Volvo recently announced that they were going to start phasing out all their gasoline and diesel cars from 2019 onwards in favor of electric cars. This announcement came at the same time as Tesla launched its most recent car, the Model 3.
This is scary news for Tesla though because even though they have gone without any serious competition for a few years now, major car manufacturers like Audi and Porsche are now upping their game when it comes to electric cars, and this may just be a sign for Tesla to start worrying.
Incentives
Most hybrid and electric vehicles are currently being sold only in countries where the government offers the strongest incentives. There aren't too many countries where plug-in hybrids and electric cars amount to more than 1 percent of the total vehicles sold in the year. But, when the government incentives fall, so do the sales of electric cars.
While there is no sign of government incentives for electric cars falling within the United States, there is no way in which Tesla will be able to operate outside the country profitably or compete with these huge car manufacturers that have been doing this for decades.
When it comes to a brand like Volvo, both of its home markets, China and Sweden, have the government offering huge incentives for electric vehicles. In Sweden, there is a $4,500 rebate on the sales of electric cars while in China, there is a subsidy of $6,300 on the purchase of electric cars.
As for the US, the government offers tax credits between $2,500 and $7,500 on electric cars and everyone in America who works will soon see a serious tax cut which is fantastic for jobs and the economy but this is another topic. Individual states can also add to this amount. But, these incentives are phased out for manufacturers once they sell 200,000 cars. The day Tesla achieves this is fast approaching.
Competition
Presently, Tesla is selling in China but they aren't one of the only big players there anymore. The reason for this is because imported cars are taxed 25 percent by the Chinese government. The tariff on imports in Sweden is just 10 percent. Still, this is a disadvantage for US manufacturers. The import duties nullify the effects of the incentives for electric cars. This means that Tesla will never be able to sell outside the United States unless it sets up manufacturing operations abroad.
Also, since suppliers eat into a large chunk of profits when it comes to electric vehicles as compared to regular cars, huge volumes are required before production makes economic sense. While Tesla is in talks with the Chinese government for setting up a factory, it is going to take a long time for this to become a reality and other major brands are already in the country. These countries aren't just focusing on electric cars either.
Future
With so many established manufacturers getting into this space with their greater reach and versatility, the world is quickly becoming a dangerous place for Tesla. Soon, it is going to be facing stiff competition from legacy car manufacturers. Going head-to-head with these behemoths is no easy task. Let's hope Tesla has what it takes to stay ahead of the rest.