Why the Race To Build An Affordable EV Is About More Than Range

By · September 18, 2013

Model S

Tesla’s ambitious plan to produce a $35,000, mass-produced car capable of around 200 miles per charge by 2015 or 2016 has much larger automakers scrambling to play catch-up. General Motors has recently been turning up its rhetoric about offering its own 200-mile sub-$30,000 all-electric car to compete with Tesla. Leaving aside the question of why 200 miles is the right bogey, the bigger challenge for large auto manufacturers is how they will match Tesla’s innovative EV-centric attitude to sales and service.

While most of the larger automakers could—they certainly have the resources—produce an electric car to compete directly against Tesla’s affordable ‘Model E,’ the race to build an affordable, longer-range EV isn’t just about miles per charge and price: it’s about redefining ownership experiences and sales practices as well.

From its sales to service, customer care to charging networks, Tesla’s approach is unique among the automotive industry. Instead of selling to customers through franchise dealers, Tesla sells its cars directly to customers. In Silicon Valley speak, that’s disintermediation. Unlike dealerships, Tesla also doesn’t profit on scheduled servicing, and some tasks normally carried out in a conventional service bay—like updating car software—are done remotely.

When it comes to refueling, Tesla promises its customers unlimited free use of its Supercharger network for the life of the car. Will GM offer free fuel for its hypothetical 200-mile EV?

GM operates with the tried-and-tested franchised dealership model. It sells cars to the dealers, and they then sell them to customers. While this model may have its benefits, including more price-flexibility and dealer choices for customers, it also makes it tough to ensure specific levels of customer service and sales—focused on electric models—are met.

With Tesla so focused on customer service and delivering a constant, high-quality, replicable experience to all of its owners, any car company wishing to match Tesla in the marketplace needs to exceed the benchmarks established by Tesla—or offer something equally innovative.

Brand loyalty—the concept that customers of big brands like Ford, Chevrolet, and Nissan would rather stay with a brand they know than one they don’t—is not as prevalent today as it was in past generations. As early adopters of cars like the Nissan LEAF and Chevrolet Volt show, customers will eagerly leave a favorite brand if they believe a competitor is offering a better product, technology or service model.

Slow and Steady

Before we get carried away with a burgeoning race to produce a 200-mile, $30,000 electric car, it’s worth remembering a couple of simple facts. First, $30,000 isn’t all that affordable. And second, nearly all-new car buyers can live perfectly fine with an electric car that can travel between 130 and 150 miles per charge.

Even with a substantial drop in battery prices, a car capable of traveling, say, 130 miles per charge would still be substantially cheaper to build and buy than a car capable of 200 miles per charge. There’s no single finish line to this race, but instead, a continual—and arguably inevitable—historical arc toward electrification.

Given GM and others have tough sales targets for all-electric, plug-in hybrid and electrified vehicles, perhaps a better way to catch Tesla’s runaway success would be to produce a wide and varied selection of all-electric and plug-in hybrid cars at varying price points and varying ranges. Given the massive diversity in gasoline cars and the needs of each and every new car buyer, this approach would certainly net a wider market penetration than being caught in a hyped-up race to produce an affordable car with the highest range possible. Silver bullets are shiny, but the day-by-day displacement of petro-miles with electric ones is the goal.

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