Auto OEMs vs. utilities - who is going to win the race in EV charging? (PART II)
E-Mobility triggers the convergence of two industries
A dualistic reflection of possible scenarios in three acts
Part II / III – Reading time: 6 minutes/ Author: Sebastian Crusius
Excerpt from an interview with Marian Hartwig, former product lead for EV charging at Maingau Energie
Introduction
The substitution of the combustion engine with an electric powertrain not only shakes the automotive competition, but it also brings two industries closer together that have had few touchpoints over the last 100 years. Spiced up by the digitization of everything, the race is on for all energy-related services around the electric vehicle - with EV charging at the forefront.
This article reflects on two possible scenarios of the question of who will win the race in the emerging competition between car manufacturers and energy companies in this fledgling domain. As an outcome, we want to provide you with some ideas on how to play your cards to master the challenge.
The analysis is structured in three acts to be released separately, where the third one is a webcast in which we will have guests from both industries.
Act I (article published on 8th of July):
5 reasons why the auto OEMs hold the key to dominate the EV charging domain as vertical integrators. Have a look >>
Act II (THIS ARTICLE):
Utilities and their chance to leverage the access to existing customers
Act III (webcast):
OEMs vs. Utilities expert panel
Act II : Utilities and their chance to leverage the access to existing customers
An interview with Marian Hartwig, former product lead EV charging at Maingau Energie
what are the three insights you have gained from positioning and implementing the digital charging product "EinfachStromLaden" as a utility company with a strong local footprint? How can these insights be transferred to other electric vehicle-related products of utilities?
Marian: “My three key insights are first, the need for a customer-centric perspective and full sensitivity of given market mechanisms, second the need for constant product development, and finally, the need for flexibility of the predominant organization model. I believe these three factors have had a crucial impact on product success in the past, and still have today.”
The need for a customer-centric perspective
"When the product was launched, the German e-mobility landscape was in its infancy. Two years ago, only 60,000 Battery Electric Vehicles (BEV) were registered in Germany. It is fair to describe the BEV owners as innovators and generally tech-savvy people who were suffering from weak market conditions, such as lack of clarity in charge point availability and price. E-mobility was politically driven, and companies were struggling to find valid business justification. MAINGAU Energie was one of the first utility companies in Germany to create an acceptable business case. They invested in EV charging solutions, addressing the need for improvement of the weak market conditions. The aim was neither to create the shiniest charging app nor to offer the most comprehensive charging solution. The goal was to understand the basic needs of EV drivers regarding public charging and provide solutions to some of their more significant issues. It is well reported, for example, in forums like goingelectric.de, that the solution had its flaws and was far from being perfect, long after product launch.
Nonetheless, MAINGAU offered the first solution to public charging which was simple to use, due to the high charge point coverage, and easy to understand, as it provided the same price structure on every location. Therefore, MAINGAU gained a rapid, profound customer base. This was the most powerful insight for me, personally. It emphasized that e-mobility market mechanisms tended to work more like those of digital businesses, leading to exponential expansion, rather than utility businesses which have linear growth.”
The need for constant product development
“In the beginning, the MAINGAU charging solution was only as good as the possibilities the e-mobility market had to offer. Cooperation with charge point operators was crucial while establishing processes and keeping the operational costs low. Soon, the first solution was no longer enough for the existing EV drivers. Continual improvements in charge point coverage throughout Europe were necessary, but without defined standards, e.g., transferring charge detail records, and cooperation constraints from market players, it felt more like troubleshooting than taking the next step. Also, partnerships with charge point operators have now become attractive, triggering the advanced needs of the EV driver. Additional service features like the connection to the &Charge app helped MAINGAU customers reduce charging costs and be entertained during the charging process. Also, the charging solution relies on the third-party software chargecloud, putting a rapid product development process at risk. One of the critical success indicators was a kind and supportive partnership which enabled constant improvements to the charging solution.”
The need to adjust the predominant organization model
“As a utility company, MAINGAU's business model is based on mass-market mechanisms, and the variables are reasonably predictable. Therefore, entering the new e-mobility market was a step towards innovation management, requiring a different mindset and different methodologies. Using EinfachStromLaden, MAINGAU started to communicate extensively with customers in social media and switched towards agile work methods to react to the high volume of customer feedback. Given the quickly growing customer base, the charging solution created awareness inside the organization. As a result, the challenges of a multi-product organization arose, and MAINGAU had to find the directorial balance between disruption and optimization. Although in the early stages, the obstacles affected different product areas and customer segments, such a contrast of underlying assumptions and work styles offered many small challenges. For MAINGAU, the situation quickly revealed the hard work necessary to become a digitally-transformed utility company and made visible the need for organizational adaptation. Time will tell if MAINGAU can change its traditional organizational structures to maintain customer-centricity and whether it will still be a renowned player in the market of public charging.”
Source: Cosmic Cat Group
You have set yourself apart from traditional utility companies. What exactly helped you to break new ground in marketing & communication?
Marian: “While many utility companies selected a top-down communication methodology, choosing words carefully so as not to get caught cheating on e-mobility, MAINGAU started becoming part of the community to understand the needs of EV drivers better. To speed up development in an agile product development process, MAINGAU had to communicate directly and openly with customers on the customers' preferred communication channels. This way, MAINGAU focused on the communication itself to learn from customer feedback, interacting in forums and Facebook groups. Moreover, this method enabled MAINGAU to use a crowdsourcing approach so that customers could catch up, at any time, on ongoing discussions about features, problems, and workarounds. Additionally, customers engaged in helping other people who were wavering and gave the team the chance to transfer what they learned to their customer care colleagues. To be authentic, product managers read and wrote posts themselves to take an active part in the EV community. The team also walked in the shoes of customers and frequently tested public charge points with EinfachStromLaden and other charging solutions, to have a common understanding with the customer base.”
