EV Ecosystem Business Models for urban areas in emerging economies

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Bachelor Thesis Business Studies

EV Ecosystem Business Models for

Urban Areas in Emerging Economies

University of Amsterdam

Faculty of Economics and Business

01-‐07-‐2013

Author:

Wybren van der Vaart

0580910

Supervisor: René Bohnsack MLitt

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Abstract

The coming twenty years the GDP of emerging economies is set to grow rapidly. People living in cities will account for the majority of this growth. The income elasticity of vehicle ownership for people entering the middle class is 2.0. In other words vehicle ownership will grow twice as per capita income. With this increase of vehicle ownership emissions are also set to increase creating dangerously high levels of air pollution in cities. Electric Vehicles (EVs) can provide a solution to the problem with emissions while at the same time being able to fulfil the demand for vehicles. The EV is not a standalone product however and needs an ecosystem to function in properly. This ecosystem consists of charging infrastructure, smart grids and other supporting technologies. The development of sustainable business models (BMs) is imperative for the functioning and commercial viability of these EV ecosystems. The research question deals with this issue and is formulated as follows: What are appropriate EV ecosystem business models for urban areas in emerging markets?

The following methodology was used to answer this research question. A

literature review was conducted on the subjects of BM’s, BM innovation, EV ecosystems and BMs for EV ecosystems. Following this a theoretical model combining the EV ecosystem, a BM, and a model for BM innovation was introduced for a methodological way of building new BMs for EV ecosystems. Five qualitative semi-‐structured interviews were conducted with experts on EV ecosystems from five different countries. Data triangulation was used to lend extra validity to the results. The defined parameters for EV ecosystems were then used to conduct general morphological analysis (GMA). The GMA is used to methodologically build BMs for EV markets.

Regarding the response to the research question we found the following. EV

markets as well as EV ecosystems have hardly taken off in emerging economies, with the notable exception of China. Market players not just in emerging economies, but all over the world, are looking for BMs for the EV ecosystem. We found that a holistic and integrated approach is imperative. All players and stakeholders of the EV ecosystem should be involved in this approach. When EVs function as an integrator between the grid, renewable energies and other complimentary technologies, the largest amount of value will be added. From this point of view BMs will have the greatest chance to succeed.

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We draw the following conclusions regarding the research question. Having asked our selves this research question is a valid one. However during our research it became clear that the role of the government and other players is just as important in the process of creating an EV ecosystem. It is especially relevant for creating the right framework conditions for the market players to flourish and to devise sustainable BMs for EV ecosystems. We have created an initial framework that works from the cooperation between all the stakeholders towards individual BMs. In the end creating new BMs is more like an art than a science. The field of EV and EV ecosystems needs visionary people who dare to dream and envision more sustainable ways of doing business for the transportation sector. We hope that with our research we can contribute to a playing field in which these individuals and organisations can flourish and take the market for EV and EV ecosystems forward.

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modes of transportation need to be explored. Cities in emerging economies are set to grow rapidly. To prevent dangerously high levels of air pollution electric transportation could provide a sustainable solution to these issues. This paper seeks to explore the possibilities of making urban areas in emerging economies ready for the full-‐scale introduction of electric vehicles (EV’s).

EV’s are not stand-‐alone products. They need an extended and often

complicated ecosystem to function properly. The International Energy Agency (2011) has defined an EV ecosystem as a “total environment to support mass operation of plug-‐in electric vehicles (PEVs)”. This involves hard infrastructure such as battery recharging infrastructure and smart-‐grids alongside soft infrastructure such as business models, law and policy. As the International Energy Agency (2011) says it requires alignment between all the different stakeholders in this model, such as governments, municipalities, energy companies and the automotive industry, to create such an ecosystem in an urban area. Everything stands or falls however with a good business model for the EV ecosystem. The various stakeholders need to be convinced of the value creation potential of the innovation or emerging technology. If the entrepreneur or the company will not be able to justify a value creation model stakeholders will simply not invest their resources in a new project.

The research question for this paper flows forth directly from this challenge: What are appropriate EV ecosystem business models for urban areas in emerging economies?

