EV Strategy for a Leading Luxury Automotive OEM

Position Project Aurora as complementary, not as a replacement

• Frame the EV as a different use case within the brand ecosystem: weekday usage, family mobility, urban luxury and technology leadership.
• Avoid implying that the traditional performance portfolio is obsolete.
• Make the message: this is an additional expression of the brand, not the new definition of the brand.

Preserve scarcity and allocation discipline

• Keep production intentionally constrained even if demand is strong.
• Use invitation-only allocations, waitlists and controlled regional launches.
• Avoid chasing volume to justify EV economics if doing so weakens exclusivity, residual values or collector desirability.

Recreate emotional differentiation in a new way

• The brand cannot fully replicate combustion-engine emotion, so it must create a distinct EV experience.
• Levers include driving dynamics, cockpit theater, personalization, acoustic engineering, software-enabled performance modes and exclusive ownership events.
• The goal is not to imitate the old product mechanically, but to preserve the intensity and identity of the ownership experience.

Segment customers clearly

• Target younger wealthy buyers, tech entrepreneurs and Chinese luxury consumers who are more open to EVs.
• Do not force adoption among traditional collectors who may view the product as inauthentic.
• Potentially separate communication, launch events and clienteling for EV buyers versus traditional performance buyers.

Maintain a balanced portfolio

• Continue investing in traditional halo cars and high-performance hybrids to preserve heritage and emotional credibility.
• Use EVs selectively as a future-facing pillar rather than making them the entire brand story in the next five years.
• Monitor brand health, resale values, waitlists and customer sentiment before increasing EV exposure.

Sample verbal answer

“I would manage the brand risk through five levers. First, I would position Project Aurora as a complementary luxury mobility product rather than the replacement for the traditional performance portfolio. Second, I would preserve scarcity with constrained production and controlled allocation. Third, I would recreate emotional differentiation through driving dynamics, cockpit experience, personalization and ownership rituals. Fourth, I would target EV-oriented segments such as younger wealthy buyers and Chinese luxury customers, instead of forcing the product on traditional collectors. Finally, I would keep a balanced portfolio with traditional halo cars and hybrids, so the EV platform adds future relevance without becoming the whole brand identity.”

• The exhibit shows a strategic trade-off rather than a pure demand problem.
• Market direction supports EV participation: ultra-luxury EVs are growing at 22% while ultra-luxury ICE is declining at 3%, suggesting the client cannot ignore EVs long term.
• China is critical, representing 42% of ultra-luxury EV demand. This suggests the EV strategy may need to be geographically selective rather than globally uniform.
• Customer demand is highly segmented. Existing owners show only 12% purchase intent, while Chinese HNWIs and younger tech entrepreneurs show much stronger interest at 61% and 58%.
• This implies Project Aurora may be more attractive as a customer acquisition vehicle than as a replacement for the traditional portfolio.
• However, the brand risk is material: 48% say the brand no longer feels authentic. This threatens pricing power because ultra-luxury automotive brands rely heavily on emotion, heritage and exclusivity.
• The 54% interest in comfort and practicality suggests the client may be tapping into a broader luxury mobility need, but this positioning must be managed carefully to avoid diluting the performance image.

Sample verbal answer

“My main takeaway is that Project Aurora has real demand potential, but not necessarily among the brand’s traditional customers. The market context is favorable because ultra-luxury EVs are growing strongly while ICE is declining, and China is a major demand pool. The customer data shows a clear split: existing owners show low purchase intent, but Chinese HNWIs and younger tech entrepreneurs are highly interested. That suggests the EV could help acquire new customers. The risk is that almost half of respondents think the brand feels less authentic, so the company needs to capture the EV opportunity without damaging the emotional identity that supports its premium pricing.”

Step 1 - Annualized fixed costs

• EV platform R&D: EUR 1,200M / 5 = EUR 240M per year
• Factory retooling: EUR 600M / 5 = EUR 120M per year
• Annual fixed costs: EUR 240M + EUR 120M + EUR 180M + EUR 220M + EUR 120M = EUR 880M per year

Step 2 - Weighted average selling price

• Weighted ASP = 45% x EUR 690k + 25% x EUR 610k + 30% x EUR 650k
• Weighted ASP = EUR 310.5k + EUR 152.5k + EUR 195.0k = EUR 658k per vehicle

Step 3 - Contribution margin per vehicle

• Fixed variable cost per vehicle excluding distribution = EUR 240k + EUR 160k + EUR 25k = EUR 425k
• Distribution cost = 7% x EUR 658k = EUR 46.1k
• Contribution margin = EUR 658k - EUR 425k - EUR 46.1k = EUR 186.9k per vehicle

Step 4 - Break-even volume before cannibalization

• Break-even volume = EUR 880M / EUR 186.9k = approximately 4,708 vehicles
• The base case of 4,800 vehicles is slightly above break-even before considering cannibalization.