Was there a digital charging product that served as a role model or reference for your solution?
Marian: “Of course! There are plenty of examples. For me, the charge point availability of NewMotion was impressive, and the processes seemed nicely managed. Also, Plugsurfing did an excellent job of marketing and positioning its solution. And, not to forget out of the Auto OEM competition, Tesla was one of the most-mentioned companies around the charging journey. But, in retrospect, the most crucial task was to define a suitable market position by diving into the EV community and tackle the most disruptive issues. Instead of delivering a perfect solution, we offered the most valuable solution from the customer’s point of view. We looked at the way other solution providers dealt with charging and noted the most important stages of the charging process by looking at the whole from a customer perspective. Only a handful of significant process steps, the so-called "moments of truth," had to be set up well and with the right intentions. From the customer’s viewpoint, it is easy to live with minor display issues as long as the promised value is delivered.”
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How can utility companies easily integrate electric mobility into their portfolios? And why is it not enough to sell only a digital charging app or a wall box?
Marian: “I believe that the customer expects utility companies to offer holistic portfolios of e-mobility solutions because they are committed to providing electricity, regardless of whether to the home, workplace, or public charging station. The first step to integrating e-mobility into a utility company’s portfolio is to accept their role in the transition towards new mobility and to decide to take part actively. This intention, then, has to be translated into a strategic plan with a clear idea of the factors: "How big will the company's involvement in e-mobility solutions be?" and "How does the e-mobility portfolio serve the company's goals?" When those directions are set, the company can gather insights into EV drivers' needs, and potential products and services can be derived.
The next step is to evaluate the company’s abilities, assets, and willingness to define the magnitude of the portfolio with products and services for EV drivers and look out for potential partners to scale. When all the relevant information is gathered, the company has to design its initial e-mobility set up and set to work. The number of networks and service providers for significant parts of the value chain has increased massively over the past five years, which now simplifies the make or buy decisions. Nevertheless, the choice of the right partnership should be carefully considered.
The hard work starts with the alignment of the prevalent (traditional) organizational structure with such an innovative product or service. The outcomes of this work will hardly be visible, but this aspect is vital because the customer has needs that go beyond narrowly defined e-mobility solutions.
Be aware that questions outside the e-mobility products or services will arise and need to be addressed by the frontline staff of the company. While the customer doesn't care much about different departments inside the organization and may choose general communication channels, the company has to allocate questions to the right person who can help the customer with advanced topics. Furthermore, this is a possibility to spot many cross- and upselling opportunities and the company has to be aware of that. For example, a person interested in buying an electric car might also need charging solutions for private and public areas. This person might also have a higher energy demand, need charging supplies such as cables, or perhaps is interested in home storage or photovoltaic systems. Further, this person might have interests in services besides electricity like car insurance or may need support in choosing public or local grants. Moreover, if the company does an excellent job of being a trustworthy partner, the customer might take over marketing activities, and create new leads through word of mouth. That's why the initial buy-in of top management is crucial to successfully integrate an e-mobility solution into a company's comprehensive portfolio and shape a profound alignment.”
Source: Maingau Energie
Why do you think utility companies win the race in EV charging?
Marian: “Customers traditionally have a trusting relationship with their local utility service providers. According to the 2019 monitoring report of the Bundesnetzagentur in Germany, the default utility company serves more than two-thirds of all electricity contracts. At the same time, most EV drivers predominantly charge their cars at home or in the workplace. One can conclude that this fact will head to numerous domestic changes regarding the electric installation.
This situation results in great opportunities, especially for local utility companies, to serve EV drivers' needs and to help the EV market grow, since the utility company is the first point of contact for questions regarding energy supply, production, and storage. The customer will not wait for a car dealer or even a car manufacturer to solve charging-related issues. Besides, most local utility providers have solved the "chicken-and-egg” problem of e-mobility by setting up a few public charging stations. And with marketing efforts, utility companies have shaped a particular association between them and EV charging.
Another point is that today's utility market involves cut-throat competition. About 1,200 utility companies provide their services in the market, and almost 100 of them offer their electricity products nationwide. Most of the existing sales channels are online, and mainly include comparison portals such as Check24 and Verivox. The battle for potential customers has a substantial impact on the price, and thus on the margin. However, since the customers' price for electricity can only be influenced by approx. 25% - e.g., through energy purchase and low operating costs - utilities have to offer energy under market price to acquire customers. However, this is the day-to-day business of utility companies, who ensure their future existence with long-term business models and valuable customer bases. These strong customer bases result in a market barrier or an "unfair" competitive disadvantage to new market entrants since they have to invest in a customer base first. This aspect finally leads us to the third point, the organizational alignment.
With the charging of electric vehicles, the utility provider serves its core business, the sale of electricity. The automotive OEM, in contrast, has been in a constant internal struggle for years to decide whether to prioritize combustion engines or electric vehicles. Even though e-mobility is gaining ground in numerous divisions of the OEM, most of their organizational structures still favor internal combustion vehicles. In my view, this dispute has not yet been resolved within the OEM companies. As a result, the OEM cannot and will not focus its full power on strategies towards e-mobility. Therefore, I believe that utility companies will have a significant advantage in providing charging solutions for electric cars for years to come. The only question is, "Are they able to leverage this potential with suitable cross- and upselling solutions?"“
Act III (webcast) – Date will announced in mid August 2020
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