EV market analysis - Porsche Mission E

Business Model Innovation in the electric automotive industry Porsche Mission-E

Team

driEV

Bartesaghi Stefano (878503), Bonfiglio Roberto (871999), Capozzo Mattia (875420)

External Analysis – STEEP (1/) SOCIAL •

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Team

Urbanization: urban population is expected to grow to 84% by 2050 from 72% in 2007  challenge for urban transportation which has to face more needs of individual mobility, traffic and pollution Decentralization: within urban area, suburbs have developed  high number of brief journeys from periphery to center. More cars per family and prevalence of lone rides for study or work.

Aging of population: over 60 tend to travel more; this trend is reinforced by improvement of health and quality of life.  need of safer transportation Green customers: growing segment of the market looking for eco-friendly products, favored by education and culture.  possible success of products that define a social status (i.e. ethical person, aware of environmental issues), which eventually can become a trend.

Millennials (born between 1980 and 2000) impact: 2,56 billion by 2020, of which 37% in India and China. Characteristics: intensive use of technology, internet, mobiles, web services… they like customizable products that can make them feel special.

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Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – STEEP (2/) TECHNOLOGICAL • Classical batteries (lithium) price is lowering.

• Development of high performance batteries in terms of weight, energy density, charging time, autonomy (graphene).

• WiTricity: wireless energy transfer for recharging.

• Modular production: more flexible concept that increase economies of scale advantages.  Battery swapping • Development of fast charging stations.

• “SmartCar”: smart rearview mirrors, connectivity, V2V, V2I, self-driving, automation, onboard intelligence, design for the driver’s experience…

• High performance materials applied to the automotive sector.

ECONOMICAL • Modest global growth. Labor market strengthens, more spending power due to low energy cost.

• Low inflation in advanced economies • Decline in commodity price, especially oil.

• Weak global trade and investment with limited advancement in labor productivity and wages  Fiscal policies implemented or projected in order to boost domestic consumption • High financial risks due to policy uncertainty • Low interest rates opportunity for governments to spend

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – STEEP (3/) ECOLOGICAL (impact of the production…no combustion and carbon fossils but…)

• Demographic growth • Climate change and pollution, and consequences on oceans and water, biodiversity, human health…  Kyoto protocol. Limit global warming under 2° C. • Deforestation • Mining impact

POLITICAL • Emerging economies are in struggle, especially limited growth in China • Geopolitical tensions: Terrorism and heightened conflict in the Middle East ( immigration policy). Anti-establishment parties in Europe. Rivalries among leading nations.

• USA elections: Donald Trump • Incentives for EV

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – STEEP (4/) IMPACT ON EV BUSINESS? • • • • • • • •

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Paris agreement’s minimum target of 1.5° C reduction of global warming rate  high positive impact.

Change of behaviors and awareness of environmental issue  positive impact Technological innovation for batteries and charging  positive impact Decreasing price of batteries, and in general more affordability of the cars  positive impact Incentives  positive impact Oil price fall and oil demand raise in developing countries (especially India and China)  negative impact.

Trump  possible negative impact on USA incentives. Unlikely.

Modest economic growth and possible increase of spending power  positive impact

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Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – Porter (1) 1) INTENSITY OF RIVALRY (medium-high) In automobile industry there is a huge amount of players and level of competition is one of the highest. However, EV can be considered a separate reality, with a fewer number of player, although many car companies nowadays have electric projects underway.

The industry’s growth projections are quite high, and this could lower the aggressiveness of competition, which is strong because of the innovation speed of the firms and the low switching costs.

Fixed costs are generally high, so economies of scale are important. Anyway, exit barrier are relatively low because assets can be used for other purposes or sold, and there are not particular exit costs.

million car sales in 2015

Suzuki

2,88

PSA

2,97

Honda

4,58

FCA

4,74

Ford

6,64

Hyundai-Kia

7,76

Renault-Nissan

8,53

GM

9,84

VW

9,93

Toyota

10,15

0

Team

driEV

5

10

15

Authors: Bartesaghi, Bonfiglio, Capozzo

EV Market Big expected growth in next decades

All these EV cars will need EV charging stations!

EV VEHICLES

EV CHARGER

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

EV Players Tesla - key player (37%) 2008 - started selling premium electric cars • 2012 - boom with the building up of an extensive fast-charging network free for Tesla owners.  possibility of charging non-Tesla vehicles through adaptors  open Tesla’s patents to its competitors for rapidly evolving technology  Strong focus on innovation (self-driving) and batteries (Gigafactory with Panasonic) •

Chevrolet (LG Chem)

7000

Mitsubishi (GS Yuasa) 6000

MWh car battery sold

Volkswagen (Panasonic) 5000

Renault (LG Chem)

4000

BMW (Samsung)

3000

BAIC (BPP/CATL)

Nissan (AESC)

2000

BYD (BYD) 1000

Tesla (Panasonic)

0 1st semester 2016

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BYD (21%) Chinese manufactures focused on low cost cars and buses (not considered in statistics)

Other traditional car manufactures (Renault, BMW, Mitsubishi, Chevrolet…)

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – Porter (2,3) 2) THREAT OF NEW ENTRANTS (medium-weak) Entry barriers are high because of the high costs of assets, investments, economies of scale, brand development costs.

