NEW BUSINESS MODELS FOR ELECTRIC CARS Results from the BeliEVe project Mats Williander
VIKTORIA SWEDISH ICT A research institute Owned jointly by Swedish Industry and the Swedish Government Focus on sustainable mobility About 60 researchers Founded in 1997 Part of RI.SE (Research Institutes of Sweden), 2 300 researchers
PROJECT BACKGROUND Swedish Energy Agency research call: Identify and, if possible, mitigate/remove barriers to a large-scale introduction of electric vehicles in the Swedish market Project approach: To examine how different business models can support the diffusion of electric cars in Sweden
Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquairing from partners? Which Key Activities do partners perform? motivations for partnerships Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? is your business more Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) Value Driven (focused on value creation, premium value proposition) sample characteristics Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope designed by: Business Model Foundry AG The makers of Business Model Generation and Strategyzer What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? catergories Production Problem Solving Platform/Network What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? types of resources Physical Intellectual (brand patents, copyrights, data) Human Financial This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. Designed for: What value do we deliver to the customer? Which one of our customer s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? characteristics Newness Performance Customization Getting the Job Done Design Brand/Status Price Cost Reduction Risk Reduction Accessibility Convenience/Usability Designed by: Date: Version: Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? channel phases 1. Awareness For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? examples Personal assistance Dedicated Personal Assistance Self-Service Automated Services Communities Co-creation How do we raise awareness about our company s products and services? 2. Evaluation How do we help customers evaluate our organization s Value Proposition? 3. Purchase How do we allow customers to purchase specific products and services? 4. Delivery How do we deliver a Value Proposition to customers? 5. After sales How do we provide post-purchase customer support? How much does each Revenue Stream contribute to overall revenues? types Asset sale Usage fee Subscription Fees Lending/Renting/Leasing Licensing Brokerage fees Advertising fixed pricing List Price Product feature dependent Customer segment dependent Volume dependent dynamic pricing Negotiation (bargaining) Yield Management Real-time-Market For whom are we creating value? Who are our most important customers? Mass Market Niche Market Segmented Diversified Multi-sided Platform TERMINOLOGY BUSINESS MODEL (BM) Describes how a company creates, distributes and captures value Becomes reference for consumers Traditional sell and disengage : Risks relate to customer ownership Technical, functional, esthetical, financial Unsuitable for unfamiliar technologies ELECTRIC CARS EV: All electric (battery electric) car REV: Series hybrid electric (range extender) car PHEV: Parallel hybrid electric plug-in car Plug-in car: any of the above ICE = Internal Combustion Engine car The Business Model Canvas Key Partners Key Activities Value Propositions Customer Relationships Customer Segments Key Resources Channels Cost Structure Revenue Streams strategyzer.com
EV-CHALLENGES TO ADDRESS Higher price: +50% to +100% Unknown used-car value Unknown battery life Costly battery replacement, would it be necessary after warranty period Rate of technology development better to wait and see? Cannot fully replace ICE car Shorter range: 100 to 150 km Longer refueling time Undeveloped charging infrastructure Towing not allowed
BM DESIGN CRITERIA Attract a substantial share of car market (private households) Address as many identified challenges as possible Profit potential for possible BM owner Zero residual value after battery warranty period (in time or distance, whatever comes first) Focus on EV but other plug-in types should also be considered
METHOD
BM BRIEF 1. Company car / fringe-benefit car Swedish tax rules make it beneficial for employees to choose a plug-in car as company car, but they are costly for the employer By sharing the benefit, both can gain from a plug-in car Main bottleneck: No long-term tax rules (shorter than one leasing period) 2. Free-floating EV plug-in car sharing Works like taxi but you drive yourself, like Car2Go and Autolib Main bottlenecks: Battery warranty-distance + cities must provide free parking + high initial investment 3. EV Subscription Car sharing service adapted for car commuters When commuting, users move some cars to where people are = extending the car sharing market Main bottleneck: Battery warranty-distance 4. Leasing chain The leasing company (operational lease) retains ownership of the car until EOL. The car is leased out in a sequence of lease cycles to users with different car age/ cost preferences until zero residual value Main bottleneck: Battery warranty-time
SOME OBSERVATIONS Access rather than ownership Lower threshold to try vs. car purchase Customer commitment: From minutes (2) to 2-3 years (1,4) Individual BM features 1,3: Bundling with ICE to replace 100% of ICE 2,3: Short life in the market = high technology development rate not as problematic 2,3: Warranted battery distance = max mobility before zero value 2,3: Exploit low running cost through high utilization 2, 3, 4: Zero residual value = no used-car value risk All: Exploit low service- & maintenance cost
BM-EXTERNAL FACTORS.constituting important parts of EV s social dilemma Battery warranty/life length Drives depreciation Technology development Drives depreciation EU s CO 2 -target for ICE-cars Reduce running cost gap ICE-EV Energy price development (in Sweden) Reduce running cost gap ICE-EV Price gap ICE-EV Remains until higher volumes and/or technology break-through
ENERGY PRICE DEVELOPMENT
POTENTIAL MEASURES REDUCE DILEMMA NOW AND FURTHER WITH TIME - Technology development - Provide significant privileges and let them follow the car - EU s CO 2 target for cars - Raise fuel taxes at a rate that keeps mileage fuel cost up for ICE vehicles - Price gap ICE-EV - Use bonus-malus
CONCLUSIONS Alternative business models can contribute to a large-scale introduction of electric vehicles in the Swedish market The magnitude of the social dilemma problem and its development over time is however critical The Swedish government can influence the dilemma potentially at quite low costs It seems better to improve battery life length than to improve energy density (distance).
THANKS TO:
MORE INFO ON OUR HOMEPAGE For each business model: Short description Storyboard Movie (english subtext can be chosen) BM description based on BM Canvas https:///projects/believe#node-8895