Step 5 - Scenario profitability before cannibalization

• Bear: 3,000 x EUR 186.9k - EUR 880M = -EUR 319M operating loss
• Base: 4,800 x EUR 186.9k - EUR 880M = approximately +EUR 17M operating profit
• Bull: 6,800 x EUR 186.9k - EUR 880M = approximately +EUR 391M operating profit

Sample interpretation before cannibalization

“The standalone economics are finely balanced. Annual fixed costs are EUR 880M, and the base-case weighted contribution margin is approximately EUR 187k per vehicle. That implies a break-even volume of roughly 4,700 units, so the base case is just above break-even and the bull case creates material profit. However, the bear case is deeply loss-making. This means the project is financially attractive only if the client can reach base-case volume without damaging exclusivity or brand equity.”

• Cannibalized vehicles in the base case: 4,800 x 30% = 1,440 vehicles.
• Lost contribution from traditional vehicles: 1,440 x EUR 330k = EUR 475.2M.
• Standalone Project Aurora contribution in base case: 4,800 x EUR 186.9k = EUR 897.1M.
• Net incremental contribution after cannibalization: EUR 897.1M - EUR 475.2M = EUR 421.9M.
• Operating result after cannibalization: EUR 421.9M - EUR 880M = -EUR 458.1M.
• Alternative shortcut: effective incremental contribution per vehicle = EUR 186.9k - 30% x EUR 330k = EUR 87.9k.
• Cannibalization-adjusted break-even volume = EUR 880M / EUR 87.9k = approximately 10,012 vehicles.

Interpretation

• Cannibalization fundamentally changes the conclusion. The base case looked marginally profitable before cannibalization, but becomes significantly loss-making once lost contribution from traditional vehicles is included.
• The adjusted break-even volume of roughly 10,000 vehicles is above the bull-case volume and likely incompatible with an ultra-luxury scarcity model.
• The client should not scale the EV platform broadly if demand mainly comes from existing customers switching from higher-margin vehicles.
• The strategy should focus on incremental customers, especially geographies and segments where the EV attracts new buyers rather than replacing traditional purchases.

• Contribution margin with EUR 675k ASP: EUR 675k - EUR 425k - 7% x EUR 675k = EUR 675k - EUR 425k - EUR 47.25k = EUR 202.75k per vehicle.
• Effective incremental contribution after 15% cannibalization: EUR 202.75k - 15% x EUR 330k = EUR 153.25k per vehicle.
• Adjusted break-even volume: EUR 880M / EUR 153.25k = approximately 5,742 vehicles.
• This is still above the base case of 4,800 units, but it is much closer to feasible than the 10,000-unit break-even under the original cannibalization assumption.
• Strategically, this supports a China-led selective rollout because higher willingness to pay and lower cannibalization improve the economics while reducing brand conflict in more traditional markets.

Clear recommendation

• I would recommend that the client continues investing in EVs, but pursues a selective and geographically focused EV strategy rather than an aggressive global scale-up.
• The EV model should be positioned as a complementary luxury mobility product, not as the future core identity of the brand.
• The rollout should prioritize China and younger tech-oriented wealthy customers, while keeping production volumes intentionally constrained to protect scarcity and brand equity.
• The client should continue investing in traditional halo cars and high-performance hybrids to preserve its emotional brand identity and credibility among existing customers.