2.1. Background: Electric Vehicles (EVs)

Since the market for EVs has only seriously taken off a couple of years ago the literature on this subject is still fairly limited. This does not mean that the concept of a vehicle with an electric powertrain is an entirely new phenomenon. In the thirties

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(Høyer, 2007). During the mid 1830s the first lightweight electric vehicles appeared

in the Netherlands, the UK and the US. In the beginning of the 20th_{century
three}

types of cars were vying for market control. These were a car with the internal combustion engine (ICE), a car with a steam engine and the EV. Development of the ICE and low fossil fuel prices however meant that all other forms of propulsion in road vehicles than the ICE were suspended for a long time. Climate change, higher prices for fossil fuels and strict new emission standards however prompted car manufacturers again to go in search for and develop alternative and more sustainable powertrains for cars. During the 1990s EVs attracted renewed interest from car manufacturers. During these years a lot of money was spent on R&D and in signalled a revival of the EV.

The revived interest in EVs as alternative to the ICE was mainly due to a

number of great potential benefits. These benefits include zero emissions, low noise

and very low cost to run the EV once it is acquired. However if EVs are truly to

become successful a number of challenges need to be overcome. Challenges that EVs

have been coping with since its very inception in 1830.

Most of these drawbacks that EVs are experiencing are related to the battery. The battery pack is costly and only has capacity to drive a limited distance. Among EV drivers this is famously known as ‘range anxiety’. Furthermore in most cases it takes a long time to recharge the battery and the performance of the battery will diminish after long-‐term usage. Besides already on going investments in R&D to improve these issues concerning the battery the EV needs an ecosystem to function properly. In the next paragraphs we will outline the different parts of the EV ecosystem in greater detail.

2.2. The EV Ecosystem

Before describing the EV ecosystem in greater detail we deem it necessary to first briefly describe business ecosystems in general so as to be clear what a business ecosystem entails. The term ecosystem in combination with business was first used by James Moore in a Harvard Business Review Article from 1993. Moore (1993) uses the term to describe the interrelations and interactions between various actors and stakeholders in the field of business. The precise definition he uses is as follows:

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An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles. (p.26)

The term ecosystem is especially applicable in the case of the EV industry for the great interdependence and interrelatedness that is present among the different actors and stakeholders. Other important trademarks of a business ecosystem are that the different organisms or actor present in the ecosystem coevolve. This means that one part of the ecosystem cannot grow or change with the other parts growing or changing as well. Furthermore it can be noted that within a business ecosystem both a high degree of cooperation and competition are simultaneously present.

As previously mentioned in the introduction the EV ecosystem is defined as follows by the IEA (2011): “total environment to support mass operation of plug-‐in electric vehicles (PEVs)”. While we will try to be as inclusive as possible in the description of the EV ecosystem we will maintain a strong focus on the EV value chain throughout this article. The reason for doing so is straightforward: the components of the value chain ultimately decide what value propositions and hence what kind of business models are most appropriate for the EV ecosystem. We will furthermore focus on the EV ecosystems and not include the EV itself and the OEM’s in this paper since this area of research falls outside the scope of the research question. In the following sections we will outline the different parts of the EV ecosystem and the EV value chain.

2.2.1. Charging Infrastructure

To charge the battery of the EV charging infrastructure and technology is required. At present three different methods to recharge the battery pack are discussed. The

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first two are inductive (wireless) charging and conductive (wired) charging (Kley, Lerch, & Dallinger, 2011). The third is swapping the entire battery pack at a specially designed station (Better Place, 2009). At present the most prevalent method is conductive charging. Within the charging infrastructure three distinctions can be made.

The first distinction is in accessibility of the charging point. The charging

point can be found on private domain, public domain, or semi-‐public domain. On private domains there is the possibility of using a domestic power outlet besides installing specialised charging points. In public and semi-‐public domains specialised charging points are used.

The second distinction concerns the power used to charge the battery. This influences how fast a battery can be recharged. Power connections usually range from 2,3 kW in domestic power outlets to 11 kW in specialised charging points. These fall in the category 1-‐phase and the speed of charging is normal. One step up from this are the so-‐called ‘fast chargers’. These come in both alternating current and direct current. The alternating current charging points deliver 11 or 22 kW and the direct current fast charger delivers 50 kW or more (Van Woerkom & Hoekstra

2012).

