The Electric Vehicles Ecosystem Model

25 Pages·2014·0.21 MB·English

The Electric Vehicles Ecosystem Model:
Construct, Analysis and Identification
of Key Challenges
Zulkarnain
vtt TechnicalResearchCentreofFinland,Finland
[email protected]
PekkaLeviäkangas
UniversityofOulu,Finland
[email protected]
TuomoKinnunen
UniversityofOulu,Finland
[email protected]
PekkaKess
UniversityofOulu,Finland
[email protected]
This paper builds a conceptual model of electric vehicles’ (ev) ecosys-
tem and value chain build-up. Based on the literature, the research dis-
tinguishesthemostcriticalchallengesthatareonthewayofmobilitysys-
tems’electrification.Consumersstillhavesomequestionsthatcallforan-
swersbeforetheyarereadytoadopt evs.Withregardtotechnicalaspects,
some challenges are coming from vehicles, charging infrastructure, bat-
terytechnology,andstandardization.Theuseofbatteryin evs willbring
inadditionalenvironmentalchallenges,comingfromthebatterylifecy-
cleforusedbattery,themanufacturing,andfromsomematerialsusedand
treatedin themanufacturing process. Thepolicy aspects include mostly
taxationstrategies.Formostpart,establishedmarketconditions arestill
lackingandthereareanumberofunresolvedchallengesonbothsupply
anddemandsideofthe ev market.
KeyWords:electricvehicles,ecosystem,mobility,policy,environment
jel Classification: l22, l62, o18, q01, r41
IntroductionandScope
Avastnumberofstudiesonelectricvehicles(evs)havebeenissuedupto
dateandthereasonsforthisareobvious,asthemovementtowardselec-
trification of mobility is gaining strength as part of greening the trans-
portation systems. This paperintroduces a conceptualmodel of the ev
ManagingGlobalTransitions12(3):253–277
254 Zulkarnainetal.
ecosystem–therelevantstakeholdersandactors–andidentifiesthekey
challenges of ev market penetration. evs have potential to change the
nature of the whole vehicle manufacturing business and the ecosystem
around current fuel-powered vehicles (cf. Petrie 2012). evs use one or
moreelectricmotorsastheirpowersourceseitherdirectlypoweredfrom
externalpower station,orpoweredbyanon-boardelectricalgenerator.
evs includeplug-inelectriccars,hybridelectriccars,hydrogenvehicles,
electrictrains,electriclorries,andelectricmotorcycles/scooters.
Many countries are considering what electrification of their mobility
system in fact means. Furthermore, these countries are not completely
aware of their current industrial structure and how ev industry will
complement the existing industry architecture. ev industry needs an
ecosystemthatisabletodelivernecessarytechnologies,servicesandpro-
cessesthatfacilitate evs topenetratethemarket.Theecosystemconsists
ofbothpublicandprivateactors,buttheex-antepresumptionisthatpri-
vateactorsaremoredominantinthemakingof ev ecosystemworks.Tax
andenergypolicies arenot theleast of these issues, butareconsciously
framedoutsidetheanalysis.Inaddition,tradepolicyissuesremainvisible
inthebackgroundcontext.
ThepolicyoftheEuropeanUnionhasbeentopromoteelectrification
ofthemobilitysystem,althoughtherelateddirectiveonthepromotion
of clean and energy-efficient road transport vehicles leaves much room
for member states to apply (European Commission 2009). A particular
emphasisisputonpublicprocurementofvehicles,whichputsweighton
publictransportvehicles,e.g.busesorsomeothervehiclefleetsinpublic
service. On taxation or other promoting measures, the directive speaks
only little, and stays only on promotional level. If the policies are to be
efficient,specificandtargetedmeasuresneedtobetakeninordertomake
evs morelucrativeforbothconsumersandproducers.
