Car makers accelerate rollout of electric models
But uncertainty fogs the road to mobility’s future
This is the year carmakers expected to begin delivering on their recent communications about producing electric cars. Rather than have one electric vehicle in the product range, leading brands planned to offer an electric engine for most of their models, with the term electric including both hybrids and electric plug-in vehicles that drive several hundred miles on a relatively fast charge.
Repercussions of the Covid-19 pandemic, the plant closings and decimated demand, slowed progress but did not immediately alter the dynamics. Government is accelerating the shift to electric both in Europe, with stricter carbon emission standards, and in China, with financial incentives for purchasing electric vehicles. In contrast, the federal government’s rollback of emission standards reduced the urgency of the transition to electric in the US.
Electric charging infrastructure is developing quickly in China, the world’s largest car market, where the government promotes the development of electric vehicles as one of the industries where it aspires to global leadership. Infrastructure is developing slowly in the US, the world’s second-largest car market, because of limited pressure from government or consumers.
Consumer adaptation of electric is still lagging in most places except China. A wide gap between intention and purchase exists, even in Europe, because of price perceptions and anxiety about battery life and driving range, according to Kantar research. Relatively low fuel prices are an added disincentive for transitioning to electric in the US.
And despite expressed consumer concern about the protecting the environment, SUVs are the most popular model option across regions, in part because consumers feel more in command sitting higher over the road. Because of their popularity, car makers are designing SUVs for all size vehicles, which dilutes design as a brand differentiator.
Shifting to electric
Carmakers are investing as if the shift to electric vehicles is inexorable and about to happen sooner rather than later, although adoption has been relatively slow so far. Among the German brands, the electric sub-brand for Mercedes is EQ; for Audi, e-tron; and for Volkswagen, ID. BMW offers a wide range of electric options called BMWi.
French car makers Renault, Peugeot, and Citroen planned to offer hybrid versions of their cars. The American, British, Italian, Japanese, and Korean carmakers each have electric ranges. One of the competitive pressures for moving quickly is the success of Tesla, particularly its mid-priced Model 3, which offers driving range options that can reach over 300 miles per charge.
Producing high performing electric vehicles was only part of the challenge carmakers faced. They needed to convince consumers to buy them. Consumers are skeptical that electric motors can match the power of a combustion engine.
In addition, carmakers needed to address consumer concern about electric engine driving range and reliability in cold climates. Consumers worry about aftercare, specifically the availability of mechanics able to repair an electric engine. Among the groups developing charging infrastructure are private entrepreneurs, supermarkets, car brands, and some energy companies adding charging stations to their retail locations. But there is limited coordination.
Plus, carmakers not only want to sell their electric cars; they want to sell them profitably, which is difficult. Producing electric cars requires major investment in production, distribution, and battery technology. Few European carmakers incentivized dealers to sell electric cars until recently. Electric vehicle sales will accelerate when the products are affordable for consumers and profitable for manufacturers, which primarily depends on achieving battery economies.
In addition, less can go wrong with electric motors, which means that car makers potentially will make less money from aftercare service and need to consider new revenue streams, such as subscription services. Some brands already offer subscription services as an option for car ownership. The subscriber chooses from a variety of cars based on need and occasion.
Adding to the dilemma of transitioning away from carbon-burning engines, it is not clear that electric engines are the most environmentally sound transportation solution because producing electricity comes with an environmental cost. Biofuels are an option. Car makers, particularly Toyota, are investigating alternatives, such as hydrogen.
Marketing and branding
For now, a lot of car marketing communication is about electric, although electric can be a hybrid or a plug-in. Car makers face at least two key challenges: helping consumers work through the confusion; and educating dealers as cars become increasingly complicated technological devices.
Because of electric engine silence, regulators in Europe and the US have mandated that, for safety, electric cars must emit some kind of sound at low speeds, like when parking, to alert pedestrians. Sound engineers have synthesized sounds that can replicate a surge of power and potentially customize a car’s personality.
In a back-to-the future development, the test drive may become more important with electric cars, as a way to convince consumers that a quiet engine can have the thrust of a powerful V-8. To provide reassurance, European regulations also require that electric engines produce a sound when they reach a certain speed threshold.
Volkswagen and Audi have shifted their communications away from stressing functional advantages to be more emotional and locally connected with stories about mobility. The brands are focusing more on people rather than cars in an attempt to sound more human and reach younger consumers.
In an Audi Super Bowl ad, an environmental activist breaks out of a traffic jam and drives an electric car past gas stations while singing “Let it Go,” the theme song from the movie Frozen. This approach moves away from telling different stories for each model, an approach taken by many car brands, and instead it shifts to telling a consistent story across the brand.
And in a major bet on the electric future for cars and the growth of electric engines, Ford has taken its most icon model, the Mustang, and introduced an electric SUV with the Mustang badge to inform its entire electric lineup with Mustang image of power and performance.
Brand building options
Volvo, which has defined the brand around safety, pushed that association even further with a commitment to reduce traffic deaths associated with its brand to zero by 2030 by focusing on three safety challenges: speeding, drinking, and distraction. And it shared relevant research with the industry.