The third distinction concerns the connection from the vehicle to the

charging point. The connection can either be unidirectional, from grid to vehicle, or bidirectional, both from grid to vehicle and from vehicle back to the grid (Kley et al., 2011). Not only can the vehicle be used as storage capacity for clean energy to serve it back to the grid (V2G) it can also be used to directly feed offices or apartment blocks (V2X) or to regulate power supply for the entire grid (Tomic & Kempleton, 2007).

2.2.2. Physical Infrastructure Management and Maintenance

The charging infrastructure also brings along a number of other components in the EV value chain. The charging infrastructure needs to be manufactured in the first place. Secondly it needs to be installed. Finally the charging infrastructure also needs to be maintained by maintenance companies. In practice the companies that have installed the charging point often do the maintenance.

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Integral parts of the charging infrastructure are the communication interface and software. These information technology systems are used for various different purposes. An interface is needed for the metering of the energy supply to the car and in the case of V2G a smart interface is needed that can keep track of the energy supply in both directions. Technology and software are needed as well to retrieve the information for billing purposes (Open Charge Point Protocol, 2013). In the case EVs will be part of a smart grid a smart grid interface is needed as well. Last but not least it is important that the various different software systems are able to communicate with each other. This is called network management. The data that are communicated through the various IT systems such as billing data or metering can be done at different time intervals. This can be done at the end of a period or a real time data stream can be provided.

It is also of great importance that a back office system is in place to help

customers whenever there are problems charging at a charging point. Various problems can arise. The power connector can get stuck to the car, a charge point can fail to charge or the charge point can fail to make a connection with the car. Whenever such a problem arises immediate support is needed for the customer in the form of back office or direct assistance.

2.2.4. Smart Grids, V2G and V2X

As already briefly mentioned in the previous section about charging infrastructure EVs can also become part of the energy networks or supply system or serve as storage capacity for renewable energy sources and supply offices, large apartment blocks or homes. This phenomenon is called ‘vehicle to grid’ (V2G) or ‘vehicle to home’ (V2H) or when the vehicle is used for any load it is called V2X.

These technologies have several possible applications. For single EVs three distinct applications can be named. They can provide base load power, peak load power and store renewable energy sources. For large fleets of EVs there is another application. This application is providing regulation services to the grid system and is called ancillary services (Tomic & Kempleton, 2007). As a direct consequence using EVs for ancillary grid services is mainly useful for corporations or for large buildings. These technologies will be part of so called smart grids where there is a bidirectional flow of data and energy in order to ensure an as efficient as possible use of the available energy. EVs will form an integral part of these smart grids.

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2.3. Actors and Stakeholders in the EV Ecosystem

All the different components in the EV ecosystem as described are being provided for and used by a host of different actors and stakeholders. Different reports by consultancy firms (Accenture, 2011; Ernst & Young 2011; McKinsey, 2009) have broadly identified four different spheres or industries in the EV ecosystems in which the stakeholders and actors reside. The first sphere identified is the OEM sphere or the sphere of the car manufacturers. The second sphere is the charging infrastructure sphere. The third sphere identified is the utility sphere and the fourth sphere mentioned is the battery sphere. As mentioned before we will limit ourselves to the spheres of the utilities and the charging infrastructure. We will not concern our selves with the OEM sphere because we will focus on the ecosystem and not on the manufacturers of the EVs and the EVs themselves. In the following part a detailed description and role of each actor in the EV ecosystem will be given.

2.3.1. Actors and Stakeholders in the Charging Infrastructure Sphere

The charging infrastructure sphere has a number of actors residing in it. First of all there are the manufacturers of the charging infrastructure and technologies. Secondly there are the firms that install the charging infrastructure. Thirdly there are the firms that maintain the charging infrastructure although in practice this is often done by the firms that have installed the infrastructure. The charging infrastructure or charging points as they are often called need to be operated as well. This happens by the charging infrastructure operators (Ernst & Young, 2011). These are also called mobility service providers. Finally there are the IT service systems providers that ensure the flow of data between the charging infrastructure and the car and vice versa for billing and a variety of other purposes that have been explained in previous sections.

