How Tesla is calling the shots in the EV shift

Why it matters: The EV pioneer faces increasingly stiff competition from traditional automakers. But Tesla is dictating the terms — and reaping the lion's share of the benefits — of America's historic shift to electric vehicles.

Driving the news: GM announced Thursday that, starting early next year, its EV owners will be able to use Tesla's network of 12,000 Superchargers (with the help of an adapter).

• Starting in 2025, GM will adopt Tesla's connector design — essentially tossing the Sony/Betamax dispute to Tesla, as Ford did when it made a similar announcement two weeks ago.
• GM said the agreement with Tesla complements its ongoing investments in charging, building on the more than 134,000 Level 2 chargers and fast-chargers currently available to GM EV drivers through its Ultium Charge 360 initiative.

The intrigue: GM's and Ford's moves could trigger a chain of falling dominos — with other carmakers embracing Tesla's technology as well, essentially digging a grave for the engineering standard agreed to by most automakers in 2012.

• Meanwhile Tesla reaps a bonanza: By opening its growing network to other car brands, the company will qualify for EV charging tax credits under the 2021 infrastructure law.

Details: GM consumers will pay competitive rates for electricity at Tesla Superchargers, a GM spokesman said.

• It's fair to assume they'll pay a premium over Tesla's own customers, though.
• Also unclear is how much data Tesla will be able to collect about GM owners' charging habits. (Terms of the GM-Tesla deal were not announced, including how much GM will pay Tesla for access to its network.)

The big picture: The shift to electric vehicles, which currently account for around 7% of new car sales, is picking up steam, fueled largely by government incentives.

• EV buyers can get federal tax credits of up to $7,500 on vehicles built in the United States, if the batteries meet certain sourcing requirements.
• Manufacturers, meanwhile, can get up to $45 per kilowatt-hour (kWh) for battery packs made in the U.S., which translates to tax credits of roughly $2,700 to $4,500 per vehicle.

No company is better positioned than Tesla to exploit these EV-friendly policies.

• Its first-mover advantage on domestic EV and battery production, along with its dominating 61% share of total EV sales, translate to a windfall that is at least three or four times larger than what other carmakers can expect.

• Tesla (and its battery partner Panasonic), for example, could pocket about $1.8 billion in production tax credits this year alone under the 2022 Inflation Reduction Act, according to Benchmark Mineral Intelligence.
• CEO Elon Musk told investors earlier this year that the value of such credits could become "very significant" and potentially "gigantic" in future years.
• Plus, Tesla's entire Model 3 lineup now qualifies for the full $7,500 federal consumer tax credit, helping make its vehicles more affordable.

The biggest worry among competitors is that Tesla will weaponize those lucrative incentives to further slash vehicle prices.

• Musk already told analysts he's willing to sacrifice profit margins if it means selling more cars.
• Tesla has already cut Model 3 prices about 20% since the beginning of 2023, which has Ford CEO Jim Farley warning of an EV price war.
• When you add state tax incentives for EVs, Tesla's once luxury-priced vehicles are downright cheap.

One example: A Model 3 starts at $40,240, but in California — the nation's largest EV market — the price may fall to $25,240 after the $7,500 federal tax credit and another $7,500 state tax rebate, depending on income and other requirements, per Reuters.

• That puts it at less than a Toyota Camry, which starts at $26,320.

The bottom line: Other automakers are racing to catch up on EVs, but Tesla is still in charge.