In recent years, the automotive industry has begun the gradual change from combustion-engine vehicles to electric vehicles (EV). For the most part, one company has been spearheading this change: Tesla. Why has Tesla succeeded when so many other startups have failed? What impacts has EV technology had on the market? And how are other companies trying to compete, or just survive the astronomical rise of this star of Silicon Valley?
The Secret to Tesla’s Success
So how did Tesla succeed when other similar startups failed spectacularly? The answer lies in Elon Musk’s commitment to in-house development. The first thing that set them apart was their proprietary battery technology, into which they poured millions of R&D dollars to provide customers with more efficiency and range than other similar EVs on the market. Once their technology made them stand out among other EV companies, it became a matter of surviving in a market dominated by combustion-engine vehicles. And once again, Tesla survived when similar startups didn’t by using a vertical supply chain that allows them to produce and control everything that they use. Tesla’s survival up until this point has resulted in their important components being used by Toyota and Mercedes-Benz to name a few.
Impact of EV Tech on Energy and Chemical Markets
These new components and technologies entering the broad automotive industry have wider impacts than you would think. With the advent of these advancements come the departure of old practices, and new EVs and hybrid systems from companies across the board have begun to show us what the future holds.
The first significant change in the market comes with the widespread use of lithium-ion batteries in hybrid and electric vehicles. According to American Energy Independence, 75% of American oil is used for transportation, and 65% of that is used in cars. As time progresses and more automakers make the shift to sustainability, the $181 billion American oil/gas industry (2018) will have to adjust to almost half of its clientele disappearing in the eventual switch to EVs.
While the commercial oil/gas market suffers though, the chemical and battery industry will swoop in to save it. Bloomberg forecasts a tenfold rise in battery demand by 2030, and companies like LG Chem, CATL, and Panasonic are rising to the challenge. Tesla won’t rely on these though, because unlike virtually every other established automaker, they insource everything. According to research by NCSU, Tesla’s Nevada Gigafactory alone cuts battery manufacturing costs by 30%. The practice of insourcing has yet to gain popularity with other car manufacturers though, as it is a relatively new process that they will need time to adjust to. However, Tesla’s success with it shows its potential.
Competition in the EV industry
While Tesla has undoubtedly been at the forefront of the EV revolution, recent years have provided challengers from both startups and established companies. Newcomers like Bollinger and Rivian have announced fully electric vehicles, while familiar faces such as Fiskar and Faraday Future have also reentered the playing field.
Companies like Nissan, Chevrolet, GM, and Volvo have also joined the revolution, releasing successful EVs themselves. However, the 3 major players to look out for are Toyota, Honda, and Hyundai/Kia. Toyota alone has plans to have 10 fully electric cars and many more hybrids on the market within the next few years, while Honda and Hyundai/Kia have proposed similar, albeit less ambitious plans for 2030. Until then, we can only watch as Tesla’s insourcing model competes with Toyota and others’ firmly established outsourcing models. The reality is if Toyota and Honda, 2 of the most popular automotive manufacturers in the world can meet these goals by that time, customers looking for more reasonably priced options will go to them and this competition of established titans may cut out and antiquate Tesla altogether.
The Future of The Automotive Market
In the end, even though Tesla currently has the upper hand, things like price, practicality, and even style will continue to draw customers to other options. However, whether these companies will ever succeed in beating the EV tycoon is something only time will tell.
About the author
I write about market analysis and technology. I am a freshman at Clemson Honors College.
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