This was the decade of Tesla.
The debut and can't-build-them-fast-enough takeoff of the Tesla Model S sports sedan in 2012, followed by the Model X SUV and its gullwing doors in 2015, and then in 2017, the considerably less expensive Model 3, transformed electric vehicles not merely from a quirky novelty into a driveway aspiration, but – perhaps more importantly – into a ho-hum near-daily sight.
Tesla's Model 3, in particular, has been driving laps around its competitors – leaving even deep-pocketed legacy companies like Toyota, Nissan, BMW, and Audi in the dust, according to sales figures compiled by InsideEVs.com. At $35,000, it's not much more expensive than a Camry or Maxima, and it boasts an excitement and cool-factor – not least from CEO-slash-hype man Elon Musk – that neither of the other daily drivers can possibly match.
But the singular success of Tesla ($TSLA) – and the Model 3 in particular – may spell trouble for the EV sector, at least in the short term. While sales of electric vehicles in the U.S. jumped 81 percent in 2018 and seemed to keep picking up speed through the first half of 2019, they hit the skids in the second half of the year as sales began to slow through Q3.
That's because much of the booming growth in recent years was driven almost entirely by the Model 3. Sales of the EV's ostensible competitors, the Chevrolet Bolt and Nissan Leaf, amounted to barely 10 percent of the Model 3's sales through the first three quarters of 2019. Meanwhile high-profile entrants in the luxury category like the Audi e-Tron and Jaguar I Pace – apparently designed to compete with the Model X and Model S, as well as Tesla's upcoming Model Y crossover – have so far had lackluster sales.
The two top-selling brands, Tesla and GM ($GM), might also be brushing against a ceiling: The Trump administration last week torpedoed a congressional deal that would have expanded the number of tax credits for EVs, a decision that's expected to dampen consumer enthusiasm for battery-powered vehicles. Tesla and GM have both hit a 200,000-vehicle cap on the current incentives.
"We've actually seen a slowing in EV sales related to a drop in incentives and a drop in sales in general: EVs remain generally expensive and household incomes are being stretched for a number of reasons. So economically, without the incentives, it's a difficult sell," said Carla Bailo, president and CEO of the Center for Automotive Research. "Unless there are incentives, until the price comes down, it's going to be hard to reach the point of saturation... where it becomes a vehicle on top of everyone's list."
It hasn't helped that the battery-range figures for competitors like the e-Tron and I Pace fell far short of Tesla's offerings. A general lack of charging stations in the U.S. has further contributed to drivers' so-called "range anxiety," which remains one of the most stubborn challenges to wider adoption of electric vehicles. While the U.S. boasted about 20,000 charging stations by the end of last year, China – which has invested heavily in EVs and infrastructure – has installed more than one million.
"Building that trust is the proliferation of charging stations," said Leo Kempel, dean of the school of engineering at Michigan State University. "Think of automobiles at the start of the 20th century: You probably carried a gallon of gas with you to get anywhere. Now, frankly, most of us don't worry about finding gasoline while driving. The same thing will have to happen with electric vehicles: enough charging stations dispersed along the places that we need."
Ford ($F) this year took a major step toward addressing those concerns, making infrastructure investment a marquee part of the iPhone-like – or Tesla-like – rollout this fall of its first mass-market EV in eight years: the Mustang Mach-E SUV. Months before the curvy crossover begins rolling off dealer lots, Ford plans to have invested in 12,000 charging stations across North America – nearly three times as many as Tesla – and will offer Mach-E buyers two years of free charging.
"Among people who already own or want to purchase electric vehicles and plug-in hybrids, 48 percent say that a lack of charging stations is one of their main concerns," Ted Cannis, Ford's director of global electrification, said at the time. "We are dismantling those barriers, allowing more customers to confidently enjoy the benefits of owning an electric vehicle."
The announcement signaled how at least some automakers – and, with Ford, even legacy members of Detroit's Big Three – are changing how they do business to be more like the tech companies that Tesla has come to emulate: With the Mach-E, unveiling the vehicle close to a year before motorists can take one home is a bid to build hype straight out of the Tesla template.
"They did it strategically to show that this is a new Ford and this is our new identity," Bailo said. "Automakers haven't done that in a long time. It's made automakers think about their business-as-usual and change the playbook. If Tesla's done anything, it's changed the playbook."
What happens in the years that follow will determine whether, more than a century after the first Golden Age of electric vehicles, battery-powered vehicles whir to life or get stuck at the starting line.
Already, the Trump administration's move last week to upend a bipartisan spending bill that would have boosted incentives for electric vehicles has forced automakers to gird for a tougher market.
"This will reduce the profits of the automakers who have hit the cap," said Mark Gottfredson, a partner at Bain & Company. "While many who are currently buying electric vehicles have more disposable income, there is still a price elasticity, and the net price will go up for the consumer leading to lower sales, or those automakers will have to drop their prices, which will go straight to the bottom line. Reduced volume or reduced price – both have a negative impact on profits."
Experts will also be watching the build-out of charging infrastructure, potential improvements in battery technology – including shifts to alternative materials – and whether automakers continue introducing new electric vehicles. Ford plans to roll out 16 fully electric vehicles through 2022, including battery-powered versions of its iconic F-150 pickup and Transit van. Even Fiat Chrysler, far from being seen as an innovator, has pursued a partnership with Peugeot's parent company to build out an American EV portfolio. Still, others have taken only halting steps into the market.
"We'll be watching the sales, the models being introduced," Bailo said. "We want to see if they really do what they said, or if they back away when the reality of sales don't match what they're planning to put in their portfolio."
