Abstract:

Electric vehicles are once again embodying the notion of disruptive innovation. They are being positioned as viable alternatives to petrol and diesel vehicles, not only in developed markets but also in emerging ones. According to disruptive innovation theory, customers are swayed by new market entrants through low-end encroachment strategies and/or new market disruption, but these predictions do not account for the rising interest in product categories such as electric vehicles in emerging markets. To bridge this research gap, the authors draw comparisons between disruptive and incremental innovation to account for electric and hybrid vehicles, respectively. The authors explore the misalignment between technological growth and customer satisfaction by comparing the electric vehicle business model with the hybrid vehicle business model based on three parameters: channels, value propositions, and customer relationships. Primary empirical data are collected from 307 survey participants. Structural equation modeling is then employed to investigate the similarities and differences between electric vehicles based on their disruptive innovation and hybrid vehicles based on their incremental innovation. The authors find that electric vehicles’ unique focus on channels leads to a positive influence on their business model and customer satisfaction, while focusing on value propositions leads to positive results for hybrid vehicles. Finally, the authors discuss the significance of the results considering electric vehicles’ high-end encroachment strategy within the luxury segment and contrast it with the relatively low-end encroachment strategy adopted by sellers of hybrid vehicles. The results obtained in this study are likely to have been caused by the diversity of encroachment strategies used in both business models since hybrid vehicle sellers tend to target more price-sensitive markets in which consumers are more concerned about risk factors, while electric vehicles sellers use their unique channels, leaving potential buyers less concerned about financial factors and the related risks.