Electric vehicles on the Danish market in 2020: And the economic value of the company Better Place

Lars Eskebæk & Jeppe Holst

Student thesis: Master thesis

Abstract

There is a transition on the way for greener technologies and solutions. The public interest for greener solutions has increased since green house gasses have been claimed to be manmade. The green conscience was further reinforced in 2008 with the surge of the oil price, when the private consumer felt the economic effects of the dependency on depleting resources. The transportation sector is also in a transition phase. The United Nations Climate Conference in Copenhagen in December 2009 is planning to include the emissions of the transportation sector into the protocol making it a regulatory issue to minimize CO2 from the transportation sector. The transportation sector emits 20% of the Danish CO2 emissions, where passenger vehicles are responsible for 55% of this emission. An introduction of electric vehicles on the Danish market will minimize CO2 emission and move pollution out of the cities. The market conditions for the EV have been analyzed through macro, industrial, and micro analyses, as well as a value network analysis. The result has showed that the present EV market conditions are not optimal: Car sales have plummeted in 2009, lack of EV models, consumer skeptic toward the range and safety issues, lack of infrastructure, as well as insufficient battery technology. On the other hand the consumer movement toward greener alternative, the increasing focus on oil dependency is charging the demands toward cleaner and more economical car or environmental correct alternatives. Recent focus on EVs by infrastructure providers and car manufacturers are rapidly improving the market conditions for EVs. It is predicted that by 2020, 13% of the total car park is EVs with an extended support infrastructure and the technological barriers of the EV and batteries have been overcome. The case company Better Place has a key role in the forthcoming transition, as they will build and manage an EV infrastructure. Better Place was used as a proxy for the success for the EVs, and has been analyzed through the economic finding of the market analysis. With the predicted 13% breakthrough of EVs, Better Place and its investors will look at a loss of DKK 44.8 million with the Net Present Value (NPV) analysis. Hence, the EV market will not be economically success, if Better Place is used as a proxy. Further, to test the sensitivity, the sensitivity analysis did not reveal any significant changes to the cash flow. The biggest revenue driver was a 1% increase in EV sales, which would improve the NPV result by DKK 9.95 million, while a quicker implementation plan would negatively impact the NPV result by DKK 800.000 per extra battery exchange station. Better Place’s market predictions are far from the authors, and have been included as a scenario analysis, which however does show that with Better Place will be profitable. Their predictions do require that EVs will gain a market share of 29.8% of the total new car sales from 2011 till 2020. To conclude the market conditions is improving and a number of changes will occur in the transportation sector, but the economically value for the EV market is further away than 2020. Hence the market conditions are not optimal for the introduction of the EV.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2009
Number of pages113