Marketing Challenges Presented by the Sustainability Agenda The Electric Car Sector

Marketing Challenges Presented by the Sustainability Agenda: The Electric Car Sector

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1. Introduction

The present headache for every organization is how to implement sustainability in marketing within the confines of synergies amongst the factors of people benefits, profit maximization for businesses, and environmental benefits. Figure 1 below is representative of the dilemma that 21st century businesses are battling.

Once presumed to be a passing cloud, concerns relating to business ethics, environmental friendly practices, and social responsibility are now dictating the welfare of organizations. Major stakeholders in any given industry including consumers, regulators, suppliers, employees, and activist groups have pushed business towards more sustainable practices. The result is the birth of a new business phenomenon: sustainability marketing (Lopez-Cabrales & Valle-Cabrera, 2020). Because of the push towards sustainable business operations that factor in the effect of profit maximization on the people and the planet, sustainability marketing has rapidly become the new mainstream, standard and conventional way of marketing as there are no longer any more alternatives. In this paper, the researcher will examine the conditioning factors leading to the development of the sustainability agenda, evaluate the challenges faced by businesses from the demands of the sustainability agenda, appraise the influence of ethics, social responsibility and environmental concerns on marketing practice, and analyse the viability of strategies and tactics for the implementation of sustainable marketing management. The focus of the analysis is on the electric car sector that is on the fore front of the sustainability marketing mainstreaming.

2. Sustainability Marketing

What is it and why is it important?

Sustainability approach is geared towards promoting continuity, and adopting the right behaviors and practices, which make the planet more inhabitable by reducing the pollution levels during production, and utilizing the resources in the right manner. The sustainable marketing strategy is geared towards longetivity, whereby companies forego short-term benefits for long-term success in their individual markets. Sustainable marketing is the promotion of environmentally and social responsible products, practices and brand values to the consumers. In this case, during sustainable marketing, the focus is not only on the products and services that a company is selling to its consumers, but also in developing and promoting its brand image and strategy (Lopez-Cabrales & Valle-Cabrera, 2020). The reason for this is that, responsibility and accountability for the social and environmental issues are being considered as common values that a majority of customers expect their brands to display, and abide by in their production processes. This is achieved by a company coming up with sustainable alternative solutions to address a majority, if not all of their environmental and social issues that are related to a specific brand.

Sustainable marketing can positively contribute to an increase in value of the products and services that an organization engages in, contribute to successful sales, and assist a company in terms of developing loyal customers. An effective sustainable marketing strategy will enable an organization to position itself in such a way that it is able to establish its business, maintain, or improve its overall sales over time.

Effective sustainable marketing approaches contribute to a company improving its overall social equity. This means that a company will have a transparent and reliable human resource service whereby employees are treated in a humane manner. For instance, in the electric car sector, this can be demonstrated by the organization offering equal employment opportunities for its applicants. Employees will not be denied employment opportunities because of their race, religion, sexual orientation, and their gender.

Sustainable marketing contributes positively to environmental conservancy and reclamation. The electric car sector is meant to help in the reduction of green house gas (GHG) emissions. An important point to note is that, the electric vehicles produce zero-direct emissions to the environment, which will lead to an improvement of the air quality in the urban areas (Braccini & Margherita, 2019). In addition to that, even though all types of vehicles produce life cycle emissions, the electric vehicles produce less, or fewer life cycle emissions, than is the case for the conventional vehicles. The reason for this is that, in a majority of the cases, the emissions tend to be lower for electricity generation than is the case for the burning gasoline, or diesel engines (Lopez-Cabrales & Valle-Cabrera, 2020). In addition to that, in the electric car sector, they can further minimize their overall life cycle emissions by only using electricity that has been produced by non-polluting renewable sources such as solar and wind. In such cases, it tends to improve the overall sustainability of the product, which in this case is electric cars.

Sustainable marketing helps an organization to have a better perspective of the value of their strategies. A business is better placed to assess the economic value of its product on both the local and global economy. For a company to consider itself as being a truly sustainable establishment, there is the need for the organization to push itself in a manner that will contribute positively in terms of changing people’s lives. This means that a business is able to improve the lives of the people in the communities that the company interacts with on a regular basis. For instance, in the electric car sector, this can be achieved by contributing to the creation of direct and indirect jobs in the industry (Kemper & Ballantine, 2019). Secondly, the ownership, and maintenance of the electric cars has to be cheaper, and in many aspects more cost-effective. For instance, the maintenance services of electric cars in the future has to be cheaper than that of the conventional cars to ensure that it reduces the cost of living of people to a point that can be considered sustainable.

As shown in figure 2 above, sustainability is all about the synergies between the society, the economy, and the environment. In line with finding this balance, the redefinition of how the electric car sector has changed consumption will be addressed.

