In 2013, Tesla Motors reached sales of 2 billion USD and the market capitalization has now soared to 26 billion USD. It is easy to dismiss this as a bubble or fad, but if the fundamentals of the market are scrutinized it becomes obvious that a paradigm shift is happening.
In 1881, Charles Jeantaud and Camille Faure designed and constructed the first battery powered carriage as an alternative to the horse. The future of the electric car was bright during the years around 1900 since they were cleaner, more reliable and required less maintenance. (Figure 1)
The weakness was the capacity limits of the battery pack. The electric car was expensive and in 1908 when the T-Ford was launched as the first affordable car, the electric car faded into obscurity. (Figure 2)
Since then, there have been several projects to construct new electric cars in order to improve air quality and diminish the dependence on imported oil. All projects have failed.
Today, the situation is different. Tesla Motors was co-founded in 2003 by Elon Musk who made his fortune from the sale of PayPal. In ten years they have gone from just having a home-made prototype to two billion USD in sales (Figure 3). The company has a market capitalization of 26 billion USD and has reached a positive EBITDA (2013). Tesla Motors has commercialized the product top-down and solved the limited range using a combination of powerful batteries and a network of fast charging stations with free electricity.
Tesla Motors’ success would not have been possible without the emergence of portable consumer electronics and the demand for powerful and lightweight gadgets. New battery technology has yielded a rapid development in capacity and a sharp decrease in price. The development of hybrid cars has also been important.
Other external factors that have helped the electric car are the generous subsidies etc. in i.e. Norway and the US. Tesla Model S was the most sold car in Norway in September 2013 and in March 2014 Tesla Model S was again the most sold car with 1 493 sold units compared to 624 Volkswagen Golf (Figure 5).
The emergence of electric cars will also have an impact on energy markets. In case 50% of the car and light truck fleet in Sweden is electric in 10 years from now, electricity consumption will increase by 5,4 TWh which represents an increase of 3,9% from current levels. Total crude oil demand in Sweden can then be expected to drop by 13,7% compared with 2011.
Tesla Motors entry to the automotive industry has been disruptive. The problem with limited range is fading and electric cars are being more accepted by the general public. Most large car manufacturers are now introducing their own electric car models. The electric car is back and it is here to stay.