Winning the electric car race is just the beginning of Elon Musk's plan for Tesla
Matthew DeBord
- The electric car race has been on since 2010, but it's now essentially over, and Tesla has won: CEO Elon Musk's automaker dominates the EV market
- But that market remains tiny, at just about 2% of global sales.
- Musk knows that for Tesla's grand vision to succeed, that share has to grow exponentially.
- Winning the EV race means that for Tesla, the real work of eliminating the internal-combustion engine has just begun.
The idea that automakers are racing to commercialize electric cars — and that one or some of them will come out on top — has always been flawed.
For starters, the auto industry is huge: More than a billion passenger vehicles are roaming the planet, with another 80 million or so joining them every year. No single victor could satisfy that level of demand.
This was obvious even in the early days of the auto industry, when scores of carmakers, engine-makers, and coachbuilders were competing to put Americans and Europeans behind the wheel. Yes, there were obvious winners and losers: Henry Ford captured a huge amount of market share early on with his Model T, then General Motors grew itself into a competitor and took the lead. But more than a century on, both are carrying on, more or less fine. That's not how races work.
In the 20th century, plenty of other famous names got in on the action. Vanished marques, such as Studebaker and Nash. Mid-century upstarts like Chrysler. The Europeans were always a factor: Mercedes, BMW, Fiat, Ferrari, Rolls-Royce, Aston Martin, Rover, Vauxhall, Renault, Citroën. Mighty Volkswagen. After World War II, a surge of Japanese nameplates rolled in: Toyota, Honda, Mitsubishi, Nissan, Mazda, Subaru.
The point is that on a planet populated by billions of people, a significant percentage of whom aspire to personal mobility, you need a lot of automakers to satisfy demand and to share the risks of trying to meet it.
That was the internal-combustion era, however. Which still makes up roughly 98% of the global market. Meanwhile, on the electrified front — 2% of worldwide sales — there's already a clear winner: Tesla.
A single statistic tells the story. Nissan's Leaf, an EV that arrived in 2010 before Tesla's Model S followed in 2012, had sold just over 400,000 units, all time. Tesla is now closing in on a million, for the five vehicles it has marketed since its founding (the original Roadster, Model S, Model X, Model 3, and Model Y).
Tesla has a near-monopoly of a tiny market, then. The race, such as it is, has ended, and Tesla can declare victory. But here's the thing: CEO Elon Musk knows the race is the wrong narrative, the one that doesn't matter. Here's why:
After Elon Musk sold his stake in PayPal to eBay in 2002, he took his personal payday — hundred of millions — and sunk it into several companies, including Tesla, which at the time was barely making any cars.
Electric vehicles weren't unprecedented. They had been around since the dawn of the auto age, and in the 1990s, General Motors took the bold step of launching the EV1, an EV with slightly more than 100 miles of range.
The EV1 used a nickel-metal hydride battery design, the best option available at the time. GM only leased the EV1 to customers, and eventually ended the program.
Tesla's battery design was rather different. It wired together thousands of lithium-ion cells to create a battery pack that required an intricate cooling system. But it yielded a range that was competitive with gas vehicles.
The original Roadster was Tesla's first product, and it was impressive. Based on a Lotus chassis, the two-seater could do 0 to 60 mph in 3.7 seconds, with double the range of the EV1.
Tesla never sold a lot of Roadsters, but the price was high enough to generate revenue to build the company's first "clean sheet" design, the Model S, unveiled in 2012. (Tesla also had a Department of Energy loan, plus equity investments from Daimler and Toyota adding to a 2010 IPO that raised about $260 million).
The Model X SUV followed in 2015. For Musk, it was imperative to sell high-priced, luxury EVs to fund his Master Plan: an affordable EV for the masses.
That car arrived in all-important Model 3, which hit the streets in 2017. By 2020, it made up the bulk of Tesla's sales, which had hit more than 250,000 annually.
