Electric vehicles (EVs) won’t be replacing gas-powered cars overnight. But with government legislation, original equipment manufacturer (OEM) pledges, and a burgeoning EV market, an electric future isn’t far off. How should OEMs reinvent their model lineups to cultivate consumer interest longer term?
With the future of automotive undoubtedly in electrification, automakers need to consider how to position their product in the long term. Part 3 of this series explained how OEMs can find success quickly by offering premium EVs targeted at high-income buyers. However, the luxury space will eventually become oversaturated, and the differentiated performance of EVs will become a less influential factor.
When this happens, lower-volume, premium vehicles will need to give way to mass-market EV options in order for volume-focused automakers to stay solvent. Their success will hinge on their vehicles resonating with the right customer segments. With this is mind, how can OEMs ensure their EVs appeal to the mass market?
How to segment EV consumers
Introducing volume focused EVs will require approaches tailored to consumers’ differing sentiments toward sustainability. Our study results show each demographic has unique purchase behavior and preferences – especially when looking at consumers through the lens of age.
Interest in sustainability directly correlates to consumer age, with the youngest demographic (Generation Z) being the most sustainably inclined and the oldest demographic (Boomers) being the least. Categorizing car buyers into younger (Generation Z and Millennial) and older (Generation X and Boomers) segments and considering the segments’ distinct preferences represents a pragmatic approach to positioning EVs.
Making sustainability affordable for younger buyers
While younger demographics currently make up a small portion of car buyers, they are primed for a more central role moving forward. OEM’s initial premium EVs will provide the foundation to successfully target this demographic later by:
- Creating brand equity that establishes an automaker as a market leader
- Enabling the technology from upmarket models to trickle down to more affordable offerings
The key to unlocking this segment will be to appeal to sustainably minded but price-sensitive consumers. In our study’s results, we find that although there is currently a limited willingness to pay (given that Generation Z isn’t yet as financially mature as older demographics), this group is willing to make luxury and usability tradeoffs for sustainability. Automakers can leverage this enthusiasm by offering price-competitive products that focus on a sustainable image instead of the niceties of luxury cars.
Automakers can further lean on sustainability and affordability as key value drivers to compensate for the performance and luxury concessions that more expensive EVs boast. To achieve this, automakers can add new sustainability touchpoints for enthusiastic consumers, such as seat upholsteries, trim levels, and a marketing plan that champions the sustainable aspect of the vehicle. Furthermore, automakers can leverage their digital capabilities to create a user experience that enhances both sustainability (through real-time consumption data and efficiency optimization tools) and the consumer experience.
Doing so will not only take advantage of EVs’ software potential but also provide a technology-savvy group with a continuously updated ecosystem of tailored, downloadable features. At its core, this initiative is a relatively inexpensive way for OEMs to add value for the customer and introduce a high-growth, lucrative revenue stream.
Making sustainability practical for older buyers
The story is vastly different when it comes to the older demographics. Enticing these buyers to adopt EVs presents challenges on two fronts: price and fundamental interest (or lack thereof) in sustainability. The messaging to this group should center around the practical benefits of EVs such as the lower cost of ownership, less maintenance required, and a more seamless driving experience. In other words, traditional value drivers are what currently and what will continue to persuade this crowd.
Fortunately, older buyers tend to skew toward the premium end of the automotive spectrum. A higher willingness to pay can free automakers from the limitations that exist in creating cheaper EVs, which come at the price of traditional value drivers. Due to the relative lack of interest in sustainability, adoption among the older generations will only occur when the sustainable option is a stronger value proposition than the non-sustainable alternative.
Though this may sound discouraging, there is promise for sustainability even in this segment. With OEMs earmarking much of their R&D budget for electrification, EVs are on a trajectory to surpass internal-combustion engines in traditional value drivers. So, while we don’t expect this group to suddenly be avid EV proponents, as EV technology progresses, these buyers will have no choice but to consider sustainable vehicles if they want the latest and greatest OEMs have to offer.
- Matthew Reich, Consultant