The Challenge of Selling Electric Vehicles

By Bryan Krulikowski, Senior Vice President

While automotive manufacturers continue to push forward with electrified plug-in vehicles in the United States, an important question begs to be answered: Who is going to buy them?

According to Morpace’s 2016 Powertrain Acceptance and Consumer EngagementTM (PACETM) study, more than one-third of current gasoline-powered vehicle owners plan to purchase an alternative fuel vehicle. While this shows high upside potential for EVs and Plug-In EVs, further analysis shows that consumers may not be completely comfortable making this leap from gasoline quite yet. In some sense, electrified vehicles are outside of most consumers’ comfort zone.

Keep It Simple, Stupid

Looking at data from the PACE study and leveraging our powertrain experience, we see that consumers prefer technologies that follow the GEMO principle—Good Enough, Move On—and prefer the least change to their lifestyles as possible. Technologies that offer both of these attributes include Hybrid EVs, turbocharged gasoline-powered vehicles, and the conventional internal-combustion engine. Automotive manufacturers have made significant strides in improving the fuel economy of gasoline-powered vehicles and, for a significant number of consumers, the fuel-savings realized by these technologies—and the lower incremental price charged for them over electrified powertrains—provides a “good enough” level of performance and efficiency. Further, neither of these technologies requires consumers to install re-charging equipment at their home, be at the mercy of infrastructure limitations when looking to re-charge away from home, or worry about other issues related to range anxiety. If you run low on gasoline, one can almost always find a refueling station nearby; for electrified vehicles, ease of finding re-charging stations is still the exception not the rule.

Not Motivated to Change

Further, the lack of a major market event is curtailing interest in electrified vehicles among mainstream vehicle buyers. Specifically, fuel prices in the U.S. are not driving consumers to consider electrified vehicles at an accelerated rate. In fact, the lower prices we have enjoyed in the U.S. have resulted in the opposite effect.

According to the PACE study, today’s national gasoline prices are below the price consumers have indicated is low enough for them to consider a less fuel-efficient, larger vehicle. This is one explanation for the market shift we are seeing away from sedans to SUV/CUVs and Trucks. In fact, gasoline prices would have to reach $5.20/gallon for the average consumer to consider a more fuel-efficient vehicle than what they have now—nearly $3.00/gallon more than today’s average.

But… There is Hope!

While the above commentary suggests a less-than-pretty future for electrified technologies, this certainly does not have to be the case. Perhaps the most important finding from the PACE study is that virtually all current owners of PHEVs or EVs will remain an electrified vehicle owner in the future. Once consumers move away from gasoline-powered vehicles, they are extremely unlikely to go back to them. However, a daunting challenge is ahead of automotive manufacturers as they need to not only offer electrified vehicles in the right package and at the right price, but they also need to rely on a dependable and comprehensive infrastructure to support these vehicles on a mass-market level.

It will certainly be exciting to see how electrification strategies play-out in the coming years.


Is Autonomy Happening Too Fast?

Is autonomy happening too fast?

By: Greg Swando, Senior Research Director

While automotive manufacturers across the globe work feverishly to equip their current automotive line with the latest Advanced Driver Assistance Systems (ADAS), and some even striving for full autonomy as early as 2020, how are consumers reacting to this new technology?

We’ve published a new study on consumer sentiments toward autonomous driving technologies and among the findings we learned that up to 50 percent of U.S. drivers that own vehicles equipped with driver assistance systems are turning them off.

Why? According to consumers it’s because some feel they are more confident in their own abilities to anticipate emergency situations.  Others find the warnings and audible alerts to be annoying. Several consumers don’t fully trust some of the ADAS technologies that are now being incorporated, while others may not even be aware whether or not they own the features.

At the same time, there are segments of consumers seeking out ADAS features and excitedly look forward to the day of a fully autonomous vehicle. These consumers are ready, and willing to put full their trust in the current technology—but is the technology ready to be trusted? Take a look at the recent Tesla Autopilot crash. We believe that one of the outcomes of our study is that consumers need to be educated on how these features work, why they’re needed, and how they can benefit from them.

