The NYTimes is all over this issue regarding novel vehicles for emerging markets that meet new energy restrictions. Besides Tata’s complete disruption of the automobile market….there’s more happening. Saturday’s article was interesting in and of itself…about how or why consumers balk at major innovations. Mr. Zachary, the reporter, claims that no one knows why the Hybrid-Electric Vehicle (HEV) is making a splash but the video phone did not. Says it’s luck, circumstance, etc.
Well….hmmm. Not necessarily so.
In my earlier post on New Market Creation I described some proactive measures that companies can take to stimulate market interest and trial over extended periods of time (which is necessary for those major innovations that will cause users to have to change their behavior).
But even more interesting is this morning’s article on Israel’s experiment. Israel is promising to support a joint venture between an entrepreneur by the name of Shai Agassi, Renault and Nissan Motor company to build the infrastructure throughout the country that will sustain the use of electric vehicles. Sure, it’s driven by desperation. Gasoline is currently $6.28/gallon in Israel! Pollution is rampant. And Israel has zero energy resources and not such great relations with Saudia Arabia. Prime Minister Olmert and President Shimon Peres position this experiment among the land of truly breakthrough visionaries, as Mr. Peres notes: “Israel can’t become a major industrial country, but it can become a daring world laboratory and a pilot plant for new ideas, like the electric car.”
The entrepreneur…Agassi, came up with a new business model: sell electric car transportation in the same way that consumers pay for cell phone usage. The cars will be cheap…cheaper than gas powered vehicles. Users pay a monthly fee based on expected mileage, and if they go over, they pay a premium for the recharge. Similar to recharging your mobile’s minutes! There are charging stations to be positioned throughout Israel and easily available batteries should a changeover be required.
The point of all of this is that Agassi has been able to convince an entire government and 2 companies to build an entirely new infrastructure. And…he plans to roll it out to other countries as it’s proven. He’s in it for the money. He sees the opportunity, and he sees the enormous value that this change can bring. And he started with a country who needs this change desparately…and is willing to recognize that.
This was not our experience with the HEV team we tracked in one major American automobile company, who planned to sell HEV’s at a price premium throughout the Los Angeles area because “consumers are willing to pay extra for green products there…” (they told us).
“Why not start in China?’ our research team naively asked. “Seems as if their economy is beginning to boom, but their automobile infrastructure is yet to be built. You could work with the Chinese government to get ahead of the pollution problem, as well as the challenge they’ll face in getting their hands on enough oil reserves.” (This interview occurred in 1996).
“We would never get involved with a government as a customer,” they replied.
They didn’t….and today they are not a player in the HEV marketspace.
Now this story is about major market creation. But sometimes that is what breakthroughs require. In fact…MANY times it’s what they require. It’s amazing that Mr Agassi could convince Israel, but a major US auto company refused to even approach the government of an emerging market. Sigh….