Automakers aim to dethrone Tesla
The global auto industry is ganging up on Tesla Inc., world leader in electric vehicles (EVs). But Elon Musk, Tesla’s cofounder and CEO, isn’t shaking in his boots. Nor should he.
True, the world’s two largest automakers, Volkswagen AG and Toyota Motor Corp., last month committed a total of $212 billion to achieving the same dominance in electric vehicles (EVs) that they’ve long commanded in traditional internal combustion cars.
Between them, VW and Toyota had total sales in 2020 of about $500 billion. Tesla’s sales that year were just under $40 billion.
This month, the Chrysler unit of European auto conglomerate Stellantis NV (Fiat, Peugeot, Citroën) said its model lineup will be entirely EVs by 2028. It is following the earlier example set by crosstown rival General Motors Co.
Last week, Ford Motor Co. said it will almost double the production rate for its forthcoming all-electric F-150 Lightning pickup in response to higher-than-expected advance orders.
The rivalry shows signs of becoming a slugfest. That figures since today’s auto sector is actually a tech industry that has more in common with the bravado and high-risk bets of Silicon Valley than the ethos of Detroit or Toyota City.
GM and VW are among the legacy automakers that have made no secret of their determination to dethrone Tesla.
Mary Barra, CEO of GM, has said there’s “absolutely” no question that her firm will soon outsell Tesla in the U.S., where Tesla has a formidable 50 per cent of the EV market.
And Herbert Diess, CEO of VW, uses Tesla as the yardstick for measuring EV progress across VW’s stable of more than a dozen brands, including Audi, Porsche, and Lamborghini.
“Our transformation will be fast,” Diess vowed last March. ”It will be bigger than anything the industry has seen in the past century.”
EVs are the fastest-growing sector of one the world’s biggest industries.
The numbers aren’t in yet, but global sales of EVs are expected to hit a record 6.3 million in 2021. They almost doubled in last year’s third quarter alone.
About seven per cent of global passenger vehicle sales last year were EVs, up from 2.6 per cent just two years ago.
Even in the U.S., where EV adoption has been slower than in Europe and China, EVs are expected to account for just over half of all new vehicle sales by the end of the decade, up from just four per cent today.
But production delays and aftermarket glitches have proved unavoidable for the legacy automakers in their early EV forays.
VW, for instance, was able last year to achieve only two-thirds of its EV goal of making at least 600,000 all-electric vehicles.
VW and its legacy peers are only now entering “production hell.” That’s the now-famous term that Elon Musk used back in 2017 to describe Tesla’s rapid transformation into a mass producer of affordable vehicles, after its successful start with low-volume luxury cars.
VW and Toyota make about 10 or 11 cars for every one vehicle made by Tesla. But in the EV sector, Tesla is king, with 2021 sales of 936,000 vehicles, up 91 per cent from the previous year.
Last year, Ford sold just 27,000 EVs. GM sold only 25,000. For each firm, EVs accounted for just two per cent of total sales.
Tesla already offers an impressive variety of vehicles that legacy firms can’t yet match.
Toyota won’t get its first global EV into the market until next year. That’s when GM’s ballyhooed allelectric Chevrolet Silverado pickup also finally makes its showroom debut.
There is a difference, of course, between legacy firms committing to going all-in on EVs, and a Tesla that has been all-in since it was founded 18 years ago.
Tesla long ago became the world’s biggest maker of EV batteries, a technology that latecomer legacy firms struggle with and often outsource.
Tesla has developed a reliable supply chain. That enabled it to sell a record number of vehicles last year despite an industrywide shortage of microchips and other components.
GM and Ford, by contrast, suffered sharp sales declines in 2021 due to materials shortages, which forced production cutbacks.
Tesla’s own expansion is keeping pace with the legacy firms, building on an already unsurpassed prowess in EV new-product development and production capacity.
Tesla is expanding its already enormous Shanghai assembly plant to a stated capacity of 450,000 vehicles per year. It has two new assembly plants near Berlin and Austin, Texas. Tesla has a battery manufacturing equipment plant in Markham.
In short, Tesla is the world’s one ubiquitous EV-only maker, with by far the largest established base of loyal customers.
The legacy firms eventually will be able to go toe to toe with Tesla. But they’re wrong if they think they can knock it out of the race.