EV Manufacturing Margins Getting More Favorable – But Don’t Forget Charging Experience
By Edward A. Sanchez – May 11, 2021
A BloombergNEF (new energy finance) forecast reported by The Guardian, claims that EVs will reach price-parity with ICE vehicles by 2027. Among many of the forecasts out there that try to pinpoint the inflection point where BEVs will actually become the more economical vehicle to produce, this is one of the more conservative, with some others saying that point will come as soon as 2024. Whatever the precise date actually is, one thing is pretty apparent – it is coming.
Many legacy OEMs’ resistance to EVs initially was from the thin profit margins on the vehicles, since so much of the engineering and components had to be designed or sourced from scratch. Relatively little of their off-the-shelf components carried over. Research and development is one of the most labor-intensive and expensive aspects of developing a new vehicle. And especially when the decades, and sometimes more than a century of learnings from making internal-combustion vehicles is no longer relevant, that puts them at a decided disadvantage.
But manufacturing price-parity is but one of many components necessary for the EV revolution to flourish. Once the automakers are producing equivalent or better margin on BEVs than on ICE vehicles, you can absolutely expect the marketing of the vehicles to get more aggressive. But the most critical factor for widespread consumer adoption of EVs will be the charging experience.
EVs are great, but manufacturers must back them with a robust charging infrastructure. (Image courtesy Ford)
I know lately, it sounds like I’m beating a dead horse with this, but I’m going to keep hammering away at it, because I can’t overstate how critical this component is to the overall EV ownership experience, and the ramp of the adoption curve. Aside from Tesla, most other automakers have only committed to third-party partnerships to build out their charging networks. So far, Tesla is the only company that has committed unilaterally on a global basis to installing a charging network using its own hardware and branding. All other efforts rely on third-party partnerships and integrations.
The partnership approach is not necessarily the worst idea, but it relies on a flawless execution, and so far, that has not been the case. The Volkswagen ID.4’s integration with VWOA’s captive Electrify America network is a six-step process to charge, as compared to a one-step plug-and-charge process on the same network using the FordPass app for the Mustang Mach-E. For customers to be surprised and delighted by the EV experience, it needs to be more like the FordPass experience, and less like the VW experience.
General Motors’ Ultium Charge 360 initiative probably comes closest in integrating seven third-party charging networks, and the promise of pain-free charging and payment. We will have to wait and see if the real-world experience of using the app lives up to its idealistic hypothetical promise.
EVs are a huge paradigm shift for legacy automakers from the standpoint that the customer experience doesn’t end at the dealership F&I office or service department. It extends to the day-to-day experience fueling and traveling with the vehicle. Do I blame GM, Ford, and others for not wanting to undertake the expensive, tedious, capital-intensive task of building out a charging network? Not necessarily. But the “short-cut” to doing it, forming partnerships with other companies, also requires a focused and concerted effort on user experience.
A focus on manufacturing margins is important, but it’s far from the only factor that OEM management needs to consider when charting the course for their electrified future.
(Main image courtesy General Motors)
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