The Model Y was next, revealed in 2019. With this car, Tesla was taking on the booming market for crossover SUVs in the US. Musk expected it to outsell the Model 3 in the long-run.
Tesla also announced a new Roadster, this time with a 0 to 60 mph time of under two seconds. Tesla hasn't yet built it, but for loyalists who took a chance on the original Roadster, it's going to be the must-have "halo" Tesla.
And in late 2019, Tesla showcased the wild Cybertruck, a massive departure from its design language. The goal was clear: GM, Ford, and FCA sell around three million full-size pickups every year. Replace them with electric pickups and you've made a major dent in the internal-combustion engine's hegemony.
While all this was going on, the rest of the auto industry was gradually figuring out its own EV agenda. The Nissan Leaf had launched in 2010, before the Model S. It was basically the only long-range EV available for several years.
Designer Henrik Fisker was seen as a direct Tesla rival in the early 2010s, with his Karma sedan. But the company went bankrupt in 2013.
General Motors launched the Chevy Bolt EV in 2016, beating Tesla's mass-market Model 3 to market. That didn't concern him — with GM back in the game, his vision had a far better chance of becoming a reality.
The Jaguar I-PACE was in the first wave of luxury EVs that took on the Model S and Model X. It arrived in 2018 and offered about 250 miles of range.
Audi rolled out its E-tron SUV in 2018, as well; it now delivers just over 200 miles of range.
Porsche unveiled its Taycan in 2019, and announced that it would have close to 300 miles of range, and — more importantly — be a proper high-performance EV. It would also be priced accordingly: $185,000 for the top-dog Turbo S version.
New startups also entered the fray. Rivian took the auto show circuit by storm in 2019, showcasing an ell-electric SUV and pickup truck, angling to capture the same buyers Tesla was targeting with the Cybertruck.
Post-Chevy Bolt EV, General Motors committed to an ambitious electric strategy. The automaker revived the Hummer nameplate, making it an electric pickup to be sold under the GMC brand.
In fact, GM has declared that its future is electric. In early 2020, CEO Mary Barra announced a new "Ultium" battery technology and said the company would introduce 22 new electrified vehicles by 2023.
Crosstown Detroit rival Ford wasn't sitting entirely still. Last year, it announced that it would extend its Mustang brand for the first time since 1965. The all-electric Mustang Mach-E was the result. It goes on sale later this year.
But of course, the big news from Ford was that an all-electric F-150 pickup was on the way, hitting the road in 2022. A game-changer? Possibly. The gas-powered F-150 has been the bestselling vehicle in the US since 1982. In 2019, Ford sold nearly a million F-Series trucks.
Despite all these new entries, Tesla's lead remains huge. It's currently opening, building, or preparing to build three new factories on three continents. Its market capitalization, at about $260 billion, is more than those of Ford, GM, and Fiat Chrysler Automobiles — combined.
Musk has taken the company from essentially nothing to be the most valuable automaker in the world, in less than 20 years.
But he wasn't allowing himself to think that winning the EV race meant that his work was done. He was, at best, only at the beginning of fulfilling his master plans.
With the US and European markets mature, the China market was the world's major growth opportunity. It could have 40 million in annual vehicle sales at some point in the future — more than twice the size of the US market.
Electric vehicles are considered a key alternative to adding millions of polluting cars and trucks to the country's fleet.
If they replace enough gas vehicles, EVs could slow climate change, an important goal for Musk. Transportation and energy generation are two of the biggest generators of greenhouse emissions.
For Musk, the master plan isn't to be the biggest manufacturer of EVs — it's to accelerate humanity's exit from the fossil-fuels age, and to convince other automakers and innovators that the market for electric cars is viable.
Tesla could be selling millions of vehicles every year by the end of the decade, staying far ahead of its sundry rivals. But what matters more is that those millions in annual sales grow the EV market from 2% today to more than 50% by 2030 — and possibly far more than that.
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