Thispaperdrawsfromtheexistingbodyofliteraturesomeofthekey
challenges on the way of electric mobility. The structuring of the chal-
lenges summarizes existing research and points out whether the chal-
lengesaremainlyarisingfromthemarket,policyorbusiness,orwhether
theyhavemoreofatechnicalorsocietal(environmental)nature.Litera-
turebaseandsystemsmodellingareusedasresearchapproachestomain
researchquestionsthatarestatedasfollows:
1. Whatarethekeychallengesof evs’wideracceptancebythemarket
andconsumersandhowthesechallengescanbecategorized?
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TheElectricVehiclesEcosystemModel 255
2. What is the current electric vehicle ecosystem (or cluster) looking
likeandhowdothemainchallengesrelatetotheecosystem?
3. Canweidentifyprospectivedevelopmentpathsthatwouldpavethe
wayfor evs andspeeduptheelectrificationofthemobilitysystem?
Inordertoanswertheaboveresearchquestions,thestudyfocuseson
the ecosystem level view that comprises set of companies or industries
withtheirfunctions,roles,anddynamics.Firmlevelanalysisisexcluded
asitwouldrequirehigherresolutionfocusonfirms’businessmodels.The
researchprocesswasdividedintofoursteps:
1. Reviewing and clustering of the literature and disaggregating the
clusteredthemesintomajorchallengesregarding ev marketsbased
ontheresearchers’perceptionderivedfromtheliterature.
2. Identificationofrelevantactorsandstakeholdersandconstructing
ageneric ev ecosystemdescription.
3. Reflectingthemajor(butdisaggregated)challengesagainstgeneric
electric vehicles ecosystem (eve) and ‘mapping’ the challenges in
the eve architecture.
4. Concludingandpresentingsomeoftherelevantstepstoovercome
theidentifiedandmappedchallenges.
Methodologically, reviewing of the literature and extracting the rele-
vant key challenges that are on the way of mobility systems’ electrifica-
tionandbuildingvisualrepresentativemodelscanberegardedasheuris-
ticmodellingofthephenomenon(ev ecosystem),i.e.problemsolvingor
increasingtheunderstandingoftheproblem(FriggandHartmann2012).
The tree-like hierarchy of challenges built around clusters (i.e. themes)
arealogicalcontinuationofthismethod.Thedevisingoftheecosystem
descriptionisconstructiveresearchbynature.Weconstructtheecosys-
tem model in order to scale-down complex reality. In some countries,
the ecosystem model finds empirical objects that correspond to the el-
ements of the construct, but in some countries, the ecosystems are un-
developed or unconscious of the needed actions to be taken. Thus the
researchprocessconsistsofexploratorypart(literaturereview)andcon-
structive parts, which are partly heuristic (modelling of ecosystem and
challenges)andpartlyempirical(ecosystemdescriptionandanalytics).
The authors gathered literature on ev from year 2009 onwards. The
catchwasabout50articlesaltogetherpublishedinpeer-reviewedjournals
orotherwell-establishedreferences,fromwhichtheauthorsselectedthe
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256 Zulkarnainetal.
prominentones.Thekeyselectioncriteriawere(i)goodqualityjournals,
(ii) preference for holistic rather than focused theme and/or approach,
(iii)exclusionofexplicitlyvehicletechnology-focusedmaterial.
Aftertheinitialphaseoftheliteraturereview,thesourcematerialwas
clustered in four main categories of research: (1) consumer aspirations
and preferences, (2) ev policy deployment, (3) business models in ev
ecosystem, (4) environmental issues associated with evs. After review-
ing the references, the authors mapped conceptually the key challenges
that seem to be posing on wide-scale deployment and market penetra-
tionof evs.Fortheecosystemdescription,atypicalsystemsanalysisand
systemmodellingwasadopted.Onecanreferto‘amodel,’‘architecture’
or ‘a design,’ but in essence, the result is a visual illustration of the ev
ecosystemstakeholdersandhowtheybuildthevaluechainfor ev mar-
ket.Wecallthisthe eve (ElectricVehiclesEcosystem)model.Themodel
isalsoamorphologicalapproachinordertogiveshapeandstructureto
acomplexsocio-technicalsystem(Ritchey2002).
TheworkwasperformedaspartofFinland’s evs nationaltestsitepro-
grammethatcomprisesseveralsmall-scaletestsitesindifferentpartsof
thecountry(seehttp://www.tekes.fi).
