“Combining expansive space and head-turning good looks. With an exceptional electric driving range of up to 300 miles, the KONA Electric gives you the best of both worlds – with no compromises.” That Hyundai’s promise referring to the KONA car, the first electric car to be assembled in Nigeria.
How will electrobility impact Africa in the next decade or two? Are we ready?
The KONA SUV is 100 percent electric, comes with zero-emission, and can be charged both at home and workplace (assuming charging points are available). And I smell disruption in the air. I sense cynicism as you read that but it is ok. This is not the first time disruption had happened in transportation.
Not too long ago around 1900, very few predicted automobiles will eventually displace commuting’s mainstay at the time; horse-carriages. Cars were too expensive, they broke down often, and the roads back then were not suitable (This last bit is still applicable depending on where you live though). The belief back then was that cars will only remain a curiosity and only rich people would be able to afford them. But alas, 50 years after, cars eventually replaced horse-carriages.
It’s clear that change is coming but it’s not clear exactly what it’s going to look like, what it will require, and when it will eventually set off for the car industry. This is what disruption looks like! Mastering the disruptions that are coming—taking advantage of the new opportunities that are opening up—will mean taking some creative, calculated risks. By taking such risks, firms will be able to avoid the fate suffered by formerly successful organisations that business schools have often cited in many case studies, books, and journals.
And by the way why electric? To reduce emissions, tackling global warming in the process. The automobile industry is at the maturity stage and obviously at the risk of being “disrupted.” In this stage, firms are increasingly focused on doing the same old things more efficiently. Just think about the innovations like the start-stop system found in virtually in most models of car manufacturers now.
And new technologies and processes have already started emerging like self-driving cars. Like cars destroyed the horse and carriage business, electric cars will do the same to diesel and petrol cars. But it is going to be a colossal task.
The Hyundai KONA costs a whopping 24 million naira. How many Nigerians can afford that?
Earlier, I mentioned I sensed cynicism but that’s essentially how successful firms that eventually went down, failed to see these kinds of disruptions—and when they do see them, they often dismiss them with the claim that “they’re never going to work around here” or “our customers don’t want them” or “we’ll never make any money doing that.” The default response is denial.
Often they find it difficult to let go of old ways of thinking and behaving just like a few of my readers that winced when they read earlier that the concept of electric cars will disrupt the automobile industry. They do not see it happening.
Let’s see how Stallion Group can approach the strategic decision on investing in electromobility and assembling the electric car project in Nigeria for the next decade or two. Three questions will be debated heavily within their ranks.
- How do we ensure we catch up with technology that provides solutions?
- What role will the government play?
- Will consumer behaviours and preferences change?
CATCHING UP WITH TECHNOLOGY THAT PROVIDES SOLUTIONS
The first uncertainty Stallion Group will face is technological. How fast will things change once people start to harness this new technology? Is there infrastructure in place to precipitate the change in behaviour of consumers Stallion Group hopes to initiate? The price of solar panels, for example, has continued to dip. This spells a sunny future for clean energy and more customers have been using this alternative energy in their homes.
THE ROLE GOVERNMENT WILL PLAY
And then there is uncertainty around political and regulatory policies. As the cost of environmental damages mounts up, salaries and wages stall, the cost of living soars, and millions of jobs are under threat, how will the state government respond. Will they be bold enough to introduce green and alternative energy or turn a blind eye as placing a similar ban on importing petrol and diesel cars may cause a ruckus? Will their policies favour fairly used electric cars more than fuel and diesel-powered engines. Will they be able to cushion the effect on consumers and encourage buy-in?
WILL CONSUMER BEHAVIOURS AND PREFERENCES CHANGE?
Another uncertainty is how consumer behaviour will change. Will consumers care about a cleaner and more sustainable mode of commuting? Will they be willing to pay a significant premium for electric cars?
Let us assume a scenario where Stallion Group assigns 30% odds to the chance that there will be significant government investment and support and to the possibility that electric cars will be competitive with its petrol and diesel counterparts in the next ten years. Very slim chances you would think, but companies that lead the way usually adopt a risk mindset. They acknowledge the uncertainties they face and use them to make strategic bets in response.
So for example, if the odds that electric cars will be competitive is 30% and the odds that there will be significant government investments and policies to speed up adoption is 30% then the chances that we’ll see “electric car paradise” in the near future are .30 * .30 = .09, or 9%. The same calculations apply to the other scenarios.
The probability of any one of the four futures is calculated by multiplying together the odds of the two uncertainties it reflects.
Let us have a look at the possible futures which will be useful because it provides a basis for fleshing out what each future is likely to look like, and how the industry might evolve in the next ten to fifteen years.
- Business as Usual : Is as it sounds— electric cars remain expensive and there are no significant investments from either state or federal government. In the future, it probably makes sense for Stallion Group to keep investing in their fuel and diesel supply chain including assembling or importing such cars. Owners of filling stations will probably maintain the same posture and consumers will go with the flow.
- Electric car Paradise: describes a world in which significant investments are made by the government and electric cars are competitive with costs for diesel and fuel cars. In this scenario, Stallion Group must invest in electric cars to remain competitive and even stay ahead of the curve. In this future, the government would have rolled out charge points for electric vehicles on streets, motorways, while consumers will install at home for the sake of convenience. Filling stations will have adapted their infrastructure to accommodate charging points for electric vehicles (EVs). The government would have made available grants for citizens that opt to buy zero or ultra-low emission vehicles and the car industry that imports EVs, making it more affordable and accessible to transition to such greener platforms. The government would also have invested in the development and mass-scale production of electric vehicle batteries.
- Electric cars become a threat: This speaks to a future where electric cars are competitively priced and are accessible. In this future, despite no major investments by the government, electric and low emission vehicles still catch on with the customers, stakeholders have been able to work around challenges and reassured consumers that they can afford these new technologies, that the EVs will deliver their mobility needs and, critically, that they can recharge as easily as they refueled. The challenges like adoption, charging points are looking like they will be surmounted sooner rather than later as mass installation of support infrastructure, and the average range of EVs starts to increase. Here again, it probably makes sense for Stallion Group to invest in assembling EVs locally and sell.
- Electric Cars tough sell: depicts a scenario in which automobile sellers are compelled to invest in electric cars as a result of regulatory actions across Europe making fuel and diesel-powered cars less attractive. Stallion Group will probably profit if it invests in electric cars in this future as well by concentrating marketing efforts on government agencies, banks, private companies and other buoyant institutions capable of not only buying but doing so in bulk.
And I think my assumptions are not far off from what Stallion Group is currently looking at. There is so much work to be done in answering those 3 major questions highlighted earlier. And the scenario planning strategy can also help a great deal in taking decisive actions that can alter or ensure an organization remains relevant. At N24 million, it’s going to be a tough sell. Part of embracing disruption often requires a willingness to accept lower returns, particularly in the short-term. And, in any business, there’s always a lively competition for resources and a temptation to simply keep investing in the old ways of doing things.
For Nigeria regarding mass adoption of EVs, it remains a white elephant project. And unless the major players engage in the critical roles highlighted, a decent or mass adoption of electric cars or low emission vehicles in the next decade or more may just be a pipe dream.