However, automotive industry is in a very critical phase, Mckinsey identified 4 disruptive forces in automotive (diverse mobility, autonomous driving, electrification, and connectivity) that can help the ascent of new entrants.

The Tesla case is an example of how new companies can successfully gain a relevant position in few years. A possible future threat comes from companies like Faraday Future with very high investments and resources that can afford to develop really innovative products and new mobility solutions.

For example the launch of Tesla Model S in 2012 had a great success and in 1 year has overtaken Panamera’s sales.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – Porter (2,3) 3) THREAT OF SUBSTITUTES (medium) Besides the traditional substitutes of the automobile industry (trains, buses, bikes…) and the internal combustion cars themselves, there is only a small number of substitutes like hydrogen cars or compressed air cars. These products are not a big issue, they are inefficient and yet investigational products. However, the impact of Internet of Things on mobility can ve bery high and new mobility solutions can be pursued thanks to new self-driving technologies.

Many tech-companies (Google, Apple…) and start-ups (Navya, NuTonomy, Comma.ai…) are developing new concepts of mobility that can revolutionise the traditional automotive industry.

In near future sport cars are quite safe from this threat because of their exclusivity, but in future there will probably be fewer people with a driving license interested in using a traditional sport car on a daily basis. The challenge in this hipotethical future is to be able to catch the emotional customers’ side providing an attractive driving experience to these new customers.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – Porter (4) 4) BARGAINING POWER OF SUPPLIERS (medium) Traditional supplier are quite numerous but there are high-switching costs because establishing part designs and specification requires a fair initial investment.

A particular attention for EV market is the relevance of batteries suppliers, that are quite concentrated in few Japanese companies. In particular Panasonic holds now nearly 46% market share in automotive industry and is the main leader in battery technology. The importance and cost of batteries for EV make the bargaining power of their suppliers quite high

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – Porter (5) 5) BARGAINING POWER OF CUSTOMERS (medium) Private individuals, commercial companies and governments are the primary buyers of cars.

Buyers usually have high degree of choices since there are no/little switching costs and differences from a vehicle to another.

Today many buyers collect information on the internet and are often really informed about car’s characteristics, performances and also possible defects. They can be highly influenced by marketing campaigns but also by scandals and recalls for defects.

As a consequence it is possible that market trends lure large shares of the buyer market from one auto-maker to another.

The threats of new mobility solutions and the diffusion of car-sharing solutions put traditional car-makers backward distant from the final customer.

The risk of this trend is really high because these companies with bigger orders has an higher bargaining power than traditional private customer and downsizes traditional car-makers.

For example Daimler AG decided to come directly in this market with car2go for urban mobility avoiding this risk.

Nowadays car sharing and similar solutions are basically on city-cars or small low cost vehicles for an easy urban mobility. In future a similar approach can be applied also for higher-level vehicles.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

External Analysis – segmentation and buyer SEGMENTATION AND BUYER ANALYSIS JUST GETTING AROUND: car perceived not as a status symbol but only as a mean of transportation point to point. Interested in low price, special deals, small cars without optional. They are more likely to switch among brands.

FAMILY CAR: established family with children in the household. They need large, safe and comfortable cars.

Interested in features that benefit the family needs (larger seats, drink holders, entertainment…)

SOCIAL STATUS: interested in the social benefits of a particular brand. They want to communicate their careers and success buying more expensive cars. Brand is more important than the features.

ENVIRONMENTALLY AWARE: concerned with the impact on the environment of the vehicle they purchase.

Consumption features are important as well as the brand which has to be seen as eco-friendly.

SECOND FAMILY CAR: both parents working or with teenagers driving. Interested in low price alternative of the first vehicle or in low price one for the first teenager’s owned car.

QUALITY: interested in technically advanced cars. More interested in the features than the brand.

OFF ROADERS: they search a vehicle for a particular purpose, such as driving off road, and they are interested in the features that enhance those particular performances that affect the purpose.

What segments does Porsche target? Social status, quality.

What segments should Porsche Mission E target? Social status, quality, environmentally aware.

Often, people environmentally aware are also interested in communicate their behavior and life style, and they are not in contrast with the social status segment.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

Internal Analysis Differentiation strategy Why is a Porsche attractive and different from its competitors?

o Well-respected Brand Always in Top Brands’ ranking and well-known in automotive for its history and tradition of +80 years. Owning a Porsche is a unique experience (Porsche Club) and 911 is an icona.

o Street-legal racecar - "Race on Sunday, drive on Monday“ (motto in 50s) “Engineered for magic, everyday” (2011 campaign) Porsche cars are perceived as high-performance vehicles, but still enough reliable and comfortable for everyday usability. The 2011 campaign aimed to reinforce this perception attracting also females and young clients o Innovation and Quality Porsche’s engineering and design capability are well valued by its clients.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

Positioning: perceptual map SPORT CAR

EXCLUSIVE and SPECIAL CARS EVERYDAY CAR

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

Positioning: competitors How to differentiate with its competitors: o Premium brands (BMW, Audi, Mercedes..)

