Is small the new Big Thing in EVs?
We saw some interesting pieces of news pass the revue the past weeks, and two of these had to do with smaller models:
1. Ford CEO Jim Farley recently said his company needs to focus on offering small, inexpensive EVs to consumers instead of big, battery-powered trucks. This was his reasoning: with internal-combustion vehicles, a larger vehicle can command a higher price, yielding bigger profit margins. That is why Ford and its peers used to prioritize big pickups and SUVs over smaller cars. But Farley believes “It’s exactly the opposite for EVs. The larger the vehicle, the bigger the battery, the more pressure on margin because customers will not pay a premium for those larger batteries.”
2. BMW, then, announced that its compact class is going electric. Its 1 Series will be transformed into an affordable electric car as the brand looks to attract younger buyers. Head of product and brand management, Bernd Koerber, told AutoCar that BMW wants to “connect with the younger generation”. He added that “Of course they have lower profitability, but they also fulfill a different purpose in getting younger customers and developing [BMW] in certain markets”.
It's interesting to note that Ford is talking about its own profit margins (which is pretty normal during an earnings call, obviously), while BMW is focused on the customer. This focus on investment in the youth market is a known strategy of BMW. They invest about 75% of their marketing budget in the smaller and less expensive types of first car that young people tend to buy.
Why? Because they know that a first car can define someone’s lifelong relationship with a brand. Some of us are Toyota people, Volkswagen people or BMW people, just because they were our first car and we stuck to it. That’s why BMW is prepared to sell these smaller EV cars with lower profitability because they have a long-term vision on customer relationships.
And that’s exactly why our CEO Patrick Vanbrabandt does not believe that smaller EVs will be the next trend. Brands just need to follow the customer and their needs and expectations, and that pretty much changes permanently, and is different for every customer.
Want CARYA to help you with your CRM, DMS, IT or marketing? Check our website for more!
2. BMW, then, announced that its compact class is going electric. Its 1 Series will be transformed into an affordable electric car as the brand looks to attract younger buyers. Head of product and brand management, Bernd Koerber, told AutoCar that BMW wants to “connect with the younger generation”. He added that “Of course they have lower profitability, but they also fulfill a different purpose in getting younger customers and developing [BMW] in certain markets”.
It's interesting to note that Ford is talking about its own profit margins (which is pretty normal during an earnings call, obviously), while BMW is focused on the customer. This focus on investment in the youth market is a known strategy of BMW. They invest about 75% of their marketing budget in the smaller and less expensive types of first car that young people tend to buy.
Why? Because they know that a first car can define someone’s lifelong relationship with a brand. Some of us are Toyota people, Volkswagen people or BMW people, just because they were our first car and we stuck to it. That’s why BMW is prepared to sell these smaller EV cars with lower profitability because they have a long-term vision on customer relationships.
And that’s exactly why our CEO Patrick Vanbrabandt does not believe that smaller EVs will be the next trend. Brands just need to follow the customer and their needs and expectations, and that pretty much changes permanently, and is different for every customer.
Want CARYA to help you with your CRM, DMS, IT or marketing? Check our website for more!