While OEMs are planning to increase their investments and marketing spend toward fully autonomous vehicles within the next 10 years, consumers need to feel better prepared to drive these vehicles than they are today. Such consumer education is key to not only getting the public to trust the new features, but to also use them properly so that accidents, like the recent Tesla one, can be avoided.

Our study, A Consumer Centric Journey Toward Autonomy, highlights customer opinions and experiences—both good and bad—when it comes to autonomous features, and found various consumer personas that will shape future autonomous vehicle adoption. These findings will help OEMs and suppliers better understand the consumer and their relationship to new autonomous technology, preventing the consumer from feeling autonomy is being adopted too quickly.


Consumers’ Positive Reaction to the New Tesla Model 3


Consumers' Positive Reaction to the New Tesla Model 3By: Jason Mantel, Senior Vice President

On Thursday March 31st, the world was introduced to the carefully planned unveiling of the new Tesla Model 3 at the Design Studio in Hawthorne, Calif. And it’s fair to say that the world was ready for the news. After all, more than 180,000 vehicles were ordered on the first day, according to the Wall Street Journal.

There’s a lot riding on the Tesla Model 3 both for Tesla itself, as this Slate article opines, and for the electric car market in general. At Morpace we quickly gathered insights and perceptions from our MyDrivingPower online community, a group of more than 300 U.S. based consumers that are current or recent owners of EVs or hybrids, and via our social media platform.

So what first impression did the smallest Tesla make on consumers? Overall, the first impressions of the Tesla Model 3 are generally positive. Morpace measured a net positive sentiment of 70 percent across the social media spectrum. But the good vibes go beyond just appearance or features. MyDrivingPower panelists were impressed with the affordability of the Tesla Model 3, which has a base price starting at $35,000. Beyond just the price point itself, there is a feeling of ‘value’ in the Model 3 offering. Specific quotes from our panelists included:

               “The Model 3 has made my goal of owning a Tesla possible.”

               “It is so much more at an affordable price point than any of the other electric cars.”

We see that consumers may have reached beyond customary automotive media outlets for learning about the Model 3. Instead, sites and blogs that provide technology news are bustling with traffic. We talked to members of our MyDrivingPower community of electric vehicle owners, who are looking to sources like Wired and TechCrunch for their Model 3 updates. These enthusiasts are visiting technology sites (49%) slightly more than automotive sites (44%) to learn more about this Tesla model. Tesla’s own website appears to be a similarly visited site. The introduction of an electric vehicle seems to transcend traditional classification, arguably being as much a ‘technological advancement’ as an ‘automotive advancement’.

As of today, Tesla is generating all the buzz with the anticipation of their Model 3. The number of Model 3 units pre-ordered is likely to rise in the coming months as more information becomes available and familiarity increases. But for today, when thinking about this vehicle and similar models from other manufacturers, our community of electric vehicle owners are leaning towards the Model 3, as compared to the Chevrolet Bolt.

Nearly 9in 10 members selected the Tesla Model 3 over the Chevrolet Bolt, perhaps the most closely similar model available (based on range and price) if they were in the market for a vehicle today. Specific quotes about the Tesla Model 3 included:

               “An industry changer.”

               “It makes all other cars seem old and out-of-date.”

Morpace will be closely following the journey of customers anticipating the Tesla Model 3 over the coming months.


Google/Apple Have Little Impact on Consumer Interest in Autonomous Vehicles


By: Mike Scott, Marketing Director; Sara Beauchaine, Marketing Associate

Would you trust an autonomous vehicle? More importantly, would you purchase an autonomous vehicle today?

Technology giants Google and Apple have strong brands and are among the most recognized companies in the world. Yet even when these brands are attached to questions asked of consumers about autonomous vehicles, our January Omnibus revealed that consumers are not only hesitant about “trusting” autonomous vehicles, but about purchasing them as well.

