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  • Writer's pictureMike Entner

Accelerated Obsolescence in EV Go-To-Market Strategies

By Michael Entner-Gómez | Digital Transformation Officer | Entner Consulting Group, LLC.

Planning for the "Smartphone Effect" in Automotive

The average ownership period for a conventional vehicle typically ranges from 6 to 8 years. In the case of used vehicles, this duration tends to be shorter, around 4 to 6 years, for reasons that are fairly evident. These ownership timeframes often correlate with factors like financing agreements, advancements in vehicle technology, and the desire for reliable, trouble-free driving experiences. It's reasonable to assert that traditional vehicle design and production don't witness significant changes within these periods, as the automotive industry generally operates on development and production cycles of 5 to 8 years. However, the emergence of electric vehicles (EVs), with their accelerated technology cycles and heightened competition, suggests a potential shift in these timelines. We might anticipate either a considerable shortening of these cycles or more frequent iterative updates. This raises critical questions about the obsolescence of EVs, particularly how it affects residual values and the market's acceptance of older technology. Factors like range, safety, charging efficiency, and overall convenience are key considerations. I foresee what I call the 'smartphone effect' in the EV market, where the cycle of purchasing and trading in vehicles could drastically shorten, driven by consumer appetite for the latest and greatest in technology. This trend will necessitate a significant shift in the go-to-market strategies of automotive manufacturers to prevent the proliferation of what might be termed 'EV graveyards.'

A Moment of Reflection

Let’s face it, the whole point of EV is a desire to combat climate change (whether you support the view or not), and the resources that go into EVs are not derived from limitless sources. Electric vehicle production is heavily reliant on materials such as lithium, cobalt, and nickel, which are finite and require environmentally impactful mining and processing methods. This paradoxically places a burden on the very environment they aim to protect, highlighting the need for sustainable practices in their production and recycling. So, an accelerated consumption cycle in which assets are naturally depreciated more quickly significantly impacts the entire automotive supply chain, calling for a radically different approach to market strategies. This shift not only pertains to manufacturing and sales but also encompasses aspects like sustainable sourcing, efficient recycling systems, and developing models for longer-lasting EVs that can withstand the rapid pace of technological advancements without becoming quickly outdated.

An answer I typically hear is that software-defined vehicles (SDVs) will hedge this effect by allowing OEMs to deliver updates to vehicles, addressing feature shifts and technological deficiencies. As a proponent of SDV architecture, I support this view in theory, but there are a few problems with it. Firstly, a vehicle is not a computer that can be updated to something newer, better, or different without buying new components, because that level of abstraction with the hard components of the vehicle doesn’t exist nor is it likely to reach that point.

For instance, in battery technology, while software may enhance certain vehicle aspects, it cannot substitute for physical components such as a battery pack. When new technologies like solid-state batteries emerge, software updates might enhance battery efficiency, but they cannot replace the inherent limitations of the existing hardware. Secondly, SDV architecture is in its nascent stages and is far from reaching its full potential, with the current state akin to being in the 'stone age' of its development. Thirdly, OEMs and Tier-1s often don't spec out vehicle technology with longevity in mind, lagging behind the more advanced technologies and ecosystems found in smartphones. 32-bit processors, anyone? This underscores a significant gap in the SDV approach, where hardware limitations can't be simply 'updated' away.

Part of the challenge with rapid technological obsolescence in EVs could be mitigated by allowing EV technology to evolve along a natural technology development and adoption curve. However, with governments and politicians actively intervening, this process has been significantly accelerated, letting the proverbial horse out of the barn. As a result, we're likely to witness several generations of vehicles and supporting infrastructure that fall short of the ideal 'sweet spot' of efficiency and functionality. Over time, as EV technology stabilizes, we may observe a slowdown in technological obsolescence, similar to the trend seen with smartphones. Yet, it's crucial to remember that, much like smartphones, EVs are not just about practical functionality; they also serve as status symbols. This aspect of consumer behavior, driven by the desire to own the latest and most prestigious models, will continue to play a significant role in the market dynamics of electric vehicles.

A Shifting Go-to-Market Strategy

The current go-to-market strategy (GTM) in the automotive industry largely revolves around traditional sales models, leveraging dealership networks, and marketing campaigns focused on vehicle performance, reliability, and brand prestige. This approach has been successful for decades, capitalizing on consumer familiarity with internal combustion engine (ICE) vehicles and a relatively stable technology development cycle. However, with the rapid evolution of electric vehicles (EVs) and the emerging challenges of technological obsolescence, a shift in GTM strategy is imperative.

The new GTM strategy must embrace the dynamic nature of the EV market, focusing on the accelerated technology life cycle and the 'smartphone effect' on consumer purchasing behavior. This strategy should not only market EVs as eco-friendly options but also emphasize their state-of-the-art technology, regular software updates, and potential for future upgrades. The strategy should incorporate flexible ownership models, such as subscription services or attractive trade-in options, to accommodate the faster turnover of EV models. It must also address the need for comprehensive after-sales services, including battery management and recycling, which are crucial in the EV ecosystem. Essentially, this new GTM strategy should position EVs not just as vehicles but as integrated, technologically advanced solutions that align with the rapidly changing expectations and values of modern consumers.

