EV Infrastructure over AV Pipe Dreams — Auto Industry Regroups on Tangible Goals
Unpacking the ripple effects of EVs going mainstream and the shift in priority in mobility innovations
From the increasingly digital in-car experience to the latest developments in EVs and driverless technologies, various factors are transforming the mobility industry from an ownership-driven, lifestyle industry to an on-demand, accessible, and sustainable service.
As a significant milestone, during Q2 of 2022, the number of connected cars surpassed that of non-connected cars for the first time ever, accounting for about 50.5% of all vehicles on the road worldwide, according to Counterpoint Research’s estimates. Looking ahead, the number of connected vehicles in service is forecast to reach 367 million globally in 2027, up from 192 million in 2023, according to a new study from Juniper Research.
The past year has been a great year for electric vehicles (EVs). In 2022, global EV sales were up 7%, equating to around 2 million units, from 2021’s figures, according to data from Morgan Stanley. Furthermore, current projections from the International Energy Agency (IEA) suggest that by 2030, more than 60% of vehicles sold globally will be battery-powered.
Part of the reason for EVs breaking into the mainstream auto market is thanks to an evolving idea of what auto buyers value. The definition of luxury in mobility has evolved to be less about premium seat fabrics and more about the vehicle’s performance and in-vehicle technologies. EVs are not only attracting younger car buyers that want their cars to have the best infotainment system available, but also luxury car buyers looking to upgrade their in-car experience.
Ride-hailing services like Uber and Lyft are also doing their part to push for the switch to EVs. For example, Uber started providing an EV ride option in select cities, named Comfort Electric, in May 2022, in addition to an Uber Green initiative aimed at recruiting more EV drivers and encouraging existing Uber drivers to switch to an EV. Rival Lyft also has similar EV incentives, which include an earnings bonus for California drivers, and EV charging discounts to drivers nationwide.
Even rental services are jumping on the EV trend as well, further providing a low-barrier way for EV-curious buyers to have a first-hand test-drive experience. For example, Hertz has announced it aims to upgrade one-quarter of its fleet to EVs by the end of 2024. Other than giving consumers what they want, EVs are also cheaper for rental companies to maintain and repair. Hertz’s own research found that EVs are between 50 to 60% cheaper to maintain than gasoline-powered cars. In particular, this comes from the fact that electric cars have fewer moving parts than combustion engine cars.
EVs going mainstream has caused three major reactions in the mobility innovation space: a cool-down on AV development, a re-energized rush to develop EV charging infrastructure, and a brewing battle between the car OEMs and tech giants over the in-car operating system. Let’s take a look at them one by one.
Shifting Priority Away from Autonomous Vehicles
In contrast to the mounting momentum of EVs, 2022 turned out to be a year of setbacks for the development of autonomous vehicles (AVs). Six years after companies started offering rides in what they’ve called autonomous cars and almost 20 years after the first self-driving demos, there are still few real self-driving vehicles on the road. Blame Elon Musk for the inflated expectations in the industry around when a level-5 AV may hit the road when he was over-hyping Tesla’s development timeline — at this point, he’s probably too mired in running Twitter and ruining Tesla’s brand reputation by association to care.
Still, the bottom line becomes excruciating clear in 2022: we are still a long way off from making fully autonomous vehicles at scale. With such realization, investors grew impatient with the pace of driverless-car development. As a result, many automakers had to pull back plans for AV development amid new pressure to curb expenses during an economic slowdown.
Ford and Volkswagen both recently scaled back on their autonomous-vehicle efforts, pulling the plug on their joint investment in driverless-car firm Argo AI. Similarly, AV delivery startup Nuro laid off 20% of its workforce, and two leading AV tech suppliers announced a merger. Earlier last year, Cruise recalled all of its self-driving vehicles after one car’s inability to turn left contributed to a crash in San Francisco that injured two people. Even Apple has reportedly backed off its plan to develop self-driving tech for now.
That said, not everyone has fully given up on developing self-driving cars — some stakeholders are holding fast and kept pushing for AV deployment. As of November, Waymo said it is sticking to its plan to launch 24/7 driverless rides to members of the public soon, starting in San Francisco and Phoenix. Meanwhile, Lyft and Motional plan to offer driverless taxi rides in Los Angeles, which will be the second city to get the service using Hyundai’s Ioniq 5 autonomous EVs.
Still, at the end of the day, these isolated tests won’t turn the industry-wide tides on AVs. 2023 could be the beginning of an industry-wide shakeout in which the leaders in this space go full on EVs to corner an emergent category that has the potential to replace the entire existing industry. In order to achieve that transformation, however, the EV industry will have to branch out from cars to the supporting infrastructure.
Building the EV Charging Infrastructure
For EVs to keep their current momentum and fully become the vehicles of choice for mainstream consumers, range anxiety is still a major adoption hurdle for EVs that needs to be addressed. 62% of EV owners say they are so anxious about their EV range that their travel plans have been affected in 2022, per a study cited by Forbes.