This shouldn’t come as a surprise. There are various stages of progress that will need to occur long before consumers would be comfortable taking a “cat nap” while their self-driving vehicle transports them from point A to point B. At this point, there is a curiosity that consumers have around the topic but not a clear understanding of what defines “autonomous.”

Officially, Apple hasn’t announced that it is in the autonomous vehicle business, but Google has. Our recent Morpace Omnibus found that a total of 31 percent of consumers “somewhat” trust or “completely” trust an autonomous vehicle with Google technology. Another 31 percent don’t trust the technology, leaving the largest percentage–38 percent–undecided.

In addition, only a minority of consumers are willing to purchase an autonomous vehicle at this time. Price could be a factor, but it’s likely that trust plays a role in the answers we received as well. Overall, 58 percent are “unlikely” or “extremely unlikely” to purchase an autonomous vehicle with Google technology, compared to 59 percent for an autonomous vehicle with Apple technology.

Finally, there was little separation between the price consumers are willing to pay for autonomous vehicles powered by Google versus Apple. Eight-in-ten consumers are not willing to pay more than $40,000, which is the base price for some higher-end standard powertrain SUVs in today’s market. The average price most consumers are willing to pay is less than $28,000, with virtually no difference in the median value for Apple versus Google autonomous vehicles.

As it turns out, we may have found one thing that the powerful brands of Google and Apple can’t directly impact—consumers’ perceptions on autonomous vehicles. Discussions and media reports surrounding autonomous vehicles are becoming more prevalent, and it is clear that education needs to be developed before a majority of consumers feel comfortable enough to drive or purchase a “self-driving” vehicle.

There is a long learning curve ahead for consumers before the autonomous technology “war” among the industry giants, not to mention the automotive OEMs, can begin in earnest.


How Will Current Economic Conditions and Manufacturers Influence Millennial Car Buyers?


By: Dave Emig, Research Director; Anthony Crechiolo, Market Research Intern

The average price of gasoline in the U.S. has continued to fall the past two years. This past year in particular, the average price of gasoline has fallen from $3.36 per gallon to just $2.42. That’s just over a 38% drop in one year. With many analysts indicating gasoline prices are to remain low into 2017, many wonder what kind of effect this will have on future vehicle sales in the U.S. The answer may lie in how 2015 evolved.

2015 was a record year for automotive sales, coming in at 17.5 million vehicles sold, a 5.7% increase from 2014. Digging deeper, we actually see a drop of over 2% in car sales from 2014 to 2015, while sales of large vehicles were up over 23%. Only looking at these numbers, it seems that Americans have a positive outlook towards the future and are putting their savings at the pump towards a bigger vehicle. This statement may be correct for Americans as a whole, but does it hold true for the next generation of car buyers, Millennials, who are just now entering into the car buying market?

In order to answer this question, I think it is important to first look at how buying a car for Millennials is different than previous generations.

Buying a car used to be a rite of passage to freedom, a way to connect with friends and escape from the parents’ sphere of influence. A car used to give you access to find and define yourself as a young adult. Because of how technology has allowed Millennials to be connected to everything at all times, they tend to break away from their parents’ sphere of influence at a much younger age. However, unlike previous generations, Millennials are entering adulthood at a much later age. Buying their first car still represents this next step into adulthood, but the difference is that this generation has already developed their individual identities before venturing out on their own.

Most Millennials are not entering adulthood until they have completed their secondary education and have found an entry-level job. At that point, they are moving out of the house, figuring out their student loan payments, budgeting daily expenses, putting money away for retirement, and to top it off, looking for a new car. Most entry-level jobs do not provide the income to spend a lavish amount on a vehicle, so Millennials are often restricted to the small or compact car segments because of the limited amount of disposable income they have available.

However, Millennials who are looking to purchase a vehicle have two macro circumstances that make right now the opportune time to purchase a car: low gas prices and low interest rates. There is also the idea, stated earlier, that older consumers’ demand may be shifting away from cars to larger vehicles. This change in demand would keep mid and full size sedan prices low in the short term, but Millennials will likely need convincing to move up from their compact and small car segments.