2.3.2. Actors and Stakeholders in the Utilities Sphere

In the utility sphere a number of different actors and stakeholder operate. The charging infrastructure is connected to the energy grid. The so-‐called grid operator operates the energy grid. The energy supplied through the grid and to the vehicle

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can ‘change hands’ a number of times before it actually reaches the vehicle. In the energy market usually a number of actors are active. Energy production companies produce the energy and in some cases sell it directly to the client as well. More often though energy traders and retailers buy the energy from the producers before supplying it to the client.

2.3.3. The Role of the Government in the EV ecosystem

Large parts of the EV Ecosystem will be present in the public rather than private space. This automatically means involvement of the national and local governments. In the next paragraph we will briefly outline the different roles the local and national governments can play in the EV ecosystem.

One of the most obvious roles a national or local government can play is by

stimulating the EV ecosystem through various different measures. These stimulation measures usually involve subsidies or protection in one form or another. Direct stimulation can be achieved by subsidizing the electricity from the charging points. Another form of direct stimulation is for local governments to install and exploit the charging infrastructure in public space (Vollers, 2013). A measure introduced in Amsterdam to stimulate the use of EVs is to grant them free parking space where normal ICE vehicles are to pay when they want to park. Indirect stimulation can be achieved by increasing taxes on cars that run on fossil fuels and to increase taxes the fuels that these cars run on. Another form of indirect stimulation is to subsidise research and development in the EV industry and in particular subsidies for recharging technology and batteries. Though we do not advocate the use of subsidies for reasons mentioned in previous sections we do acknowledge the fact that they can be very useful in the start-‐up phase of a new industry.

Another role the government can play has been discussed in the section

about utilities. Utilities are often partially or in some countries completely owned by the government. When this is the case the government is automatically more involved in the EV ecosystem than in more deregulated markets.

2.4. Business Models

2.4.1. The Concept and Definition of Business Models

The academic field of business model (BM) study is itself a young field to begin with. Various authors (e.g. Morris et al, 2002; Schweizer, 2005) agree on the fact that the

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field is still rather undeveloped despite the fact that in management and entrepreneurial circles BM’s are widely used. To start with an overview of what business models exactly entail a proper definition is necessary. This is where the first challenge arises. Throughout the literature authors have defined the concept of business models differently and also agree on the fact that there is not one generally accepted definition of the BM (e.g. Osterwalder, Pigneur & Tucci, 2005; Zott, Amit & Massa, 2011). Zott et al. (2011) also observe that the literature is developing in silos. They furthermore observe that researchers often use idiosyncratic definitions that fit the purpose of their research. As a general result cumulative progress is hampered.

Furthermore the conceptualisation of the term BM differs tremendously among various authors. Zott et al. (2011) and Osterwalder et al. (2005) are two examples of authors that have tried to explain the various different concepts used in the literature on BM’s. Osterwalder et al. (2005) claim that a division in the literature can be made among authors that use the term BM to refer to the way a company does business (e.g. Galper, 2001; Gebauer & Ginsburg 2003) and other authors that focus on the model aspect (e.g. Gordijn 2002; Osterwalder, 2004).

Osterwalder et al. (2005) go on to claim that a lot of misunderstanding and confusion arises because of the before mentioned problem of conceptualisation and identify three groups of authors within the group that focuses on the model aspect that each describes the BM in a different way. The first group describes the BM concept as an abstract overarching concept to describe real world businesses. The second group describes different abstract business models that correspond with a group of businesses with similar characteristics. The third group describes aspects of real world business model or a complete conceptualisation of a real world business model.

Zott et al. (2011) say that despite the differences in conceptualisation among

the various authors four different emerging themes can be discovered in the literature about BM’s. The first theme is that the BM is identified as a new unit of analysis that is distinct from the product, firm, industry, or network. The second theme they mention is that BM’s emphasize a system-‐level, holistic approach to explain how firm’s do business. The third emerging theme is that the activities of a firm and its web of partners play an important role in the various BM concepts that

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have been proposed. The fourth and last theme identified by the authors is that business models try to explain both value creation and value capture.

