Local Design & Global Dreams

Local Design & Global Dreams

Emerging Business Models Shaping the emergent electric Vehicle Market

Associate Professor Morten Rask, Professor, PH.D. Poul Houmann Andersen, Assistant Professor Mai Skjøtt Linneberg , Aarhus School of Business, and Professor Poul Rind Christensen, Kolding School of Design, have written this peer reviewed Conference paper for the 34th Annual Macro Marketing Seminar, June 2009, Norway.

Abstract
Electric cars hold the potential to completely alter the interrelationship among actors in the automobile industry architecture. As such they may not only be able to alleviate environmental externalities but also revolutionise the automobile industry as such. This paper is concerned with the processes of industry creation for the electric car industry, which is a particular fascinating topic matter as it allows the analysis to provide an understanding of the processes of innovation and of some of its inventors in concert. In continuation of this, the aim of this paper is to describe and analyse which emergent business models and corresponding value capturing capabilities can be found in the emerging market for electric cars.

Introduction
Over the past decades the negative impacts of transport on the environment have developed into a general accepted problem or discourse depicting a growing concern for our environment (Van Wee, 2007). Concomitant to this growing concern, industries are pushed to become more sustainable. With respect to the car industry, current dominant measures to reduce the demand for car usage have concerned assessments of how to reduce car use rather than reducing the environmental impact per car (Gärling & Loukopolos, 2007) and consequently there exists no standard solution for sustainable car usage. Accordingly, as part of the growing awareness on sustainable development, changing the core technologies of cars as reflected in the emerging electric car industry appears to hold promises for a more sustainable automobile usage. Such developments are in alignment with the general growing concern of the population as well as among politicians. This is also reflected by the increasing interest taken in the electric car by automobile manufactures such as General Motors, Chrysler and Ford, who are part of the growing set of stakeholders on the global scene which may form the future industry of electric cars.
Edison constructed an electric car as early as 1881, but in spite of the technology of electric cars having existed for more than a century, attempts to construct a market for electric cars have never gained convincing success. However, along with an increased institutional pressure from political bodies as well as normative pressures from research, more novel attempts of innovation appear to have the potential to create a “disruptive” or Schumpeterian innovation (Henderson & Clark, 1990), where the linkages between core actors are changed and core concepts constituting the vehicle and fuel provisions are replaced.
Entrepreneurs emerging with novel ideas on how to design the electric car industry hold the potential to completely alter the interrelationship among actors in the automobile industry architecture, including end users. Although sustainable technological alternatives such as bio fuels rival this development, there are strong forces in favour of developing a technological
infrastructure around the electric vehicle. It appears to potentially hold promise of not merely being able to alleviate environmental externalities, but also revolutionise the automobile industry as such. Therefore, shifting to more emission free technologies is an industrial change which marks a classic disruption or discontinuity in an industry. One of the focal interests with respect to such disruptions is the questions of which market participants hold the largest probability of being able to define the business models of the future, or in other words which capabilities will frame the future market. Industrial rivalry and competition remains at the core of this problematic.
This paper is concerned with the processes of industry creation for the electric car industry, which is a particular fascinating topic matter as it allows the analysis to provide an understanding of the processes of innovation and of some of its inventors in concert. In continuation of this, the aim of this paper is to describe and analyse which emergent business models and corresponding value capturing capabilities can be found in the emerging market for electric cars.
The analysis takes its point of departure in the most prevalent stakeholders in a Danish context. Hence, although many global firms are found among the stakeholders in the emerging industrial field of electric car manufacturing, and scope economies are decisive for capitalising on the investments in this new technology, the competitive battles are fought on a more local basis. Local market access is necessary, since particularly in the early phases of developing electrical cars into a viable alternative to fossil-fuel based private transportation, systems call for massive investments in public infrastructure. Evidently, the range of the batteries is decisive for the geographical scope, which will change over time according to the technology of the battery. From the demand side, market conditions differ, for instance with respect to energy availability. Denmark constitutes an interesting lead country for the
development of an electric car market. First, Denmark has a surplus of electricity production, given problems relating to integrating surplus energy production from wind power plants into the existing consumption pattern. Moreover, Denmark is a small and highly developed country, where private transportation needs (i.e. work commuting) are critical and take place over distances which fit well with the operative charging range of electric vehicles. Finally, Denmark, despite its limited size and lack of critical mass regarding relative consumer purchasing power, has a very visible profile in the environmental debate and therefore appears to constitute an excellent demonstration market.
The paper is structured as follows. First, a general theoretical framework for understanding competitive organising of business activities in emerging industries is presented. Secondly, general data on Denmark for the development of an infrastructure based electrical vehicle is presented. Thirdly, in the analysis strategies followed by relevant stakeholders are typified and analysed according to the dimensions developed in the theoretical section. In the final part of the paper, we discuss implications including how diverse strategies may lead to rather different futures once the industry moves from a nascent to a more mature phase.
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