Short Answer: Everyone.
The move to electric vehicles isn’t going away anytime soon and the biggest automotive manufacturers know this more than anyone. Traditional gas-powered cars may dominate the market for years to come but EVs are taking an increasingly large share as Tesla (TSLA) and others have proven there is demand for electric cars.
Entering the Market
General Motors (GM), Ford (F), Toyota (TM), Hyundai (HYMTF), Nissan (NSANY), and many other of the biggest automotive companies have been working on their electric-vehicle lineup for some time. However, recent demand and market changes have led to most of these companies accelerating their EV production as more and more consumers are choosing electric over gas. It often takes seeing a competitor focus more on EVs to push these older firms into new technology as companies such as Ford can’t stand the idea of rival GM getting a hold on a new market.
So, with Tesla’s recent success and other startups popping up, what are the forecasts for the automotive giants?
Production Forecasts
Ford recently announced that it plans to double its F-150 Lightning production to 150,000 trucks per year. This development comes just after Ford increased the capacity for its Mustang Mach-E. Ford now expects to have the capacity to deliver 600,000 EVs annually by the end of 2023. 600,000 is relatively small compared to Ford’s overall deliveries this past year of 1.73 million but would already be two-thirds of Tesla’s total deliveries in 2021, that company's best year ever by a wide margin.
The ability to ramp up production to get to two-thirds of what Tesla just produced in its best year by far goes to show the economies of scale of firms such as Ford. Tesla was founded nearly 20 years ago now and has been a success story in a ridiculously competitive landscape for so far, but it simply still cannot match the scale of producers like GM, Ford, and others.
GM in fact has been making a strong push to EVs for some time now with the company planning to sell only electric vehicles by 2035 and is expected to release 30 new EV models by 2025. Interestingly, GM has gone the way of developing new models it believes EV consumers will prefer while Ford has just made EV versions one of it's classic vehicles. GM meanwhile delivered 1.78 million vehicles in the U.S. in the first nine months of 2021 and is set to be second in total U.S. deliveries behind Toyota.
2025 and 2035 aren't exactly right around the corner but it’s not that far off either, and these big names are increasingly focusing on EVs as the new future as they don’t want to be left behind. For consumers and the environment that’s a great development but for the little guys trying to break into the electric vehicles space, not so much.
Where do Startups Go?
Tesla is about the only significant automotive manufacturer to be founded in the past 50 years and there’s a reason for that. It takes a tremendous amount of infrastructure and capital to manufacture vehicles and sell them at competitive prices. Automobiles have one of the highest barriers to entry because of this and only extreme niche cars tend to succeed recently. Tesla started with a nearly hand-made, very expensive sports car and has been ramping up production since. This relatively novel strategy, combined with a deep-pocketed celebrity leader in Elon Musk have allowed the company to succeed where others have not.
There was no immediate plan to just start ramping up production of Tesla models as it first had to introduce its product to the market and focus on the technology behind it. Two things it was able to do because of the large amount of money behind it, thanks again to Elon Musk already having made billions of dollars. But that same kind of strategy can’t work for companies like Rivian (RIVN), Nikola (NKLA), Fisker (FSR), and others because EVs aren’t new and they aren’t going to be the first.
Tesla has survived because it has a cult-like following and has grown enough to create moderately competitive priced vehicles while charging stations have become more and more common. New startups might get the benefit of consumers already wanting electric vehicles and there being more infrastructure for them than when Tesla started, however, the big manufacturers have now entered into the market.
There’s no hope for Rivian to just sell more pickup trucks to Americans than Ford or Chevy. Rivian is going to be far more expensive most likely and will not have the brand loyalty that those two have in spades. Instead, the best chance for new companies will be to fit a niche and/or just specialize in one area of the market. There are no new brewers attempting and succeeding to match Budweiser sales numbers, but there are seemingly new craft breweries that open every day and do just fine for themselves. Trying to sell the most basic sedans probably won’t work for new EV companies, but trying to develop the absolute best electric car for off-roading, or other specialty use-cases, might.
Where Does This Leave Tesla?
Tesla is now one of the biggest companies in the world by market cap but is still only about halfway to matching Ford’s annual production and even less than others such as GM or Toyota. More and more consumers will likely look to electric over gas cars but the competition is rapidly growing, and Tesla is going to have a hard time competing at the budget price range. The good news for Tesla is that it doesn't have to. Tesla is seen as a premium brand and if it’s entry-level vehicles start somewhere around $35,000 or $40,000, it can still capture plenty of customers.
A large part of the market is looking below that price range but only the absolute biggest manufacturers can sell at that price and even then the margins are nowhere near as good as at the upper levels. GM and Ford aren’t making money from base-model sedans for $20,000, but selling trucks with all the bells and whistles for $70,000 is a nice moneymaker.
The even better part for Tesla is that it now has massive brand loyalty and an absurd cult following of people either obsessed with their cars or the crazy genius behind them. Tesla might not be the most popular car on the road in 10 years, but they will be on the road in the future and still be a symbol of wealth. Plus, Elon Musk always said the goal was to transition from gas to electric, it may not be Tesla that dominates the market but he certainly got what he wanted by the looks of it.