3. Triple Bottom Line in the All Electric Car Market

In this section, the aforementioned models will be further integrated into practical examples of companies in the electric car market, especially the marketing model applied by Tesla.

Again, the section will use sustainability marketing practices employed in the electric cars business to show how the people, the planet, and profits make a case for sustainability.

In the triple bottom line (TBL) approach, the economic belief that is promoted is that companies should commit to addressing social and environmental concerns in a similar manner as they focus on making profits (Braccini & Margherita, 2019). This means that, instead of a a company focusing on one bottom line, they should take into consideration three: profit, people, and the planet (3P’s). The TBL is meant to assess a company’s level of commitment towards corporate social responsibility, and its impact on the environment over a long duration.

TBL Approach for Tesla

The TBL approach of this establishment has been contributed by the right capital re-investments, focusing on developing the right and strategic partnerships, utilizing on a variety of funding resources to provide the required financial assistance for its innovation, and the company’s leadership having the right vision, which have helped Tesla realize its goals and objectives over time.

Profit

One of the biggest problems that is being experienced globally in the 21st century is high energy consumption and rapid depletion rates. It is estimated that with the current fossil fuel reserves and the consumption rate globally, the oil reserves will probably last for another 50 years, or so. In addition to that, with the current trend, the global prices of petroleum products are increasing at a rate, which will soon be unsustainable for a majority of the consumers (Kronthal-Sacco et al., 2019). The increase in the petroleum products has also indirectly affected other industries as the transportation costs have substantially increased over the years. However, even though currently the automotive market is still largely dominated by the petrol/diesel engine cars, Tesla has over the years been building its brand value, which have ultimately contributed to the company increasing its overall market share (Lim, 2017). This is attested by the company’s improvement in revenue earnings over the past four years as can be seen in table one below.

Year Revenue (in million U.S. dollars)

2017 11,759

2018 21,461

2019 24,578

2020 31,536

Throughout the last four years, the company has experienced a considerable increase in its overall revenue. In 2020 in particular, Tesla reported that it had recorded a profit of $721 million from its overall sales, which were worth approximately $31.5 billion.

People

Tesla has focused on ensuring that their cars are stylish, but have the right safety measures. Tesla promotes itself as not only an automotive manufacturer, and developer, but a company that is selling a concept of the future to its target audience. Tesla brands itself as a young, energetic and futuristic brand, which is in line with the demographic of target audience. It focuses on people who have these elements to sell to them not only its cars, but the ideas that the company has, and is working on presently (Mangram, 2012). For instance, Tesla has invested in the development of superchargers and long battery life. The other social benefits that Tesla has focused on is that, its vehicles have low operating costs, reduced maintenance, and the overall performance of the vehicles is high because of electric torque and electronic traction control. Tesla cars have good handling because of a low center of gravity.

Tesla has invested in ensuring that their cars have the right safety measures to promote a high level of trust. The car’s system is developed from the driver’s, or consumers point of view. The company has implemented specific actions, which are meant to improve the overall public confidence in their cars (Mangram, 2012). This includes: smart software update, full warranty for the vehicle, and the transport agency conducts full investigations in the event of an incident taking place. These actions are meant to ensure that the consumers gain and maintain a high level of trust and confidence in relation to Tesla’s products.

Planet

One of the main goals of Tesla when it was launched in 2003, was to develop and build a sustainable means of transport that would eventually outperform the petrol vehicles. This is a company that wanted to change the dynamics of the automobile industry through its energy innovative initiatives, and which it is on course to achieving. Electric cars are highly efficient, in comparison to the internal combustion engines in terms of their energy efficiency (Mangram, 2012). The reason for this is that, most of the electrical energy in these cars is converted to mechanical energy. In addition to that, there are no greenhouse gases that are emitted from Tesla. Although there is the argument that, greenhouse gases are emitted during the production of electricity, there is more renewable energy that is being harvested and super-charger stations that are being supplied by solar power, which will contribute to the gradual reduction of greenhouse gas emissions to the point that they will have minimal environmental impact (Iyer & Reczek, 2017). In addition to that, there is the utilization of domestic energy, which has contributed to the creation of jobs, and the renewable energy sources will ultimately contribute to the reduction of fossil fuels, and coal-powered plants. Furthermore, the batteries that the company produces are considered to be non-toxic to the environment (Teles et al., 2018). Also, the superchargers ensure that the car rapidly charges within a reasonable amount of time, and one can travel without recharging over a distance of approximately 300 miles. Tesla recycles these batteries, which is an indication of its environmental sustainable efforts.