The current landscape in the automotive industry reveals that, apart from Tesla, most OEMs have yet to substantially address the shifts occurring due to the rapid evolution of EVs. While Tesla has made strides, notably with its initiative to offer its own insurance tailored to its vehicles, other OEMs seem to lag in recognizing and adapting to these changes. This inertia stands in contrast to the dynamic environment of the EV market.

Tesla’s move to provide specialized insurance, despite yielding mixed results, represents a tangible effort to tackle the unique challenges inherent in the EV sector, particularly those related to insurance premiums driven by high repair costs and advanced technology. This initiative indicates an understanding of the broader needs of the EV ecosystem and the necessity of integrating solutions that transcend traditional automotive frameworks.

On the other hand, the broader industry's response, or lack thereof, highlights a significant gap. Many traditional OEMs continue to rely on established go-to-market strategies, primarily focusing on vehicle performance, design, and brand reputation, without adequately addressing the nuances of the EV market. This includes factors like the need for innovative ownership models, sustainable production and recycling practices, and strategies to manage the fast-paced technological turnover characteristic of EVs.

As the EV market continues to expand and consumer preferences increasingly lean towards technologically advanced and environmentally sustainable options, it becomes imperative for OEMs, other than Tesla, to reevaluate and modify their approaches. Adapting to the new realities of the automotive market is not just a matter of staying competitive, but it is also essential for meeting the complex and rapidly evolving demands of the industry.

Recycling and the Secondary Market

Confronting the potential "disposability" of EVs – a scenario that seems counterintuitive to their carbon footprint reduction proposition – requires an acknowledgment of the need for comprehensive recycling strategies, especially as we consider an accelerated depreciation cycle. This includes not only the recycling of batteries at the end of their lifecycle but also designing EVs with the intention that their entire contents can be recycled. This approach mirrors the current trend in the smartphone industry, where devices are often disposed of when their batteries fail. However, this contradicts the environmental benefits EVs are supposed to offer. Just as some, like Apple with its certified refurbished smartphones, replace batteries rather than discard the entire device, the EV industry must adopt practices where the entire vehicle can be refurbished or its components recycled. The implementation of battery replacement and refurbishment programs, along with vehicle design considerations for end-of-life recyclability, could significantly mitigate the environmental impact of EVs.

The secondary market for electric vehicles (EVs) is a burgeoning sector within the automotive industry. It includes the resale of used EVs and extends to trading used EV batteries for energy storage or other applications once their vehicle use diminishes. Additionally, the market presents opportunities for refurbishing and upgrading older EV models, particularly with new battery systems or software enhancements. This is critical in extending the usability and value of EVs, especially in light of a potentially faster obsolescence rate.

In determining the value and functionality of used EVs, a key aspect is the development of reliable methods for measuring battery depletion. Accurate diagnostics of battery performance are essential for a transparent and informed secondary market. The ongoing improvement of battery technology and its recyclability is crucial for enhancing the attractiveness and sustainability of EVs in the secondary market.

Another important element is the establishment of independent repair facilities capable of servicing EVs outside of factory warranties. These facilities are vital for post-warranty support and make used EVs a more viable option for consumers. They reflect the industry’s adaptation to the rise of electric mobility, ensuring that EVs remain a practical choice in the secondary market.

The development of the secondary market for EVs, addressing their unique needs, indicates a major shift in automotive go-to-market strategies. This is not just about supporting the lifecycle of EVs; it’s a pivotal move towards aligning with environmental goals and promoting sustainable transportation solutions. As this market matures, it will play a crucial role in how electric vehicles are perceived, managed, and valued, reinforcing their position as a sustainable and practical long-term investment. This evolution is a clear response to the challenges of technological obsolescence and environmental responsibility, marking a significant transition in how electric vehicles are marketed, sold, and supported throughout their entire lifespan.

Government’s Possible Influence

The interplay between government policies and the future outlook of electric vehicles (EVs) is a critical factor in understanding the dynamics of accelerated obsolescence in EV go-to-market strategies. Government policies and incentives play a pivotal role in shaping the EV market, potentially accelerating the pace of technological advancement and market adoption. Incentives such as subsidies, tax rebates, and stringent emissions regulations can hasten the introduction of newer, more sophisticated EV models. As a result, these interventions can lead to an even shorter lifecycle for EV models, as newer, more advanced vehicles quickly supersede existing ones.

Understanding these government influences and future projections is crucial for automakers as they navigate the EV market. They need to anticipate not only the technological evolution but also the regulatory shifts that could drastically alter market dynamics. This foresight is essential for developing effective go-to-market strategies that are resilient, adaptable, and aligned with the fast-paced nature of the EV sector. As the market continues to mature, these strategies will play a vital role in determining the success and sustainability of EVs in the face of rapidly changing consumer and environmental landscapes.

Closing Thoughts

Looking ahead, the trajectory of the EV market suggests a continual rapid evolution, influenced by both technological advancements and regulatory landscapes. Predictions about future market trends indicate a sustained push towards more efficient, high-performing EVs, driven by advancements in battery technology, charging infrastructure, and vehicle autonomy. This trend will continue to compress product life cycles, reinforcing the trend of accelerated obsolescence.

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