The dream of an electric car future began to crystallize in 2010. That’s the year Tesla went public. Soon after, Tesla introduced its Model S sedan. By 2013, the company finished the year selling just 22,000 cars. Most industry observers predicted Elon Musk’s Silicon Valley startup would be the next DeLorean. Wall Street analysts widely predicted the company would go bankrupt.
Fast forward to 2020. As the year came to a close, TheStreet praised Tesla’s “meteoric 731% rise year-to-date” to become one of the ten most valuable companies in the world. At the time, Tesla’s market cap grew higher than Volkswagen, Toyota, Daimler, BMW, GM, and Ford combined.
A few weeks ago, a report from Money UK noted Tesla was the most “Googled” investment opportunity in the world, “ranking as the most searched for investment in 82 countries worldwide.”
Tesla is at the vanguard of a paradigm shift unfolding in the automotive space. Just as the past 5–10 years surprised the majority of the market, the next 5–10 will shock everyone. EV adoption will accelerate far faster than anyone thought possible.
Zachary Shahan, the editor of CleanTechnica told me,
“On the one hand, such rapid growth seems hard to believe in an industry as large, complex, and slow-changing as the auto industry. On the other hand, tech transitions aren’t slow once a technology becomes cost-competitive. The fabled S-curve of tech adoption looks much more like a steep rise than an S.”
He adds, “How many major companies have faced such moments of shock and disruption? Countless have, from Kodak to Blockbuster.”
|Above: New tech adoption rates for popular technologies over time (Source: New York Times, via CleanTechnica)|
Most agree, electric vehicles (EVs) are poised to replace internal combustion engine (ICE) vehicles over the next few decades. Traditional automakers, EV upstarts, and government initiatives all point to this future.
According to Marketwatch, electric cars currently make up around 2% of global auto sales, and estimates for a future market share vary from a low-end forecast of 10% to 20% of cars sold by 2030 to as much as two-thirds of the market by that time. “The EV party is just beginning, buckle the seat belts,” Wedbush analyst Dan Ives said recently.
Traditional Automakers Go Electric
On the heels of Tesla’s stunning success, traditional automakers have aggressive plans in place to transition to EVs.
|A recent clip from Bloomberg Green showcases the direction of the auto industry moving forward (Source: Bloomberg Green)|
For example, three major automakers have recently made significant announcements touting an electric future.
FORD. Ford just announced an electric version of their best-selling F-150 pickup truck. Bloomberg reported the company revealed plans to boost its investment into EVs to $30 billion and pledged that 40% of vehicles sold would be battery powered by the end of the decade.
GENERAL MOTORS. Autoweek reports that GM plans to invest most of its $27 billion in electrification efforts as “the automaker plans to offer 30 battery-electric models by the middle of this decade, aiming to offer 40% of its lineup as BEVs by the end of 2025.”
VOLKSWAGEN. According to Reuters, Volkswagen is planning to invest a staggering $41.7 billion (35 billion euros) in EVs including an ambitious plan to build six European battery gigafactories by 2030.
Meanwhile, many other auto brands including Mercedes, Hyundai, Audi, and Porsche are all pushing to fast-track plans for vehicle electrification as well.
New EV Companies Are Coming To Market
At least $28 billion was invested in public and private electric vehicle companies in 2020, according to data from CB Insights and Dow Jones Market Data Group (via Marketwatch). While traditional automakers join the EV race, investors are funding EV startups in hopes to find the next Tesla.
According to the Wall Street Journal, Rivian received 8.2 billion dollars from notable investors like Blackrock and Amazon. Lucid has received 7.4 billion dollars from other major investors including the Saudi Arabia Public Investment Fund.
EV startups like Workhorse, Proterra, Bollinger, Fisker, and Canoo show promise (and significant funding) too.
In addition, well-funded Chinese EV companies like NIO, Li Auto, Xpeng, and Warren Buffet–backed BYD are also looking to enter the US auto market soon in order to compete globally in the EV space.
A Backdrop Of Government Support
All of this investment into EVs from traditional auto and new car companies is happening against a backdrop of strong government support for electrification.
According to Barron’s, President Biden now has a bill coming out of the Senate Finance Committee that offers federal tax credits for EV buyers ranging from $7,500 to $12,500, which would be “a potential boon for American car makers, including General Motors, Ford, and, of course, Tesla.”
In addition, many states in the US offer additional tax credits for buying an EV, including CARB states offering up to a $2,500 tax credit which can be used in addition to the federal tax credit. In some cases, these combined tax credits could reduce the cost of buying an electric car by $15,000.
Often, government support for EVs is actually more generous in other countries. And it goes beyond just tax credits and incentives. In fact, according to CleanTechnica, “there are 31 national and local governments that have announced bans on the sale of some forms of transportation powered by internal combustion engines.” And this list is always growing.
|A partial list of the national and local governments that have announced bans on the sale of some forms of transportation powered by internal combustion engines (Source: Charged Future, via CleanTechnica)|
Tesla Poised For 50% Annual Growth
While traditional auto and EV upstarts look to challenge Tesla, Elon Musk and Team Tesla aren’t simply standing still. The company is making significant investments to build and expand its gigafactories in Nevada, Texas, Shanghai, and Berlin.
Will Tesla’s bold investments result in accelerated growth? In Tesla’s Q1 Investor Update shareholder deck (on slide 10), the company forecasts: “Over a multi-year horizon, we expect to achieve 50% annual growth in vehicle deliveries.”
In the immediate future, the forthcoming introduction of the Tesla Cybertruck — a vehicle that currently has an estimated 1 million pre-orders — will prove to be a bold entry into the lucrative pickup truck market. Following Cybertruck, Tesla plans to introduce its first mass-market car, the so-called “Model 2” (in 2024), with an estimated price point of $25,000.
So Who Will Win This Race?
Tesla is certainly a good bet. But keep in mind, overall global EV sales should top 12.2 million by 2025, indicating annual growth of nearly 52% (compounded), according to IHS Markit. Everyone is getting in. So get the popcorn, it’s going to be fun to watch this race.
This decade should mark a dramatic turning point for electric vehicles. The transition from outdated ICE technology to a battery-powered future will gain traction and accelerate. And with zero tailpipe emissions, we can all breathe a sigh of relief (and some cleaner air) as the auto industry embraces electrification.
Originally posted on EVANNEX.
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