Whenever a new technology or product innovation enters the market the level of consumer acceptability will be a crucial factor in determining how successful it will be. It is quiet common to hear stories of success by budding entrepreneurs who entered the market with nothing but a good idea and a lot of determination and ended up making it big. Stories on product and technology failure are much less common with people and firms less keen to comment on their inability to succeed in making their new product or technology triumphant. This part of the product lifecycle is often overlooked and companies and individuals do not investigating these aspects to a high degree. Indeed it can be this lack of assessment that leads to a new product or technology not being widely accepted by consumers.
In relation to the introduction of LEVs into the automotive market it is important for manufacturers to investigate what are the likely hindrances to consumer acceptance. These rejection scenarios happen when consumers appraise a new vehicle for its suitability according to a set performance criteria and deem the product unsatisfactory. These scenarios will happen throughout the purchasing process and will entail both absolute appraisals where vehicles are required to pass specific levels of acceptability and also relative appraisals where multiple vehicles are compared simultaneously against a set criterion.
Determining what these likely rejection scenarios will be is a critical step in formulating invention policies aimed at sidestepping the rejection and ensuring LEVs move forward in the product appraisal aspect of the consumer purchasing procedure. Below we outline the most likely rejection scenarios and advise on potential strategies to mitigate the effects. This list will not be completely inclusive of all eventualities and it will not be until these products become widely available that we will be able to construct an accurate picture on the reasons why consumers choose not to consider LEVs.
1. Range limitation – One of the most commonly expressed reason for consumer rejection of some forms of LEVs (such as Electric Vehicles) is the limited range these vehicles have before they are required to be refuelled/recharge. A conventional vehicle can usually travel upwards of 250 miles before it needs to be refuelled. An EV can only manage around 100 miles and then requires upwards of 8 hours to fully recharge compared to a few minutes for a conventional vehicle. Potential consumers express their reluctance to consider EVs due to anxiety over if they would be able to offer them the mobility they require. In fact consumers often overestimate their usual daily mobility requirement and upwards of 95% of average daily car use in the UK could be satisfied within 100 mile vehicle ranges. This range misconception will have to be addressed and a combination between consumer education and technological advance will most likely product the best results. Travel planning can assist consumers in understanding that an EV would actually be suitable for their travel behaviour and the introduction of more advanced infrastructure such as quick charge stations and battery swap facilities can help dispel fears.
2. Price Premium – LEVs in their current state have an associated price premium above conventional vehicles attributed to the advanced technologies they employ. EVs can be anywhere between £5,000 and £10,000 more expensive in their purchase price. These cost premiums are usually offset by lower operating costs attributed to cheaper fuel and decreased tax. The degree by which these savings offset the initial price premium will depend on how much the consumer will use the vehicle. It has been shown that consumers have large discount rates which act to reduce in real terms the cost savings for LEVs from reduced operating cost which acts to relatively inflate the initial price premium. An intervention strategy here could be to better educate the consumer on their likely cost savings associated with buying a LEV against the price premium and also to change the relative costs, for example, by offering a price premium reduction and/or increasing the cost of conventional vehicles (both in terms of price and operating costs).
3. Safety – It is a sad fact that millions of people die each year due to traffic collisions on the World’s roads. Most of these accidents happen due to human error with less than 2% directly attributed to vehicle malfunction. However consumers exhibit anxiety when apprising the use of alternative powertrains in vehicles especially the use of Hydrogen and Compressed Natural Gas which they deem to be more volatile and more likely to explode in a collision. In order to dispel this fear an information campaign would have to be employed to ensure potential consumers that LEVs were just a safe on the roads as conventional vehicles and are subjected to the same strict safety requirements.
4. Reliability – Similar to concerns expressed in relation to vehicle safety, consumers have a general belief that new technology is more likely to malfunction due to having less historical operation and improvement behind it. This may be the case with regards to some new technology but in relation to EVs the likelihood of malfunction is actually lower compared to conventional vehicles due to the presence of less moving parts. This also means that maintenance costs are usually cheaper if anything was to go wrong as well. In order to overcome this objection manufacturers will most likely have to offer extended warranties.
5. Depreciation – Buying a new car is one of the most important financial decisions a person will make in a year. Vehicles can also been seen as physical assets owned by an individual which retain some of their value throughout their lifetime. This retained value will depend on the future demand for a particular vehicle subject to its upkeep. Consumers want to know that when they come to sell their new vehicle they can recoup a decent proportion of their initial investment. Consumers are concerned that the value retention of LEVs will be low especially if there is a sudden change in government policy or market preferences. A potential strategy to combat this possibility is for manufacturers to offer a minimum buy back guarantee giving consumers some form of security concerning the minimum sell price they are likely to experience in the future.
Overcoming these concerns is not likely to be easy or without financials costs but if LEVs are to go mainstream then each of the above points will need to be mitigated. A combination of strategies is likely to be the best option with a synergy between government and manufacturer policies. It is unlikely that we will know the full extent of consumer’s apprehensions when appraising the purchase of an LEV until they are common in the market and any new rejection scenarios will have to be evaluated as and when they arise.
No comments:
Post a Comment