When will the EV market have its Model T moment?
Achieving price parity with ICE vehicles and continued improvements to EV infrastructure will prove pivotal to uptake, writes Jim Johnson
For over 100 years, private vehicle ownership has been a staple of the developed world. This trend began developing during the first decade of the 1900’s, particularly amongst the wealthy classes of society as a status symbol and a vastly more convenient alternative to the horse. Once Ford’s Model T was introduced in 1908, ownership rates exploded from just 197,500 to more than 23 million by 1927. The key was affordability; the average assembly line worker could purchase one with four months’ pay in 1914, helping fuel its incredible growth and laying the foundation for the nearly US$3tr global industry that exists today.
Electric vehicles (EV) have experienced a similar growth arc, with the earliest adopters primarily wealthy, tech-savvy consumers who could tolerate both a high price point and the inevitable hiccups that occurred for EV brands as they ramped up, including software glitches and difficulty scaling production. Today’s EV owner is still wealthier than average, more likely to be a homeowner with their own charging equipment and live in or near major cities where charging infrastructure is robust and incomes are high. The question now is, when will the EV market have its “Model T moment”?
The opportunity is massive for automotive brands to integrate themselves into the digital lives of their owners in ways that enhance the owner experience, increase loyalty and customer lifetime value, and generate additional revenue
The answers are beginning to come into focus. During 2024, EV adoption will continue its slow march into the ‘early majority’ phase after many early adopters of the technology have already made their first EV purchases. This will be accelerated by two major trends: achieving price parity with internal combustion engine (ICE) vehicles and continued improvements to EV infrastructure, especially public charging access.
Globally, it’s no coincidence that Nordic nations such as Norway, Iceland, Sweden, Denmark and Finland have consistently held top rankings in terms of EV share of vehicle sales, with perks such as tax incentives, free parking, and free tolls creating price parity with ICE vehicles and convenience for owners. Those countries successfully crossed the chasm of adoption thanks to these owner benefits. Several US states are following suit (notably California) while the federal government has chipped in with a US$7,500 tax credit for qualified EVs, in addition to allocating US$5bn toward EV charging station infrastructure.
Still, adoption in the US will vary dramatically by state given the disparities between them in terms of public charging, local incentives and owner perks such as high-occupancy vehicle access and preferred parking. VDX.tv predicts the top five US states in terms of EV adoption are California, Colorado, Illinois, New York and Maryland, thanks to generous state-level incentives, robust charging infrastructure, high fuel prices and incomes, and propensity for solar installations, which have a similar value proposition of long-term energy savings and sustainable living with higher upfront costs.
Connected services will also continue their rapid growth as an extension of our digital life. In contrast to traditional ICE vehicles that have been retrofitted with advanced vehicle technology, EVs have been designed with software in mind from the start. As more EVs are launched, their core differentiators will mostly be intangible, in the form of software packages and personalised driver experiences. All of them will be connected to the internet of things (IoT), allowing automotive brands the opportunity to seamlessly integrate consumer data from the outside world into the vehicle, and vice-versa. The upshot is a more personalised experience everywhere, from music and mood preferences to pre-loading stops along a road trip and ordering food ahead of your arrival. Privacy concerns notwithstanding, the opportunity is massive for automotive brands to integrate themselves into the digital lives of their owners in ways that enhance the owner experience, increase loyalty and customer lifetime value, and generate additional revenue through add-ons, subscriptions, and service packages.
Finally, two major demographic trends are converging to support mobility outside of personal vehicle ownership. It is estimated that by 2050, 70% of the world’s population will live in cities. Gen Z, the generation born between 1995 and 2010, appears less interested in obtaining their drivers licenses and buying cars than previous generations.
Both of these trends will continue to push auto brands to develop alternatives to personal vehicle ownership, including ride-sharing, public transportation, e-bikes and scooters. One caveat to Gen Z’s apparent aversion to owning vehicles is that a similar phenomenon was predicted with Millennials before they starting to buy houses and vehicles at similar levels to previous generations before them, albeit at a later age. Still, this great migration to cities will require some reimagining of personal mobility, where multi-modal transportation depending on need will likely become the norm.
2024 promises to be another year of growth across the automotive industry on several fronts globally, and with optimism that global inflation will be tamed and EV infrastructure and incentives continue to grow, the grand vision of a carbon-neutral future for much of the globe is still alive and well.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Jim Johnson is Lead of Industry Solutions–Automotive at VDX.tv
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