Future Market Share for Electric Vehicles - Case Study Example

A Report on Future Market Share for Electric Vehicles Student’s Name Institutional Affiliation Introduction This report is focused on examining the development of the electric car industry and is solely directed towards Bayford Volkswagen Camberwell; a major car dealer in the country. It is meant to give a possible future direction of the overall growth and possible changes of the industry. The future of the car manufacturing is going to change for the better as most of the current car producers will likely adopt production of electric cars at affordable rates. In 2015, the threshold of 1M cars was surpassed closing in at 1.26M. Ambitious set targets and a policy support has resulted to the lowering of vehicle costs, widened vehicle ranges and, also eliminate possible consumer barriers in a substantial number of countries. Sectors and governments as well as initial adopters of this technology have continued to succeed in demonstrating to the public that electrical cars can effectively deliver the practicality, safety and affordability from them. The Future of the Electric Vehicles In essence, the future of car sales is likely to change in great length as consumers are likely to only focus on purchasing cars that will be technologically savvy and will have minimum levels of impact in relation to air pollution. Consumer acceptance is deemed to be an important factor for continual success of a sustainable transportation industry (Egbue & Long, 2012). However, it is ascertained that consumers will tend to resist new technology that is considered to be somehow unfamiliar and unproven. In this regards, the failure by EV manufacturers and policy makers to clearly ascertain and overlook consumer perceptions could result to low acceptance of EVs (Egbue & Long, 2012). In recent times, there has been an increase in the number of reasons that are focused on adopting EVs, which include; an ever-rising and volatile gasoline prices; possible greenhouse gas emissions as well as a country’s overdependence on imported petroleum products (Egbue & Long, 2012). Graham-Rowe et al(2012,p.143) indicate that the present penetration of electric vehicles production has indeed widened over time as lots of car manufacturers have now made significant investments in their production plants to accommodate and embrace this new technology. The figure below shows how the adoption of Electronic cars has been adopted overtime; The rationale behind the adoption of electronic vehicles is focused on the possibility that there will be an enormous success in the future in the case where there is evidence of efforts of sustainable transport systems as well as possible optimisation of urban structures, which is needed for possible reduction of trip distances and a shift towards public transportation. The retailer should note that it is set to benefit from the readily-available financial incentive and the expansive availability of charging infrastructures- factors that will almost guarantee a positive correlation of growth of electric vehicle market shares (Li et al, 2016). It is presumably clear that the future of the car manufacturing and thus, car retailing will be entirely focused on electric cars. There are a great number of reasons as to why the retailer should brace for a future characterised by a higher demand for electric and hybrid vehicles as a whole. Electric vehicles are set to reduce overreliance on foreign oil importation. As at now, there is almost more than 80% of the cost of a gallon of gas that leaves the entire US economy (EAFO (European Alternative Fuels Observatory) 2016). For the retailer, higher oil prices will likely to result to a relatively higher mark-up in a way to outdo competition hence contributing to a significant level of profitability for the firm as a whole. Savings on oil importations will help improve the overall economy of a country while also help to improve on the livelihoods of car owners. It is also very likely that the adoption of electric cars over the gasoline-based ones will improve the overall quality of life for the EV infrastructures across the globe thereby increasing its immediate demand. In this regards, the retailer will likely benefit from the way consumers in the leafy Camberwell would engage in replacing their gasoline-cars to EVs in order to improve on their standards of life. As a car retailing company, Bayford Volkswagen Camberwell, should now focus on putting proper mechanisms in place in order to ensure that they are not left behind whenever the electric car revolution amongst consumers is expected to take effect. In relation to vehicle stocks, it is ascertained that the electric car inventories for most of the developed countries will reach 20M in 2020, which is a value that is 100 times larger than the 2010 estimates. The global electric car stock growth and development surpassed the 77% mark in 2015, with the number of electric cars now increasing more than ever in the preceding years (ACEA (European Automobile Manufacturers Association), 2016). Seemingly, the retailer is also set to benefit from this car stock growth especially when there are future expectations of more customers choosing EVs over gasoline cars. In this sense, it will likely enjoy tremendous sales growth. In close to 8 to 10 years to come, it is assumed that there is also going to be an enormous policy support framework put in place to increase on the overall market share of the EVs. It is presumed that the government and other non-governmental organisations tasked with reducing GHG emissions will engage in encouraging for development of charging infrastructures and rebates for