A few weeks ago I visited a car dealership. There was a new electric car in the yard that was just being charged. An SUV, and the brand doesn't matter, because neither the design nor the technology set standards. If you like it, you can imagine any established brand and a 4,70 meter long SUV, that's all it takes.
Curiosity then drove me to open the driver's door and sit in the electric car. Again, I found no surprise. Two differently sized displays, a few buttons for operation, which is more the exception. Then a mountain of cheap plastic that didn't quite match the manufacturer's asking price. In my mind's eye I saw the electric car in the €40.000 class. The price tag corrected my error immediately. The customer should pay more than €60.000.
Well, I thought to myself. A product is always worth what you are willing to pay for it. I found the price absurd, I was out. I'm probably not alone with my thoughts. Because the fear of the Havana effect is rampant in the automotive industry.
The Havana effect is going around
The term Havana effect is relatively new, it exists Havana Syndrome, which has nothing to do with cars. But the term is becoming established. Hidden behind it is the fear of the manufacturers that a certain, not insignificant percentage of the customers could refuse the electric car.
The fear is not unfounded! The prices are running away, and the argument that the €60.000 SUV has a relatively large battery and that all the electronics are simply scarce and expensive could not catch on with the customer. He could start calculating and turn out to be stubborn. He could continue driving his old, long-paid-for combustion engine. In a couple of years, when he's mulling over bills and realizing how much it's saved him, he could be lost to new cars forever.
Just as in Havana the old US road cruisers and the achievements of Soviet automotive engineering are doing their job steadfastly, so it could soon be the case in Europe as well. The number of vehicles in Germany has been growing older for years. Most recently, it was 9,8 years on average, and 5% of the vehicles are even between 20 and 24 years old (source: KBA).
Politics exacerbates the effect
On the supply side, the trend is intensifying, because inexpensive compact cars and small cars are now disappearing from manufacturers' offers. Increasingly strict emission regulations, more and more mandatory assistance systems, and the dependence on Asian suppliers and their scarce allocation cause them to retreat to the more profitable high-price segments.
In response, customers are fleeing to used cars, which are increasing in price month after month. But this is possibly just the beginning. It can be particularly exciting to see what will happen when the electric cars sold in numbers in 2022 push back onto the market. Will the classic used car buyer then access it? Or does he refuse? And what will happen when today's electric cars are 10 years old and there are no replacements for defective components? Who will repair ECUs from Chinese manufacturers that are unlikely to have publicly available documentation?
The Havana effect is bad for manufacturers. If the customer refuses, fewer new cars are produced and the entire cycle comes to a standstill. From another perspective, however, he has a certain charm. Once the arithmetic has started, you inevitably come across the sum that you will destroy in a few months with a new car.
In the future, this will be particularly high for an electric car. Because while you can use an old combustion engine for decades, every e-car has its expiry date from the moment it is born. When it rolls into the dealer's yard, it's already old, the processors have had more powerful successors for a long time, the displays are available with better resolution, and the software is two revisions further.
The lost comfort factor
In addition, the industry has lost its comfort factor. For decades, the greats have passed the balls to each other. Innovations came with caution, the hardware was spared, it should age comfortably. The Chinese, whose manufacturers will present 50% of all new electric cars announced worldwide this year, do not know the comfort factor.
Innovations, mostly gadgets that may or may not be useful, are constantly coming out of China. The trendsetters are in Asia, a certain younger clientele with an affinity for technology will love that and adjust their future expectations accordingly. Bad times for the big ones, who think it's enough to stay relaxed and just change the type of drive.
Perhaps the Havana Effect will educate us to be more sustainable and less consuming. It may be that something is being created here that will convey good news for medium-sized companies. For smaller producers who take care of the spare parts for an aging car fleet and can reproduce them, for workshops and service companies, painters and bodybuilders.
Local businesses and faded car brands like Saab could be the winners if Havana moves in - Cuba has always had its special charms.
You might now see your aging Saab with an easy-going, Caribbean charm! Anyway, have a nice Sunday and a good start into the new week! We read each other!