It seems that Millennials don’t put the same emotion or value on their first car as previous generations have because it doesn’t give them the same type of freedom, as they are already aware of their unique identity. A vehicle to them is more of a machine that serves a functional need – getting them from point A to point B.

But with cars having more connective technology than ever before, will automotive manufacturers use their advertising prowess to convince these first-time consumers that cars can not only keep you connected, but have space for their friends to tag along, too?

Currently, there are hardly any advertisements targeting this group of first time buyers. You see it over and over again, commercials for a mid to full size sedan that emphasize re-kindling that childhood passion. If the idea that the older consumer is shifting from purchasing cars to a larger vehicle is true, it might be time for automotive manufacturers to increase advertising towards the next generation for these types of vehicles. If we see a shift in advertising affordable mid to full size sedans to first time buyers, the automotive industry could continue to boom.

As a result of the recent recession, Millennials feel an increased emphasis on not overextending themselves financially. As you move further along in life and become more financially secure, then you can push your financial boundaries. This trend can be noticed with most Americans; as they move up in their career, they also move up in vehicle class. If automotive manufacturers realize this and are able to persuade these first-time buyers into the purchase of a larger vehicle, they will make more money over time, since this type of buyer moves up the career path more quickly because of their higher starting point.

Will automotive manufacturers be able to persuade Millennials to spend the extra disposable income they have available on upgrading their first car purchase? Or will they just accept that first-time car buyers will come in at a lower vehicle segment and spend their extra dollars on other technology that will continue to make their lives more connected? The future of the automotive industry is in the hands of Millennials—the next generation of savvy consumers.


Are We On the Brink of an Electric Vehicle Revolution?

EV Parking Station

By: Dave Emig, Research Director

As the automotive industry evolves, battery-powered vehicles are being integrated more and more into the car-buying equation. While sales figures for electric vehicles (EVs) are still relatively low, that could soon change.

There are three major factors fueling the potential for increased sales of electric vehicles. First is the adoption of CAFE (Corporate Average Fuel Economy) standards that require vehicle manufacturers to reach a 54.5 mile per gallon average for their entire U.S. vehicle fleet by 2025. This has indirectly motivated manufacturers to integrate EVs into their product portfolio. As such, the level of competition between manufacturers has increased, allowing for a few start-ups to emerge, thereby promoting more rapid change.

Second is the blistering pace at which technological advancements are being made with batteries, such as outputs (power), capacities, and sizes. The most important technological advancement, however, is the increased distance these new EVs can travel, which helps to curb range anxiety and fit the needs of many more consumers.

While these two elements have greatly aided in the proliferation of EVs, the third factor, the design of these vehicles, has also become more important. Manufacturers are moving away from the outlandish, quirky designs and creating vehicles that are more conventional and aesthetically pleasing. But it’s not just all about design—these modern EVs are now offered in different sizes, from small compact cars to large utilities!

The combination of these factors, along with the growing confidence of consumers in EVs, is spurring interest. However, adoption of EVs is still in its infancy, primarily due to a lack of familiarity. While there are some early adopters who have done their research, became comfortable with the idea of an EV, and took the leap, they find many consumers are playing the waiting game. Whether the consumers have no interest at all or don’t feel an EV will fit their lifestyle, they just can’t bring themselves to purchase one at this time.

Manufacturers who are interested, but waiting, find there are a number of hurdles to overcome before general consumer interest increases to a serious consideration to purchase. Consumer concerns over purchasing EVs are understandable. After all, outside of buying a home and the cost of higher education, a new vehicle is the largest purchase many consumers will make in their lifetime.

While “fear of change” may ultimately be the primary barrier, many consumers indicate deterrents like a lack of infrastructure (charging stations at work, close to destinations, etc.), the length of charging time required if unable to use a 240V or supercharger, complexity with home installation (with some not owning a home with a garage), and worries about the longevity of the battery. But, resoundingly, owners emphasize that there is a serious lack of knowledge when it comes to the dealership experience. Often times, consumers need to find answers to their own questions. The role of the dealership staff to help educate consumers about the advantages of the EV and how they function is critical. If the sales staff at a dealership aren’t invested in the concept of EVs or comfortable selling them, chances are sales will lag, meaning dealer commitment is crucial.