Car makers have moved away from some of the historically important marketing platforms. The Frankfurt Auto Show planned to end with the 2020 event, for example. However, Ford was present at Gamescon, the digital game trade fair in Cologne, where it announced the launch of e-sports racing teams. And Ford intends reallocate some trade show investment into more targeted consumer events.
Trade shows are still part of the marketing budget, but in different ways. In the effort to broaden the perception of their businesses, car makers exhibited at the Consumer Electronics Show in Las Vegas. As part of its larger positioning as a mobility solutions company, Toyota appeared at CES to publicize its development of autonomous transportation for smart cities.
Having exhibited leadership on hybrid cars with the Prius, Toyota plans to be an Olympics sponsor for at least the next several years to establish leadership in mobility. Mobility initiatives include the work of Toyota’s foundation to improve urban transportation and personal mobility, particularly for older or physically disabled people.
To market its luxury brand, Toyota Motor Corp. is developing restaurants and airport lounges by Lexus, including the restaurant Intersect by Lexus in New York City’s trendy Meatpacking District. The NY restaurant is managed by an organization run by Danny Meyer, a restauranteur renowned for high standards of hospitality.
In an updated expression of traditional engine power, carmakers have created fuel efficient high horsepower muscle cars including the mid-engine Corvette, Dodge Challenges, Chevy Camaro, and the Mustang, for people who love driving.
A mobility future
And that is a key question: how many people love driving? Will consumers still choose to buy cars or switch to other mobility options. Kantar research found the people feel the driving experience is best in their own car rather than in an equivalent rented car. People believe that their own car is safer and more personalized.
Only a limited group of people, mostly in urban centers, expect to abandon cars completely, Kantar research found. But outside of urban setting, where the most convenient option will be a car parked in a driveway or nearby, some version of car ownership will remain popular. Ownership could also include leasing a car.
But even in urban areas with lower car ownership, car brands intend to be part of the mobility solutions. In several German cities, for example, Volkswagen operates a shared-ride service using electric minivans to transport people traveling in the same direction. In a joint venture, Mercedes and BMW operate a car-sharing service called Car2Go. PSA Groupe, maker of Peugeot and Citroën, operates Free2Move, a vehicle sharing service that includes cars, bikes, and scooters.
Toyota is experimenting with a comprehensive mobility solution. Called Kinto, it intends to seamlessly link transpiration options, including car sharing, carpooling, ride-hailing, leasing, and subscription services.
For now, carmakers are driving toward a foggy future that will include some combination of cars powered by environmentally friendly engines and networks of other transportation options. To keep rolling until the fog lifts, they are depending on brands that are sufficiently differentiated and environmentally responsible.
A tough business
The car category struggled before the Covid-19 pandemic, shifting to electronic vehicles and preparing for an uncertain future of multiple mobility options. Plant shutdowns, supply chain disruption, dealer closings, and consumer reluctance to spend on big-ticket items during the pandemic made a tough business even tougher. The car category declined 7 percent following a 7 percent decline a year ago, when every car brand lost value. This year every brand but one—Tesla—declined. Tesla’s 22 percent increase in value underscores a Covid-related theme crossing many categories. While few brands were immune to virus’s impact, resilience came from being on-trend, responding to consumer values regarding sustainability, for example. Tesla not only met the growing desire for electric cars, but it began to produce them at a relatively affordable price. The stock market rewarded this accomplishment.
Brand Building Action Points
- Assert leadership
Brands across categories are expressing a point of view about sustainability and, more important, brands are taking actions to advance sustainability, particularly in categories where product or packaging changes can help reduce the negative impact on the environment. This challenge gives car brands an opportunity to differentiate and assert leadership.
- Own a space
Enabled by technology, carmakers today produce safer, higher-performing vehicles featuring connectivity that enhances the driver experience with information and entertainment. And most brands offer these benefits in SUVs, the model consumers most prefer. Because of these advances, brands have ventured too close to experience and design sameness. One way to differentiate is to own a space—safety, technology, design, experience, price—whatever space best aligns with the brand.
People believe that their best driving experience is in the car they own, according to Kantar’s Mobility Futures research. This finding suggests people appreciate the level of comfort and familiarity they find in their own vehicle, and efforts to increase personalization add value. As in other categories, experience is an important brand feature for people today, especially young people. With more data available, it becomes more possible to personalize experience.
- Anticipate change
Prepare for a future that includes cars but in which cars fit into a larger mobility landscape. In some places, particularly in rural areas, ownership will be more important than in urban areas where people will have more transportation options. But the challenge is not simply a rural-urban bifurcation. The balance of car-centric and other transportation options varies across cities worldwide, according to Kantar’s Mobility Futures study. And the situation is fluid; around a quarter of urban citizens say they are willing to change the way they travel.
Comprehending and creating the mobility future of cars and services that will move people from place-to-place will required the collaboration of insight, manufacturing, and technology specialists. Association with the right partner not only adds expertise but also brand enhancement.
- Update marketing touchpoints
Some touchpoints are new, like gaming, others are traditional but changing, like car shows and dealers. In addition to their role providing reassurance and closing the deal, dealers remain important to provide information beyond what is available on brand websites, and also to correct misinformation found on the internet. Dealers need to remain educated about the newest technology so they can help explain it to the customer. Especially with electric cars, the test drive becomes important as way to overcome skepticism about the power of the electric engine.