Shafer, Smith & Linder (2005) have extensively studied the different

definitions available within the literature on BM’s. With the help of a so-‐called affinity diagram (Pyzdek, 2003) they have identified four categories that were most common in all the different definitions used in the BM literature. These categories are strategic choices, creating value, capturing value and the value network. They have used these four categories in combination with the meaning of the word business, the meaning of the word model, and definitions coined in previous articles to construct a new definition. The definition of a BM by Shafer et al. (2005) is as follows: “a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network”.

Osterwalder et al. (2005) have also done an extensive study of the different definitions available in BM literature. From this study they have come up with a number of building blocks that have emerged from the literature they have studied and that are mentioned by at least two different authors. Furthermore they have left out all the elements related to competition and to BM implementation. They have done this because these concepts are related but not an intrinsic part of the model itself. With these different building blocks Osterwalder et al. (2005) have come up with the following definition:

A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm it is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams.

It follows explicitly and implicitly from all the definitions used in the literature on BMs as summarized by Osterwalder et al. (2005) and by Shafer et al. (2005) that in a business model at least the following three components are found (Doganova and Eyquem-‐Renault, 2009):

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2. The value chain configuration: the potential possibilities to design a product or a service taking into account all the different stakeholders.

3. Revenue model: how do we make money from our product or service or in essence how do we capture the value that we have created?

2.4.2. Business Model Innovation

Taking into account the fact that the research question deals with BM’s for an entirely new technological market and extended technological ecosystem we will furthermore review the literature on BM innovation.

Chesbrough and Rosenbloom (2002) call the BM concept a construct that

establishes the link between an emergent technology and its potential economic value. This illustrates the importance of the BM concept when introducing new technology to the market. However according to Kley et al. (2011) classic types of BM’s as described in the literature cannot be applied to the market for EV’s and EV ecosystems due to technological restrictions. Chamal & Caron (2007) say that it is very important for companies involved in technological innovation projects to be able to imagine the value creation potential sufficiently early in an environment that holds a lot of uncertainty, both on the technological side as on the market side. They go on to say that successful technological innovations have more often than not innovated on their business models. Casadesus – Masanell and Ricart (2010) say something in similar vein. The competitive game used to be quite straightforward and the classical BMs functioned well enough for a company to survive and to sustain competitive advantage. However drivers such as technological change, globalisation and deregulation have profoundly altered the competitive environment. They found that the best performing and fastest growing firms in this new landscape are firms that have used these structural changes to innovate their BMs.

In the next paragraph we will review the extant literature on business model innovation. We do this because the market for EV ecosystems is a young and undeveloped one and there is still a lot of uncertainty on both the technological side as well as on the market side. We make the assumption that BM’s for EV Ecosystems will change and develop throughout the years, especially throughout the development and design phase. Therefore BM innovation will play a crucial role in the success of the EV ecosystems and EV markets.

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BM innovation, or BM change and BM evolution as various different authors also call it, is a small niche within the field of BM literature. Just like the entire BM field this is a young and a relatively undeveloped area of research. Existing research on structured methodological approaches for BM change is fragmented (Pateli & Giaglis, 2005). Various authors (Pateli & Giaglis, 2005; Chesbrough, 2007; Sosna et al., 2010) do agree on a number of points however. The first point might sound obvious but deserves mention nonetheless. They all mention the fact that BM innovation is not an easy issue to tackle for any company. Many companies are very rooted in their BMs and will invest sooner in R&D for new products or services than investing in changing their BMs. All authors agree on the fact however that BM innovation is more important than just inventing a new technology or a new product. A new BM is often what makes or breaks a product. The second point the authors agree upon is that one of the main tools for BM innovation is simply to experiment. Chesbrough (2007) explicitly mentions the fact that experimenting internally with new BMs is the way to go. An example of this can be pilots that are run within a company for several months among employees to test the marketability of a new product or service or combination of the both. Once such a BM seems successful it can be deployed on a wider scale. If it is not successful the new BM can either go to the bin or the company can choose to again alter it and to keep experimenting with it. This implicit point from Chesbrough (2007) has been made explicit by Sosna et al. (2009) when they say that BM innovation is a trial and error process.