4. Barriers and Transitions to Change

In accordance with the growth of population, there is also an increase in the energy consumption which leads to an increase of CO2 emission from fuel combustion. As the carbon emission keeps increasing, organizations become aware of its effect, one of which is the global warming issue. Apart from carbon emission, other environmental impact such as greenhouse gases also contributed to the global warming. A lot of attention has now been given to reduce the carbon emission (Pomering, 2017). Additionally, sustainability marketing is going to contribute in solving the issue. Nonetheless, the electric car sector is facing some issues relating to barriers and transitions to change. This section will look at these issues and link them back to the sustainability agenda.

In the recent past, the driving range for a majority of the electric vehicles models has improved significantly. For instance, the driving range of the Tesla Model 3 is up to 370 miles. Even though this can be considered conducive for drivers who are engaged in in-town distances, it is considered a challenge for drivers who are engaged in long drives, or who drive their cars in cold weather. This has presented a marketing challenge for the electric car manufacturers, especially in terms of convincing people who regularly engage in long drives to purchase their vehicles. A strategy that electric car manufacturers are using to deal with this challenge is developing batteries that have bigger storage capacities to improve the driving ranges of their vehicles (Taoketao et al., 2018). As the lithium-ion battery technology improves over the next few years, this issue will be addressed, and these cars will be convenient for all users.

The charging time is less ideal for a majority of drivers. An important point to note is that, the amount of time that it takes for a charger to charge a car is dependent on its battery capacity and speed of the charger. For instance, when using a standard wall charger, it will take approximately 8 hours to charge the battery of a Tesla S Model (Tiwari, 2017). On the other hand, the use of a super charger will only take one hour for the battery of this car to be fully charged. Still, this is a long time to wait for a battery to be charged, especially for an individual who is in a rush. In addition to that, there is a lack of charging infrastructure in some locations (Pomering, 2017). Tesla is addressing this issue by building super charging stations in areas where their car models are being bought at a significantly high rate. In addition to that, to address the issue of the long charging time, there are charging systems that are being installed in parking lots and shopping centers, whereby electric car owners can charge their cars as they engage in other activities.

The switch by a majority of the consumers from fuel-powered vehicles to electric cars is expected to change time. Approximately 34% of the consumer population globally are considered late majority. This means that their likelihood of adopting a new product will be influenced after they see a majority of consumers have successfully adopted this technology. In addition to that, in some countries where companies like Tesla hope to penetrate the market, consumers take a long period before they change their vehicles (Tiwari, 2017). For instance, in the UK, a typical car owner will take 15 years before they can change their cars. As the sale of the petrol and diesel vehicles is still being conducted, it is highly unlikely that the electric car market will experience a boom in the next few years. A majority of the countries in Europe have announced target dates to end the sale of the new petrol and diesel engines. For instance, Norway target date is 2025, while that of Denmark and the UK is 2035 and 2040 respectively.

In comparison with the internal-combustion vehicles, electric cars have a limited diversity, or range of car models from which a consumer can choose from. Tesla, which is considered the most successful electric car manufacturing company globally has only four car models I.e. Model S, Model 3, Model X and Model Y. The small diversity makes these cars less ideal for a majority of consumers, especially if the car manufacturer does not have a car that fits to their needs. For instance, although Tesla Model 3 can be considered as an off-road car when it has been fitted with off-road wheels and tires, and Model X, which has been used for off-road purposes, these cars perform dismally in relation to the internal-combustion engine vehicles that were designed for off-road purposes (Tiwari, 2017). Tesla’s research team is engaged in research to ensure that the future car models that the company will produce will be in line with some of the needs of the clients that it has been unable to achieve presently. Increasing the diversity of its cars will mean that the company will be in a better position to increase its customer range in the market.

One of the major challenges that continues to act as a barrier for electric cars in terms of marketing is the cost of these cars in comparison to the internal-combustion vehicles. Electric cars presently cost a lot to build, and because of their prices, a majority of the potential customers have been reluctant to purchase them, despite of the overall benefits that these cars provide both for the user and the environment (Roblek et al., 2021). Tesla researchers have been conducting studies, and recently Tesla announced that it would develop a $25,000 electric car within the next three years. If this is achieved, then the initial cost of purchasing an electric car will significantly reduce, and this may contribute to a majority of people owning these cars, and contributing to benefits that electric cars offer to the environment, in comparison to the internal combustion cars.

The Sustainable Product

Transportation and electricity production are considered to be two of the largest sources of GHG emissions. Tesla intends to reduce the environmental impact of transportation and electricity production on the environment. Electric vehicles (EVs) produce lower tailpipe GHG emissions in comparison to the internal combustion vehicles. An important point to note is that, for the EVs, which only use electricity to power them up, they have zero tailpipe emissions. However, the GHG emissions can be produced by the source of this electrical power that they are using such as that of a power plant (Braccini & Margherita, 2019). However, in areas where low-polluting energy sources are used for the electricity generation purpose, EVs have significantly lower emissions in terms of the well-to-wheel emissions in comparison to the gasoline or diesel vehicles.