Let’s face it, with any change comes some level of anxiety. It will always be present. As EVs evolve, many of the current hurdles will disappear, yet if the consumer does not understand or have confidence in the product, they will not buy.

So how do dealers manage this shift?

We performed Morpace-managed client focus groups with electric vehicle and plug-in vehicle owners in 2015 and discovered a few key points that can help answer this question. Consumers who have purchased an EV were more enthusiastic about the vehicle and had more knowledge than dealer personnel. This knowledge gap has a negative effect on the decision to purchase, but there is a solution to consider–appoint a sales person who lives and breathes electric vehicles. This sales person would drive the car(s) daily, know the cost per mile (very important to consumers!), be able to identify charging locations around consumers’ work, office, and daily route, explain the ancillary benefits such as free parking, and be able to respond confidently to any questions, especially those concerning range anxiety. “Having those sales folks that really understand it [EV technology] is going to be crucial…The knowledge about electric cars needs to be in the hands of the people selling them. People coming in may have great knowledge, but, you have to have that confidence that you’re buying from someone who will be able to support you.”

While fine-tuning the dealership will help, there is more hope on the horizon.

The bright side for manufacturers selling EVs is that many current owners indicate they have no desire to go back to a conventional engine for their daily vehicle. They despise buying gas and love the driving experience of an EV. Owners find the lack of engine noise, instant torque, and shifting to be extremely appealing , summing it up by mentioning that “a gas car now just feels mundane. It doesn’t feel as sophisticated”. As a result, these owners have become staunch advocates. Word of mouth is the best form of advertising… and it is FREE!

But how do you get someone who is still skeptical to actually take that leap? Sell them a used EV!

There are a large number of EVs that will be hitting the market in the coming year. Dealers and manufacturers will want to move them as quickly as possible, which means consumers could get an EV for quite a bargain. The financial commitment for a used EV will be less of a burden and should entice those who are playing the waiting game to take the plunge.

However, a primary concern remains: How reliable is the battery? The dealership can do their part by providing the expertise, but consumers want assurances, primarily an honest warranty on the battery (or straight up replacement). They want the warranty to guarantee the range and charging cycles, freeing them from concerns with degradation. “Dealers need to test the battery, if it meets a certain range, then they’re good to go. They need to provide a warranty and guarantee that the vehicle will at least go a certain range.” Ideally, manufacturers and dealers could develop a specific, rigorous pre-owned program unique to EVs in an effort to quell consumers’ key concern surrounding the battery and make used EVs even more appealing.

While familiarity and interest in EVs is growing, manufacturers and dealers will need to find ways to combat consumer fear, getting them past the tipping point to purchase. Current issues with selling used EVs need to be addressed to get consumers in the vehicle to experience the benefits that so many current owners relish. To do this though, dealers need to be committed. If they can find a way to adapt the sales experience to give consumers the information they want in order to curb concerns, we may be on the brink of an EV revolution.

As production increases over the next few years, manufacturers who are in the EV game will be primed to make a splash as current used EV owners will be looking to buy a new EV.


Electric Vehicles: A Smart and Economical Choice for Small Businesses

photo 1

By Michael Schmall, Vice President; Kimberly Doherty, Project Director

When you think of electric vehicles, the terms “practicality” and “affordability” are probably not the first things that come to mind — especially for a small business. That perspective could be changing, as electric vehicles continue to bring new and modern dynamics to this automotive segment.

The fact that electric vehicles are more attainable and desirable for small business owners is evident when we spoke with Tracey Stroia, owner of the all-electric Smart car used for deliveries at TV’s Deli & Diner, located in Trenton, Michigan.

“Food delivery has been an offering of our business for over eight years, and it continues to be an important primary service we provide for our customers,” says Stroia. TV’s Deli & Diner also features a catering business and has several traditional cargo vans that are used for select deliveries. In the past, these vans were utilized for all deliveries, even when individual delivery orders came into the restaurant.