COMMON

DIFFERENT

Reliability Attention to details and finitures Comfortable cars for everyday use

Less Sport-oriented Less exclusive Broader vehicles range

o Sport brands (Ferrari, Lamborghini…) COMMON

DIFFERENT

High performances Driving pleasure Drivers – club experience

o Tesla

More exclusive More Track-oriented Less adapt for everyday use

COMMON

DIFFERENT

High performances Comfortable cars for everyday use

Less reliable Innovative DNA: only full-electric Hi-Tech approach: «car as a smartphone»

Porsche has also many others competitors like - Jaguar (more luxury/comfort oriented), - Aston-Martin (tailor-made approach) - japanese sport models (of Honda, Nissan, Lexus) that can guarantee high performances with lower price vehicles and high level of innovation but without an high level of exclusivity

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

Positioning: competitors Porsche in past years has well competed with others traditional automakers. But Tesla is new!

Tesla, besides producing only-electric vehicles, has promoted some great challenges in automotive like: • On-line selling • Software-focus (i.e. wi-fi software updates) • Self-driving system development In general Tesla push towards a disruption in car industry, based not only in EV and battery technology but also on a new hi-tech car concept.

Tesla’s R&D investments are really high (18% revenues, 2015) and it is trying to grow and spread around with more affordable vehicles (i.e. Model 3).

Tesla’s STRENGHTS • • • •

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Focus on future: R&D and new technologies Unique EV expertise Special access to batteries technology (Gigafactory) Innovative and less expensive customer relations (online selling, few advertising campaigns…)

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Authors: Bartesaghi, Bonfiglio, Capozzo

Tesla’s WEAKNESSES • • •

Vehicle hacking risk Electronic/IT unreliability (i.e. autopilot incidents) Manufacturing issues and high costs

SWOT STRENGTHS - Strong brand image for sports car - Customers’ loyalty - Engineering expertise - Unique driving and club experience - Part of 2° world car group (VW) with an extensive sales network - wide portfolio (6 models)

WEAKNESSES - Little expertise in EV - Reputation damage (VW Dieselgate) - Not seen as innovative player, but as a traditional one

THREATS

OPPORTUNITIES - Growing EV market - International expansion - Attract new clients (younger) - Portfolio broadening - High margins on particularly exclusive EV cars

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driEV

- Alienation of traditional clients interested in noisy ICE - Well-established competitors (Tesla) with highly innovative an disrupting approach - New technologies (i.e. Toyota hydrogen car) - Technology disadvantage (battery costs)

Authors: Bartesaghi, Bonfiglio, Capozzo

BUSINESS MODEL - Canvas KEY PARTNERS

KEY ACTIVITIES

VALUE PROPOSITION

• Battery and charging-stations manufacturers

CUSTOMER CUSTOMER RELATIONSHIP SEGMENTS

• Integrated product • Porsche Mission E • dedicated and development personalized personal assistance • standard setting (Porsche Club •Others auto-makers experience) First full-electric • Energy companies Porsche with top performances, • Governments exceptional driving KEY RESOURCES CHANNELS experience and • Long-run batteries • Porsche dealers high tech features.

• Ultra-Fast-charging and showroom network • Porsche website + guaranteed ultra• Product and app fast charging development • Charging stations network available app • R&D to all Ev. • Brand

• EV

and enthusiasts • Porsche clients

car loyal

• high-end customers interested in medium-long journeys by car

COST STRUCTURE

REVENUE STREAMS

R&D, manufacturing, purchasing, charging network

Car selling, additional driving experiences (Porsche championships)

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo

Porsche Mission-E Future steps: CHARGING STATIONS NETWORK (Hubject, EVA+…)

The development of a wide fast charging network is essential for Ev’s diffusion. Porsche is involved in many projects in defining charging standards (also according to new charging technologies) and in building up an extensive end effective network.

PORSCHE EV models Build up experience in EV for being ready for the transition from internal combustion to full electric maintaining a Porsche identity with its design, its performance and the driving experience. Improve the overall trip experience of both the driver and the passengers ADDITIONAL SERVICES: - Porsche Smart Mobility: develop solutions for guaranteing high-level mobility services to the most demanding customers of future’s smart cities. Possible concierge-style call program, competing with Uber, car2go at the higher level thanks to Porsche brand.

- Porsche Driving Experience Center – driving as a hobby: Improve and increase the number of Porsche’s driving experience centers satysfing owners’ desire of speed in an attracting and exclusive environment. With self-driving car, driving will become a costly hobby.

Team

driEV

Authors: Bartesaghi, Bonfiglio, Capozzo