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When Will Tesla Push Gasoline Cars into Museums?

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  • Tesla and its CEO, Elon Musk, frequently mock gasoline cars. Yesterday, in a tweet, the company again teased gasoline cars.
  • Tesla’s popularity has been rising steadily, and Model 3 sales are rivaling earlier best-selling models in several countries.

Tesla and gasoline cars

On September 25, Tesla (TSLA) tweeted, “Do you ever dream of a day when it’s not ‘electric vehicle’, it’s just ‘vehicle.’” This isn’t the first time the company has taken a jab at ICE (internal combustion engine) cars. Over the last couple of months, Tesla and CEO Elon Musk have frequently mocked gasoline cars. Last month, Musk, who is known for stirring the pot, tweeted that gasoline cars “look cool in a museum.”

Do gasoline cars have an expiry date?

There are varying estimates on how soon we’ll go all-electric. Last month, a futurist predicted that by 2026, all cars sold globally would be electric. Interestingly, recently, Honda Motor Company announced that it would go all-electric in Europe by 2025. Europe is a major market for Tesla.

Bloomberg New Energy Finance predicts that by 2040, EVs (electric vehicle) will account for 57% of all new vehicle sales. It also estimates that by 2040, over 30% of the global vehicle fleet will be electric. OPEC estimates that by 2040, 16% of the global fleet will be alternative fuel vehicles. OPEC has upwardly revised its estimate as optimism over vehicle electrification has risen. JPMorgan Chase predicts that by 2025, 30% of global car sales will come from hybrid and all-electric cars.

Concerns over Tesla’s US sales

The bottom line is that while one may argue the specifics of the pace of vehicle electrification, the general trend is moving toward higher EV adoption.

However, EV enthusiasts received a jolt as global electric car sales reportedly fell year-over-year in July. Tesla’s US sales are also expected to have fallen in August. So is the recent fall just a blip, or have EV sales plateaued? Let’s discuss this in perspective.

Government support

China recently lowered subsidies for EVs, and this hit global EV sales in July. Similarly, starting in July, Tesla cars are eligible for lower federal tax credits in the US. This change brings forth an important point.

EV sales rely heavily on policy support from governments. In our view, for EVs to take off in a big way, we need two things. Firstly, we need some sort of price parity between EVs and comparable ICE cars. This parity would act as a pull for EVs. Currently, EVs are costlier than comparable ICE cars. While Tesla bulls would rightly point to lower running and maintenance costs for EVs, the lack of price parity acts as a dampener for EV sales.

Tesla and China

The second support could come as a push factor from governments. Here, it can be a carrot or stick approach—or a combination of both. From providing subsidies for EVs to discouraging ICE car registrations, governments are already doing their part. Recently, China exempted several Tesla models from its purchase tax. Tesla’s China Gigafactory is also coming online later this year.

Stringent emission norms could also push automakers toward EVs. US President Donald Trump has been at odds with automakers such as Ford (F) and General Motors (GM) over emission standards lately. Typically, it’s the companies that ask for softer standards. However, in this case, Trump wants softer emission standards, while automakers want strict regulations.

Outlook

To sum it up, technological advancements and government policy support are necessary for EVs to make a serious dent in gasoline car sales. Automakers have also taken note of rising EV adoption and have launched new EVs in a hurry. However, breaking Tesla’s dominance in the US EV market has been tough for established automakers.

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