Why buy an electric car?

Stefan Worm

Price, environment or performance

The study is co-authored by Lukas Burs and Ellen Roemer from Hochschule Ruhr West, and Andrea Masini from HEC Paris.

Norway stands out when it comes to electric vehicles (EVs). In 2019, more than half of new vehicles were electric or plug-in hybrids. An additional 12 percent were non-plug-in hybrids. This was achieved through a combination of proactive regulation and increasingly attractive product offerings.

In other markets, news is less uplifting. The US trails far behind, with plugin EVs accounting for around 2 percent of new cars in 2019. For China, the number is around 5 percent. The European Union has set ambitious goals for decreasing the CO2 emissions of passenger vehicles. Nevertheless, electric car sales are well below target with major markets like the UK, Germany and France still under 5 percent.

Increasing EV sales is a crucial step toward decoupling road transport from fossil fuels. In a new study, BI Professor Stefan Worm and colleagues argue that part of the problem is a limited understanding of what buyers are looking for in an EV. To shed light on this question they propose three main customer segments. They construct them from a study among 752 students and staff from a French higher education institution.

Three main customer segments

Utilitarian savers

The Utilitarian Savers segment places a premium on cost savings. Especially in terms of vehicle price, but also when it comes to running costs. EVs are currently more expensive to buy than fossil-powered cars, but they are often cheaper to run.

While price is crucial to utilitarian savers, performance, recharge time, range and environmental impact are of negligible importance. They place almost no importance on brand and are in general poorly informed about EVs.

In Norway, the Buddy electric car was an early product to cater to this segment. After years of negligence of this segment’s needs by electric car manufacturers, Volkswagen’s e-Up, Renault’s Zoe, and the E.Go Life have recently been targeted at this segment, but overall product choice remains limited.

Performance seekers

Performance seekers place a premium on speed, range and availability of charging points. They appreciate things like driving pleasure, comfort and self-expression with little emphasis on price and costs.

They are likely to compare speed and range to fossil powered cars, where a high speed of 160 km/h and ranges of at least 300 km are normal. Perhaps surprisingly, performance seekers place little emphasis on brand. Environmental impact is also of little importance to them.

With vehicles like Tesla models S and X, Audi’s e-tron, and Porsche’s Taycan, buyers in this segment appear to have received the most attention by electric car developers.

Green technologists

Green technologists have the highest knowledge about EVs. They place a premium on environmental impact and the availability of charging points. Range, speed and cost are of little or no importance to them. They are chiefly attracted to reductions in emissions and want to be seen as early adopters of environmentally friendly technology.

Surprisingly, relatively few electric vehicle models on the market cater to green technologists. BMW’s i3 represented an early attempt, albeit with mixed success in the market.

Regulators and car manufacturers must appeal to all three groups

As the example of Norway shows, regulation must be targeted at different customer groups. Policymakers should first and foremost analyze different consumer groups in the population, and decide on targeted incentives to ensure EV uptake in these groups.

For example, utilitarian savers are likely to respond to financial incentives. Our research also shows that they are the least informed about EVs, and may therefore benefit from information campaigns about EV advantages. To attract green technologists, governments should expand charging infrastructure and work to strengthen the green image of EVs.

For managers in car manufacturing, this study underlines the importance of a customer orientation in product development and communication. For example, performance seekers should be addressed with communication campaigns emphasizing the pleasurable driving experience. Too often, communication efforts have focused on the environmental benefits of EVs, with little emphasis on their high comfort and performance. Performance seekers look for a status symbol as much as a mode of transport.

The purchase price of EVs remains significantly higher than the price of fossil powered cars. To target utilitarian savers more effectively, manufacturers will need to come up with affordable models that appeal to this segment. They should also clearly communicate information about total cost of ownership, emphasizing the advantages of low fixed costs and low energy costs.

Lastly, green technologists are conspicuous consumers concerned about the environment. Car manufacturers should communicate clearly the total environmental balance of EVs and develop environmentally friendly sourcing and production of cars.

Source: Burs, L.; Roemer, E.; Worm, S.; Masini, A. Are They All Equal? Uncovering Adopter Groups of Battery Electric Vehicles. Sustainability 2020, 12, 2815.

The text is written by Communications Advisor Knut Myrum Næss.

Published 2. October 2020

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