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Automakers must look beyond EVs
2017-12-25, AXEL SCHMIDT

The electric drivetrain, which ensures that power gets to the wheels that drive a vehicle, is here to stay. After about 100 years or so in the making, the technology is now close to becoming mainstream.

Last year, electronic vehicle sales grew by about 60 percent worldwide, and industry watchers predict that sales are likely to reach 100 million registered electric cars, or 30 percent of the worldwide market, in 2030.

At the same time, costs for electric drivetrain technology are falling: These are projected to become as cheap as cars with internal combustion engines as early as 2025.

China arguably offers the biggest potential for electric vehicle (EV) sales, due in part to the size and growth of its already existing EV market, and to new regulations. New rules will soon tighten restrictions on carbon dioxide emissions even further, and will require original equipment manufacturers, or OEMs, to meet set targets for EV sales.

Chinese OEMs are already among the leaders in EV technologies: All the key players have begun to bring EVs to the market, and the sales for some of these — such as the BAIC EV Series, the BYD e6 or the Geely Emgrand EV — already are in the tens of thousands annually. While this is impressive, there are more opportunities for Chinese automakers. 

EV technology not only replaces internal combustion engines, it is poised to change the entire auto industry. That is because it will usher in new industry concepts, business models and strategies. Automakers that want to win in the future must radically rethink their current approach.

For example, since electric drivetrains are much less complex than gasoline or diesel ones, this enables new business models around simplified, cheaper car builds, new infrastructure and new services. But, even though most OEMs are aware of this, only a few have tried to build such a business.

As a result, new players are entering the market. For example, United States-based EV manufacturer Tesla not only pioneered the idea of a mass-market EV, but has also revolutionized the OEM business model by integrating solar energy and energy storage solutions. And the company continues to innovate around marketing, vehicle sales and charging services.

The electric drivetrain will also be a catalyst for the “mobility-as-a-service” business model, which is set to disrupt the Chinese auto industry as well as other major markets. Mobility-as-a-service integrates a variety of transportation services into a single mobility service that is accessible on demand.

In the next 15 years, EV technology will converge with connected-car and self-driving technology, which will change everything about the way vehicles are built and used.

Self-driving and connected-car technology will allow for the free sharing and on-demand use of cars that drive themselves, their owners or other passengers to wherever they want to go. And the electric drivetrain will make sure that they do so at very high use rates, with limited need for maintenance and repairs. That is because EVs have fewer moving parts that can wear, tear and break.

The results of this could be revolutionary. Fewer people may choose to buy a car. Some experts believe that the cost of buying a ride in a shared, self-driving electric car could fall below 5 cents per kilometer.

Sales of “legacy” cars are forecast to begin to slow, and the market for “mobility-as-a-service” is expected to explode. Shared vehicles will likely be driven more than unshared ones. And the more EV cars are driven, the more economical battery packs will become.

None of this could happen with EV technology alone — but none of it could happen without it, either. And that is the key takeaway for every OEM, supplier, and startup: The auto industry of the future will not be run by those who master EV technology alone, but by those who are in the position to master the electric drivetrain, connected-car and self-driving technology, and mobility services.

This means automakers that want to secure a significant share in these markets must not stop at building EVs — but continue to make bold moves in order to master the other three required capabilities.

So, if you are working in the Chinese auto industry, continue to push for new, electric versions of existing models. But do look further also: Pursue bigger ideas and broader strategies that make use of your business’ existing strengths and add new ones that will be needed to win the future.

 

The author is Accenture’s managing director and global lead of its automotive practice. The views do not necessarily reflect those of China Daily.


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