Article

Premium customers hold key to success in electric cars

Most European governments are launching programs to get more people to use electric vehicles. But few really understand who the electric vehicle customer is.

By John Smith

Published on January 05, 2010
min read


It is one thing for the Mayor of London, Boris Johnson, to announce that he plans to make London the electric-car capital of Europe, it is quite another to understand who will buy or sell those vehicles. He is not alone though. Most European governments are launching programmes to get more people to use electric vehicles. But few really understand who the electric vehicle customer is. How many Europeans truly want to drive electric vehicles? And what exactly are these people looking for? The first question is a challenge because of the higher cost of electric vehicles, which depend on expensive batteries. Customer research reveals that if electric vehicles are offered at a total cost (vehicle price plus fuel and maintenance charges) comparable with conventional cars, global sales of electric vehicles would be upwards of 1.5 million units a year, with almost 600,000 sold in Europe. The second question is even more complex. According to market research on more than 2,000 urban car owners from Europe's four largest markets—Germany, the UK, Italy and France—the demand for electric vehicles in Europe will come from four distinct customer segments with varying affinity for electric vehicles. These are the eco-friendly "green innovators", the budget-conscious "cost-shoppers", the risk-averse "laggards" and, last but not least, the eco-prestige, high-end "Premium 2.0" customers. In Europe, it is these up-market customers who will lead the charge for the new technology. They are willing to pay a higher price and put up with new technology glitches as long as they are the first to drive the "cool", new electric cars. We have identified a potential market of about 350,000 such premium customers worldwide—about one third of them in Europe—who would be ready to buy an electric vehicle today, even if it is priced ¤10,000 (£8,900) above a comparable conventional car. The emergence of the "Premium 2.0" shopper as the first sizeable customer segment—as opposed to eco-shoppers—will have huge implications for carmakers on how they design, market and package electric cars in Europe. Just as iPhone customers pride themselves on being quite distinct from other mobile phone users, these prestige customers seek cachet. Just as Apple revived its fortunes with the iPhone, the race for the electric car market will be won by the manufacturers that change gears the fastest. The nascent market for electric cars is a potential disruptive force that could redefine the dominating position of leading car companies in Europe. "Premium 2.0" customers currently drive premium conventional European brands. When asked which carmaker they would buy an electric vehicle from, many listed German brands, such as BMW and Audi. They also gave high scores to brands such as Toyota, Honda and Mitsubishi—brands that normally would not be on a premium customer's shopping list. More than a dozen carmakers plan to launch electric vehicles in Europe in the next 18 months. Quite clearly, the London electric vehicle sweepstakes are open to any manufacturer willing to woo premium consumers with trendy models that offer cool, urban, zero-emissions mobility. John Smith is global head of Bain & Company's Industrial Goods and Services Practice.

It is one thing for the Mayor of London, Boris Johnson, to announce that he plans to make London the electric-car capital of Europe, it is quite another to understand who will buy or sell those vehicles.

He is not alone though. Most European governments are launching programmes to get more people to use electric vehicles. But few really understand who the electric vehicle customer is. How many Europeans truly want to drive electric vehicles? And what exactly are these people looking for? The first question is a challenge because of the higher cost of electric vehicles, which depend on expensive batteries. Customer research reveals that if electric vehicles are offered at a total cost (vehicle price plus fuel and maintenance charges) comparable with conventional cars, global sales of electric vehicles would be upwards of 1.5 million units a year, with almost 600,000 sold in Europe.

The second question is even more complex. According to market research on more than 2,000 urban car owners from Europe's four largest markets—Germany, the UK, Italy and France—the demand for electric vehicles in Europe will come from four distinct customer segments with varying affinity for electric vehicles. These are the eco-friendly "green innovators", the budget-conscious "cost-shoppers", the risk-averse "laggards" and, last but not least, the eco-prestige, high-end "Premium 2.0" customers.

In Europe, it is these up-market customers who will lead the charge for the new technology. They are willing to pay a higher price and put up with new technology glitches as long as they are the first to drive the "cool", new electric cars. We have identified a potential market of about 350,000 such premium customers worldwide—about one third of them in Europe—who would be ready to buy an electric vehicle today, even if it is priced ¤10,000 (£8,900) above a comparable conventional car.

The emergence of the "Premium 2.0" shopper as the first sizeable customer segment—as opposed to eco-shoppers—will have huge implications for carmakers on how they design, market and package electric cars in Europe. Just as iPhone customers pride themselves on being quite distinct from other mobile phone users, these prestige customers seek cachet. Just as Apple revived its fortunes with the iPhone, the race for the electric car market will be won by the manufacturers that change gears the fastest.

The nascent market for electric cars is a potential disruptive force that could redefine the dominating position of leading car companies in Europe. "Premium 2.0" customers currently drive premium conventional European brands. When asked which carmaker they would buy an electric vehicle from, many listed German brands, such as BMW and Audi. They also gave high scores to brands such as Toyota, Honda and Mitsubishi—brands that normally would not be on a premium customer's shopping list.

More than a dozen carmakers plan to launch electric vehicles in Europe in the next 18 months. Quite clearly, the London electric vehicle sweepstakes are open to any manufacturer willing to woo premium consumers with trendy models that offer cool, urban, zero-emissions mobility.

John Smith is global head of Bain & Company's Industrial Goods and Services Practice.