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Electric Vehicles – Arranging the ecosystem

Dan Ginger Tuesday, 18 November 2014.

Such is the subtlety of technological transitions, that when the Electric Vehicle (EV) was pitted against the Internal Combustion Engine (ICE) in the 1920s, the ICE that causes so many environmental, health and social issues today, won out because Europeans preferred the faster model. There are various elements that affect the uptake of technology, and the resurgence (or not) of EVs today has been no different, with multiple issues slowing or accelerating the EV's attack on the ICE's current system lock-in. This article outlines the key changes that are required in order to arrange the economic ecosystem into one that is favourable for the EV.

shutterstock 55056499Firstly, as exemplified by the transition to the ICE, social factors are incredibly important in technological uptake – especially in today's consumer-driven environment where trends are made and lost online in an instant. It can be argued that here is the EV's greatest chance of a breakthrough, especially in the developed world. Various scholars argue for the existence of 'post-material values' when an area and community is well developed. Here, individuals have realised their own material goals and hence shift towards broader, more humanitarian values. The environment is one such issue and commands potentially the largest activist movement of global issues today, with 2.8 million members of Greenpeace International alone. Citizens may therefore be more likely to select an EV on environmental grounds, especially if they are able to absorb the costs. While this may stimulate hope for EVs and green technologies in developed markets however, the ideal of post-material values does not resonate across the globe, as for many transport choices remain limited. 19 million new car registrations were made in China in 2012 – representing an 18.1 per cent growth on the previous year. However just 0.08 per cent and 0.33 per cent of new registrations in 2013 and 2014 respectively have been on electric vehicles. It is the large developing markets such as China and India where focus must be made in order to make a truly global difference.

The technology itself also provides a substantial challenge that requires further innovation and investment from multiple actors. Potential consumers list 'range anxiety' as a core worry for buying an EV. Consumers fear that the batteries in EVs cannot travel far enough, and that there are not enough charging points. The latter is potentially true, but the former can be disputed. The TFL study of average journey distances for a person in London shows that 90 per cent of journeys made are less than 10km - well within the capabilities of an EV. It is important that this point is made clear in advertising of EVs, reassuring the marketplace and building confidence in the technology through reliability and convenience. EV advertising currently focuses too far on the environmental benefits of the technology, as opposed to its functional advantages as well.

However, charging points certainly must increase in number and in geographic spread. Currently there are only an estimated 1500 locations for charging across the UK. Successful trials have taken place in Paris and London with the Autolib' and Source schemes respectively, but travel outside of the city is more difficult. The core issue here is a vicious circle, discouraging various stakeholders from making the first move. Consumers don't buy EVs because there aren't enough charging points. The government and firms don't invest in new charging points because they don't believe that there is a market for them. Collaboration is required to prove to investors that their initial outlay will be worthwhile, and to ensure that the investments go towards what is important for potential consumers. For EVs to truly take off, someone needs to take the first step. Charging must be easy and convenient to make refuelling an EV as similar as refuelling an ICE at the pump.

There remains a further, key issue delaying the transition to EVs. It is a core consideration of the customer, but, the EV is not yet viable in this area. It is too expensive – the basic EV model of BMW, the 'BMW i3', is priced 'from £30,680', which is far more than their entry ICE model at £17,775. Again, we have a vicious circle. Governments and companies will only subsidise their products if they can envisage a market and the subsequent positive externalities, or if producers can gain economies of scale in production. Consumers aren't purchasing partially because they are too expensive. Despite the UK government's offer of up to £5000 towards the purchase of an EV, and exemption from tax (4), ICEs remain clearly cheaper and hence a greater proportion of the population can afford them – though rising fuel prices and increased taxation are narrowing the gap slightly. While the technology is still being refined and isn't as convenient for consumers as an ICE, cost-pricing must level the playing field and give the consumer something to think about.

To conclude, there are many conditions and aspects that must come together in order for the EV to finally begin to undo the system lock-in of the ICE and grow a successful market of its own. In short, the 'Multi-level Perspective', outlined in much transport studies scholarship, has to be realised. This idea enforces the need for change at the niche innovation, socio-technical regime, and infrastructural landscape levels, if a technological transition is to successfully occur. Multiple factors must come together from across social, political, economic and technological borders if the EV is to be successful. Socially, we are starting to see a shift in consumer opinions of EVs, but this now needs to be backed up with government subsidies/taxes and improved infrastructures if the small uptake of recent years is to become widespread. Development is required at each of the levels, and EV innovators, environmental campaigners and economic/political supporters must attempt to organise the Ecosystem Economics™ of the market in order to have any chance of success.

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Dan Ginger

Dan Ginger

Dan joined entrepreneurcountry in November 2014, following the award of a First-Class BA (Hons.) degree in Geography from Keble College, The University of Oxford. Alongside writing articles for EntrepreneurCountry, Dan works as an Analyst for the Ariadne Capital team, and is particularly interested in the development of global emerging markets.

LinkedIn Profile: http://uk.linkedin.com/pub/daniel-ginger/5a/b62/804
Twitter: @DanGinge

 

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