THE RISE OF THE ELECTRIC CAR

One of the most notable social trends affecting consumer behavior is the idea of going green. As climate change and environmental concerns increase in their seriousness and impact, consumers seek to buy green products that might help mitigate or combat the problem. In response, many companies are developing new green products—including electric cars. The first electric car actually was built in 1891, but it lost popularity when Henry Ford introduced the gas-powered Model T. Electric cars regained consumers’ interest as Toyota developed its Prius in the late 1990s. The original Prius actually was a hybrid, powered by both gas and electricity; its success prompted other companies such as Honda, General Motors (GM), Ford, and Chevrolet to innovate their own hybrid models, as well as some all-electric versions. By the early 2000s, though, all the major automakers had terminated their all-electric programs. It was not until 2006, when Tesla Motors revealed its Roadster, that a modern version of the all-electric car became a distinct and appealing possibility.

Tesla remains the gold standard for electric cars. The Model S all-electric sedan is the top-ranked ultra-luxury vehicle. Yet its high price has kept the brand from being a very widely purchased car. For example, a new Tesla Model S 75D starts at $75,700, and models with longer ranges without recharging start at $98,700.71 Even if more customers might want to purchase an all-electric car, few of them can afford a Tesla. In response, Tesla innovated a less expensive entry model, the Model 3, that starts around $35,000.72 In parallel, other companies have released their more economical all-electric options: the Chevrolet Bolt starts around $37,000 and offers a battery life comparable to that of the Tesla Model S.73 General Motors also recently decided to compete with Tesla directly. One of Tesla’s greatest advantages has been its over-the-air software, which automatically and regularly updates the cars’ software when they are plugged in overnight. Recognizing that it already installs OnStar Page 170as a safety service standard on any GM vehicle, GM has found a large fleet of connected cars at its disposal already. Therefore, it plans to use OnStar as a means to compete directly with Tesla’s software.

Furthermore, GM’s latest all-electric car seeks to do more than address just the problem of climate change; it wants to help drivers overcome the problem of congestion in cities. Its all-electric E100 will cost only $14,000 before incentives; with the incentives, the paid price drops to close to $5,000.75 But it is being launched only in China, under the company’s Baojun brand. The Chinese car market is the largest in the world, and the electric car segment is the largest growing segment in China, due in part to the subsidies and incentives offered by the national and local governments. Accordingly, China already makes up 40 percent of the worldwide electric car market. The E100 has been designed specifically to meet the needs of consumers living in Chinese cities, in that it is compact, seating only two adults, and easy to maneuver in the heavily populated streets. Furthermore, its top speed is 62 miles per hour, and its battery can last for about 96 miles, and then takes only about 7.5 hours to charge. It might not be an ideal option for someone living in a rural area who needs to travel long distances, but it is perfect for a city dweller. Finally, although the car does not cost much to own, the E100 still provides some key luxuries: the interior features a digital dashboard, a seven-inch touchscreen center console, and Wi-Fi capabilities.

Launched in China by General Motors, the inexpensive Baojun electric car is designed to overcome the problems of congestion in cities. Imaginechina via AP Images Within the week of its announcement, more than 5,000 people had registered to buy the first 200 models of the E100, spurring the company to make another 500 cars available quickly. Although the E100 will be available only in the Guangxi region of China in the immediate term, GM plans to expand its availability throughout the country as soon as possible.

  1. Discuss how specific environmental issues examined in this chapter impact the development and sale of electric cars.
  2. Which market do you believe will be more successful, Tesla in the United States or GM’s E100 in China?
  3. Defend your answer.

Sample Solution

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