LiteratureBrief
what are (business) ecosystems?
Businessecosystemsaddressbusinessopportunitiesthatrequireadiverse
set of capabilities to meet customer needs that are beyond the capabil-
ity of any single company (Carbone 2009). Compared to a single com-
pany,abusinessecosystemcaninvestmoreresourcesandtoleratehigher
risk through cost sharing, integrate broader set of diversified capabili-
tiesanddevelopbroadersetofproducts(IansitiandLevien2004).Busi-
nessecosystemsworkforincorporatingthenextroundofinnovationsby
(Moore1993)bringingsynergiesofdifferentcompaniesandpublicactors
togethertowardsacommoninnovation.Theecosystemperspectiveem-
phasisesactors’co-evolvingrelationshipsanddynamicnatureofbusiness
networks(HearnandPace2006).Thereisasharedfateoftheinvolved
actorsandneedtounderstandorganization’sownroleintheecosystem.
Themostrelevantandstrongactorsorstakeholderscouldhavethreeal-
ternative roles within the ecosystems: a keystone who improves overall
health of the ecosystem, a classic dominator who leaves little opportu-
nityforemergenceofameaningfulecosystem,oravaluedominatorwho
captures most value for itself leaving a starved and unstable ecosystem
ManagingGlobalTransitions
TheElectricVehiclesEcosystemModel 257
aroundit(IansitiandLevien2004).Actors’competitiveandcooperative
interactions advance the ecosystem coming up with new offerings and
satisfyingcustomerneeds(Moore1993).Thus,actorsinaco-evolutionary
relationshipactivateselectivepressuretowardsothersandinfluencecon-
sequently each other’s evolution (Corallo 2007). In an ideal ecosystem,
actors share resources, knowledge and technologies across the ecosys-
temprovidingbasisforholisticvaluecreationviatheecosystem(Hearn
andPace2006).Eachorganisationaddsitsdistinctaspectsofofferingto
thevaluegeneratedbytheecosystemandsharethetotalvaluecreatedby
theecosystem(Camarinha-Matosetal.2009).Productivityoftheecosys-
temscanbemeasuredbynetworks’abilitytoconsistentlylowercostsand
launchnewproducts.
Inemergingecosystems,suchasthe ev ecosystem,centralcompanies
typicallyfocusonworking togetherwithessential stakeholders,suchas
leadcustomers,keysuppliersandchannels,to:(1)definenewcustomer
valuepropositionsbasedoninnovation;(2)determinehowtodeliverand
implementthecustomervaluepropositions;and(3)designbusinessthat
servesthepotentialmarket(Moore1993). ev ecosystemhasbeencom-
petingagainstfuel-poweredvehicleecosystemforawhilewithoutsignif-
icantglobalsuccess,andmostlikelymuchduetothedominanceofkey
stakeholder,i.e.thevehiclemanufacturingindustry.Forotherstakehold-
ers,themarketandnegotiationpowerissignificantlylower.Thus,the ev
ecosystemisnotyetprovidinggoodenoughbusinesscasesforthemost
of the customers and, consequently, cannot capitalize its market poten-
tial (e.g. Petrie 2012). The grand challenge of the ev ecosystem in this
competitionistochangethisstatusquobycreatingcompellingcustomer
valuepropositions,which,byitself,facilitatetheemergenceandgrowth
of thriving global business ecosystem. At next, challenges related to ev
ecosystem performance are studied based on the literature to facilitate
the ev ecosystemdescriptionandanalysis.
selected evs studies and identified challenges
A number of studies on consumer views of evs will cover several as-
pects i.e. consumer willingness to pay, attitude and behaviour, aware-
ness,andpreferencesthatseemtobecrucialtopush evs intothemar-
ket.Hidrueetal.(2011),SkipponandGarwood(2011),Axsen,Kuraniand
Burke(2010),Lievenetal.(2011),Zhang,YuandZou(2011),andZulka-
rnainetal.(2012)have takenpartinsomestudies in termofconsumer
aspirationsandpreferencesofthe ev.
