x Abu Dhabi, UAETuesday 25 July 2017

Investors take note as Gen Y avoids electric-only powered cars

Eco-money With young consumers avoiding fully electric cars and manufacturers developing high-tech hybrids, green investors should exercise caution.

The Toyota Prius is popular among Gen Y consumers. The next step is to get them to embrace electric-only cars.
The Toyota Prius is popular among Gen Y consumers. The next step is to get them to embrace electric-only cars.

The good news is that young consumers across the world are starting to favour fuel-conserving hybrid cars that run on both electricity and petrol. The bad news is that they are cold-shouldering purely electric vehicles (EVs) that do not have the capacity to switch between clean power and traditional fossil fuels.

Despite the appearance of some new EVs at the World Future Energy Summit in Abu Dhabi last week, such as the US-made T3 Motion three-wheel vehicle made for police forces and unveiled by the Abu Dhabi-based Dynamic Security, electric cars still have a long way to go before they seriously effect global fossil-fuel consumption.

But, according to Craig Giffi, the vice chairman of Deloitte, the international accountancy firm, young consumers in markets like China and the US could be the "generation that leads us away from traditional gasoline-powered vehicles".

The auto industry as a whole is betting the farm on creating cars for consumers in their 20s. Deloitte predicts that Generation Y - people between 19 and 31 - will buy one-in-four new cars in the US this year. Within 10 years, Deloitte predicts that they will buy 40 per cent of new cars.

A majority, or 59 per cent, of the 2,000-plus Gen Y consumers interviewed by Deloitte in the US, China and Western Europe preferred an electric vehicle over any other type of car or lorry, while only 37 per cent favoured petrol-only vehicles. The Deloitte survey also found that 57 per cent of Gen Y prefers petrol-electric hybrid cars.

Although this sounds like great news for the electric-car industry, the findings also reveal that most Gen Y consumers in these three key markets have no intention of buying a totally non-petrol vehicle. Only 2 per cent of the young consumers surveyed favoured electric-only cars.

According to Deloitte's findings, the chief reason Gen Y drivers prefer hybrid vehicles that can run on both electricity and petrol is because they can help to offset rising fuel costs. Additional research from Deloitte reveals that Gen Y is also wary of cars that require plug-in recharging for long periods. Some electric-car batteries can require recharging for as long as eight hours. But Deloitte says young consumers expect a car battery to recharge in two hours or less.

However, one unique attraction hybrid and electric cars have for Gen Y is their capacity for extending their high-tech, internet-driven lifestyles onto the road.

"Generation Y consumers clearly view their automobiles as more than just a way to get from point A to point B," says Joe Vitale, the global automotive sector leader at Deloitte. "They see them as a way to stay connected around the clock.

"Generation Y consumers prefer automobiles that are an extension of their social media and digital lifestyles. Auto manufacturers may have an opportunity to capitalise on Generation Y's connected lifestyle by developing innovative and low-cost personalisation options for this powerful consumer segment."

According to Deloitte's research, digital-dashboard technology is the most important part of a vehicle's interior for 59 per cent of Gen Y. Almost three quarters of the survey's respondents, or 73 per cent, want touch-screen interfaces similar to those found on the latest generation of smartphones and computer tablets. Deloitte's findings show that young US consumers are willing to spend an additional US$3,000 (Dh11,019) on their car to ensure it carries the latest computer hardware.

This demand has already prompted the world's leading automakers to develop a new generation of digital cars. The Ford Motor Company, for instance, announced this month a new research laboratory in Silicon Valley to scout out new technology and keep ahead of digital trends. As well as integrating smartphones and other devices into Ford cars, the facility will work on applications such as digital safety systems that alert drivers when they are approaching another car.

Meanwhile, Silicon Valley's home-grown, high-tech carmaker Tesla is scheduled this summer to roll-out what it claims will be the world's first fully electric premium sedan. In addition to having a 17-inch computer touchscreen as part of its controls, the Model S accelerates from zero to 60 kilometres an hour in 4.4 seconds, faster than a Porsche 911 Carrera. However, despite considerable investor interest in Tesla, the company has yet to turn a profit.

With young consumers avoiding fully electric cars and manufacturers developing high-tech hybrids, green investors should exercise caution. There is a danger that the industry will be sidelined into installing high-tech add-ons such as computer touch screens embedded in the dashboard and multimedia entertainment for passengers while continuing to make vehicles that run predominantly on fossil fuels.

Investors must, therefore, pressure mainstream carmakers to make the shift from hybrids to fully electric vehicles capable of competing with both traditional and hybrid cars in terms of convenience and cost.