Electric Vehicle Industry
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The industry analysis suggests that technological, political, and macro-economic forces are the most powerful determinants of the future growth of the EV industry. EVs production costs are much higher mainly due to its expensive battery, which makes EV almost unsellable without government subsidies and tax incentives. Consequently, technological advancement that will enable mass production of battery at much lower costs will be a critical factor to make EV more affordable in the future. Without lowering costs, EV will continue to struggle in terms of price competitiveness and its sales will remain heavily reliant on governmental supports. The sustainability of such governmental incentive programs is uncertain because subsidizing a specific industry is a highly debatable political decision that can sway anytime depending on the political environment. Macro economic factors such as consumer confidence and gasoline price are also major determinants of the future growth of EV industry. Purchasing an EV is more easily justifiable when gasoline price is high and its fuel efficiency is likely to bring about greater savings in fuel costs than the price premium. In contrast, a favorable economic environment boosts consumers confidence about job security and income growth, making them less susceptible to gasoline price and fuel efficiency.
In the perspectives of Porters five forces, consumers in the EV market are considered fairly powerful mainly because of the availability of substitutes, relatively low switching cost, and abundant buyers information. EVs are competing not only with other fuel-efficient ICE vehicles but also with other forms of transportations such as train, subway, bus, and airplane. These transportation means are widely available for most consumers and they all achieve the same goal of moving passengers from one location to another. However, the perceived consumer utility varies depending on factors like cost, safety, comfort, efficiency, and status associated with each form of transportation. Consumers high price sensitivity indicates that the switching costs among different EV brands or other substitutes are relatively low. Hence, consumers will be willing to purchase EVs only when the overall utility they realize from EV is greater than the price premium they pay over other options. Furthermore, abundant buyers information makes consumers more price sensitive. Buyers of EVs are affluent and sophisticated consumers, and they tend to make well-informed purchasing decisions by studying cost and functionality comparisons that are readily available through various sources such as consumer report websites.
Given that EV is widely known by consumers and already started to penetrate into mass consumer market, the EV industry appears to have entered the growth stage in its product life cycle. In the growth stage, a general key success factor is the ability to scale up production capacity