Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Electric Vehicles

Tesla Is Finally Doing the Smart, Obvious Thing

It’s not too late for “Redwood.”

A Tesla and redwoods.
Heatmap Illustration/Getty Images, Tesla

Elon Musk tried to soften the blow.

On a call with investors last week, the Tesla chief warned of a “gap year” for the company. Its tremendous sales driven by the Model Y crossover would slow, while Tesla’s promised next wave of success was at least a year away. That phase would be powered by “Project Redwood,” a new platform on which Tesla would build a new, smaller crossover starting in the middle of 2025.

It can’t come soon enough. Despite the company’s waning market dominance, it’s still true that as Tesla goes, so goes the EV industry — and frankly, the entire industry feels like it’s entering a gap stage.

Perhaps you’ve heard that the EV vibes are bad. Over the past several months, publications have reported that the world is entering an EV slowdown, and executives like General Motors CEO Mary Barra have given interviews warning of some EV winter. The emerging narrative is that buyer demand for electric is weakening, and that just maybe the automakers got ahead of themselves by racing to electrify their lineups. But as Heatmap showed, that notion is not quite correct.

There is worrying data, yes. Truck buyers, for example, may not have the appetite for electric Ford F-150s and Chevy Silverados to support a mass transition, at least not yet. Lagging charging infrastructure in many parts of the country certainly makes some potential buyers skittish. Yet the traditional automakers’ electric woes arise from more banal concerns, such as rising interest rates dinging all auto sales, and especially Musk’s big price war. Tesla slashed its prices multiple times in 2023, forcing the likes of Ford to do the same and lose money on its Mach-E electric crossover, for example.

The numbers don’t support the case that consumer EV demand has fallen off a cliff. Instead, it looks more like this particular stage of EV development is coming to an end while the next one isn’t quite ready to begin.

Just look at the electric vehicles on offer. Of the best-selling EVs in America that aren’t Teslas, most fit the mold of the industry-leading Model Y, a sleek crossover with about 300 miles of range, with a price tag in the neighborhood of $40,000. The Kia EV6, Hyundai Ioniq5, Volkswagen ID.4, and Ford Mustang Mach-E landed in the top 10 by following this pattern.

Heatmap’s Robinson Meyer has noted that Hyundai and Kia, in particular, have cracked the code of this particular EV moment by offering several varieties of electric (and plug-in electric hybrid) crossover and SUVs in this price range to meet America’s endless appetite for them. Seen in this light, Ford and GM’s struggles are less about waning consumer demand for electrics and more about the fact that Ford didn’t follow up the Mustang Mach-E by flooding the zone with EV versions of the Edge, Explorer, and Escape.

As EVs continue to improve, Meyer noted, more people will go electric not out of environmental concern or because of price shopping, but simply because EVs will be better cars than their combustion counterparts, cold stop. Yet there is another inescapable fact: No matter how long monthly payment plans get, not everybody can afford a $40,000 car, electric or otherwise. (The shifting nature of federal tax credits doesn’t help, nor does the tendency of the dealership system to slap on thousands of dollars of bogus fees on top of the MSRP.)

The next phase of electrification is the true entry-level EV. Price is the killer app, and nothing would reinvigorate EV demand in America like the realization of Musk’s long-teased dream — a $25,000 vehicle that could compete with compact cars like the Honda Civic and Mazda3, or even a $30,000 compact SUV that would go up against the Toyota RAV4s and Honda CR-Vs that patrol American suburbs.

This is, of course, maddeningly difficult to accomplish given battery economics and the tremendous costs involved in designing and manufacturing new vehicles. Tesla’s plan hinges on its “unboxed” manufacturing process that would slash the time its Gigafactories require to build a new vehicle, thus making it more profitable to sell a higher volume of cheaper cars.

As I’ve argued, Tesla could have been further along in this quest if it hadn’t wasted so much time and attention on Musk’s pet distraction, the Cybertruck. Indeed, the company’s future rests not in a stainless steel lightning rod, but in the more boring reality of selling cars to Americans that Hyundai and Kia have already figured out. Just give us various sizes of not-that-different crossovers, and try to keep the price down if you can.