Volume12·Number3·Fall2014
258 Zulkarnainetal.
Hidrue et al. (2011) point out that in the us the consumers are con-
cerned with evs’ driving range and vehicles’ availability because of the
neededchargingtime.Inaddition,theconsumersseemtobeuncertain
onthepotentialfuelsavings,whichisoneoftheobviousargumentsfor
evs. Without subsidies, the battery costs are also considered too high.
Thesameconcernswereexpressedbytheconsumersinthe uk:driving
range, cost savings and charging options (Skippon and Garwood 2011).
Axsen, Kurani and Burke (2010) particularly raise the question on bat-
tery technology’s maturity and whether that meets the consumers’ ex-
pectations–theirresultspointouttheseexpectationswillnotbemetin
the near future at least. In Germany, a study by Lieven et al (2011) con-
cludedthatabout5ofthepotentialconsumerswouldbereadytochoose
ev as their primary car. Hence,the total volume of the market was not
thatsignificant,asthe5sharewouldbedividedbyseveralmanufactur-
ers. However, it must be noted that these figures might quickly change
over shortperiod. In China, the consumers’awarenessof ev options is
stilllimited,asreportedbyZhang,YuandZou(2011).Thisindicatesthat
theemergingmarketsmightnotbereadyforlargerscale ev penetration,
in particularif the market potential for conventional vehicles is still far
fromunsaturatedandthelevelofmotorizationstilllow.Zulkarnainetal.
(2012)pointoutthatthe ev industryisinitsinfancy,butpossessesgreat
potentialaccordingtomarketsurveysandbusinessintelligencereports.
The test sites are already emerging around the globe. Once the market
penetrationstartstotakeplaceseriously,theearlyactorsareinthebest
competitiveposition,iftheyhavebeenabletosuccessfullypilottheirown
concepts.
PerujoandCiuffo(2010),KangandRecker(2009),Camus,Fariauand
Esteves(2011),Schill(2011),Hongetal.(2012)andCrist(2012)havestud-
ied ev policyneedsandoptions.Thechargingof evs willnothaveany
significanteffectonannualenergyconsumptionaccordingtoPerujoand
Ciuffo(2010),butthedailyandhourlyelectricitydemandinturnmight
requiresomeregulationoratleastdemand-basedpricinginordertoeven
out demandpeaks. Camus, Farias and Esteves (2011) reachedabout the
sameconclusion regardingon-peakandoff-peakpricing, aswellasdid
Schill(2011).Peak-timedemandwillreducetheconsumersurplusof evs
frompurelyeconomicpointofview,eitherthroughpricingorincreased
needofsupplycapacity.Both,PerujoandCiuffo(2010)andCamus,Farias
andEsteves(2011)pointoutpositiveimpactson co emissions.Despite
2
of possible reduced economic gains due to sharper peak-time demand
ManagingGlobalTransitions
TheElectricVehiclesEcosystemModel 259
ofelectricityand/ordemand-basedpricing,thepublicsubsidiescanstill
pay-off from the societal perspective. Hong et al (2012) claimed that in
South-Koreawith1trillionwongovernmentsubsidytoservicesforgrid-
to-vehiclewouldresultinalmost2trillionwonofsocialwelfaresandad-
ditional2trillionincreasedprofitsforserviceoperators’profits.Intheir
analyses,theyincludedinsocialwelfare:(i)expansionofcharginginfras-
tructure,(ii)increaseinpeaktimeelectricitysales,(iii)fuelcostsavings.
Thelastmentionedwasactuallythemostexplicitbenefitfromthemacro-
economicviewpoint(asKoreaisanimporterofoil).Theyalsoincluded
externalities (co, co and no ) but did not price them. The most effi-
2 x
cientwayofmaximizingthesocialwelfarewastaxincentives.Crist(2012)
analyses the differencesbetween bevs and internal combustion engine
(ice) vehicles and finds out that under the French tax regime and sub-
sidy system the government revenues over the life cycle of the vehicles
arenotveryfarfromeachotherbutstillfavouring ices over bevs.Fur-
thermore,thecomparisonresultishighlydependableonhowandwhere
theinitialelectricityisproduced.
