Gauging the future of electric vehicles

Even with growing demand, can the auto industry sell enough cars to make it worth its while?

This story was originally published in the Spring 2022 issue of strategy

By Will Novosedlik

There’s the Nissan Ariya. The Ford Mustang Mach-E and its F150 Lightning. The Audi Q4 e-tron. The Mercedes EQS. The Toyota bZ4X. And perhaps the cutest of the bunch, Volkswagen’s ID van.

These are just a handful of electric vehicle (EV) models that automakers have committed to producing through 2030 as part of a $515 billion investment. According to analysts, the shift toward the market is unlike anything the industry has seen before.

“This is a huge battle right now and for years to come,” says Robert Karwel, senior manager, power information network, J.D. Power & Associates. “Canadians have been spending about $45-$50 billion on new vehicles every year for the past three years. About 3% were specifically EVs. There is a very long way to go, if the end-goal is to dramatically increase EV penetration.”

One of the earliest entrants was Nissan, which launched its Leaf in 2010 and is set to debut its second EV, an SUV crossover, called Ariya, in Canada by Fall 2022. “Consumer demand [for EVs] has been overwhelming,” says Ken Hearn, director of marketing at Nissan Motor Corporation of Canada. “We displayed [Ariya] in a space at Yorkdale Mall called Nissan Studio, and in February we launched an online reservation system where you could pay a deposit and place an order. We sold out in two weeks.” But even with an increasing level of demand, will the industry be able to sell enough product to make it worth their while?

“The fear is that people won’t buy EVs quickly enough or in enough quantity, and that the OEMs [original equipment manufacturers] will suffer massive financial losses because of the investment they plowed into the tech,” says Karwel. “So the government will have to step in, in greater amounts, to ensure that not only do OEMs invest to build EVs and batteries, but that consumers will be there to buy those EVs.”

The other issue is supply. According to Karwel, average pricing and dealer profits are increasing, vehicle incentives are decreasing, and retail velocity is quickening. The country doesn’t have enough new gas-powered vehicles for the current level of demand, he says. And EVs, in particular, will be hard-hit going forward with the multitude of global logistics issues and sourcing of metals, materials and microchips.

And then there’s competition. With so many models arriving at once, it won’t be easy to differentiate. Nissan has the advantage of being first to the market a decade ago, so it can build its messaging around trust. The “Electric Cars for Electric Drivers” commercial running in the U.S. right now does exactly that, betting on heritage and the number of miles that have been driven by Nissan EVs, like the Leaf, since 2010.

The other challenge is infrastructure. Canada only has a total of 7,108 public charging stations, 44% of which are in Quebec, 27% in Ontario, 18% in BC and 11% across the other seven provinces. So the country has a long way to go.

Thankfully, batteries have greatly improved over the last few years. For instance, the Nissan Ariya’s top range on a single charge is 482km, a number that will vary with driving speed and ambient temperature. Technically that means you can drive from Toronto to Ottawa on a single charge.

Auto advertising has long been focused on aesthetics and performance. That won’t change with EVs. And it won’t be much different than weaning consumers off meat: the most successful strategies rely on how closely the taste and texture of plant-based protein resembles the meat they’re trying to emulate. But with cars, there is an added purchase driver: the price of gas. And with the situation the world is in right now, 2022-23 could drive a lot more EV purchases.