Tesla’s visionary CEO has pushed the auto industry to speed the development of electric vehicles.
Elon Musk undoubtedly has helped change the face of the automobile industry.
Legacy carmakers like Ford (F) – Get Ford Motor Company Report, General Motors (GM) – Get General Motors Company Report and Volkswagen (VLKAF) have made Tesla and its charismatic and whimsical chief executive their main rival.
Startups like Rivian (RIVN) – Get Rivian Automotive Inc. Report and Lucid (LCID) – Get Lucid Group Inc. Report want a hand in the situation by disrupting the disruptor-in-chief that is Musk and the company he leads. Ambitious Chinese manufacturers NIO (NIO) – Get NIO Inc. American depositary shares each representing one Class A 蔚来汽车 Report and BYD (BYDDY) know they must beat Tesla to dominate the highly lucrative local green vehicle market.
Musk’s fans will tell you that the present and the future of the auto is Tesla. Many investors seem to agree, judging by the Austin company’s market capitalization — $954 billion at last check, again approaching the prominent threshold of $1 trillion. Last October Tesla became the first car manufacturer to exceed a market value of $1 trillion.
For comparison, Volkswagen and Toyota (TM) – Get Toyota Motor Corporation Report, the world’s two largest automakers by sales volumes, have market values of $100 billion and $200 billion respectively.
Musk Writes the Obit for Gasoline Cars
Ford’s market capitalization is $62.4 billion and GM’s is $61.3 billion. The two American manufacturers nevertheless sell several million vehicles a year, compared with barely 1 million units in 2021 for Tesla. The EV leader is currently the world’s sixth largest company based on valuation, just behind Apple (AAPL) – Get Apple Inc. Report, Saudi Aramco, Microsoft (MSFT) – Get Microsoft Corporation Report, Alphabet (GOOGL) – Get Alphabet Inc. Report and Amazon (AMZN) – Get Amazon.com Inc. Report.
This market confidence in Tesla stems from the financial community’s view of the company as the EV-market leader at a time when environmental issues have become a key priority in many countries.
Tesla also seems to have a head start on autonomous technologies, with its full-self-driving driver-assistance system, which is designed to enable vehicles to drive themselves. Full-self-driving hasn’t reached that point just yet — but Tesla’s relatively rapid rise to prominence and overall market position give Musk the credibility and standing to predict how the auto industry will develop.
And the serial entrepreneur just predicted the imminent death of gasoline vehicles.
“Won’t be long before we view gasoline cars the same way we view steam engines today,” the world’s richest man said on Twitter on Sept. 12.
In less than 24 hours, the tweet had received more than 142,000 likes.
Two hours after this dark prediction, the billionaire sent another message, putting another nail in gasoline cars’ coffin.
“The residual value of gasoline cars bought today will be much lower than people think,” Musk added.
The many comments that these two posts prompted make clear that many users of the Twitter network share the tycoon’s opinion.
“The final destination of gasoline cars 😩,” commented one Twitter user.
“But it should be because of competition in a free market, not gov’t coercion,” said another user.
“Once electric cars are commonly accepted, I believe the value of gasoline cars will plummet,” one user argued.
Full Victory for EVs Is Still Far Away
Faced with steam and electric vehicles, the petrol-powered internal combustion engine was put in place at the very beginning of the 20th century, thanks to its practicality plus prompting in the market. It enabled the automobile industry to develop and grow for a more than 100 years.
But new environmental standards set worldwide will deal a fatal blow to this technology, many experts say.
From 2035, for example, it will no longer be possible to market a new car emitting CO2 in the European Union. The average life span of a car is 15 years, and the deadline is part of the prospect of achieving carbon neutrality in Europe in 2050.
California recently decided to get internal-combustion-engine-powered vehicles off the road in 13 years. That prospect doesn’t seem crazy.
To be sure, EV sales are increasing but for now remain a small part of the market. In Q2, EV sales accounted for 5.6% of the total market, an increase from 5.3% in Q1 and a record, according to recent data from Cox Automotive. EVs’ share in Q2 2021 was 2.7%.
And mass adoption of electric vehicles still faces key hurdles, particularly affordability. Consumers are wondering if whether electric vehicles will ever come cheap; currently, few of them sell for under $30,000.
And the industry still faces the big problem of range and charging stations. Currently, charging an electric vehicle is a challenge unless you have a charger installed at home or work. And recharging EV batteries takes much more time than filling a gas tank, a particular issue when you are on the road.
Drivers of EVs can recharge at about 50,000 public charging stations in the U.S. But industry insiders say it’s not enough. The administration of President Joe Biden has proposed a multibillion-dollar outlay to build a nationwide EV charging network.