“It doesn't matter if you win by an inch or a mile. Winning's winning.”
I’m reluctant to call Vin Diesel’s Dominic Toretto one of the great philosophers of our time, but his line in the inaugural Fast & Furious movie is as true about street racing as it is about anything else. And in the current electric vehicle sales race, Tesla is the clear winner in mid-2023—this, despite an aging lineup of vehicles, tactics that make the rest of the car business nervous and a dependence on non-car products to entice buyers.
Things could’ve gone very differently this year. I certainly thought so about six months ago. This was supposed to be the year that Tesla’s slew of increasingly dated cars faced real, direct competition for the first time ever; when its CEO’s objectively disastrous foray into social media ownership took attention away from his core business; and when most other car companies got truly serious about creating a future without gasoline.
But now that we have insight into what EVs people bought — or didn’t buy — in the first and second quarters of this year, the numbers tell a different story. Tesla is still the clear leader in EV sales, moving almost half a million cars globally in just the past three months. The Model Y is the best-selling car in the world. The rest of the competition that was supposed to show up and eat Elon Musk’s lunch? Not even remotely close.
According to data from Automotive News, the rest of the EV landscape looks sad by comparison. After the Model Y and Model 3, the bronze medal finish went to the Chevrolet Bolt — an EV that’s generally excellent and affordable but outdated and soon to be discontinued. (By the way, Tesla sold almost six times as many Model Ys as Chevy sold Bolts.)
Right below the Bolt, there’s the expensive and also aging Model S, followed by the Volkswagen ID.4, finally hitting its stride somewhat due to EV tax incentives. After that, the Ford Mustang Mach-E, which has had a slew of production problems this year; then the Hyundai Ioniq 5, a superb EV but one that does not qualify for any tax breaks unless it’s leased; and then Tesla’s own Model X, also long in the tooth.
Keep in mind that the freshest product in Tesla’s lineup these days is the Model Y, which went on sale in 2020, followed by the Model 3, which is now six years old — at the point when another car company would replace it with an entirely new model. The point is, the hottest-selling EVs in the world aren’t fresh, new products at all. (And to be fair, Tesla’s had its own share of headaches with the Cybertruck, which has been pushed back so much it’s starting to feel like the Half-Life 3 of cars.)
Finally, questions are arising about EV demand in general. Monday morning, Axios reported on “the growing mismatch between EV supply and demand,” meaning that while EV sales are steadily climbing and making up more and more of the U.S. market, those sales aren’t matching what car companies are actually building and putting up for sale. In fact, the time EVs spend sitting on dealer lots — a measurement of demand for a car, traditionally — is now nearly double the industry average, Axios reports. In other words, they’re sitting there, unpurchased, about twice as long as gasoline cars.
That’s disheartening news for the climate, especially given how palpably horrific the heat and weather events have been this summer. The world cannot wait for people to switch to electrified and lower-emission vehicles. But there are a lot of reasons this is happening, and the biggest factor is still cost.
With rising interest rates, an uncertain economy ahead and the average EV still costing almost $60,000 — which actually went up this year despite Tesla’s price cuts and all the new cars on the road — can you really blame buyers for sitting this out until things get cheaper?
Simply put, Tesla is offering the best deals right now. As old as the Model 3 and Model Y are, they’re still fun to drive, high-range EVs boasting the best charging network in the business (we’ll get to that in a bit.) They’re also still cutting-edge in most ways that count for EV newcomers; they just don’t look new and are beginning to lack key features offered by many new competitors like bidirectional charging or more predictable automated driving assistance.
This year, Tesla has dramatically slashed their prices and positioned them to take advantage of the full EV tax credits when other car companies cannot. Tesla’s lead remains a solid one in 2023; it has the experience, production capacity, and scale to slash prices on these cars while remaining profitable. Other automakers are sweating their ability to make money on EVs at all right now.
Generally, car companies are wary of slashing prices too much or relying too heavily on discounts. They tend to water down a brand’s image while cutting into profit margins, and the auto industry is very much a business of margins. Now, Tesla has taken a hit to its gross profit margins amid these price cuts, but it’s still doing well and Musk doesn’t seem to care. In the meantime, more than likely, a person’s first EV will be a Tesla.
And then there’s America’s new EV tax credit scheme, which may actually be backfiring to some degree right now.
In short, to get the full $7,500 tax credit on an EV, a car and its batteries must be now made in North America. On a long enough timeline that will help build a robust electric car and battery manufacturing infrastructure here, so that both aren’t dependent on China — exactly the goal of the law. The problem is, local battery factories alone will take years to set up; it’s going to be a long time before the majority of EVs Americans can buy meet both qualifications.
At the beginning of this year, EV demand seemed to be booming because those “buy local” rules hadn’t taken effect yet. Now, a bunch of automakers, including BMW, Volvo, and Hyundai, are left out of the credits because their EVs aren’t made here yet. While well-intentioned, the stringent rules of the tax credit scheme run the risk of dampening EV demand and killing the momentum the car industry had in January.
Finally, car companies now seem to be struggling to reconcile their big environmental promises — you know, vowing to go all-electric by 2035 — with the cold, hard realities of public-company capitalism.
Take General Motors, for example. While it’s made that all-electric commitment, its promised EV lineup has barely materialized yet; the Bolt is the best representation of this promise and it’s on the way out. The Cadillac Lyriq? MIA. The other EVs? Delayed. And the GMC Hummer EV is so environmentally unfriendly, they may as well have just given it a V8 engine. Speaking of, GM has said it’s committed to making gasoline heavy-duty trucks and SUVs for a long time to come; they’re far too profitable to phase out, planet be damned.
Or take the Volkswagen Group, the original “pivot to EVs” automaker in penance for its diesel-cheating sins. It’s dealt with a ton of delays, production problems, and software issues, and it too is reluctant to phase out its most profitable ICE vehicles. And both companies are due to have massive fights with their labor unions over EVs and jobs soon enough.
Essentially, pivoting to EVs is hard. It’s not just about making battery-powered cars. Automakers must retool how cars are designed, built, and sold while focusing on software and revamping their entire supply chains. Deep down, most auto executives would probably rather not do this. It will be an expensive, messy, and complicated process that runs counter to just making shareholders happy each quarter with the status quo until you comfortably retire.
And Tesla’s most powerful weapon keeps proving to be its charging network. There’s perhaps no greater signifier of car companies’ EV trepidation than their willingness to say “You know what? You deal with this” while handing the charging keys to Tesla. GM, Ford, Volvo, Rivian, Volvo, and now Mercedes-Benz have all said they’ll switch to Tesla’s charging standard in North America, giving EV buyers access to that network in the coming years. Perhaps that will drive up EV purchases and make buyers consider things that aren’t Teslas. I think that it probably will.
But in doing so, Tesla will reap significant income in public funding for EV charging stations made possible by the 2021 infrastructure law. It’s unclear whether doing that — and getting revenue from the charging itself — will outweigh potential lost future sales to Mercedes or Volvo or whoever, but one thing seems clear: the biggest winner of the Biden-era tax incentives so far is Tesla.
Short of dramatic price cuts — which are unlikely to happen because these things are so unprofitable as-is — or radically new cheaper battery technologies, it feels unlikely that Tesla will lose the lead in the electric drag race this year or anytime soon.
Who cares if it’s winning on price cuts and its charging network? Ask Dom; a win’s a win.
USGS
