Op-Ed: Are EVs A Better Product, Or Is Musk Just A Fool On A Fool's Errand?
My thanks to the many readers and those who made comments on my last article. It is encouraging to know my humble words are being read. I was pleasantly surprised at how many comments the latest article received.
Readers and viewers are the fuel that drives creators to create. I appreciate the readers who take the time to comment. Over the years, I have learned things from the various comments made. I have even adjusted some opinions because of comments.
I made my writing on “Why I’m Pro EV” intentionally brief. I choose to not go into too much detail. A couple of comments on the article have prompted me though to expand on what I said.
One reader, AnyPronounWillDo, had this to say.
“First rule of marketing: suppress any tendency to believe that others believe as you do.
I own an EV and love it. But I see large segments of the market that need things EVs don’t yet provide, who can’t afford an EV that makes ownership easy, or their tolerance of risk and effort is lower than what is presently required to make an EV their only vehicle. For these people EVs are not better products yet.
Toyota understands this well enough to delay introducing BEVs. Those who criticize them should review that first rule of marketing.”
Be a marketing prophet
The first part of APWD’s comment is advocating for solid market research. In other words, conduct customer polls, customer focus groups, and the like to find out what it is that potential customers want. The idea being, don’t merely rely on your own opinion or ideas. Then, once you’ve uncovered those customer wants, through research, deliver on them.
Looking at marketing from a broad, high-level perspective, APWD is correct. A good marketing person wants to be a prophet, not a historian. The hope is to foretell what will work and what will not. Generally speaking, without good research, a business manager is flying blind.
The marketing annals are full of cases where “the boss” had a “great idea” that he pushed to implement and ultimately the idea flopped, costing the company big money. In some cases even the eventual failure of the company. “The boss” didn’t do any market research. He didn’t try to find out what potential customers wanted.
The market leap?
But market research isn’t always the end-all-be-all. There can be pitfalls.
First and foremost, the research has to be done in an unbiased way, otherwise, the resulting data is not merely useless, but potentially harmful. One of the more infamous cases of this is the failure of the Ford Edsel.
Secondly, even carefully conducted market research can give false positives or false negatives. Debbi Fields, the founder of Mrs. Fields Cookies, went against the market research about introducing a macadamia nut cookie. The research suggested that it would be a flop. Mrs. Fields decided to move ahead with the cookie. It turned out to be one of the company’s most popular cookies.
Finally, market research often isn’t very good at predicting technological leaps. If people were polled back in 1990 about what they wanted in a phone, how many would have described the smartphones we carry around in our pockets today? A famous quote from Henry Ford illustrates this. He said, “If I had asked people what they wanted, they would have said faster horses.” It’s well known that Steve Jobs, Apple CEO, was leery of relying on market research.
Is Musk playing the fool?
So, how does all this apply to electric vehicles?
From a classical marketing point of view, Elon Musk was an absolute and utter fool back in 2003. He had no research data to indicate that electric cars would sell. The only indication that even hinted at the possibility of success was the passionate admiration drivers had expressed for their General Motor’s EV1s. Business as usual should have suggested that it wouldn’t make sense to start an electric car company. Of course, Elon had personal philosophical green reasons for moving ahead.
But, as it turns out, the product difference was so very clear that market research really wasn’t necessary. When it comes to electric vehicles, I stand by what I said. EVs are just a better consumer product. It doesn’t take a PhD in marketing to quickly grasp that EVs have a strong appeal. It’s clear to those who already own one that going back to an IC put-put usually isn’t considered an option. In the case of EVs, the product difference makes it easy to be prophetic. It’s easy to see that EVs are the future. The advancements already made in EVs mean that millions of people can enjoy the benefits of EVs today, as is.
Now, to address the second part of APWD’s comment:
“I see large segments of the market that need things EVs don’t yet provide, who can’t afford an EV that makes ownership easy, … For these people EVs are not better products yet.”
He (AnyPronounWillDo) doesn’t expound on what things EVs don’t yet provide. So I have to make some assumptions. I suspect he is talking about affordable range and ease of charging. The keyword in APWD’s comment is “YET”.
I recognize that, at present, EVs with ranges above 300 miles are comparatively expensive and not affordable to many people. (A)
I can use myself as a case study. As strange as it may seem, I don’t own an EV (yet). My conservative leaning makes me unwilling to afford to spend over half a year’s wages on a new vehicle that I’ll drive only 6-7,000 miles a year. My current vehicle is a used minivan that was 10 years old when we bought it for only $10,000.
I’m also not willing to compromise on a vehicle with a limited range. We are a one-vehicle family. As such, I’ll insist that our next vehicle has a range of over 300 miles. I want a vehicle that is easily capable of the occasional longer trips. So, unless something changes, a used long-range EV within my budget may not even be available until sometime after 2028. (I am willing to pay a premium to go electric. But in my use case, I’d want to see the cost-benefit of going electric within four or five years.)
This doesn’t, however, preclude me from readily seeing the product advantages of EVs. What it does mean is that I understand that for a good portion of the population, EVs are, at the moment, out of reach. That doesn’t, however, make EVs an inferior product!
Happily, though, there is a large number of people who do buy brand-new cars, and for whom buying an EV makes a lot of sense right now. They can benefit from the better customer experience that EVs can provide for them, today. These are the pioneers. They are the ‘innovative adopters’ like APWD who will make it possible for people like me to one day afford and own a used EV.
I’m going to go out on a limb and make some predictions. I’m cutting myself some slack though with a qualifier that even if my predictions are three years late, I’ll still consider myself right.
