We have seen 2017 kick off with a range of announcements about new and future electric vehicles (EVs), as well as planned improvements in infrastructure. And with their arrival, the hope by many is that they could help drive increased sales. Among those that likely share that hope are automotive manufacturers confronted with the challenge of determining which markets around the world to invest in to maximize their return on investment in EV manufacturing.
To help them address this challenge, Accenture has conducted a new study that identifies nine domestic markets, in addition to the U.S. and China, that have the potential to generate significant EV growth in the next four years. These markets were analyzed to pinpoint the crucial distinctions that shape EV attractiveness, including Canada, France, Germany, Japan, the Netherlands, Norway, South Korea, Sweden and the UK. The criteria for determining their growth potential includes researching the status of government regulations and subsidies, charging infrastructure, vehicle range and charging times.
A greater chance of EV sales increasing in these markets comes at a time when more mass-market EV introductions are also planned over the next four years, adding to the possibility that EVs globally could quickly become part of high-volume car-buying. Moreover, EV sales have steadily grown despite declining oil prices, rising from 36,000 units sold in 2011 to more than 270,000 in 2015. Though 2015 sales still accounted for only 0.3 percent of the global automotive market, an increase by just 3 percent would equate to 2.7 million EVs.
Given these dynamics, automakers should seriously consider investing in a number of these markets to ensure that they will be in the best position to capitalize on increased EV growth. As part of their investment, auto companies also should consider enhancing their manufacturing capabilities, as they likely will need to cater to specific customer preferences in each country. This will require not only having EV production platforms in place to accommodate various models, including full and hybrid electric, but also the manufacturing flexibility to satisfy such diverse demand.
The study examines the potential of the markets to drive EV growth by dividing them into four distinct categories: best in class, high potentials, hesitators and pensioners. The U.S. and China rank as best-in-class markets because they show both high EV market size and growth, and have already reached attractive volumes.
The nine additional markets that are poised to join the U.S. and China in generating greater EV sales are defined as high potentials. France, for example, is receiving support from the French government in the form of EV purchase credits of up to $6,300, free charging station use and free EV parking. The French government aims to establish 2.7 million charging station by 2020.
The study classifies Brazil, India and Russia as hesitators because of their small market size and expected low EV growth. The key point is that multiple markets are gearing up for more EVs, driven by technological, economic and political factors. Automakers, particularly those heavily invested in EVs, should consider these factors and be prepared for such growth, including extending their manufacturing footprint.
Blueprint for EV success
Automakers should focus on five key actions to prepare themselves:
- Plan globally and focus locally, channeling overall EV investments toward the right domestic markets using total unit market size as an indicator of their attractiveness.
- Concentrate initially on the U.S. and China, as these best-in-class countries can serve as a benchmark for expanding into other markets.
- Monitor the high potentials to be prepared to extend the company’s footprint into these markets.
- Hesitate with the hesitators, but keep them on the organization’s long-term radar.
- Follow government agendas, as plans for EVs can rapidly change—especially in China.
>>Andy Howard, firstname.lastname@example.org, is managing director in Accenture’s Automotive and Industrial Equipment practice. Christina Raab, email@example.com, is managing director in Accenture's Automotive practice.