Tesla utilizes a renewable energy source to produce the electricity that is used by its cars. The company has invested in solar panels that are used to produce the required energy to power up their vehicles. The company’s solar electricity generation has presently exceeded the amount of energy that the entire Tesla vehicle fleet has consumed (Roblek et al., 2021). The total amount of energy that Tesla solar generation system has produced over the years is 13.25TWh, while the total amount of energy that has been consumed by cars is 5.26TWh. Using a renewable source of energy to produce electricity, Tesla has reduced the GHG emissions from its cars (Tiwari, 2017). An important point to note is that, the solar and energy storage systems for Tesla do not only provide clean, and zero-emission energy, they have also improved the overall reliability and resilience of the electric grid.

Suitability of the Strategies Employed

Electric cars are the future of the transportation industry. While the internal combustion engine cars use fossil fuel, which is rapidly decreasing, and whose cost is regularly increasing, EVs are using a source that is renewable-electricity. This makes this type of cars sustainable in terms of the short-and long-term markets (Dyck et al., 2019). Second, EVs will promote to less air pollution due to the GHG emissions. This will have a significant improvement on the overall environment than has been the case for the internal-combustion cars. For the environmentally conscious customers, they are willing to purchase these vehicles because of their positive impact to the environment. In addition to that, a majority of the EVs have been built with a high focus on safety of the occupants of the vehicle. For instance, they are low to improve their overall stability (Font & McCabe, 2017). The automatic software updates, and a company like Tesla providing full warranty for the vehicle, and conducting thorough investigations whenever their vehicle is involved in any accident, or incident will ultimately make these products to be more attractive to the consumers in the future.

7. Conclusion

The aim of this discussion is to show how sustainability marketing has created challenges for modern industries, with a special focus on the electric car sector. Once presumed to be a passing cloud, concerns relating to business ethics, environmental friendly practices, and social responsibility are now dictating the welfare of organizations. Major stakeholders in any given industry including consumers, regulators, suppliers, employees, and activist groups have pushed business towards more sustainable practices. Responsibility and accountability for the social and environmental issues are being considered as common values that a majority of customers expect their brands to display, and abide by in their production processes. Sustainable marketing can positively contribute to an increase in value of the products and services that an organization engages in, contribute to successful sales, and assist a company in terms of developing loyal customers. An effective sustainable marketing strategy will enable an organization to position itself in such a way that it is able to establish its business, maintain, or improve its overall sales over time. Sustainable marketing contributes positively to environmental conservancy and reclamation. The electric car sector is meant to help in the reduction of GHG emissions. An important point to note is that, the electric vehicles produce zero-direct emissions to the environment, which will lead to an improvement of the air quality in the urban areas. In addition to that, in the electric car sector, they can further minimize their overall life cycle emissions by only using electricity that has been produced by non-polluting renewable sources such as solar and wind. In such cases, it tends to improve the overall sustainability of the product, which in this case is electric cars.

Electric car manufacturers, although new players in the automobile industry, are engaging in sustainable marketing, which has contributed to their rapid increase in the market share. Although the internal combustion engine cars still dominate this market, the applicability of the sustainable approach will contribute to a sense of market domination of the EVs in the future. In the sustainability marketing approach, Tesla has adopted the three bottom line approach focusing on people, planet, and profitability. In terms of people, the company does not only offer stylish vehicles, but also safe cars for its consumers. The focus on implementing the right safety measures is meant to improve the trust level between the company and its consumers. In line with being environmentally friendly, Tesla’s electricity energy source is the sun, which is considered a renewable source of energy. In addition to that, these cars are highly energy efficient, which means that there is little to no energy that is lost as they are being driven. Furthermore, these cars produce zero GHG emissions. In terms of profitability, Tesla for the past four years has been experiencing an increase in its sales, which have translated into considerable profit margins. In 2020, the company reported a profit of $721 million from its overall sale of $31.5 billion. Although the EVs are utilizing a sustainable marketing strategy approach, they are still facing market barriers such as costs, long duration of battery charging, and low adoption rates. Companies such as Tesla are coming up with innovative ways to address some of these challenges. For instance, in relation to cost, the company is developing a car that will cost approximately $25,000, which will be affordable to most people. The EVs are a relatively new sector in the automobile market. However, because they offer solutions to a majority of the problems that have existed in this industry, and their use of TBL, they will take over this industry in a few years time.

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