The Electric Growth of the Electric Car Industry

Tesla's emergence in the electric car industry has changed the landscape. What can we expect to see from other automotive giants? On September 5, 2013, Elon Musk, founder of Tesla Motors, announced he would drive from Los Angeles to New York in his company's flagship electric car, the Model S sedan. This means that instead of stopping for gas, Musk would be halting at strategically located Tesla Supercharger stations to recharge his car's batteries (and perhaps grab a bite or two). The nine-day trip isn't just a demonstration of Tesla's technology; it is an attempt to prove that electric vehicles have matured enough to undertake the most American of endeavors - the cross-country road trip. The modern electric vehicle (EV) industry is broadly divided into Hybrid Electric Vehicles (HEVs) and Plug-in Electric Vehicles (PEVs). HEVs combine internal combustion engines with limited-range electric battery packs. After the battery runs out, the internal combustion engine takes over, giving the driver unlimited range as long as there is a gas station nearby. PEVs, on the other hand, run only on battery power. If the battery runs out, the driver has no option but to call in a tow-truck and haul the car to the nearest electrical outlet. The PEV industry represents 'pure' electric vehicles. Since there is no internal combustion engine (and hence, no emissions), the environmental benefits are immense. This industry is expected to grow at a whopping 37.4% CAGR over the next few years and account for 3% of all global vehicles sales by 2020. More enthusiastic estimates by energy experts, like Tony Seba, predict electric cars to completely replace gasoline vehicles by 2030. Several factors are driving the growth of this industry:
- Decreasing battery costs, which are expected to drop by 70% by 2015
- Better cars with a range in excess of 300 miles (Tesla Model S)
- Innovations, such as Tesla's electric Supercharger network
- Prices of solar panels, widely deployed in Tesla's Supercharger network, which have dropped by 60% from 2011
- Improved safety of PEVs over gasoline vehicles. Tesla's Model S, for instance, was recently awarded the highest ever safety rating by NHTSA.
- Strong public perception due to environmental benefits of zero-emission PEVs.
Altogether, the tremendous growth of electric vehicles has shaken up the automobile industry and sent most manufacturers scrambling to compete with existing industry leader, Tesla.

Tesla's Impact

The EV industry can be broadly divided into two periods: before and after Tesla. Before Tesla, electric vehicles were treated like the senile, mildly alcoholic uncle at Thanksgiving dinners - with disregard bordering on derision. The industry's ambition - to create fully electric vehicles that could outperform cars with internal combustion engines - was deemed too far-fetched to be worthy of serious consideration. With limited resources, incompetent technology and lack of public interest, the industry produced vehicles that were too eccentric, too incapable or too cost-prohibitive for mass-consumption. All this changed after Tesla.

The Tesla Roadster Arrives

Tesla's first stab at an EV resulted in the Tesla Roadster - the fastest ever production electric car with a top speed of 125 mph and a range of 244 miles. That it could go from 0 to 60 in 3.7 seconds and looked like a European sportscar was testimony to Tesla's engineering capabilities. More importantly, it signaled to the broader audience that EVs had arrived on the big stage.

Tesla Model S: A High-Performance, Luxury Electric Sedan

Tesla phased out the Roadster by 2012 to focus on the more consumer-friendly Model S sedan. At a base price tag of $64,000, the Model S is significantly more affordable than the Roadster. Both the design and performance are better than anything competitors offer. Suitably enough, the car won most Car of the Year awards in 2013. The heavy battery with the forward engine placement also lends the car exceptional safety, leading to the highest ever safety ratings by NHTSA. Sales have skyrocketed, with the Model S outselling established luxury brands in certain states.

Tesla's Supercharger Network

Crucial to Tesla's future expansion is the company's Supercharger network of electrical charging stations. These are like gas stations, albeit with electrical outlets instead of gas pumps. Tesla vehicle owners can drive in, plug-in their vehicles, grab something to eat and have their car batteries fully charged in less than half an hour. The electricity is completely free, thanks to solar panels (incidentally, made by Musk's other company, SolarCity) installed on top of charging stations. There are 23 Supercharger stations in America today, with plans to cover 98% of the country by 2015. Plans are also in place to cover much of Western Europe by winter 2014. Widespread distribution of the Supercharger network negates the 300-mile range of the Model S, making trips like Musk's cross-country excursion possible. Tesla's impact on the EV industry cannot be underestimated. As a technology leader, Elon Musk's company has transformed public perception of electric vehicles. Tesla's cars are modern design marvels with unprecedented engineering standards. It remains the only company making long-range pure electric vehicles. With the company expected to launch a long-awaited SUV (Model X), followed by a low-cost consumer model, expect the automobile industry to be transformed radically in the next few years.

The Competition: GM and Volkswagen Step Up

Tesla's success has triggered a panic catch-up reaction among automobile majors. GM, which had earlier invested heavily in the hybrid Chevy Volt, has plans to launch a direct competitor to Tesla. This followed a statement by Dr. Martin Winterkorn, CEO of Volkswagen, asserting that VW would become the largest electric car manufacturer by 2018. GM and Volkswagen's approach is different from Tesla's. Both GM and VW want to sell a range of PEVs and HEVs at different price tags, whereas Tesla is committed to making pure plug-in, long-range electric vehicles. The Supercharger network is a testimony to this approach; Tesla wants to change consumer behavior rather than let consumer behavior affect its plans. For consumers, competition can only mean one thing: more choices at lower prices. With research dollars pouring into EV R&D, expect significant technological breakthroughs in the next few years. Wider adoption of electric cars will also reduce battery prices as economies of scale kick in. At the same time, the environmental benefits of electric vehicles will continue to increase as clean-energy (especially solar and wind) start accounting for an ever larger chunk of global electricity production. Solar energy production, for instance, is growing faster than any other energy technology.

Conclusion

Who will reign supreme in the EV market is a matter of speculation for now. Tesla's low-cost model could be a phenomenal hit or a complete dud, GM's Tesla competitor might go kaput on launch or VW's Audi A3 e-Tron could hit the jackpot with its simple design and Audi brand name. The only thing concrete for now is Tesla's unmistakable lead in the electric vehicle market and the winds of change that have gripped the entire automobile industry.

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