Aug 3, 2018

Why the electric vehicle revolution still needs Tesla

The future of electric vehicle adoption, in the U.S. but elsewhere too, remains bound up with Tesla even as other automakers bring more and more models to market.

Data: Securing America's Future Energy; Note: The totals represent combined battery electric vehicles and plug-in hybrid electric vehicles sold; Chart: Kerrie Vila/Axios

Why it matters: Tesla's stock got a boost after decent second quarter financials and a renewed pledge to be profitable later this year. But Tesla's long-term health is a question mark as it ramps up production of the Model 3 sedan.

“What happens with the Model 3 is going to be hugely indicative of whether the EV industry is going to be successful."
— Sam Ori, executive director of Energy Policy Institute at University of Chicago

The big picture: EVs can help to fight climate change, quicken the arrival of peak oil demand, and alter the very nature of mobility when paired with autonomous tech.

  • Tesla stands out as the clearest example of a disruptive player with a cool factor that can help transform EVs into something beyond niche status.

Where it stands: Right now, Tesla represents a third of the U.S. market for plug-in vehicles (including full electrics like Tesla's line and plug-in hybrids).

Now the company is ramping up production of its Model 3, a more mass-market product that's key to its long-term future and already the nation's top-selling EV. But Tesla must still show it can consistently keep boosting production.

What they're saying: Analyst Colin McKerracher of Bloomberg New Energy Finance says their forecast shows Tesla selling about 100,000 Model 3s per year starting in 2019, alongside continued sales of their other models.

Then Tesla's planned Model Y arrives in 2020 "and ramps up slowly to hit a similar volume as the Model 3," he notes.

Other new models from other automakers are hitting the market in coming years and will help drive demand, but none are aiming for Tesla's volume, McKerracher said. Overall, their U.S. forecast shows sales of pure electrics from all automakers combined reaching slightly over 676,000 in 2022 and almost 1.6 million in 2025.

"If Tesla were to disappear for some reason, our U.S. EV adoption forecast would definitely be reduced."
— Colin McKerracher

Nonetheless, the technology is far enough along that there's no going back.

“Losing Tesla would have a big impact on the EV market, especially in the short term," said Paul Ruiz, a policy analyst with the group Securing America's Future Energy.

But he adds: “On the other hand, in the medium and long-term, a lot of these automakers have made sizable investments in EVs, and the EV infrastructure nationwide is continuing to grow."

And looking outside the U.S., other players are much more important in China, the world's biggest auto market where officials are strongly pushing EV deployment.

What's next: Tesla CEO Elon Musk said the company could produce as many as 1 million vehicles in 2020.

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