Where electric cars are headed

As electric vehicles take centre-stage in the world’s green transition, efforts to scale up their production are gathering pace. With China firmly in the driver’s seat – the country is the world’s biggest producer of EV car batteries, and BYD recently overtook Tesla as the world’s biggest EV maker¹ – how the global EV industry will evolve has been a topic of keen interest.

Martin Eberhard, who co-founded Tesla in 2002 and was its Chief Executive Officer until late 2007, offered his perspective on what shaped the carmaker’s early success at the HSBC Global Investment Summit. He also shared his insights into how the EV industry might develop in future, and what the defining factors would be for success.

Tesla, he said, wasn’t born out of enthusiasm for EVs. The journey began in search of a replacement for traditional cars running on fossil fuels and an engineering analysis that showed EVs were significantly more efficient than other alternatives at the time.

Back in 2003, EVs weren’t popular as they had a very short driving range and were found to be not attractive to consumers. He decided that trying to compete with a very mature gasoline cars industry, by trying to enter the lower end of the market, would be a mistake.

So Tesla did the opposite, and built a luxury vehicle.

“I said our first car will be one that's engineered to break everybody's stereotype of what an electric car could be. It's going to be a beautiful, fast, fun sports car,” Mr. Eberhard said. “Not cheap, but desirable as a way to create a brand and to develop a technology that would allow follow-on cars to happen.”

That said, the path to success for Tesla then isn’t necessarily the right path for EV companies now. What is more crucial for EV companies is to keep exploring alternatives and developing technologies to produce batteries.

Although Tesla was the first to use lithium-ion batteries in cars, whether they will remain the battery of choice in the future remains to be seen. “We are very young in the age of electric vehicles,” Mr. Eberhard said.

There is a case for carmakers to keep developing different technologies and exploring alternatives for batteries, because they are critical to EVs. From a supply-chain perspective, it makes sense for the batteries to be assembled near the location of car factories, because they are big and heavy as well as dangerous.

Driving down costs will be critical for the wider adoption of EVs, and it is an area where Chinese carmakers have made big strides.

“I think that we will see electric cars crossing over very soon on cost, compared to gasoline-powered cars. You're talking about these low-end low-cost Chinese cars, and this is where it will happen,” Mr. Eberhard said.

Still, in the long-run, Japanese and Korean carmakers might offer competition to Chinese carmakers by making EVs more affordable in the low-end of the market, he said.

Mr. Eberhard said he is not particularly enthusiastic about autonomous driving as mistakes by fully autonomously driven cars can sometimes prove to be fatal.

“Getting an autonomous car to work correctly, in all situations, is a very, very difficult problem. And I am in favour of the advanced driver assistance systems that make cars safer,” he said.