Are the Wheels Coming Off the BEV Juggernaut?
According to Geoffrey Moore’s marketing bestseller ‘Crossing the Chasm’, new products are taken up first by Innovators (who like weird, techy stuff), then by Early Adopters (who like to be seen to be trendsetters) before facing the crucial challenge of adoption by the Early Majority (who buy based on value and utility). Smartphones are a classic example, but the process has held true since the first consumer products emerged over a century ago.
Initially, battery electric vehicles (BEVs) seemed to be ticking the boxes of this model - Innovators bought the first Teslas and Nissan Leafs, Early Adopters bought the second wave of vehicles, and then…? This year, BEV market share in the UK has stalled at 16%, with the market share of BEVs to private buyers actually falling from 22% to 16% in April. In the EU, market share is static at 12% and in the US, it seems to have stuck at around 8%. Why is this? Why are BEVs struggling to cross the chasm to become mainstream, and what needs to happen to solve this?
Typically, successful disruptive products offer a quantum improvement in performance, and for a time, price is not too important - again, smartphones are a good case in point. Over time, as the new technology premium erodes and volumes increase, prices come down rapidly and market adoption surges – but BEVs are not following this script.
In terms of overall ownership experience, BEVs have failed to convince the wider public they are as good as - let alone better than - the incumbent technology: the humble tried, tested, and constantly evolved internal combustion engine. Assessed on utility and performance, BEVs offer higher purchase costs (before government subsidies), are substantially heavier, have shorter driving ranges and have the prospect of long, unreliable charging cycles on longer journeys. In the long term, there is the prospect of expensive replacement of old batteries, and to cap it, it seems they do not hold their value. Leaving novelty aside, which will never sustain a new product/technology in the mainstream, there are clearly good reasons the Majority are failing to get excited.
To date, most people who have bought BEVs have done so for one of the following reasons – (i) they are company car drivers benefitting from substantial tax breaks, (ii) they take global warming seriously and, rather than waiting for governments to force adoption by regulation, believe cars should have zero tailpipe emissions (iii) they are affluent owners with off-road parking/charging, who use a BEV as a low-mileage second car. However, the Majority, who tend to be private buyers with a single car, unless dedicated environmentalists have largely shunned BEVs.
The failure of BEVs to gain mainstream traction in the passenger car market - ironically, the market for which their performance window is best suited – is a real problem for two reasons. Firstly, without widespread adoption by the Majority, we have no chance of successfully combatting climate change. Secondly, unlike many other products which do not depend on a liquid secondary market, the automotive market needs a thriving second-hand market for any model to remain successful.
In the case of BEVs, the second-hand market has become a disaster as Early Adopters seek to recycle their cars to new owners, and low resale values are a further blow in terms of the total cost of ownership. Many are now thinking twice about buying another BEV.
With sales volumes stalling, western manufacturers of BEVs are licking their wounds, and with the threat of substantially cheaper Chinese BEV imports on the horizon, many Western governments face a crucial dilemma. Do they double down on tax incentives and quotas to try to force BEV adoption on reluctant consumers, or is it time to recognise that the path to zero-emission mobility needs to be rapidly re-evaluated?
A truly viable solution must be market-driven rather than depending upon government subsidy and regulation, and this means buy-in from the Majority. Recent evidence indicates this is not happening and that vehicle choice will depend on use-case, total cost of ownership, range, availability of refuelling infrastructure and refuelling cycle, with equivalency to petrol and diesel clearly a must. So, while well-intentioned politicians around the world threw their support behind BEVs, believing the technology alone would deliver zero-emission mobility, consumers are sending the message that, on their own, BEVs do not offer a broad enough solution to replacing petrol and diesel engined vehicles.
A swift response and more balanced approach is now essential if we are to hit our zero-emission targets, and it must include a stronger commitment to hydrogen, which offers advantages over BEVs in many applications, especially when range and carrying capacity are important. With these factors critical in driving demand, the cost of hydrogen fuel cell powertrains could be reduced to match the cost of BEVs by 2030 and petrol/diesel-engined vehicles by 2035.
In the meantime, there is evidence that many OEMs are quickly developing plans for a greater commitment to hydrogen. In many cases, this is initially based on hydrogen combustion, which can be rolled out as an interim technology relatively quickly and cheaply while fuel cell production ramps up. At the same time, both the US and the EU (which regard hydrogen as central to their energy security strategies) are providing substantial funding for the essential hydrogen infrastructure required to make hydrogen vehicles viable.
If we are to succeed in our efforts to achieve zero-emission mobility in a meaningful timeframe, we must quickly agree that the solution will not be one size fits all, that a variety of technologies will be required, and crucially, that without broad consumer buy-in, the whole enterprise risks failure.
