Fine-tuning the EV sales pitch

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One concern with electric vehicles is simply the novelty of the technology. Although in many ways electric engines are less prone to breaking down, your neighborhood mechanic won’t have much experience fixing them, should the need arise.” –Bryan Hansel, CEO, Smith Electric Vehicles U.S.

There’s been a big push of late to foster wider adoption of all-electric vehicles in the U.S. – especially where light-duty commercial trucks are concerned.

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Luminaries such as FedEx Corp.’s Chairman, President and CEO Frederick Smith are trying to get the government to help fund what would be a $120 billion plan over eight years, mainly through tax credits, to get seven million “grid-enabled” vehicles on America’s roads by 2018. [Now, because such incentives as vehicle tax credits are dependent on how many vehicles are purchased, $120 billion over eight years represents the maximum if all of the plan’s goals are met.]

Smith is particularly concerned about the national security ramifications of our heavy reliance on imported oil to fuel everyday life.

“It is my belief that after terrorism and the proliferation of weapons of mass destruction, our increased dependence on petroleum represents the biggest single threat to our nation’s economy and national security,” he said in testimony before the U.S. Senate Subcommittee on Energy and Water Development back in February this year.

“Oil is the lifeblood of a mobile, global economy. We are all dependent upon it, and that dependence brings with it inherent and serious risks,” he stressed. “In 2008, Americans consumed nearly 20 million barrels of oil a day – one-fourth of the world’s total. We imported 58% of the oil we consumed, leading to a U.S. trade deficit in crude oil and petroleum products that reached $388 billion – 56% of the total trade deficit.”

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At the crux of America’s oil dependence, Smith said, is the energy demand of the transportation sector. Transportation accounted for almost 70% of American oil consumption in 2008, he noted in his testimony. Cars and trucks were 94% reliant on oil-based fuel for their energy, with no reliable substitutes immediately available in anything approaching sufficient quantities.

That’s why Smith is co-chairman of the Energy Security Leadership Council – a coalition of business executives and retired national security leaders formed in 2006 who believe that U.S. our dependence on oil, much of it imported from unstable and hostile regimes, poses an unacceptable economic and national security threat.

He’s also joined the Electrification Coalition, formed late last year, which is a group of business leaders that represent the entire value chain of an electrified transportation sector and are committed to promoting policies and actions that facilitate the deployment of electric vehicles on a mass scale.

[You can view some of his remarks below at the coalition’s “kick off” meeting in November 2009.]

Smith returned to Capitol Hill this week to testify before the U.S. House of Representatives as part of a panel dubbed Clean Energy Policies that Reduce Our Dependence on Foreign Oil, pointing out for instance that a 2009 RAND Corporation study places the cost of defending the U.S. foreign oil supply routes at between $67.5 billion and $83 billion each year.

[You can read more about Smith’s testimony here in a good story filed by Bartholomew Sullivan with The Commercial Appeal newspaper out of Memphis, TN.]

Yet a more fundamental question remains to be answered in all of this – how do you convince fleets, much less the average motorist, to make the switch from the petroleum powered internal combustion engine to an electric vehicle?

“Even as the technology and manufacturing hurdles are cleared, concerns remain over consumer acceptance. It’s a real issue for those of us in electric vehicle industry,” said Bryan Hansel , CEO of Smith Electric Vehicles U.S., an all-electric commercial truck maker based out of Kansas City, MO.

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“Convincing customers to throw out a proven technology for an unknown technology, no matter the practical benefits, requires a bit of patience, certainly,” he explained. “It also requires rethinking how we, as producers of these cleaner vehicles, do business. Instead of waiting for the public to demand electric over diesel, we must realize that the old ways of selling vehicles might be part of the problem.”

He thinks part of the reason the “sales pitch” needs to change is that many of the technological and practicality problems afflicting the electric car market – like range and acceleration – don’t cross over to electric commercial trucks.

“With many commercial trucks having regular routes of 50-70 miles or less, an electric truck can operate all day on a single charge,” Hansel said. “Our plan calls for something different. So we’re looking at a new decentralized manufacturing model that will allow us to manage the total customer experience over the full lifetime of the vehicle – building new production facilities in 20 or so markets nationwide.”

[Here’s a walk-around of Smith’s all-electric truck shot last year during a special roll-out event in Washington D.C.]

Don’t mistake these facilities for dealerships, he stressed. What they’ll be are miniature production plants where customers can actually watch their electric truck assembled right in front of their eyes, as well as a place to service them.

“One concern with electric vehicles is simply the novelty of the technology. Although in many ways electric engines are less prone to breaking down, your neighborhood mechanic won’t have much experience fixing them, should the need arise,” Hansel noted. “That’s why we want our customers bringing their electric trucks in for service to the same location where we built and they bought them. We want our customers to understand the production process and trust the people who are making, selling and servicing their trucks.”

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He added that the electric truck models Smith builds – dubbed “Newtons” – don’t require “Detroit-style” scale production factories.

“While the technology might be advanced, the production process is far simpler,” Hansel explained. “From the day we finalize a site, we believe we can have the facility up and running in 120 days, with minimal capital expenditure of between $3 and $5 million. Each site will have the ability to produce up to 1,250 trucks each year per shift, with a maximum of three possible shifts.”

Hansel’s hope is that this “decentralized production process” should address customer concerns about investing in something different.

[Here’s Hansel’s take on why all-electric trucks should appeal to fleets.]

“Customers may already know that an electric truck is better for the environment and will save money on gas. But how does it handle? How do I care for it? Does it go up a steep hill? By bringing the customer closer to the product, we aim to demystify electric vehicle technology,” he added.

“We in the industry can’t meet this new technology with a ‘business-as-usual’ attitude,” Hansel noted. “It’s our job is to rethink how we build, sell and maintain them.”

That will indeed be critical if electric vehicles are to become a viable transportation alternative in the U.S. for motorists and commercial fleets alike.

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