas Price ($)
Appx. 2010
Battery Cost
Battery cost / KWh ($)
$1,000
$900
$800
$700
$600
$500
$3.00
-$1,675
-$1,175
-$675
-$175
$325
$825
$3.25
-$1,525
-$1,025
-$525
-$25
$475
$975
$3.50
-$1,375
-$875
-$375
$125
$625
$1,125
$3.75
-$1,225
-$725
-$225
$275
$775
$1,275
$4.00
-$1,075
-$575
-$75
$425
$925
$1,425
$4.25
-$925
-$425
$75
$575
$1,075
$1,575
$4.50
-$775
-$275
$225
$725
$1,225
$1,725
$4.75
-$625
-$125
$375
$875
$1,375
$1,875
$5.00
-$475
$25
$525
$1,025
$1,525
$2,025
EV has an
Operating
Benefit over
ICV
Key Takeaways

Since both the gas price and battery costs will inhibit adoption, OEMs will need to spend large
incentives to sell EVs in next two to three years

Adoption will pick-up as battery costs cross the $600/KWh mark in 2014, assuming fuel costs
remain stable
Source: Deloitte Analysis, Pike Research, HyrbidCars.com
- 20 -
In light of customer adoption barriers, the most probable purchase
funnel scenario results in a 3.1% EV market share in the US market
Adoption Barriers
Volume Forecast
Scenario Analysis: Purchase funnel in 2020
2010 Purchase
Funnel
Aggressive
Probable
Conservative
Familiarity
Brand
Charging
Awareness
26%
93%
83%
75%
Opinion
19%
55%
44%
28%
44%
24%
14
%
Infrastructure
Range
Price and
Ownership
Cost
Consideration 13
%
Purchase
5.6%
N/A
3.1%
1.9%
Purchase Price
Low ($25K)
Medium ($35K)
High ($45K)
Range
High (350 miles)
Medium (200 miles)
Low (100 miles)
Gas Price
High ($4.5/gal)
Medium ($3.5/gal)
Low ($3/gal)
Note: 1. Analysis considered BEVs and PHEVs only. 2, Current funnel is derived based on the customer survey. The 2020 purchase funnel is based on sensitivity of consideration to
purchase price and range within customer clusters and the purchase funnel metrics for Hybrid adoption 3. The US light vehicle volume for 2020 is assumed to be 15 Million.
Sources: Deloitte analysis, Primary research, GfK Automotive Purchase Funnel Benchmarks, Jan 2010
- 21 -
Assuming a 2020 volume of 15M, a 3.1% share translates to
approximately 500k units
Volume Forecast
Market Penetration and Volume Trends for EVs (BEVs and PHEVs)
Market share in 2020
900K
5.6% (840K units)
800K
Sales Volume
700K
600K
Market share in 2015
Aggressive
0.5% (75K units)
Probable
0.4% (60K units)
Conservative 0.3% (45K units)
500K
400K
300K
200K
3.1% (465K units)
1.9% (285K units)
100K
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Aggressive Scenario
Probable Scenario
Conservative Scenario
Note: Volume estimates are based on an automobile market of 15 million
Key Takeaways

Due to barriers such as battery cost and gas price, adoption will be slow for the first three years
but will pick-up as battery costs decrease
Note: 1. Analysis considered BEVs and PHEVs only. 2, Current funnel is derived based on the customer survey. The 2020 purchase funnel is based on sensitivity of consideration to
purchase price and range within customer clusters and the purchase funnel metrics for Hybrid adoption 3. The US light vehicle volume for 2020 is assumed to be 15 Million.
Sources: Deloitte analysis, Primary research, GfK Automotive Purchase Funnel Benchmarks, Jan 2010
- 22 -
Conclusion
The Conclusion: Long Road Ahead
Implications
Summary



Customers
EVs are attractive to customers, the automotive
industry and the country

There are approximately 1.3m individuals with the
demographic and psychographic profile of
potential ‘early majority’ EV customers in the US
EVs bring performance and styling
improvement opportunities

Understanding of technology needs to improve
and range anxieties addressed
There are six barriers to adoption

Key to adoption is reduction of price and
assurance of EV lifestyle
− Familiarity
− Brand
Automotive Industry
 Green tech investments are accelerating,
supported by government incentives
 Through investments on hybrids, Toyota,
Honda and Ford have the upper hand on
green image
 New EV introductions will broaden awareness,
build excitement and imagery
 Given forecasted volume of 465k units the 15
brands/models will struggle to achieve
profitability and manufacturing efficiencies
− Range
− Charging
− Infrastructure
− Price

and Cost of Ownership
Ultimately, consumer adoption of EVs will be
challenged for the next decade
adoption will be gradual – roughly 3%
by 2020
− Mass
− Complimentary
technologies will continue to
gain acceptance
- 23 -