Carmakers Face A Conundrum — An Economist’s Perspective
By Paul Wildman and David Waterworth
By Paul Wildman and David Waterworth
A common theme off and on for years regarding Tesla is subsidies, and it’s a popular one again. The idea from critics is that Tesla is getting billions of dollars of subsidies and that’s why it’s a viable company. Let’s hone in on that thought and see how accurate it really is.
While the administration just finalized its reduction in vehicle efficiency from 5 percent per year to no better than a measly 1.5 percent per year (despite their own evidence showing how bad it is for the country), that hasn’t stopped the auto industry from seeking even further reductions.
Harvard Business Review recently released a new article on how Tesla sets itself apart. This is something that many a Tesla fan, owner, and shareholder already know that Tesla sets itself apart from its competition.
As a CEO of a large global automaker, you have a huge problem of existential dimensions. If you don’t solve it, it’s not just your job that’s lost, but you will be remembered as the person who is responsible for a century-long proud legacy ending.
I wasn’t planning on writing a second article in this series so quickly, but I was reading through the comment section and felt compelled to write a response to cover some of those replies.
The automotive and oil industries dominate the global economy, and both are on the cusp of revolutionary change. The ramifications of this are endless, and when auto industry experts start discussing the current state of affairs with an open mind, the conversation can take some very interesting turns.
It’s no secret that legacy automakers are making the transition to electric vehicles only reluctantly, in response to regulatory pressure from governments and to competitive pressure from Tesla. Contrary to what many seem to believe, Big Auto’s reluctance to embrace EVs is not merely the usual corporate fear of the future, nor is it the result of any oil industry-fueled conspiracy (as far as we know). It’s a simple matter of money — there are good reasons to believe that electrification will take a major bite out of industry profits, as BMW and Daimler execs recently acknowledged.