By the end of 2026, there will be compelling new EVs on the scene that will be on “cost parity” for the under-$35,000 new car buyers. Keep in mind, this parity doesn’t mean exactly the same sticker price. The lower total cost of ownership means that EVs rightfully deserve at least a $4,000 premium.
This parity does mean though that their consumer utility will be on par with comparable IC vehicles. (see the InsideEVs article “EV vs ICE Parity?”) They may cost a bit more, but not drastically more. They may not have as much range, but they will have enough to comfortably do any trip, particularly as charging infrastructure improves. This brings us to the next part of APWD’s comment.
Ease of charging
Commenting about the topic of charging, reader jimv1983 chimed in with this:
“The author of this article assumes that everyone can charge at home. He gives the example of a hypothetical mobile phone that has to charge at a special station but for around 40% of the United States that’s exactly what we’d have to do…go to a charging station. For us the range, charging speed and number of public charging stations matters a lot. He also doesn’t take into account longer trips where those things that are important to those of us who can’t charge at home become relevant to even more people.”
I recognize that only about half of the US population can currently have easy at-home charging access. It’s true, a large segment of the population lives in multi-family dwellings which, at present, often makes at-home charging impractical.
I also recognize that public charging is currently not up to par. It’s not where it needs to be. These problems are basically a chicken-and-egg challenge.
So far, there has been little economic incentive to invest in charging. To date, the market for EV charging has been rather small. Because there have been only a few million EVs on the roads there has been little fiscal rationale to make the push to install charging stations. This will change.
Research confirms that there is enough inherent interest in EVs that very soon over 5% of all automobiles on US roads will have a plug. Again, thanks to APWD and innovative adopters like him, over 10 million plug-in EVs will be on US roads as early as the beginning of 2026. While this is still a small percentage of the total vehicles, it will be a large enough segment to begin justifying substantial for-profit investment in charging.
As EVs proliferate, even the at-home charging situation will change. We have a long way to go to reach EV saturation of single-family dwellings. There is plenty of room for EV adoption from this segment alone. Down the road though, once 50% of all vehicles have a plug, it will become clear to landlords that installing onsite EV charging is just good business sense.
By the end of 2027, public charging will be significantly improved, and this improvement will only continue. This will greatly enhance the utility of EVs for everyone. EV range will become less and less of a concern. Any EV with over 300 miles of usable range will be enough for most people to comfortably make long-distance trips. By 2035, landlords that do not have at least some on sight charging will be considered behind the times.
Finally, APWD said:
“Toyota understands this well enough to delay introducing BEVs. Those who criticize them should review that first rule of marketing.”
I have to disagree with this assertion. Many people want EVs. The limiting factors are the costs and automakers’ ability (or will) to manufacture them in large numbers.
I think the more likely truth is that Toyota is facing The Innovator’s Dilemma. Toyota is gambling with its future. It is toying with becoming another Kodak story. The disruptors are becoming the disrupted.
Japan may not realize it, but they are once again at war with China. But this time, it is a new kind of war.
By delaying going heavily into EVs, Toyota is merely putting off the fiscal pain that will be necessary to make the switch. The longer management waits, the greater the fiscal pain will be. The one hope Toyota could have would be to produce inexpensive range-extended BEVs.
History will tell the story. I think we’ll have some hints of the outcome by 2027 and a very firm idea by 2030
What do you think? Are EVs destined to take over the automotive world? Will Toyota survive the transition to an EV world?
A. Regarding the EV tax credit: Keep in mind that there are many people, like myself, for whom the $7,500 EV “tax credit” is useless. The credit only applies if you have a net tax liability to the government. There are many people who don’t end up paying federal income tax. For those people, the purchase of a new EV is entirely on their own dime.
B. More responses to jimv1983‘s comments:
“I definitely wouldn’t want to make the drive from the San Francisco Bay Area to the Los Angeles area in an EV given the current state of EV technology and that’s a relatively short trip.”
If I’m not mistaken, that trip has already been completed in a long-range Tesla Model S without stopping.
Regardless, it’s correct that it would be a little inconvenient in a 300-mile range EV. But by 2030, it will be no problem to make the trip. By then, two convenient 10-minute bathroom breaks along the way should make it easy enough to add the additional 100 miles of range necessary (total travel time, about 6.5 hours).
“He also talks about economic advantages but he doesn’t seem to take into account how the cheaper “fuel” is offset by a much higher price of the car (and higher insurance, taxes and registration due to the higher cost of the car). He doesn’t mention that it actually takes 10s of thousands of miles just to break even in total cost of ownership. In some cases over 100,000 miles.”
EVs do rightfully deserve a price premium. The lower energy cost means the user will save 10 cents a mile, or more. That is at least $1,000 savings for every 10,000 miles driven. So yes, depending on the amount of premium paid, it could take 100,000 miles to “break even.” But if you’re paying what you consider is a $10,000 premium for an EV, that’s on you, not the market. (2023 BMW 3 Series: $42,000. 2023 SR Model 3: $43,000) And given the fact that the EVs can last over 200,000 miles, no worries, there is a lot of room there for savings.
“And as far as a quieter driving experience that really depends on the EV. It certainly isn’t true for Teslas. I can’t remember the last time I was in a car that had worse road noise than a Tesla. Do they have any sound-dampening material at all? They are SO loud.”
The few empirical tests that I’ve seen on YouTube of this don’t support this conclusion. The consensus given is that the lack of engine noise makes the road noise more noticeable.
Source: Read Full Article