Thanks to the Cybertruck distraction, and Musk’s adoration of the whooshing sound deadlines make as they fly by, it will be some time before Tesla’s car of the future can hit the road. It won’t doom the company — Musk has delivered bad news during earnings calls before that tanked Tesla’s stock price, but only temporarily. And when “Redwood” finally arrives (along with the return of the much-beloved and affordable Chevy Bolt), Tesla may yet again pull the industry along with it.

If that means the start of a new phase, in which most Americans can actually afford an EV, then it’ll be worth the delay.

Green

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Energy

AM Briefing: Power Hungry

On the IEAs latest report, flooding in LA, and Bill Gates’ bad news

Global Electricity Use Is Expected to Soar
Heatmap Illustration/Getty Images

Current conditions: Severe thunderstorms tomorrow could spawn tornadoes in Mississippi, Louisiana, Arkansas, and Alabama • A massive wildfire on a biodiverse island in the Indian Ocean has been burning for nearly a month, threatening wildlife • Tropical Cyclone Zelia has made landfall in Western Australia with winds up to 180mph.

THE TOP FIVE

1. Breakthrough Energy to slash climate grantmaking budget

Bill Gates’ climate tech advocacy organization has told its partners that it will slash its grantmaking budget this year, dealing a blow to climate-focused policy and advocacy groups that relied on the Microsoft founder, Heatmap’s Katie Brigham has learned. Breakthrough Energy, the umbrella organization for Gates’ various climate-focused programs, alerted many nonprofit grantees earlier this month that it would not be renewing its support for them. This pullback will not affect Breakthrough’s $3.5 billion climate-focused venture capital arm, Breakthrough Energy Ventures, which funds an extensive portfolio of climate tech companies. Breakthrough’s fellowship program, which provides early-stage climate tech leaders with funding and assistance, will also remain intact, a spokesperson confirmed. They would not comment on whether this change will lead to layoffs at Breakthrough Energy.

Keep reading...Show less
Yellow
Climate Tech

Breakthrough Energy Is Slashing Its Climate Grantmaking Budget

Grantees told Heatmap they were informed that Bill Gates’ climate funding organization would not renew its support.

Bill Gates.
Heatmap Illustration/Getty Images

Bill Gates’ climate tech advocacy organization has told its partners that it will slash its grantmaking budget this year, dealing a blow to climate-focused policy and advocacy groups that relied on the Microsoft founder, Heatmap has learned.

Breakthrough Energy, the umbrella organization for Gates’ various climate-focused programs, alerted many nonprofit grantees earlier this month that it would not be renewing its support for them. This pullback will not affect Breakthrough’s $3.5 billion climate-focused venture capital arm, Breakthrough Energy Ventures, which funds an extensive portfolio of climate tech companies. Breakthrough’s fellowship program, which provides early-stage climate tech leaders with funding and assistance, will also remain intact, a spokesperson confirmed. They would not comment on whether this change will lead to layoffs at Breakthrough Energy.

Keep reading...Show less
Blue
Spotlight

Anti-Wind Activists Have a Big Ask for the Big Man

The Trump administration is now being lobbied to nix offshore wind projects already under construction.

Trump and offshore wind.
Getty Images / Heatmap Illustration

Anti-wind activists have joined with well-connected figures in conservative legal and energy circles to privately lobby the Trump administration to undo permitting decisions by the National Oceanic and Atmospheric Administration, according to documents obtained by Heatmap.

Representatives of conservative think tanks and legal nonprofits — including the Caesar Rodney Institute, the Heartland Institute and Committee for a Constructive Tomorrow, or CFACT — sent a letter to Interior Secretary Doug Burgum dated February 11 requesting that the Trump administration “immediately revoke” letters from NOAA to 11 offshore wind projects authorizing “incidental takes,” a term of regulatory art referencing accidental and permissible harassment, injury, or potential deaths under federal endangered species and mammal protection laws. The letter lays out a number of perceived issues with how those approvals have historically been issued for offshore wind companies and claims the government has improperly analyzed the cumulative effects of adding offshore wind to the ocean’s existing industrialization. NOAA oversees marine species protection.

Keep reading...Show less