Recent studies on ev industry and business are presented by Kley,
LerchandDallinger(2011),SanRomanetal.(2011),andAndersen,Math-
ews and Rask (2009). Kley, Lerch and Dallinger (2011) identified three
sub-ecosystemsorcomponentsforthe ev ecosystemanddevisedanap-
proximate descriptive model for the ecosystem. San Roman et al (2011)
identified two roles or functions in the ecosystem that were needed for
efficientmarketstructure,whereasAndersen,MathewsandRask(2009)
showed that evs could be used as distributed electricity storages when
not in use. This in term would call for intelligent electricity grid. The
scarcityofthisliteratureisobviousbutunderstandableassomanytech-
nical issues remain to be solved and regulated. The ecosystem in itself
startstobevisible,evenifsomenewrolesorfunctionscouldbeneeded
inthefuture.
Browne,AllenandLeonardi(2011),Thomas(2012),Zackrisson,Avel-
lánandOrlenius(2010),andLucas,SilvaandNeto(2012)haveconducted
their own research regarding to environmental issues of the ev. At the
samewhen evs have great potential toreduce co emissions (Browne,
2
AllenandLeonardi2011,Thomas2012),Lucas,SilvaandNeto(2012)sug-
gest that ev energy supply infrastructures are more energy consuming
than those of conventional vehicles,’ when looking at the whole life cy-
cleofinfrastructures.Furthermore,thebatteries’lifecycleanalysisisstill
somewhat open, but more than 50 of the batteries’ carbon footprint
Volume12·Number3·Fall2014
260 Zulkarnainetal.
Maintenance
Safety
Services
Others Performance Topspeed
Payment
Drivingrange
Style
Consumer
acceptance
Highinitialprice
Chargingpointavailability
Runningcost Price Infrastructure
Chargingtime
Incentives/discounts
figure1 ConsumerAcceptanceChallenges
is generated by their manufacturing (Zackrisson, Avellán and Orlenius
2010).Therecyclingissueshavenotbeenyetthoroughlyaddressed.
Thesummaryofreviewedliteratureon evs ispresentedintable1.
BuildingtheHierarchyoftheChallenges
consumer acceptance
In this early stage of evs development, consumer acceptance is one of
criticalaspectsthatneedtobepaidattention.Anumberofconsumersur-
veys show a promising market for evs when there is a group of people,
called evs adopters,whohavewillingnesstobuy evs asnextgeneration
vehicles.However,somechallengescomingfromtheconsumerperspec-
tives are still present. Consumers still have some questions that call for
answersbeforetheyarereadytoadopt evs.Thesequestionsrelatetothe
price,performance,andinfrastructure,amongothers(figure1).
Astopriceaspects,thehighinitialpricetobuyanelectricvehiclestill
becomesoneofthemajorinhibitors.Thisismainlycausedbyhighbat-
terycosts–48oftotalprice(mec Intelligence2011).Moreover,therun-
ningcostforthe evs arestilluncharted.Incentivesprovidedbygovern-
mentshavebeenbroughtforthinseveralcountries,forinstancesin eu
environmentalzones(e.g.London,BerlinandStockholm)thatofferat-
tractive incentives for ev drivers such as: free public parking, allowed
tousebuslanes,noroadtaxesandfreeferrytransport.However,some
studiesindicatedthatthegovernmentincentives’impactontheadoption
of evs isstillrelativelylow(e.g.Diamond2009andJenn,Azevedoand
Ferreira2013).
