Global electric vehicles (EV) sales figures have been growing rapidly from 36,000 units sold in 2011 to more than 170,000 over three years. However, the share of EVs as a percentage of the global automotive market in 2014 was only 0.3 percent. An increase to just 3 percent would equate to 1.7 million EVs. Moreover, the rise of EVs means automotive players are experiencing profound and long-lasting challenges to the status quo by new technologies and products, new competitors, and the rise of fuel-efficiency regulations.
The potential for EV uptake, however, varies greatly across domestic markets and needs to be assessed for each market individually. For example, in the world’s largest automotive market, China (19.7 million passenger vehicles sold in 2014), EVs in 2014 only accounted for 45,000 sales. By contrast, in Norway (144,000 passenger vehicles), 18,000 EVs were sold. So, why does Norway have a 13 percent market share, while China only has 0.2 percent?
Accenture has developed an EV Market Attractiveness framework that analyzes selected domestic EV markets to provide insight into key factors are driving EV market growth. EV Market Attractiveness is defined as the degree to which—from a customer perspective—the purchase of an EV instead of a conventional vehicle, in both monetary and non-monetary terms, is a more attractive option. It depends on factors that are either market-specific (typically governmental regulations and subsidies) or non-market-specific (e.g., battery costs).
Non-market-specific factors influence the global attractiveness of the EV market and affect all domestic markets to a similar extent. For example, battery costs, which account for up to 38 percent of an EV’s price, have fallen from above US$1,000 per kilowatt-hour in 2007 to US$300 in 2014, bringing prices down to a more viable level and increasing the overall attractiveness of EVs. In most markets, a major obstacle for example is an insufficient charging infrastructure. At the same time, one of the biggest and strongest catalysts for EV Market Attractiveness is the presence of monetary and non-monetary government subsidies. The latter can be observed in Norway where the government is driving the EV market with measures like nationwide access to bus lanes or free parking.
Another example of government support for market development is China where, to reduce emissions, the government decided to ban conventional scooters from mega cities. In 2013, this led to sales of 9.4 million electric scooters. The sales figures of those electric scooters in the rest of the world were a negligible 31,000 units. Although this did not involve the automotive EV market, it is a clear example of the sizeable impact that government decisions can have. In fact automotive OEMs are operating in a highly heterogeneous marketplace, as we investigated 14 selected markets - defined at the intersection of the 10 largest automotive markets and the 10 largest EV markets with respect to their EV Market Attractiveness.
Based on our findings the recommendation is simple yet powerful: Plan globally, focus locally. In other words, OEMS need to channel the overall EV investments toward the right domestic markets.