White Space for Electric Cars - Nissan, Chevrolet, Ford, Tesla

According to Marketing Daily "Electric Cars Set to Tiptoe Into Showrooms."  Nissan is supposed to introduce the Leaf.  Chevrolet,  Toyota and Ford are all supposed to begin offering a plug-in hybrid.  None have announced prices, but all indicate they intend to price them at the high end - more costly than a like-sized traditional gasoline powered automobile.  One reason for the higher price is that dealers normally expect to make 20% of a traditional vehicle's price in high-margin maintenance and repairs, and because these electrics won't provide that revenue and margin the manufacturers believe the dealer has to make more on the initial auto sale - or they won't sell them.

The manufacturers themselves are not optimistic about sales.  They are targeting wealthy early adopter consumers for whom climate change and environment are critical issues.  Citing a lack of infrastructure for recharging, and battery technology that takes too long to recharge, the manufacturers are non-committal on how many cars they will make - preferring to wait and see if demand develops.

Sort of sounds like a self-fulfilling prophecy, doesn't it?  This approach is very unlikely to succeed, because they manufacturers are trying to sell electric cars to people who are already well served by existing petroleum powered traditional and hybrid cars.  These people have little or no reason to pay extra for new technology, so will be a hard sell.  And with built-in excuses for the technological limits, the manufacturers aren't being promotional.  Simultaneously, the manufacturers are more worried about the impact on  dealers than the success of the vehicles.

It's not the product that's wrong, its the approach.  These manufacturers are trying to launch a very different product, that really needs to appeal to very different customers.  But they are trying to do it in the totally traditional way.  Same brand names, same distribution, same sales people, same marketing, same financing - same everything.  They are trying to have the existing organization, with all its Lock-ins, do something very different.  And that never works.

Electric cars are ideal for White Space team introduction.  White Space projects are given permission to do what it takes to make a project succeed.  They are given permission to operate outside the Lock-ins.  It's that permission to find the right answer, to find the market-based solution, which allows the innovation to develop a new Success Formula that meets market needs. 

Electric cars are not a solution for the way automobiles have been used in the past.  To succeed requires appealing to different scenarios about the future.  Electric cars need to appeal to people for whom a traditional auto has limitations they don't like, and instead the electric auto is something they want.  People who are underserved by the current products.  The electric car will succeed with buyers who have reasons to want one.  For whom the electric car is the solution to their problem - not a second-rate, overpriced solution to an old need.

Cell phones didn't succeed because they were purchased by people who already had wired phones with long distance.  Early cell phones, for all their expense and weakness, were bought by people who had a real need for mobile telephony.  For years, mobile phones were used only by a small group of people.  It took years for cell phones to become commonplace.  We all now know younger generation people who have no land line phone - for whom the mobile phone has displaced a traditional phone.  But the cell phone didn't succeed by trying to be a high-priced alternative to the existing solution, it was a product that was desired by people for the advantages it offered - even when it was expensive, big and had limited range.  Only over time did the cell phone evolve to a new Success Formula that is making traditional phones obsolete - and leaving traditional phone companies with a very hard transition.

Electric cars need an entirely "greenfield" start.  Those responsible need to be chartered to "make this work" in an environment where failure is not an option for them.  They need to believe their careers depend on finding the right solution, and developing it.  And they need permission to do what the market requires.  They need to be able to have a stand-alone brand, and its own distribution system, and unique marketing.  They need the White Space with permission to do what it takes, and the resources to accomplish the task.  Free from worrying about dealer reaction, marketing impact on traditional autos in the brand, or requirements to solve "infrastructure issues."

Imagine urbanites who want cars just for short hauls.  Think about the ZipCar business in most major U.S. cities as the target buyer, rather than selling cars to individuals. Or think about other markets - outside the USA.  How about places like Taiwan or Malaysia where distances are short and traffic is bad and much fuel is wasted just sitting.  Towns like Tel Aviv.  Maybe as delivery vehicles in urban areas where traveling is rarely more than 200 miles in a day because most time is spent sitting at lights - or making the delivery.  There are places for which an electric car could be an ideal solution - just as they are today.  Where a head-to-head match-up favors the electric vehicle.

Secondly, who says a traditional dealer is the right way to sell this vehicle to these people?  Maybe it should be sold on-line, with somebody delivering the vehicle to the buyer and offering personalized instruction?  Maybe it should be sold out of a Home Depot, or Staples, or Best Buy like an expensive appliance or computer?  It's not clear to me that people, or companies, have much value for auto dealers - so perhaps this is the time to change the distribution system entirely -- and perhaps take a lot of cost out of auto distribution.

There is a market for electric cars.  Today.  Just as the technology exists.  And if White Space teams were allowed to find and develop that market, we could have a robust electric car industry in just a few years.  But it won't happen via traditional approaches, from companies Locked-in to their traditional ways.  Those companies only see obstacles, not opportunity.  Without White Space, this will be just another example of a technology delayed.

But it does leave the door wide open for a company like Tesla.  Tesla is a stand-alone company pioneering the electric car market.  They are operating in White Space.  Easy as Tesla is now to ignore, they may prove to be the upstart like Southwest Airlines that succeeds and makes money while the traditional industry players keep struggling.

Comments

[Steve Dean]

I think it similar to the 70s when the executives at GM looked out the window at their parking lot and said - "I don't see anyone driving compact cars".

[yamaha raptor 250r]

well, I guess all these car companies you have mentioned are all into the groove.