Who's winning the electric vehicle race?

Oil-rich Texas is an unlikely spot for an electric vehicle demand surge. But John Luciano, general manager of a Volkswagen dealership in Amarillo, says his customers are juiced about EVs, suggesting the market might finally emerge from niche status nationally. "If there is interest in Amarillo, Texas—which is truck country—there is definitely interest," he says. Automakers are banking on it. Billions of dollars are flowing into the sector, with Ford, General Motors, Nissan, Honda and other big auto brands making grand pronouncements about their electric vehicle ambitions. Volkswagen Group, whose brands include Audi and Porsche, last week announced it will launch an estimated 70 new electric models in the next 10 years—up from its previous 50-model projection—accounting for 22 million vehicles globally. Audi last month ran a Super Bowl ad touting its claim that one-third of its new models will be electrified by 2025. "A thrilling future awaits. On Earth," the ad boasted. Rising EV Sales Percent of total U.S. vehicle sales BEV = battery electric vehicle PHEV = plug-in hybrid. Source: Cox Automotive via InsideEVs.com, HybridCars.com and Kelley Blue Book Automotive Insights. But there could be plenty of chills along with the thrills as brands look to overcome long-held consumer concerns about EVs. These include their relatively expensive pricetag when compared to similar gas-powered models, and so-called "range anxiety," which refers to fears of being stranded, out of power, with no charging station in sight. Technological advances, including investments in charging infrastructure, will quell some of the angst. But it will be up to marketing departments to get the word out with advertising that reaches beyond tree-hugging EV loyalists or wealthy, tech-obsessed buyers—all without overspending on a sector that remains unpredictable. "It's very much a build-it-and-they-will-come belief that's going on now, which is very difficult," says Mark Wakefield, a managing director at global consulting firm AlixPartners. The firm projects that automakers will spend $260 billion on EV development in the eight-year period that began in 2016. "The marketing spend will start to follow," Wakefield says. But because the segment has been so small—and largely unprofitable—brands so far "haven't really wanted to do the 'why-buy-now' bottom-funnel marketing," he says. A tipping point could come in 2022, when the cost of owning a battery electric vehicle will finally be on par with owning a gas-powered one, according to a report by Deloitte published earlier this year (before VW made its production forecast). This will help spur global EV sales to reach 21 million vehicles annually by 2030, up from just 2 million last year, the report predicts. Governments are playing a role. Twenty global cities, including Paris, plan to ban gas- and diesel- powered cars by 2030, according to Deloitte. The regulation situation is cloudier in the U.S., where the Trump administration last week proposed ending the $7,500 consumer tax credit on purchases of new electric cars. Presently, the credit phases out once an automaker sells 200,000 EVs, a level that GM and Tesla have already hit. Brand battles With so many models in the pipeline, Deloitte projects a global supply glut of 14 million EVs by 2030. The supply-demand imbalance could lead to intense brand battles in the years ahead, with advertising playing a key role. In the U.S., Tesla has been winning the EV war, without much competition. The trendsetting electric vehicle maker accounted for 80 percent of the 239,492 battery electric vehicles sold in the States last year, not including gas-electric hybrids, according to figures provided by Kelley Blue Book. While total EV sales jumped from 105,949 in 2017, the segment still only accounts for about 2 percent of total auto sales. And Tesla has stumbled trying to enter the mainstream market, leading to a cash crunch. In late February the company announced it was closing almost all its stores in a cost-cutting move meant to fund a price cut on the Model 3, its first mass-market EV, to the long-promised $35,000 level. (The starting price had most recently been $42,900.) Days later Tesla reversed course, saying that it would indeed keep some stores open but would raise prices on its more expensive Model S and Model X vehicles. Wealthy buyers have fueled demand for those vehicles, a factor that has led competing luxury brands like Audi, Porsche, Jaguar and Mercedes to step up their EV plans or risk losing clout with affluent buyers. "They want in. They have seen Tesla eating into their sales," says Tim Fleming, a forecaster at Kelley Blue Book, of the luxury automakers. Tesla broke through by mostly shunning traditional advertising, unless you count the seemingly daily headlines garnered by its mercurial CEO, Elon Musk. "They