Casadesus – Masanell and Ricart (2010) take a more methodological

approach though. They say that there is no clear agreement yet about the distinctive features of superior BMs. According to them there is a very clear reason for this however. The reason for this is that no clear distinction is made between the different constructs involved in the process of BM innovation. Three different constructs can be named in the process of BM innovation. The first is strategy, the second is the BM itself and the third is tactics. Strategy is all about the choice of BM through which the firm will compete. BM refers to the logic of the firm, how it creates and captures value. Tactics then refers to the residual choices that are present and that a firm can employ because a particular BM is chosen. With these three mentioned constructs an integrative framework is created that clearly separates the three mentioned constructs in order to help practitioners find new

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ways to compete in the market and turn a profit. The authors do mention the fact however that creating new BMs is closer to an art than to a science and that they simply hope to hand practitioners a more methodological approach in creating new

BMs. In Fig. 1 the framework as presented by Casadesus – Masanell and Ricart

(2010) is shown.

Fig. 1, source: Casadesus – Masanell and Ricart (2010)

2.5. EV Ecosystems Business Models

In the next section we will outline the different business models that are being used at the moment for different EV ecosystems around the world. We will outline the different value chains present in the EV ecosystem and explain how value is created and captured by the different actors.

We will start with a general overview of the entire EV ecosystem value chain as presented by Accenture (2009) in their report “Betting on Science): Disruptive Technologies in Transport Fuels”. Accenture (2009) defines three different industries or three different value chains that have to merge to make up the EV ecosystem or electrification value chain as they call it.

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Fig. 2, source: Accenture Analysis

The three value chains that merge in the EV ecosystem are the OEM value chain, the battery value chain and the charging infrastructure value chain. A report by Ernst & Young (2011) also defines a number of industries and different value chains in the EV ecosystem. Just like the report from Accenture (2009) they identify the OEM value chain and the charging infrastructure value chain. Unlike Accenture (2009) though Ernst & Young (2011) do not recognise the battery value chain as separate but they identify another value chain, which they dub the utilities value chain. These three different value chains or spheres as they call them revolve around

the customer. The three spheres are presented in Fig 4, and 5.

Figure 4, source: Ernst & Young: Beyond the plug: finding value in the emerging electric

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Fig 5, source: source: Ernst & Young: Beyond the plug: finding value in the emerging electric vehicle charging ecosystem

Another representation of the EV ecosystem value chain is given by Weiller

(2012). As can be seen in the representation of the model in Fig. 2 she also broadly

identifies a number of industries that partake in the EV ecosystem.

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Figure 6, source: Weiller (2012)

She mentions the OEM industry, the charging industry, the battery industry, the utilities sector, and a number of other peripheral services that can be grouped together under services. From these studies it follows that a number of different industries have to work together and that a number of different value chains have to merge to form the EV ecosystem. We will now have a closer look at the different BM’s for the EV ecosystem discussed in the literature.

In another report from Accenture (2011) they mention three likely BM’s for

the charging infrastructure. The first model they mention is the ‘public infrastructure model’. This model is designed for charging infrastructure in the public space and is especially designed for people who do not have access to home charging. The second model mentioned is the ‘private infrastructure model’. This model is designed for private space and focuses on installing charging infrastructure at homes and other private sites like offices. This model ensures higher usage and a higher return on investment. The third model mentioned is the ‘end-‐to-‐end solution’. This model provides an all-‐in solution to the client with battery and vehicle maintenance, charging and value adding customer services. This minimises the client’s use of many different interfaces and interaction with different actors and thus ensures a simplified solution for the customer. According to Accenture (2011) these different BMs for the charging infrastructure all have different implications on cost, the grid and the customer. We will briefly outline the differences mentioned between these three different BMs.

The ‘public infrastructure model’ needs a high amount of upfront investment and is likely to have a long payback period due to low prices that will be charged to consumers to ensure usage of the charging points. Accenture (2011) calls this model a no return model and therefor unattractive to market players. It will require investments from municipalities and local governments and is important to kick start the market and incentivise consumers. In this sense it is also to prevent the famous ‘chicken-‐and-‐egg-‐problem’. The impact on the grid will be volatile as the usage of the infrastructure will likely be unpredictable. Chances are that it will

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increase peak load. This point emphasizes the fact that utilities will play an

important role in this model.