Between the businesses’ young drivers—who weren’t very experienced at driving the larger cargo vans—and fluctuating gas prices, Tracey recognized the opportunity to consider alternative vehicles that are better suited for her business’s delivery needs. Keeping an open mind during her search led Tracey to realize that not only would a smaller vehicle reduce gas costs, but an electric vehicle could eradicate them all together. As a result, Tracey began to entertain the idea of leasing an electric vehicle, which could potentially slash overhead delivery costs and provide a major source of savings for her business.

After further exploring her options, Tracey decided to choose an all-electric vehicle for her business’s deliveries. She did not start out her search with a specific electric car in mind. In fact, Tracey was very flexible about what make and model vehicle she would consider. Her “open-minded, what-is-best-for-my-business” approach eventually led her to consider a Smart brand vehicle. The Smart Electric Cabriolet caught Tracey’s attention because of its affordability and cost-reducing characteristics. To her surprise (and eventually to her staffs’ surprise as well), this vehicle had quite the “get-up-and-go” power and was ultimately spacious enough for even her 6’4” employee to ride comfortably in, while still allowing enough additional space for the food being delivered.

There is no doubt that the overall pricing available on this vehicle was the number one feature for Tracey. Tracey did the math — she wasn’t going to lease any vehicle that did not optimize her business. With a monthly lease program that was less than the average cost of gas per month on one of her delivery vans, choosing the Smart vehicle was an easy decision.  The fact that her “Smart” choice was an electric vehicle and doesn’t pollute the environment is an added bonus for her, in addition to the cost savings it continues to provide.

Tracey finds leasing her Smart car to be an environmentally sound choice that hasn’t sky-rocketed her electric bills. It has offered more stability in the cost of running the delivery portion of her business because it creates insensitivity to the volatility of gas prices. For Tracey’s small business, owning and operating an electric vehicle simply makes good business sense.

Employees of TV’s Deli & Diner enjoy driving the car around town and find it to be not only surprisingly quick, but also a pleasurable driving experience. The Smart car was a unique vehicle that stood out to Tracey, and it continues to be well noticed among TV’s customers. The fact that it is an all-electric vehicle, modified with TV’s Deli & Diner advertisement, and charged right out front of their restaurant, creates quite the buzz.

“I’ve had loyal customers who [because of the vehicle] just now realize that we deliver,” Tracey stated, emphasizing that the vehicle doesn’t just save gas money, but also attracts new delivery customers. The positive response Tracey has received from the unexpected marketing and tell-tale uniqueness of her small electric vehicle was an additional advantage that wasn’t anticipated, but is much appreciated.

Tracey’s experience relates to business owners’ vastly expanding awareness and willingness to consider alternative powertrain vehicles. It is also a reminder that, ultimately, small businesses will make decisions that are overwhelmingly based on their economic merit.


Research Challenge: Catching the Elusive Green Mind


By Julie Vogel, Vice President

About five years ago the U.S. government had delivered a stiff mandate to automakers: by the year 2025 – just 10 years from now — any automakers wishing to sell vehicles in the U.S. must offer ones that average 54 mpg. Automakers were seeking a  ‘Reality TV’ type of insight of  Electric Vehicle (EV) owners, to understand how the plugging in and recharging of EVs was incorporated as part of daily life.

Here’s where it gets difficult. The elusive, Electric Vehicle owners represent less than 1% of the population and EVs are less than 1% of vehicles on the road. Also, these rare owners were starting to burn out from endless research requests from multiple corporate researchers.

Given Morpace’s unique contacts with both automakers and energy-efficient owners, the MyDrivingPower online research community was born, which includes more than 250 owners of electric and hybrid vehicles from across U.S.

Today, the collective voice of these vehicle owners is shaping the electric vehicle industry. This information is being utilized by vehicle manufacturers, utility companies, and government agencies, charging station manufacturers, battery manufacturers and the media.

For more insights visit this article in Automotive News.