Automotive: Can Tesla Survive?

Technology Review
Feb 16, 2012

Hard ride: Tesla's Roadster. Credit: Tesla

The year 2012 will be an important one for Tesla Motors. Amid growing competition from established automakers, Tesla plans to sell a new Model S luxury sedan in July, and to supply Toyota with batteries, motors, and control systems for a new electric RAV4 SUV. The success of these efforts could determine whether the company survives long-term—and what it might look like if it does.

Even if Tesla can't succeed as an independent automaker, it could still be acquired by a bigger company, or live on as a supplier to major automakers.

Tesla is best known for its electric sports car, the Roadster. But from its early days, the company has hoped to move beyond the Roadster to lower-priced electric vehicles sold in much higher volumes. Earlier this week, Tesla revealed a luxury electric SUV, the Model X, which it plans to sell starting in 2013.

But the automotive industry has changed dramatically since Tesla was founded in 2003. At the time, changes to a California mandate that had required carmakers to make electric cars had just led GM to cancel the electric EV1, and Toyota to cancel the original electric RAV4. By and large, Tesla had the electric vehicle market to itself, its only competition coming from a handful of other small electric car companies.

Now, GM, Nissan, and others are selling electric vehicles in numbers that after one year far exceed the total production of the EV1. In fact, every major automaker has announced plans to sell electric cars of some type. Furthermore, vehicles from companies including BMW and Mercedes will compete directly with Tesla in the market for high-performance or luxury electric vehicles.
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