Future of Cars Electric…?

Is the future of cars electric, or something else?

The simplest story about Tesla goes like this: It has the best technology, by far, and strongest brand, by far, in the auto market’s largest growth sector.

Indeed, the company already makes the two best-selling electric cars in the U.S.—the Model S sedan and the Model X SUV. Its most promising product, the Model 3, a relatively affordable sedan ($35,000, before government incentives), debuts later this year. Then there’s Tesla biggest tech advantage: its battery technology. Facing a shortage of high-quality and affordable lithium-ion batteries required in electric cars, Musk built his own proprietary “Gigafactory” in Nevada to produce state-of-the-art batteries that could cement a permanent advantage, the way Apple’s hardware has upheld the company reign over smartphone profits. Lithium-ion batteries, which are used in electric and hybrid cars, in addition to everything from spacecraft to smartphones and e-cigarettes.

Several automakers, like General Motors and Honda, are dabbling in other clean energy, like fuel-cell systems. But hydrogen fueling stations cost about $2 million to build and there are only 34 in the United States today, with more than half in one state—California. Given the technology’s questionable viability, Musk has called fuel-cell systems “mind-bogglingly stupid.”

Still, several things stand in the way of Tesla’s dominance in electric vehicles. First, its technology might be best-in-class, but it’s not one-of-a-kind. Sales of General Motor’s Chevrolet Volt are up 40 percent so far this year, a faster rate of annual growth than sales of Tesla’s Model S sedan. Ford, Nissan, and BMW all make electric vehicles that sold more than 5,000 units last year. It’s too early to say whether Tesla’s technology edge is like Apple’s, a truly wide moat, or like Whole Foods’, whose high-end revolution in groceries inspired competitors, like Kroger and A&P, that easily crossed the river to take back marketshare.Second, an enduring era of cheap gas might prevent some on-the-fence households from springing for electric. Average gas prices have been under $3.00 a gallon since 2015. In the last three years, Americans have regained their mid-aughts habits, by moving to sunny, cheap suburbs and buying small trucks. Sales of cars are declining in the U.S., while SUVs and pickups are the bright spots in the domestic auto market. This story even holds for Tesla: Ninety percent of its growth in unit sales so far this year came from the Model X SUV. Tesla is expecting big things with its Model 3 car unveiling later this year, but the vast majority of Americans might be happy with bigger SUVs and trucks powered by cheap gas for a long time.

Source: The Atlantic