Will Tesla’s Slip Complicate The Climb To Mass Electric Vehicle Adoption?

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We recently hired a certified electrician to upgrade our garage so we’d have another place to charge our Tesla Model Y. As introductions got underway, it became clear that the electrician didn’t realize the SUV parked next to him was a battery electric vehicle. Wow. If an electrician didn’t recognize an EV when he saw it, how will electric vehicle adoption become commonplace among longtime internal combustion engine (ICE) owners? How can early EV adopters convince newcomers to ignore the rampant headlines about plugin electric vehicle adoption? And is the Tesla announcement of Q1 2024 sales, which are well below market estimates, part of the same parcel of EV problems?

We know a lot of facts about the transition to all electric transportation. We know that:

• fossil fuels are creating climate pollution and pushing the world to its limits for adaptation;
• transportation emissions account for 29% of the anthropogenic US greenhouse gas (GHG) emissions.;
• electric vehicles (EVs) are a key component of helping to clean up our country’s transportation sector;
• by the end of last year, 31 countries had surpassed what’s become a pivotal EV tipping point: when 5% of new car sales are purely electric;
• in the 2024 AAA car guide, “EVs reign supreme;” and,
• global sales of ICE vehicles have fallen each year since 2017 as EVs incrementally gain a market share — to the extent that the world has hit peak ICE vehicle sales.

Even though we know factually about the transformation of the automotive industry to battery electric powertrains, the public seems unconvinced. Why is that?

Adding to the Tension is the Tesla Slide from Prominence

We’ve all been mulling over the disconcerting drop in Tesla stock after the company’s lackluster delivery report this week. Does the New York Times have it right? One article claims, “Tesla appeared to be losing command of the market it effectively created after it reported a stunning drop in quarterly sales on Tuesday, raising fresh questions about Elon Musk’s leadership of the company.” Another one concludes, “Wall Street has sounded the alarm for weeks that the transition to electric vehicles may be stalling, despite billions in government subsidies and huge investments by auto giants.”

The automotive manufacturing company led by Elon Musk delivered just 386,810 vehicles in the first 3 months of the year. Several reasons contributed to the resulting stock slide:

• interest rate hikes that impact car loans;
• alleged arson problems at the Tesla Berlin plant;
• supply chain difficulties;
• Red Sea-related shipping delays;
• the sour taste of Musk being Musk on X;
• competitive growth and pricing from the China EV market.

Because consumers have other electric vehicles from which to choose, the doomsday argument goes that Tesla’s fall from dominance was bound to happen. Add to that equation a mercurial CEO who is untethered by the Tesla board of directors, and negative theorizing boasts that the drop in consumer interest in Tesla was inevitable.

Or was it? Is the Tesla disturbance in the force truly a sign of things to come for the company, and, by extension, electric vehicle adoption?

Another way to look at this situation is that keen competition in the Chinese automotive marketplace has pitted the top automakers against each other, with the real beneficiaries being consumers. Also, buried on inside media pages was the news that Tesla reclaimed its place as the world’s top seller of electric vehicles, holding off BYD.

As is typical with most systemic change, there’s a lot to muse over and understand in EV adoption rates.

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The Path to Electric Vehicle Adoption is Nuanced

Electric vehicle adoption rates must necessarily experience highs and lows; these were to be expected. This major shift in the way we think of and use personal transportation is happening quickly, and it’s disturbing for humans — we just don’t like change. But to proclaim that the EV revolution is over is not only premature, but just plain wrong.

Think about cynicism when color televisions or smartphones were first introduced. Now both are mainstream. All factors point to the same trajectory for EVs.

Let’s look a bit at the commonly accepted process for technology adoption to give us one bit of insight into electric vehicle adoption. What is the path to innovation acceptance, according to the Diffusion of Innovation Theory?

• Innovators (2.5%) — Innovators are willing to take risks, are youngest in age, have the highest social class, have great financial lucidity, are very social, and have closest contact to scientific sources and interaction with other innovators.
• Early Adopters (13.5%) — Early adopters are typically younger in age, have a higher social status, have more financial lucidity, have advanced education, and are more socially forward than late adopters.
• Early Majority (34%) — Early Majority tend to be slower in the adoption process, have above average social status, have contact with early adopters, and seldom hold positions of opinion leadership in a system .
• Late Majority (34%) — Late Majority are typically skeptical about an innovation, have below average social status, have very little financial lucidity, experience contact with others in late majority and early majority, and hold very little opinion leadership.
• Laggards (16%) — These individuals typically have an aversion to change, like tradition, have the lowest social status and lowest financial fluidity, are the oldest of all other adopters, are in contact with only family and close friends, and express very little to no opinion leadership.

An example of the dissonance is the popular yet discontinued $26,500 Chevy Bolt. The affordable EV, with its familiar dashboard and just enough technology, was GM’s best selling EV in North America, by far. But the Chevy Bolt did not align with GM’s long-term EV technology strategy, which is to focus on the Ultium platform to replace the now obsolete BEV2 platform that had been the basis of the Bolt and Bolt EUV.

GM’s dilemma is indicative of auto industry frustration: legacy automakers need to keep current shareholders mollified while they develop new EV models and shore up supply chains. Launching electrics at high volumes, scaling production, and developing public charging systems will follow and will make EV adoption extend from the early adopters to the majority and even to the laggards.

“Once enough sales occur, you kind of have a virtuous cycle,” explains Corey Cantor, an EV analyst at BloombergNEF. “More EVs popping up means more people seeing them as mainstream, automakers more willing to invest in the market, and the charging infrastructure expanding on a good trajectory.”

It’s hard for us to be patient, but the virtue is important as we move to zero emissions transportation.