A new segmentation for electric vehicles

NOVEMBER 2009 • Nick Hodson and John Newman : Automotive & Assembly Practice

Global carmakers are trying to define a future market for electric vehicles. To reach beyond affluent, environmentally conscious, or technically enamored buyers, these companies will need to develop products that satisfy the consumers’ main concern—good value for money. Given the current cost of energy storage, that is a considerable challenge.

A recent McKinsey study suggests that one way companies can achieve this goal would be to focus on tailoring battery-powered vehicles to the actual driving missions of specific consumers—that is, to the way they use their vehicles. Most existing gasoline-fueled cars, as well as many electric ones now on the drawing boards, are intended for multiple driving missions of differing lengths and speeds. By focusing on specific driving missions of consumers, a company can match a vehicle’s energy storage requirements to a consumer’s particular needs and thus design more economic vehicles. It can also shape its brand and advertising messages and go-to-market strategies for such products more efficiently.

Our study, which focused on typical driving missions in the United States, examined the factors underlying the energy storage requirements, and thus the costs, of car batteries. We divided energy use into two major categories: the energy required, first, by the vehicles’ physical characteristics (such as rolling resistance and mass) and, second, by the way the vehicles are used (such as driving distance, speed, and the frequency of stopping and starting). It is well understood that the addition of incremental energy storage increases an electric vehicle’s cost substantially. (That isn’t true for gas-fueled vehicles, since a larger gas tank is almost cost free.) But we found that the energy storage requirements of cars used for different missions could be vastly dissimilar, even if their size and total number of miles driven remained the same. Driving missions—much more than the size of vehicles—determine energy storage requirements.

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