Key arguments supporting the recommendation

• The market opportunity is real and strategically relevant
  • Ultra-luxury EV demand is growing strongly, while traditional ICE luxury vehicles are declining.
  • China represents a large share of ultra-luxury EV demand, making it the most attractive market for a targeted rollout.
  • Younger wealthy buyers, tech entrepreneurs and Chinese HNWIs show meaningfully stronger purchase intent than existing owners.
• The EV can help the client access new customers
  • Existing brand owners show relatively low purchase intent, which suggests the EV is not naturally appealing to the traditional customer base.
  • However, newer customer groups show stronger interest, meaning the EV could work as a customer acquisition vehicle if positioned correctly.
  • This supports a targeted strategy focused on incremental customers rather than a broad push across the whole client base.
• Brand risk is significant
  • A high share of respondents feel the vehicle no longer feels authentic to the brand.
  • This is a major concern because ultra-luxury automotive brands rely heavily on emotion, heritage, scarcity and exclusivity.
  • If the client scales EVs too aggressively, it may weaken the same brand equity that supports its premium pricing power.
• The financial case is challenging
  • The EV platform carries substantial fixed costs and requires meaningful scale to break even.
  • Base-case profitability is only modest before cannibalization, and the downside case is loss-making.
  • Once cannibalization is included, the project becomes much less attractive because some EV buyers would otherwise have purchased higher-margin traditional vehicles.
• China-focused growth improves the case
  • A China-led rollout is more attractive because China combines higher demand, stronger EV acceptance and higher average selling prices.
  • This allows the client to capture EV growth where willingness to pay is strongest while limiting exposure in markets where the product may face stronger brand resistance.

Key risks

• Brand dilution risk
  • The EV may weaken the brand’s emotional identity if customers perceive it as too practical, too technology-led or insufficiently authentic.
  • This could affect not only the EV model, but also the desirability of the broader portfolio.
• Cannibalization risk
  • If a material share of EV buyers would otherwise have purchased traditional models, the client may reduce profitability per customer.
  • This risk is especially important because traditional models likely carry stronger margins and stronger halo effects.
• Volume and exclusivity risk
  • The financial case may push the client to increase EV volumes, but higher volumes could weaken scarcity, waitlists and resale values.
  • This creates tension between financial break-even and long-term brand protection.
• Market execution risk
  • Demand may be concentrated in China and weaker in Europe or among traditional collectors.
  • If the client rolls out the product too broadly, it may face low adoption in some regions while increasing brand controversy.
• Competitive risk
  • Luxury EV competitors, especially in China, may move quickly and define customer expectations faster than the client can adapt.
  • The client needs to stay technologically credible without overcommitting to a strategy that undermines the brand.

Next steps

• Refine customer segmentation
  • Quantify demand by geography, customer type and ownership history.
  • Separate incremental buyers from customers who would otherwise buy traditional models.
• Run a phased China-led rollout
  • Prioritize China as the first major growth market.
  • Keep European and traditional-owner exposure more limited until brand perception improves.
• Set volume guardrails
  • Define maximum EV production volumes that preserve scarcity.
  • Monitor waitlists, resale values and order quality before expanding capacity.
• Track brand health closely
  • Measure authenticity perception, customer sentiment, collector reactions and impact on traditional model demand.
  • Treat brand KPIs as seriously as financial KPIs.
• Test future product concepts
  • Explore whether future EVs should be more performance-led, more exclusive or more clearly differentiated from the core traditional portfolio.
  • Assess whether a separate EV positioning, limited edition strategy or differentiated clienteling approach would reduce brand dilution.

Sample verbal answer

“I would recommend that the client continues investing in EVs, but does so selectively rather than pursuing an aggressive global scale-up.

The reason is that the EV opportunity is strategically relevant, especially in China and among younger tech-oriented wealthy customers. Ultra-luxury EV demand is growing strongly, while traditional ICE luxury is declining, so fully ignoring EVs would create a long-term relevance risk. At the same time, the customer data suggests that the EV is much more attractive to new customer segments than to existing owners, which means the product should be positioned as a customer acquisition vehicle rather than as a replacement for the traditional portfolio.

However, I would be cautious on scaling. The brand risk is material because many customers feel the vehicle is less authentic, and the client’s pricing power depends heavily on emotional appeal, heritage, scarcity and exclusivity. The financial case is also challenging. Fixed costs are high, the base-case profitability is limited before cannibalization, and once cannibalization is included, the investment becomes less attractive because some customers would otherwise have bought higher-margin traditional models.

Therefore, I would prioritize a China-led and tightly controlled rollout, keep EV production intentionally constrained, and position the EV as a complementary luxury mobility product rather than the new core identity of the brand. In parallel, the client should continue investing in traditional halo cars and high-performance hybrids to protect its emotional credibility with existing customers.

The main risks are brand dilution, cannibalization of higher-margin traditional models, and pressure to scale volumes beyond what the brand can support. As next steps, I would refine customer segmentation, quantify incremental versus cannibalized demand, launch a phased China-focused rollout, set strict production guardrails, and track brand health indicators such as resale values, waitlists and customer perception before expanding further.”