Electric vehicles might charge up business opportunities

Otso Massala

GM has announced that it will launch 20 new electric vehicle (EV) models. Volvo Cars announced that, within a few years, every Volvo automobile will have an electric motor. Ford reported significant commitments to all-electric vehicles.

Tesla’s order book is swelling beyond half a million EVs.

And so the news continues.

Few EVs are on the roads now. Chevrolet Volts, Nissan Leafs, Teslas and other EVs represent 0.3 percent of the nation’s car and truck population.

In some scenarios, the growth of EVs is considered a threat to traditional business sectors. That worry looks premature. Traditional businesses have time to adapt and, for the foreseeable future, gasoline- and diesel-fueled vehicles are expected to remain the mainstream.

What business opportunities are opening in case the EV fleet expands rapidly?

Infrastructure will need to be built and maintained in public spaces and homes. Operating a charging station gives a chance to invoice for energy, access and speed. Because charging typically takes at least 20 minutes, the providers of charging spots are creating a captive market and can advertise and sell an almost unlimited variety of goods and services.

Providing EV charging points might increase tourism from EV travel to popular destinations. Perhaps hotel guests who once selected a hotel based on Wi-Fi speed will use an EV charging point as new criteria.

Charging will be invoiced, and charging systems might create opportunities for selling subscriptions, collecting data and cross-selling. Connecting large-capacity car batteries to the grid could provide storage capacity for technically advanced businesses, and that could be used to level variations in energy use.

There also are opportunities related to equipment itself.

Chargers and cars need to be built and sold. Tax-credit-based financing may arise. EVs can be used for creating a distinctive image for an organization. EV retrofits might even emerge.

Battery technology, specifically, is in a key position. The EV supply chain starts with raw materials and includes a number of parties. Lithium-ion batteries require lithium and cobalt. New battery technologies need to be developed. There will be repairs and maintenance. Batteries are taken out of service when capacity has decreased to 60 to 80 perent of optimal level. Someone will need to dispose of or repurpose them. Rescue solutions for drivers with empty batteries could become necessary.

The lower operating cost of electric vehicles creates other opportunities.

Currently the cost of operating a fully electric vehicle corresponds to the cost of operating a combustion-engine car with a gasoline price of $1 per gallon. Cheaper driving and potential self-driving enable lower-cost transportation of goods and people. Sharing and renting cars becomes more attractive when cost is based more on buying a car and less on mileage.

It is possible that EVs will remain insignificant players in the car and truck population. However, it is also possible that something will make EVs more attractive. It could be a breakthrough in battery or charging technology. It could be a gradual change combining several factors, such as improved charging networks, increased concern about air quality, lower production costs, higher gasoline prices, increased movement into densely populated areas or improvement in self-driving capabilities.

Choosing the right time to get involved in EV is a key decision for many businesses. Today may be too early. Next year might be too late.

According to data from charging infrastructure provider ChargePoint, Pennsylvania demonstrated the seventh-fastest EV population growth among the states in 2016. At Shippensburg University, we created a few potential EV population scenarios. If we assume the annual growth rate of new EV sales remains constant, we conclude the EV proportion of the total car fleet grows to 3 percent within the next 10 years. Under this scenario, there will be more than 7 million EVs — and a lot of business opportunities.

If the proportion of buyers attracted to EVs would grow gradually from 1 percent to 25 percent, the EV fleet could grow to 26 million and to 10 percent of total vehicle population within the next 10 years. That’s 50-fold growth compared to the status quo.

Most likely the businesses positioned to benefit from that growth would be doing well.

Perhaps even very well.

Otso Massala is an associate professor and director of the Charles H. Diller Jr. Center for Entrepreneurial Leadership and Innovation in the John L. Grove College of Business at Shippensburg University in Shippensburg, Pa. Email him at OAMassala@ship.edu.