Electric Vehicles The Challenges of Introducing and Managing Revolutionary New Products

Not all new products are created equal. Some new products are designed to replace an existing product. In some cases, such a product is more than just a "new and improved" version of the existing product; it is one so revolutionary, it requires completely new methods of production, channels of distribution, and means of consumption. Electric vehicles (EVs) are that type of new product.

skim the attached mini case and ans the questions.

1. In what ways do startup companies like Tesla and Rivian have advantages over established vehicle manufacturers in developing and marketing electric vehicles?

2. Why is it so important for companies now launching their first EVs to accurately assess the correct product life cycle stage?

3. What do you think are the major barriers to adoption and success of electric vehicles?

Electric Vehicles The Challenges of Introducing and Managing Revolutionary New Products Not all new products are created equal. Some new products are designed to replace an existing product. In some cases, such a product is more than just a "new and improved" version of the existing product, it is one so revolutionary, it requires completely new methods of production, channels of distribution, and means of consumption. Electric vehicles (EVs) are that type of new product. These days, it seems that EVs are gaining traction. While electric vehicles have been around in some form since the dawn of the automobile, established auto makers had not made any serious efforts to market EVs until 2010 when Nissan introduced the Leaf-the first affordable EV from a major automaker. Since then, automakers have been announcing intentions to embrace this alternative means of propulsion and figuring out a strategy for establishing a foothold in the EV market. In 2015, Volvo Car Group CEO Hakan Samuelsson stated, "We believe that the time has come for electrified cars to cease being a niche technology and enter the mainstream." That opinion was echoed by numerous voices in the automotive industry. Today, more than a dozen car makers sell fully electric plug-in vehicles in the US with virtually every major auto maker set to bring new EV models to market within the next few years. While forecasts vary widely, conservative estimates predict that market share for EVs in the US will reach 10 percent in 2025, 20 percent in 2030, and will all but eliminate the sale of new internal combustion vehicles (ICV) by 2050. And yet evidence of the predicted automotive revolution remains sparse as sales of EVs remain a small fraction of total vehicles sold. Last year, 330,000 EVs were sold in the US. While that may sound like a lot, it was 30,000 fewer EVs than were sold the previous year. It also represents just over 2 percent of the more than 17 million passenger vehicles sold. What's more. the largest share of EVs sold bore emblems of the same make-Tesla, a startup automaker founded in 2003. Even as automotive manufacturers give the appearance of accelerating rapidly into this new high-tech market, the speed with which car buyers adopt the enticing benefits of these revolutionary new transports is slowed by numerous barriers.The value promised by EVs is simple. For starters, the cost of operating these vehicles is far lower than that of IOVs. These costs vary, depending on the model as well as the price of fuel and electricity. But recent studies show that costs for fuel and maintenance of EVs are less than half that for comparable ICV models. This is only partly because electricity costs considerably less than gasoline. Electric vehicle powertrains are also far less complex than ICV motors, putting power to the road with significantly fewer moving parts and an almost complete absence of petroleum-based lubricants. It is true that the purchase price of an EV model is substantially higher than that of a comparable ICV. But with government tax credits and lower operating costs. the total cost of ownership for an EV is typically very close to that of an ICV. Perhaps more important to many customers than the cost of operation is the impact of a vehicle on the environment. The absence of any carbon emissions during operation gives EVs an immediate and obvious advantage in environmental impact, even when electricity to charge an EV is produced by fossil fuels. And while the manufacturing process for EVs requires rare earth metals that are more carbon-intensive to extract, studies show that the overall carbon output for producing and operating an EV throughout its lifecycle is lower than that for an ICV. And as EVs become more mainstream, economies of scale will make the manufacturing process progressively cleaner. Additionally, electricity grids are expected to become even less carbon dependent as renewable energy sources continue to replace fossil-fuel power plants. But EV ownership offers more benefits to customers than lower costs of ownership and environmental impact. Electric vehicles are software driven, delaying obsolescence with updates to the car throughout its life. With the full torque of electric motors available right off the line, most EVs outperform comparable ICVS. A standard Tesla Model 3 will accelerate to 60 miles per hour in just 5.3 seconds, faster than all but a few four-door compact cars. The performance upgrade for the same model propels occupants to the mile-per-minute mark in a blistering 3.1 seconds-fast enough to beat most supercars. With all these benefits, you might think customers would be pouring into dealerships to buy EVs. But numerous barriers challenge the market adoption of a technology that, on the surface, seems to provide higher levels of customer value. One of the biggest of these is range. In the past, most EVs had a range of less than 100 miles per single charge. That range has been gradually improving. with the average across all EV models available now at 181 miles. Stil, this range is a far cry from the average of 300miles for ICVs, not to mention the fact