Of course, there are other adoption hurdles as well, such as price and car options, but those will likely improve in time. Meanwhile, EV range and charging capability likely won’t improve drastically in the near future, due to the innovation bottleneck of battery technology. Therefore, upgrading the existing road and energy infrastructure has unsurprisingly become a top priority for the auto industry.
Global charging stations are expected to balloon from around 2 million in 2020 to over 40 million by 2030, per estimates of Extrapolate. Of course, that upgrade won’t be cheap: hardware, planning, and installation for public charging could cost more than $35 billion through 2030, per a McKinsey study. And that’s where brands and advertisers come in.
Starbucks, for one, wants to become the gas station of the future. With 15,000 locations across the U.S., the coffee chain is aiming to convince EV owners that it’s the perfect place to charge up. In a pilot that ran in late 2022, the company partnered with Volvo and ChargePoint to install EV chargers in its parking lots along a 1,350-mile route from Denver to Seattle, with stops available roughly every 100 miles. Starbucks plans to test usage rates and then decide whether it wants to expand the service nationally. Could Starbucks replace the gas station convenience stores? Only time will tell. But it is certainly a smart move for the coffee chain to try.
Amazon also continued its push into the auto space with a partnership with EVgo, a leading charging station provider. Through this partnership, Amazon customers can access over 150,000 U.S. public charging stations listed on PlugShare via Alexa. This integration will also allow drivers to pay for charging using Alexa in compatible EV models.
Of course, auto brands are paying attention too. At CES 2023, Mercedes announced its plan to partner with EV charging station provider ChargePoint, Mercedes plans to invest more than 1 billion euros to establish a global network of over 400 fast charging stations, starting in California and Nevada, which will be open to non-Mercedes EVs as well.
The growing EV charging infrastructure presents important media opportunities for brands. For starters, charging stations are often located in high-traffic areas such as shopping centers and highway rest stops, providing a captive audience for local businesses to advertise to. Many Many charging stations are created with built-in touch screens that can be used to show interactive ads or even stream branded content. There are also sponsorship opportunities where companies can sponsor charging stations or place their branding on them.
The current rapid charging time for most EVs hovers around 30 minutes on average, which presents brands with longer-form content opportunities to reach an audience waiting for their cars to refuel. Early entrants like Volta Charging and Meridian are already taking advantage of this space, creating engaging digital out of home experiences, incorporating dynamic visual content, and serving addressable promotions directly to the nearby consumer.
Of course, the media opportunities are not just limited to the time spent waiting at the electric pump. The battle for the in-car dashboard OS is just heating up as well.
Battle for the In-Car Ecosystem
With the incoming wave of people switching to EVs, more cars will become connected cars over the next few years, which will massively increase the audience reach of digital media in cars. A McKinsey study found that 37% of survey respondents suggested they’re eager to switch to cars with increased connectivity, and nearly half of premium auto consumers have an interest in exploring the digital capabilities of their new cars, which would translate to expected shipments of connected cars to approach 76 million units by 2023.
As a result, the fight over the in-car ecosystem rages on, more fiercely than ever. A renewed focus on conquering the dashboard operating system among the automakers, especially in the face of increased in-vehicle connectivity and cars emerging as the next new battleground for media time. From Sony teaming up with Honda to develop their own EV brand Afeela, to the likes of Samsung and LG announcing their respective in-car platform, everyone wants a piece of the “in-car attention” pie.
Beyond video content, gaming services are also starting to sneak into the backseats of some newer models. In December 2022, Tesla rolled out a software update, adding support for cloud-based game service Steam on the 2022 Model S and X. Similarly, Nvidia announced at CES that it is bringing its cloud gaming service, GeForce Now, to the backseat screens of select new vehicles from Hyundai, Swedish EV brand Polestar, and Chinese automaker BYD.
Most of these in-car systems will have to compete against mobile-oriented Android Auto and Apple CarPlay, not to mention that Apple is rumored to be working on its own EV as well. We’re only at the beginning of legacy car makers clashing with tech giants for the control of the dashboard experience — not to mention all the data they generate and collect. The winner of this battle will not only have a chance to directly build a long-term customer relationship, but also get to dictate the brand opportunities in connected cars.
While tech companies may leverage its outsider perspective to deliver a better in-car infotainment system, the software-based approach to car design could also lead to new types of business models. The recent backlash to Mercedes-Benz introducing a subscription fee for access to increased acceleration on some of its EV models shows the potential for consumer resistance and frustration among car owners.
In conclusion, whether it was in-car dashboard innovation or EV charging solutions, the primary focus of the mobility industry has evidently shifted from chasing the pipe dreams of autonomous vehicles to a far more practical and immediate goal — building an ecosystem to support the rapid transition to EVs. Now we are all dealing with the ripple effects of this pivot for years to come, with plenty of emerging media opportunities for innovation-minded brands to test and learn from.
If you want to learn more about the emerging EV ecosystem, or want to chat about the future of mobility and how to future-proof your business, please reach out to Josh Mallalieu, VP of Client Services, (josh@ipglab.com) and ask for our latest category disruption report on this topic.