The private infrastructure model’ seeks a return on investment and will therefore charge a premium over public charging. However it is expected that this premium includes value added services like integrated IT and billing and convenience of location. Accenture (2011) says that home charging will most probably be a preferred option and that multiple BMs can arise for home charging. They mention two different options. Option one means paying for the charging point in one go. Option two however means paying for a whole integrated service package that includes charging, integrated IT services and billing. This would mean that you either lease the charging point via a contract or you pay for the charging point over time. Another feature part of the ‘private charging BM’ is fast charging. Fast charging means higher costs for the consumers than regular charging but also greater convenience and flexibility. Fast charging will also have a notably stronger effect on the grid. This is something grid operators need to keep in mind. A wide range of variations on the ‘private charging BM’ are being pursued by a range of different actors such as utilities, oil companies and OEM’s. Gomez San Roman, Momber, Rivier Abbad and Sanchez Miralles (2011) also talk about private charging and semi-‐public charging. They specifically mention how the market players here can apply different tariffs during different stages of the day when the grid demand differs. Higher prices would be the norm when the demand on the grid is greater and lower prices when grid demand is low.

The end-‐to-‐end model is a model that has all-‐inclusive service for the customer, from the point where the vehicle is purchased to maintenance and charging. Different contracts will be available but notable options are battery swap, in-‐vehicle services and managed charging. The market player trying to exploit this BM was Better Place. It has to be noted that Better Place filed for bankruptcy on May 26 (Financial Times, 2013). In this light it remains to be seen if this particular BM will actually take off and develop further. A week after Better Place had filed for bankruptcy however Tesla announced that they would introduce a battery swap system for their Model S alongside the conductive charging infrastructure.

Ernst & Young (2011) mentioned five different BM’s or business strategies as they call them in their report about EV ecosystems. We will briefly discuss each BM discussed in their report. The first BM mentioned is called ‘the Builder’. This is a

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straightforward BM where there is a manufacturer of hardware charging infrastructure. The manufactured infrastructure can then be sold either branded or unbranded. Revenue is made at the point when a charging station or a set of charging infrastructure is sold. The second BM mentioned is ‘the maintenance installer’. The ‘maintenance installer’ will install and maintain the charging infrastructure. An added activity could be retailing of charging infrastructure. Revenue will be made through multi-‐year service contracts. The third BM from this report is called ‘the Broker-‐Operator’. The ‘Broker-‐Operator’ manages a wider set of activities and capabilities than the first two BMs mentioned. Besides manufacturing and installing the infrastructure this market player also manages the energy delivery and the billing. According to Ernst & Young (2011) this player can own, outsource or have a set of partners for a number of or for all of their activities in the mentioned activity set. With such a wide set of activities for this player it is likely that different variations of BMs will emerge. The fourth BM described is called ‘the Grid Master’. The activities of this player also involve the management of the energy supplied to the vehicle but more importantly it also uses the batteries of the EVs as a resource to manage the different kinds of energy demand present during a day. This aspect is also described in previous chapters under V2X. Gomez San Roman et al. (2011) talk about a similar BM that they call ‘the supplier-‐aggregator’. This market player contracts a high number of EVs and has a high level of control over the charging processes. This player is therefor also responsible for the system load management and can thus hedge the risks in the electricity market.

The fifth and last strategy mentioned by Ernst & Young (2011) is called ‘the Guardian’. This BM encompasses a very wide range of activities and competencies. All the before mentioned activities from the previous BMs could in theory also fall under one BM in the form of ‘Guardian’. ‘The guardian’ not only extends its services to EV owners but also to other stakeholders in the EV ecosystem. These value added services may be peripheral to the actual EV owners but are critical for the upkeep of the EV ecosystem. Just like the ‘Broker-‐Operator’, ‘The Guardian may own, outsource or manage its activities via a web of partners.

2.6. Combining a BM with the EV Ecosystem in a Theoretical Framework

Having reviewed the literature on BM’s, BM innovation and the EV Ecosystems a number of points have come to the fore. We will briefly review these points as

EV Ecosystem Business Models for urban areas in emerging economies

Bachelor Thesis Business Studies