have already built a very strong brand," says Autotrader analyst Michelle Krebs. But marketing could play a bigger role as the luxury EV market heats up. Krebs expects established brands to do more traditional advertising, but asks, "What is Tesla going to do? Certainly, they don't have the kind of money that an Audi or a Porsche has to do that kind of advertising." Calming the range anxiety Audi's marketing push comes as it prepares to launch three battery electric vehicles—part of its new e-tron series—in the next three years in the U.S., beginning with an SUV that has a $74,800 starting price. Marketing includes influencer deals with Judner Aura, who runs a YouTube page reviewing tech products that has more than 2 million subscribers. A recent video shows him test-driving an e-tron at a car-racing resort in Spain. Audi is also planning TV ads for the SUV, which will hit dealers in the second quarter. Loren Angelo, VP of marketing for Audi of America, declined to reveal details, but says, "What we want to do is dispel some of the myths around EVs." Range anxiety and lack of charging infrastructure are the top two consumer concerns limiting EV growth, according to an AlixPartners survey. But according to the Deloitte report, fears will fade with the next generation of battery electric vehicles, with new models capable of getting anywhere from about 250 miles to 620 miles per charge. Audi says its e-tron SUV gets 160 miles after 30 minutes of high-speed charging. The brand touts a partnership with Amazon Home Services in which buyers can sign up to have an electrician install a home-charging unit. For e-tron buyers, Audi is giving away 2,000 miles worth of charges at sites run by Electrify America, which is building a nationwide network of such sites, expected to number 484 across 42 states by July. Audi parent Volkswagen formed Electrify America in 2016 as part of a legal settlement related to VW's diesel scandal, in which it had installed devices on diesel cars to cheat on emissions tests. Environmental vs. practical Electrify America is also shoveling millions of dollars into a brand-agnostic electric vehicle awareness campaign. The group earlier this month tapped San Francisco agency Eleven to oversee a 30-month, $62 million marketing effort that begins in July. Mike McKay, chief creative officer at Eleven, suggests the best ad approach is to lean in to practical points—such as the fact that most EVs today look like normal cars—rather than to play up environmental benefits. "Everyone is aware that the electric car is better for the planet. I think that job is done," he says. Honda—whose goal is to generate two-thirds of its global sales from electrified vehicles, including gas-electric hybrids—also favors a practical approach. "A lot of it is just simplicity in the messaging," says Susie Rossick, assistant VP of Honda national and regional marketing. Honda recently began an Electrification Education program that includes dealership point-of-purchase kits "so we have something next to the vehicle that speaks English, that doesn't speak technology," Rossick says. On its website, Honda runs a quiz to help people pick the right electrified car—a hybrid or fully electric one—based on factors like where buyers live. Currently, Honda only sells its all-electric Clarity in California and Oregon—where charging stations are widely available —while its hybrids are available nationally. In the meantime, Hyundai is prepping a "green family" campaign that will debut later this year. It will combine Hyundai's multiple hybrid and electric models as well as its hydrogen-powered Nexo fuel cell SUV. "We feel that from an efficiency standpoint, a messaging standpoint, we've got to roll everything up into a family to show some breadth and width of the offering," says Dean Evans, chief marketing officer at Hyundai Motor America. Volkswagen of America has yet to outline marketing details for its forthcoming EV onslaught, which includes a line of vehicles under its new I.D. sub-brand. "Given the importance of EVs to the brand, we plan to put significant dollars against marketing efforts," a VW spokesman stated in an email. Crafting VW's EV marketing future was a key part of the automaker's recent global ad agency review. Last month, Johannes Leonardo was named the automaker's lead shop in the U.S. In Texas, VW dealer Luciano says there's a lot of chatter about VW's I.D. Buzz, modeled after the classic Microbus. It won't hit the market until 2022. "I've been doing this 38 years and it's been a long time since I've seen the interest in a vehicle like I've seen with I.D. Buzz," he says. Once a skeptic about EVs, Luciano is now sold. "There are many people who will never drive them. But there are just as many people who think it is the only way to go."

Who's winning the electric vehicle race?

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