Consumer Interest in Tesla Spells Bad News for the Rest of the EV Industry, Claims Bloomberg

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【Summary】Traditional automakers are having a hard time going up against Tesla’s electric vehicles, which is why they have been so slow to introduce new electrified cars. Things are only going to get tougher for them.

Original Vineeth Joel Patel    Mar 03, 2020 6:30 AM PT
Consumer Interest in Tesla Spells Bad News for the Rest of the EV Industry, Claims Bloomberg

Some research companies believe that electric vehicles are going to become incredibly popular in the upcoming years. Nearly every automaker has plans to introduce electric vehicles down the road in anticipation of increased consumer demand and stricter regulations. 

But there's one automaker that has beaten everyone to the punch: Tesla. With so many automakers set to come out with electrified cars, it seems like the age of EVs is indeed right around the corner. Unfortunately, that doesn't look like the case.

Rough Times Ahead For EVs

As Bloomberg points out, Tesla is the only real automaker that's set to make a profit off of electric vehicles in the near future. Everyone else that's entering the segment understands that losing money is just par for the course. Apparently, surveys, dealers, traditional automakers, and forecasters predict rough seas for manufacturers looking to switch gears to electrified cars.

The outlet claims that an American executive at Toyota believes that the electric-car market is going to face tough times. Traditional automakers, like Toyota, believe that high battery costs, pricey electric vehicles, and limited options will stop buyers from making the switch. Instead, more consumers are more interested in hybrids than vehicles with an electric port.

These issues won't disappear as new models will be introduced. In fact, these things will be even more problematic as more electric vehicles appear on the market. LMC Automotive claims that roughly 121 electric vehicles will be on sale within the next half-decade, which represents a seven-fold increase from the current number of just 18 options. 

Unfortunately, electric vehicles are only expected to claim 5.5 percent of overall automotive sales in the U.S. in 2025, which means a whole bunch of EVs are fighting for a tiny piece of the pie.

"We're going to see electrified Armageddon," said Bob Carter, Toyota's executive vice president of North American sales. "Supply is going to get ahead of true customer demand."

EVs Fight Over Small Portion Of Sales

The idea of consumers not being all that interested in electric vehicles isn't just secluded to Toyota, other traditional brands feel the same way. It could explain why a few other brands, like Honda, Nissan, and Subaru have been slow to adopt an electric future. Instead, these brands have decided to wade into the future with electrified options like hybrids and plug-in hybrids. 

These automakers are being cautious, purposefully so, as they're wary of the high costs of development and low-profit margins. BloombergNEF believes that more traditional brands will probably wait until prices between EVs and internal combustion engines match up, which is expected to happen closely to 2024.

Until that happens, Tesla will continue to dominate EV sales. LMC claims that electric vehicles are expected to account for the same size as the midsize segment – about 934,000 units. While only 13 sedans are fighting for those sales, there will be nine times as many electric cars on the market that consumers can choose from. And when it comes to EVs, the Model 3 reigns supreme, as it managed to account for roughly eight out of every 10 EV sales last year. 

LMC thinks Tesla will expand its options to a total of seven by 2025, which would mean even more domination.

For automakers that want to challenge Tesla, they're going down the route of marketing new models with extreme measures. Things like stars, impressive scenic backgrounds, and iconic names are all being used to draw consumers in. Whether that works, remains to be seen, but history reveals that no is the answer.

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