INNOVATIVE BUSINESS MODELS IN THE WORLD OF ELECTRIC VEHICLES

Global resources and climatic changes have led to a rethinking of classic individual mobility based on combustion engines. Due to this, technological improvements in electric vehicles are being aggressively introduced and further market penetration can be expected. New challenges have started arising for the classic automotive industry and the upcoming ones, due to a possible vast implementation of battery-powered electrical propulsion systems in near future.

A huge potential to link electric vehicles, local energy systems, and personal transport is present in cities now. Once this linking happens, we can improve a lot of things including air quality, climate change, and also work towards growing new business models. Newer e-mobility models can form a link among the three sectors that have been operating and existing in isolation from each other; The energy systems, the transport infrastructure, and the auto industry.

The business model innovation is much required because new engineering techniques and technological innovations are at present far ahead of the ability of the energy system’s capacity to put up with. 

Irrefutably electric vehicles have become the future! Automobile players all around the globe have already started making significant progress in designing, creating, and delivering electric and hybrid transports. The whole industry is trying to refine the customer adaptability whereas the manufacturers have begun to gear up for an ultra-modern line of production augmented and backed with highly advanced research. New challenges are highly anticipated and are becoming obvious as the industry is trying to establish how the new models will exactly power and build the new electronic vehicles.

The TCO parity hasn’t given the anticipated push towards mass adoption of Electric vehicles. All over the globe, several business models have now emerged to address the problems and obstacles that are in the way of wide-scale adoption. The obstacles namely are anxiety, battery reliability, upfront cost differential, and time needed to recharge batteries.

A lot of various business models have been designed, developed, and tested through the years and in the history of this business.

Here’s an analysis of a few models that have been introduced to promote and boost the adoption of Electric Vehicles in the Indian market. 

VEHICLE LEASING/SUBSCRIPTION MODEL: 

Today, subscription models across premium cars and motorcycles are widely prevalent. Owing to this, many OEMs have also started introducing these for Electric Vehicles. With this model, without any upfront costs, the vehicles can be sold on a monthly rental basis. The aim of this model is to reduce the customer’s up-front costs. This model was conceptualized to make electric vehicles (EVs) more accessible to a rapidly growing base of future-conscious citizens.

Also, most OEMs offer maintenance that is extensive and insurance plans along with the vehicle to the subscribers. Battery-related issues, in addition, are covered and taken care of by OEM or the subscription partner respectively, addressing what the exact concern is around the battery reliability.  

When the subscription tenure comes to an end, the subscribers have the choice to retain the vehicle after paying the due pre-agreed amount. To add to this, some OEMs also provide flexibility to subscribers with subscription plans that range from 13 to 36 months. It is ideal for subscribers who prefer usership over ownership in this rapidly growing era of a shared economy.

This model gives the subscribers an option to try out Electric Vehicles without any ownership hassles. The subscribers get the first-hand experience of driving an EV without any worries about matters such as the battery technology and its reliability.

This model seems custom-made for people like new immigrants and millennials who want simple, affordable, hassle-free temporary mobility solutions with easy cancellations and return policies. 

It is suitable for commercial segments where subscribers such as delivery men can pay rentals on a monthly basis making their lives and transport more convenient. The financial aspect and concerns are also covered in this model as it takes care of the most commercials users who have limited access to finances or financing options. 

BATTERY LEASING/SUBSCRIPTION MODEL:

It is hard for someone to predict how long a battery will last. It is one of the most crucial issues for the economy of all-electric vehicles after their relative price. The battery is the most expensive component of an electric vehicle, it comprises of around 50% of the total cost. The primary reason for the significant price difference between an ICE vehicle and an EV. In this model, the electric vehicle is sold without a battery and the batteries are sold separately on a monthly subscription. The aim of this model is to do away with concerns around upfront cost discrepancies and the reliability of the batteries.

In a very recent statement, the government allowed the sale f e-2Ws and e-3Ws sans the batteries in order to further promote drive adoption. Present-day, battery technologies are the main key of differential for OEMs, especially when they are a car or a scooter OEM. Sales of the vehicles without batteries however would require higher levels of standardization of batteries which might be a limitation and coerce the OEM investment in battery technology. Conversely, this model of business would give momentum to the energy operator business model and might even help ease consumer concerns on the reliability/technology of the batteries. It also might help reduce upfront cost differences and provide easy access to finance options.

BATTERY SWAPPING MODEL:

An extension of the battery subscription model, this model has an option wherein the subscriber has the choice to swap the drained battery for a charged one for a fixed amount. The model addresses primarily the apprehensions on the reliability and charging time of the battery. A network of swapping stations that spread in a wide area could also help in addressing concerns like range anxiety for vehicle owners.

This swapping model is best suited for vehicles used in commercial applications like e-3Ws, e-rickshaws and LCVs. Many OEMs in these categories have already started testing out this model. This model helps in eliminating the downtime related to the battery charging (the lithium-ion batteries take typically 3-4 hours) and improving the efficiency of operations of the fleet. The success of this model however, would depend largely on the standardization of batteries along with the formation of a closed battery-swapping network. 

CHARGING AS-A-SERVICE (CaaS):

To address the customer’s concerns regarding range anxiety, some OEMs have created charging networks. This charging infrastructure provides the subscribers with an option to charge their vehicles on a pay-per use basis or subscription. There are also specified subsidized energy rates by the government for electricity used for Electric Vehicle charging exclusively. The CaaS model however currently has limited geographical coverage as the development of a charging network requires considerable capital investment. The deployment of this model across OEMs requires standardization of charges too.

SALE OF VEHICLE WITHOUT BATTERIES  

The sale of e-2Ws and e-3Ws without a pre-fitted battery has been allowed by the government. This was done with an intent to reduce the upfront cost of the Electric Vehicle and make cost-efficient for the customers. The government however needs to provide clarifications on how the subsidies under FAME II should be determined, while also keeping the stakeholders and industry in confidence.

Although these innovation models are focused on promoting and driving adoption of EVs by the masses, most of these are still in the initial stage. The market expands and grows in size, these models are anticipated to take form in the context of the ever-so evolving client needs and the dynamics of the market.

The four described business models seem possible for other competitive businesses providing similar services based on ICE cars and traditional car sales business models, judged at an authorized conceptual level. Competitive here means equal to or more attractive to the target customer segments when it comes to prices, costs and taxes. They have the potential to be seen as more attractive by potential customers and to be more profitable for their operators.

Business model innovations are thought to be a response to not only to technological changes but also to the society’s preferences, institutional rule & systems, resource pressures etc. Various thoughts and ideas have emerged suggesting different ways of studying how innovations are adopted into complex systems.

In conclusion, alternative business models can be important assets for a faster commercialization of electric vehicles, but their long-term feasibility the price tag gap needs to shrink, the energy cost gap needs to remain the same or increase, the battery lifetime must improve and the technology needs improvement speed to be offset. 

Best,

Rahul Thakur