If you think the growing electric-car market would exist without Tesla, think again

• 17-year-old Tesla has become the dominant electric carmaker in the world because it took on huge risks. But it’s now reaping equally huge rewards.
• With the global EV market poised for growth, automakers are salivating over new sales, and they have Tesla to thank.
• Tesla still faces considerable risks, but it has validated Elon Musk’s vision. In Q3, the company delivered 139,300 vehicles, putting it on a pace to sell more than 450,000 in 2020.
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Take the risk, reap the reward — that’s what Tesla is now experiencing, as its market capitalization has surged to nearly $400 billion in 2020, making it the world’s most highly-valued automaker.

To borrow some of Tesla’s lingo, the risk was insane, the reward ludicrous. But it’s not the only one enjoying the benefits. 

A decade ago, no major automaker was going to bet on a non-existent electric-vehicle market. Big Auto was happy to sit back and watch Tesla try to create a new segment. But now, almost every carmaker has announced significant electric-vehicle ambitions for the coming decade.

Make no mistake: Without Tesla, this wouldn’t be happening. We’d still be asking the circa 2006 question, “Who killed the electric car?” if Tesla hadn’t reset the EV race in the years before the financial crisis, narrowly avoided bankruptcy, and positioned itself to deliver half a million vehicles in 2021 (and gift investors with a 9,200% return).

Inspiring the competition to compete

Tesla hasn’t found its way to a promised land of stability just yet. It remains among the riskier names in the car business, mainly because it’s never been tested by sustain downturn in demand, thanks to a decade of rock-bottom interest rates and an exceptionally resilient auto sales cycle in the US.

But Elon Musk’s company has shown that EVs are a viable way to build a business. As recently as 2016, the jury was still out on that matter. General Motors had launched its mass-market Bolt, but few expected it to sell in large volumes, given that at the time the entire global EV market amounted to only around 1% of total sales. 

The debate then was how long GM would stick with the Bolt, using it as a so-called “compliance” vehicle to meet overall fuel economy goals, as required by the US government. Fast-forward to 2020 and GM is now talking about becoming an all-EV carmaker and is coming out with 22 new electric vehicles by 2023, including a revived Hummer pickup truck.

Big Auto joins the party

I was around for Hummer’s demise after the financial crisis when GM was shedding brands, and I argued against killing it off. But kill it off GM did, and I certainly never anticipated a comeback, much less a reboot powered by electrons rather than dead dinosaurs. 

Tesla did that, much as Tesla spurred Ford to create its Mustang Mach-E, the first-ever electric pony car, going on sale this fall. Tesla also inspired a host of new EV startups, from Rivian to Lucid to Fisker. That’s important because back in 2010, Tesla didn’t entirely stand out from a batch of EV startups that ultimately withered or declared bankruptcy. Since then, a member of a crowded field has become the clear leader of the pack.

We could easily forget that Tesla is also the first new US auto brand to succeed in about a century (the last was Chrysler, in an era when people who had relatives who lived through the Civil War, owned one pair of shoes, and in many parts of the US didn’t enjoy indoor plumbing).

So the company’s achievement is a double-whammy: it beat odds established by the internal-combustion age as well as defied the naysayers when it came to electric cars, which after all had been a bust since the dawn of automaking.

Driving investment in EVs

One might insist that events like Volkswagen’s diesel-emissions-cheating scandal have hastened the ascent of EVs, given that EVs offer a logical way to build vehicles in essentially that way they have been for decades, just with different drivetrains and no gas tanks. In fact, GM builds the Bolt at its Orion plant in Michigan, on the same assembly line as gas-powered cars — some get battery packs, and some get fuel tanks. 

That’s true, but EVs are less about tires and doors than they are about the technology that enables them to travel 300-400 miles without being recharged. Until recently, such range was impossible because batteries had to be so large to power vehicles over such distances.

But again, Tesla cracked a code of sorts, using thousands of lithium-ion battery cells to top 200 miles with its first car, the original Roadster. After that, the genie was out of the bottle and consumers realized that they had a viable alternative to spending thousands of dollars each year on gasoline. 

Growth, growth, and more growth — especially in China

That generated demand where none had existed before, and suggested to big carmakers that they could invest in EVs and sell electric replacements to folks who owned gas cars and trucks. It was like the music industry when vinyl records were superseded by CDs — everybody paid to make the switch.

Now, the global EV market is poised to grow, especially in China, where auto sales are already millions more annually than in the US, with the potential to top out at twice what the US sees every year, around 16-17 million new cars, trucks, and SUVs. A large percentage of those new sales could be electric, and automakers don’t want Tesla to capture them all.

There should be plenty of sales to go around. But there wouldn’t be if Tesla hadn’t bet and bet big that the electric car, far from being dead, was on the verge taking over the world.