Tesla-Model for Tomorrow?

By John Eichberger | April 2016

Was the unveiling of the Tesla Model 3 the beginning of the end for the internal combustion engine? When I woke the next day and flipped through my Twitter feeds, I was given the impression that indeed the end was near. In fact, the hype and fanfare with which some of the auto journals were covering the event had me expecting to see images of Elon Musk moonwalking onto the stage with one, glittery white glove while car enthusiasts in the audience wept with delight.

Yes, this is a vehicle whose arrival has been anticipated for years – a full-electric vehicle with 215 mile range and a price point of $35,000. Within 24 hours, Tesla had received orders for 150,000 units, collected $150 million in deposits and recorded future sales worth more than $5 billion. These indeed are impressive figures, but is this vehicle a game changer?

When we look at it in the context of the overall electric vehicle market, I would say “Yes.” In 2015, according to WardsAuto, the U.S. sold less than 71,000 electric vehicles incorporating 14 different models. So, the Model 3 is definitely changing the EV landscape.

I wonder, however, is the Model 3 this successful because it is a Tesla or because it is a relatively affordable, 200+ mile electric vehicle? If the former, is it truly indicative of a change in consumer acceptance of electric vehicles or an expansion of the Iron Man-like attraction of Elon Musk? If the latter, what effect will the Chevy Bolt have on the market when it debuts later this year? It is expected to boast 200+ miles per charge with a price point in the low- to mid-$30,000s.

I argue that if consumers gravitate towards the Bolt, and other EVs that will soon be introduced with similar characteristics, then we are witnessing the beginning stages of an electric powertrain revolution. But the popularity of the Model 3 alone does not necessarily mean that we have reached a tipping point for EVs, although it very well may lead us there.

It is important to maintain accurate context when considering the emerging alternative vehicle market. Last year was a record breaking year for the auto industry, selling more than 17 million new vehicles. Of those, 97% were gasoline or diesel internal combustion engines – still the most dominating sector of the auto industry. But, even with fuel prices staying below $3.00 for the year, EVs increased their share of new vehicle sales by 8.4% - the largest growth of any powertrain sector. At the same time, sales of hybrids and plug-in hybrids dropped 16% and 22%, respectively.

The EV market is showing strong signs of growth and the Model 3 (whether or not a beneficiary of the Tesla-halo) will greatly accelerate the rate of market expansion. Other vehicles, like the Bolt, that seek to overcome the range anxiety and high prices that have limited EV sales in the past, will further enhance the popularity and familiarity of the technology.

Although Musk did not moonwalk alongside the Model 3, and although technically he is not Tony Stark, I do believe he has set in motion something that will forever change the face of the auto industry. To what extent and how quickly remains to be seen, but it seems as if electric vehicles will soon stop being viewed as “new” and “exotic”, but rather real options for real people. In fact, a colleague of mine called out to me in the hall the day after the Model 3 was revealed – “John, I want to get your thoughts on the Model 3…I think I might want to buy one.”

The dawn of a new day may be on the horizon.

Read more from the April Issue of our Fuel for Thought newsletter.