that many IOV models are able to travel well over 400 miles without refueling. Of all EV brands, Tesla leads the market in vehicle range due to its competitive advantage in battery technology. A base Model 3 has a range of 263 miles, while the latest Model S Long Range Plus can travel just over 400 miles without stopping to recharge. Other EV manufacturers are fast improving vehicle range. But most car-buying customers remain leery of the prospect of being left on the side of a road with a dead battery. To some extent, the range issue can be tempered by the ability to recharge from remote locations quickly. But this is another barrier to market acceptance. The sale of new EVs is highly dependent on the infrastructure of charging stations and the speed with which vehicles can be recharged. Auto manufacturers are making improvements to charging speed. But they are not in the business of building fueling stations. And while other organizations are progressively installing more charging stations, they face the risk of oversaturating a market that has been slow to develop. Even as charging becomes less of an issue, consumer perceptions of this matter lag behind the reality. Another deterrent to the adoption of EVs is the relative lack of choice when choosing a new car model. While part of this can be explained by the newness of the market as well as by the gradual market acceptance, it also must be recognized that shifting to developing EVs represents a substantial risk, especially for established auto makers. With ICVs still accounting for nearly all new vehicle sales for veteran auto makers, such corporations are stuck in a bind between keeping their bread-and-butter vehicles palatable and developing new EVs when the future of such is uncertain. Adding to the reluctance of manufacturers is an even greater hesitance from the independent dealers that sell new vehicles. These dealers see an EV future as a threat to their well-being. This is because the majority of their profits come not from the sale of new cars but from servicing and repairing cars. Two of the three top maintenance items for passenger cars and trucks-oil and brakes-are all but eliminated in EVs. The electronic, software heavy systems for EVs also allow for on-the-fly diagnosis of operating systems, minimizing the need to visit a dealership should something go wrong with the car. Thus, the typical automotive dealer would suffer a 35 percent decline in service revenue for EVs relative to IOVs. It's no wonder that most salespeople have very little knowledge of EVs and some have been reported to actively discourage potential customers from buying them.In addition to these barriers, the manufacturing of EVs requires fewer people, which has led to push back from powerful automotive unions. The higher software needs of EV's have manufacturers faced with either purchasing software from tech companies or investing large sums of capital to develop their own software inhouse. The use of rare metals and other raw materials not used in ICVs has created bottlenecks in building supply chains that previously did not exist. With these challenges in mind, it is understandable that established auto makers have not developed EV technologies quicker. While it is apparent that most of these challenges are being addressed on some level, there is still a high degree of uncertainty with respect to how fast the market will grow. This has led many industry observers to speculate that startups like Tesla, Rivian, and Nikola-companies that exclusively manufacture EVs-are at an advantage because they have access to investor capital and are completely invested in EV success. While it is by no means a foregone conclusion that these new companies will succeed, if EVs continue to grow, it is likely that the companies that lead the industry will change. Endnotes and Bibliography: 'Korosec, "Volvo." Baldwin, Roberto. "EV vs. Gas: Which Cars Are Cheaper to Own?" Car and Driver, May 22, 2020. https://www.caranddriver.com/shopping-advice/832494027/ev-vs-gas- cheaper-to-own Bakheuser. Sina "How Do EVs Compare to Gas Cars?" Whyibox April 24, 2020. https://wallbox.com/en catalog/how-do-evs-compare-to-gas-cars. Brennan, Reilly. "Electric Vehicles Are Changing the Future of Auto Maintenance." Techarch, March 8. 2020. https:/techcrunch.com/2020/03/08/electric- vehicles-are-changing-the-future-of-auto-maintenance Ellsmoor, James. "Are Electric Vehicles Really Better for the Environment?" Forbes, May 21. 2010. https://www.forbes. com/sites/jamesellsmoor/2019/05/20/are-electric-vehicles- really-better-for-the-environment/?sh=b00383c76d24. "Journeys in the Teslaverse: The Future of Cauneking," The Economist, September 19. 2020. p. 50. Korosec, Kirsten. "Volvo: It's Time for Electric Cars to Enter theEndnotes and Bibliography: Korosec, "Volvo." Baldwin, Roberto. "EV vs. Gas: Which Cars Are Cheaper to Own?" Car and Driver, May 22. 2020. https:/www.caranddriver.com/shopping-advice/832494027/ev-vs-gas- cheaper-to-own. Ralhauser, Sina, "How Do EVs Compare to Gas Cars?" Wallbox, April 24, 2020. https:/wallbox.com/en_catalog/how-do-evs-compare-to-gas-cars. Brennan, Reilly. "Electric Vehicles Are Changing the Future of Auto Maintenance." Techwich, March 8. 2020. https:/techcrunch.com/2020/03/06/electric- vehicles-are-changing-the-future-of-auto-maintenance Ellamoor James. "Are Electric Vehicles Really Better for the Environment?" Forbes, May 21. 2010. https://www.forbes.com/sites/jamesellsmoor/2019/05/20/are-electric-vehicles- really-better-for-the-environment/?sh=b00383c76d24. "Journeys in the Teslaverse: The Future of Gamekiog," The Economist, September 19, 2020. p. 50. Korosec, Kirsten. "Volvo: It's Time for Electric Cars to Enter the Mainstream." Fortune, October 15, 2015. https //fortune.com/2015/10/15/volvo-electric- cars-lineup Morris, James. "Why Isn't Everyone Buying EVs Yet? It's Not Just the Price." Forbes, August 15. 2020. https:/www.forbes. com/sites/jamesmorris/2020/08/15/why-isnt-everyone-buying- eve-yet-its-not-just-the-price/#10670eb510f4