Armen Hareyan's picture

Car makers have little incentive to compete with Tesla unless it succeeds with model 3

In the long term Electric Cars should be cheaper, but a lot will depend whether Tesla succeeds with it's upcoming $35,000 Model 3, which is set to be unveiled in spring of 2016. Auto manufacturers are likely to await Tesla's success or failure before they commit significant resources to the EV market. Corey Henderson reports below.

Most auto makers are not fully vested in making Electric Cars. Making an EV is reactionary to what they see as a niche market. Instead of building an EV from the ground up, they take their cheapest ICE car and replace components to make it an EV.

Go to any car dealership and ask 20 questions about their EV. An average salesman won't know a thing about it. The rest of their cars they memorize things like ignition timing.

If dealers don't train their sales guys on EV specs, they aren't trying to sell them. If they are trying to sell them, the upstream isn't trying hard enough.

Under this design model, Electric Vehicles made by ICE manufacturers will never be able to compete with their ICE cars. There just isn't enough R&D for it, and as long as there isn't significant demand, you remain in this vicious cycle of lack of investment because of lack of interest.

The Case of Tesla
Tesla's edge is different. The automaker is fully vested in a no-compromise EV. If they succeed in making the $35,000 Model 3 a reality and it has very high demand, other auto manufactures will be scrambling to compete, but will be far behind.

Will EV prices match ICE vehicles in 10 years? Yes, if Tesla succeeds. Even so, will we have a $15,000 EV that's worth a damn? Probably not.

Tesla has "parity" at the high end. The question is, will lower cost cars have an EV competitor? Think the Mazda 3 or the Dodge Dart. Cars that cost less than $16,000. Cars anyone can afford.

Until Tesla can make high volume (500,000+) they can't make a car for such a low price. Other manufacturers have no incentive to ramp up R&D and production on a car like that, because the margins aren't big.

They'd be making a high risk and low reward investment. Make an EV to compete with their own already established product?

The LEAF is simply a modified Versa, which is the cheapest new car on the market, at just above $12,000. The LEAF is nearly 3x the cost of that. It's outrageous.

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