Monday 12 August 2013

Are we starting to see a split in the EV market?

ElectricForum.com report that over the last few weeks we have seen some significant movement with regards to the price of electric vehicles in the US amid signs that polarisation of industry is beginning. We have the likes of GM, Nissan, Toyota and an array of other electric vehicle manufacturers looking towards the volume end of the market while Tesla Motors and BMW, to name but two continue to dominate the luxury end of the electric vehicle market.

Some experts believe that we will see mass-market penetration by 2017 although it seems as though some EV manufacturers are looking to position themselves for an entry into the mass market in the short term.

Luxury brands at luxury prices
If you look at the luxury end of the electric vehicle market the names of Tesla Motors and BMW are the two which jump out at you straight away. Despite the fact that we have seen price reductions with regards to the Nissan Leaf, Toyota Fit and the Chevrolet Volt EV hybrid there has been little or no movement with regards to the price of Tesla and BMW electric vehicles.

Recent statistics suggest that the ever popular Tesla Motors Model S is selling around 1500 units a month at the original price of $70,000. The BMW i3 was only just released to the market although there is little sign of the company reducing its price to increase sales. The reality is that the likes of Tesla and BMW have made a living on luxury prices for luxury products and a reduction in the price of their latest electric vehicles would have a detrimental impact upon their reputations. These types of vehicles are not aimed at the volume end of the market and despite the fact that Tesla plans to introduce an affordable EV by 2017, it will for the time being be regarded as a luxury electric vehicle manufacturer.

Volume sales at reduced prices
There has been much discussion with regards to the likes of the Nissan Leaf, Toyota Fit and more recently the Chevrolet Volt with some experts suggesting that these vehicles are loss-making at this moment in time. The fact is that of the underlying parent companies have set their stalls out to attract volume sales at reduced prices and while there may be short-term losses until the electric vehicle market penetrates the mass-market, they seem willing to take on this added burden for now.

It is difficult to forecast with any great confidence when the electric vehicle market will penetrate the mass-market but the signs are already there, a polarisation of the market between the volume end and the luxury end and price adjustments across-the-board. Many of the future volume electric vehicles will not only see an improvement in margins for high-volume but there will also be efficiency savings and reduced technology expenditure. This is what makes the market, offerings from the volume end right the way up to the luxury end with companies emerging to fill in the gaps.

Are we on the verge of a price war?
In traditional markets you would suspect there was a price war around the corner but the electric vehicle market is not quite running at full capacity at the moment. Many of the companies operating in the electric vehicle industry have significant excess capacity available as and when the industry goes mass-market and while prices have been reduced on some of the more popular vehicles, a price war to any great extent would not help the industry or the individual manufacturers just now.

It will be interesting to monitor the price of all electric vehicles in the coming months and the price of new entrants to the market because recent US government statistics show that the rate of sales growth across the EV industry is far higher than that seen in the hybrid industry at a similar stage of development. EV sales are expected to double in 2013 compared to their 2012 level and grow significantly from 2013 onwards.

 Conclusion
There is no doubt that we are starting to see two very different groups of EV manufacturers emerging, those looking towards the mass-market volume end of the sector and those looking to maintain prices at the luxury end of the industry. The names will be familiar to you, they will be in the headlines over the coming months and while we are not on the verge of an out and out price war it is interesting to see that competition across the sector is starting to influence prices.

 The reality for many electric vehicle manufacturers is that they are currently running at a loss on their EV offerings and are unlikely to reduce prices any further without significant sales improvements. However, there is no doubt that the EV market is now starting to hot up!