Otherchallengesarecomingfrom evs’performance,i.e.safetyissue,
ManagingGlobalTransitions
TheElectricVehiclesEcosystemModel 261
Statedpreference,choiceexperiment,internetbasedsurvey Directexperience,question-naire,vignetteexercise Statedpreference,onlinesurvey Reviewofmarketsurveys,businessintelligencereportsandtestsites Consumersurvey,analysisonbatterytechnology Questionnaire Forecastingandsimulation
Hidrueetal.(2011) SkipponandGarwood(2011) Lievenetal.(2011) Zulkarnainetal.(2012) Axsen,KuraniandBurke(2010) Zhang,YuandZou(2011) PerujoandCiuffo(2010)
aryofReviewedLiteratureonevs wtpforevandtheirattributes:(1)Drivingrange,chargingtimeandfuelcostsaving;(2)Significantlydropbatterycostisrequiredtoattaincompetitivemarketwithoutsubsidy. Responsestobatteryelectricvehicles(bev):ukconsumerattitudesandattri-butionsofsymbolicmeaningfollowingdirectexperiencetoreducepsychologi-caldistance.(1)Wouldconsiderbevasamaincarifithas150milesrangeandasasecondcarfor100milesrange;(2)Willingtobuybevoverconventionalvehicleforequivalent3yearsrunningcostsaving;(3)Prefercredit/debitcardandelectricitybillaspayment. Whowillbuyelectriccars(Germanycasestudy):5oftotalbuyerwillchooseevastheirmaincar. Marketpotentialisstillprojectedtobesignificant,buttherealgrowthhasnotyettakenplace;testsitesareactivearoundtheglobe. Batterytechnologyisnotmeetingtheconsumers’expectationsconcerningthecosts,power,longevityandsafety. Analysingpublicawarenessandacceptanceofalternativefuelvehicles(ev)inChina.(1)Factorsinfluencingconsumers’purchasewillingness:purchasetimeandpurchaseprice;(2)LimitedacquaintanceofevsinChina-differentinfluencesonconsumerbehaviour. ImpactofevsrechargingactivitiesontheelectricsupplysysteminMilanfor2030timehorizon:(1)Inthefuture,withhighmarketpenetrationtheim-pactonannualenergyconsumptionwillquitenegligible;(2)Fordailyelectricpowerrequest,appropriateregulationisneeded(e.g.smartgrid) nextpage
table1Summ Consumerandmarketviewstoevs evpolicydeploymentandimpacts Continuedonthe
Volume12·Number3·Fall2014
262 Zulkarnainetal.
s
Activity-basedmodelling,simulation Simulation Gametheoreticmodel Socio-economiccostanalysi Conjointanalysisandsimu-lation
KangandRecker(2009) Camus,FariasandEsteves(2011) Schill(2011) Crist(2012) Hong,JeongandLee(2012)
uedfromthepreviouspage Potentialenergyprofileimpactonphevsdeploymentintheus:(1)Circuitupgradesbringfasterchargingtimeandlesschargingtimedifferencebetweenphev20andphev60;(2)Homechargingandpublicchargingbenefitstoservetraveldistanceandmileageconversiontoelectricity. Impactevspenetrationonloadprofiles,electricityprices,andemissionforscenario2020inPortugal:(1)Electricitypricesof20cents/kWhforhighhydroproductionandpeakhoursscenariowith2millionevs,andenergycostsof5.6cents/kWhforlowhydroproductionandoff-peakhourscenario;(2)Upto10emissionreductionareobtained.co2 Theeffectsonprice,welfare,andelectricitygeneration:(1)Uncontrolledve-hiclerechargingcouldincreaseeveningpeakloadsandprices;(2)Arbitragecapabilityofunusedbatterywillsmoothelectricitypriceandincreasecon-sumersurplus;3)Increasedutilizationofgeneratingtechnologiesbecauseofcontrolledloadingofevs. ComparisonofbevsandicesshownogreatdifferencesingovernmenttotalrevenueswhenanalysedunderFrenchtaxregime;thelife-cycleemissionsbetweenbevandiceareslightlyinfavourofbevs. Ex-anteevaluationofprofitabilityandgovernment’ssubsidypolicyonv2gsysteminKorea:(1)Themaximumprofitforav2gserviceproviderwillbe1.27trillionKoreanwon/yearwithanannualsubscriptionfeeof0.65millionKoreanwon;(2)Thegovernmentsubsidyof1trillionKoreanwon,givenannu-ally,willincreasesocialwelfareby1.94trillionwonandalsoboosttheprofitofvehicle-to-gridserviceproviderto1.98trillionwon.
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