homes with such platforms. With the much better current efficiency levels, electric cars will certainly provide lower running costs in comparison to vehicles that use ICEs. In fact, with the current electricity and fuel taxation, a 100km trip will likely costs only ¼ of the overall costs that is used in car powered through the traditional ICE model. This will translate to extensive fuel savings that will surpass at least $3000(PWC, 2017). The table below shows a summary of policy support mechanisms for electrical vehicles set in place for a predetermined set of countries as at 2015; Possible restrictions that have been formulated to limit the wider adoption of electric cars in the previous years include; a range of restrictions and overall vehicle costs, both of these factors being associated with a higher cost of energy storage technologies. In addition to these barriers, there are also restrictions that relate to the immediate need for accessing recharging facilities; costs and issues that are attributed to installation; a relatively inefficient awareness level or confidence in the technology; being an imminent factor. The diagram below shows how the development of charging facilities has grown over time; It is important to note that the advantages related to EVs are associated with their ability to eliminate and possibly reduce pollution levels; a possible need for energy diversification and climate change mitigation and, also effective promotional signs that are observed in cost and performance developments in the recent period remain to be some of the most paramount drivers of the deployment of a significant number of policy support framework for the market overall uptake of electric cars (Thiel, Perujo, & Mercier, 2010). Volkswagen 2016 annual report indicate that one of its major risks going into the future lies in the economic situation within Europe that might cause redundancy in its overall sales volume and thus, inhibit the overall revenue growth (Volkswagen, 2017). To cushion itself from possible future shocks, Volkswagen indicates that it has resorted to putting much of their efforts toward sustaining the existing markets where it enjoys a great presence and posts an enormous contribution margin, which loosely translates to most of the focus being directed towards adopting technological production advancements. The adoption of electric vehicles into its production process is now; more than ever expected to take a centre stage. Basically, the electric vehicle market is expected to experience lots of pull factors that include; improved regulatory measures like tailpipe emissions policies and fuel economy standards, which will sometimes include possible credits that are deemed conducive for EVs; such financial levers like a vehicle taxation framework focused on fuel economy as well as other forms of instruments like possible waivers on parking fees and tolls. To effectively sustain company’s growth in relation to share market and sales; there will be a need to improve on the current product portfolio to accommodate electric cars like the current Volkswagen e-golf in order to serve the ever-changing needs of future potential customers as a whole. Considering this level of uncertainty, Volkswagen Group, as a notable car manufacture, should now focus its efforts towards adopting newer production techniques like the one used in the generation of hybrid electrical cars in order to comply fully with the underlying government legislations. Certainly, there is a current trend towards production of intelligent car, which poses an exciting period of future production transformation where customer experiences is set to remain a top notch priority in a bid to cut down on unnecessary competition (PWC,2017). In the process of adopting the sale of electric cars in the future, the possible bounds include; first, the presumption that the current logistic framework of the company in relation to the number of orders they can service at a given moment. Secondly, the level of awareness provided to potential customers in relation to the use of electric cars over conventional ICEs as well as the assumption that the adoption of electric cars penetration will dependent on the expectation that the fuel prices will continue to increase per each of the barrel purchased. References ACEA (European Automobile Manufacturers Association) 2016, "Electric and alternative vehicle registrations", www.acea.be/statistics/tag/category/electric-and-alternative-vehicle-registrations. EAFO (European Alternative Fuels Observatory) 2016, www.eafo.eu. Egbue, O. & Long, S., 2012. Barriers to widespread adoption of electric vehicles: An analysis of consumer attitudes and perceptions. Energy Policy, 48, pp.717-729 Graham-Rowe, E., Gardner, B., Abraham, C., Skippon, S., Dittmar, H., Hutchins, R. and Stannard, J., 2012. Mainstream consumers driving plug-in battery-electric and plug-in hybrid electric cars: A qualitative analysis of responses and evaluations. Transportation Research Part A: Policy and Practice, 46(1), pp.140-153. Li, S., Tong, L., Xing, J. & Zhou, Y. 2016. The Market for Electric Vehicles: Indirect Network Effects and Policy Design. Available at SSRN: http://ssrn.com/abstract=2515037 or http://dx.doi.org/10.2139/ssrn.2515037 Price-Waterhouse Coppers. 2017. 2016 Auto Industry Trend. Retrieved from http://www.strategyand.pwc.com/trends/2016-auto-industry-trends Thiel, C., Perujo, A. & Mercier, A., 2010. Cost and CO 2 aspects of future vehicle options in Europe under new energy policy scenarios. Energy Policy, 38(11), pp.7142-7151 Volkswagen. 2017. 2016-Annual Report. Retrieved from http://annualreport2016.volkswagenag.com/group-management-report.html Read More