Research investments are pressuring profits, but new revenue opportunities are on the horizon


Electric vehicle investments and global competitors are pressuring margins

Today, entry-priced electric vehicles (EVs) are often loss leaders for OEMs, with models priced for profit out of reach for many consumers. At the same time, environmental regulations are leading OEMs to invest heavily in EVs. As North American and European companies push consumers toward environmentally sustainable transportation, their bottom lines could pay a price: 85% agreed that the research and development cost of transitioning to EVs will be a substantial risk to the industry’s profits for the next five years.

Our industry’s biggest challenge when it comes to electric vehicles is to develop an electric car that is as affordable and convenient as a traditional internal combustion engine automobile.”

Anonymous respondent, Vice President of Marketing

Chinese EVs are leading the pack

Adding pressure is an emerging competitive threat: Chinese OEMs are years ahead of their global peers in terms of consumer adoption, mass-market pricing, manufacturing cost, and technological innovation. According to Forbes: “The most underestimated aspect of Chinese EV makers is that they have the benefit of scale, with the China market about twice the size of Europe. Consequently, manufacturing cost is significantly lower, companies can innovate faster, and they can reach profitability sooner. Even the basic Chinese models contain advanced connectivity and driver-assistance features.”

The automotive industry in China is years ahead of anyone in this space, in terms of EV production, charging technology, and connectivity. That will become a point of competitive advantage and price differentiation as well.”

Matthew Simpkins, Automotive Regional Vice President (UK and EMEA), Salesforce

Subscriptions and partnerships offer new revenue opportunities

As companies race to develop reliable, safe, and affordable EVs, they are turning to subscriptions and partnerships as revenue generators: 68% of OEMs and 62% of retailers are already investing in Internet of Things (IoT) applications such as Apple CarPlay and smart home devices. Captive finance companies are also exploring new ideas, like giving customers the chance to buy use-based insurance products, allowing them to streamline the purchase of extra lease miles online and bundle financing and maintenance into a single payment for commercial purchasers.

Auto Finance: In the context of connected vehicles and expanding adoption of electric vehicles, what are the new business models and partnerships that your company is investing in?

OEMs and Retailers: In the context of connected vehicles and expanding adoption of electric vehicles, what are the new business models and partnerships that your company is investing in?

In the context of a connected vehicle ecosystem, which external industry partnerships would provide the best customer experience?

A LOOK AHEAD: Out-of-sector businesses spot a new EV revenue opportunity

As EV adoption grows globally, the pressure is on companies to solve concerns related to vehicle affordability, charging station availability and compatibility, and the harmful environmental impact caused by mining battery minerals. As companies in the industry adapt to new incentives promised by the Inflation Reduction Act, some out-of-sector businesses are already jumping on a new growth opportunity.

Some retail companies are installing EV charging stations at locations throughout the U.S. The goal? Attract Gen Z and millennial customers who are more likely to drive EVs and make purchasing decisions based on a product’s sustainability. Giving customers the opportunity to charge their vehicles as they shop for groceries or buy a cup of coffee, they reason, will drive loyalty — and revenue for years to come.


It will also be interesting to see how EV drivers may benefit by charging overnight at lower rates, and then potentially ‘selling’ back their excess energy to utilities.”

Vicki Poponi, Vice President and Automotive Industry Advisor, Salesforce

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