Margins.
GM, Ford, Honda, Toyota, etc. are competing with a commodity product in a commodity market. There's no big difference between a Toyota Yaris, a Honda Fit, a Kia Rio, a Ford Fiesta, and similar cars from every other brand.
They're all within a few hundred bucks of $15k. They all cost do the same thing, cost the same to produce, and I imagine the margins are razor-thin. If any of the brand could lower prices by $500, they'd own the market.
Tesla sells a unique product, with unique technologies.
If Tesla has 5% of the market, but 10x the margins of its competitors, which doesn't seem an unlikely outcome:
1) Its profits will be roughly 1/3 of the total profits of the whole market
2) It will be much more stable. Razor-thin margins mean companies go bankrupt with even minor instability. If Ford's costs rise by 5%, it's dead. If Tesla's costs go up 5%, it's a almost a rounding error.
I think the key question is whether Tesla can execute, but right now, things look promising, although far from certain.
[1] https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-...
With a little sanity, luck, and changing political winds, it could disappear in an instant.
Making a good EV is hard. The set of technologies required is still unknown -- bear with me for a little bit.
In the early days of the PC; anyone competent could make a perfectly competitive computer in their own garage in a few months, buying chips, etching PCBs, and coding up a basic operating system. Wozniak did that, as did a few others. It seemed like it'd be simple forever, but it wasn't. Today, the tech tree to make something like a MacBook is long, wide, and extensive. There's a massive engineering team for the mechanical design alone, let alone the OS or the CPU. I can still make a computer, but it won't be competitive.
Same thing happened with airplanes; shortly after the Wright Brothers, all sorts of amateurs made basic planes on their farms. It's still possible to do that, but you won't be competitive with an Airbus jetliner.
Early radios were a few vacuum tubes. Compare that to making a modern cell phone.
Part of the reason ICE vehicles are complex are the same process. The first mass-produced ICE vehicle, the Benz Patent-Motorwagen, was pretty simple. It cost under $5000 in today's dollars ($150 at the time), and looked like a glorified tricycle with an engine.
If you throw engineers at tech, it goes up in sophistication. People figure out how to do things better. Anyone can make an EV. I'm confident, though, that we'll see the same progression as we did in every other fields. If Tesla has enough of a head start making things cheaper and better -- and they seem to -- it's unlikely the established players will be able to compete.
Running at a loss to build out market share, technology, branding and economies-of-scale is a standard startup strategy. Tesla is still in that stage.
The key question is whether things like the Gigafactory provide Tesla with unique economics and competitive advantage. If they do, Tesla will be able to have lower costs or more expensive products than GM. If not, it's overvalued.
That's just GM. Ford and others are the same. The Ford F truck line is practically a money printing operation.
A fancy UI on a screen is not a defensible moat, not when you suck at manufacturing (QA is still bush league).
Yes they will. I'd bet that the price of oil is not going to go above $80 or so in the next twenty years.
Two major reasons, and a bunch of minor ones.
1: massive quantities of non-OPEC oil are available in shale and tar sands. Right now these are only barely profitable, but if the price of oil increases production there will increase, stabilizing prices.
2: renewable energy is now just barely cheaper than other forms of energy, but they're projected to drop dramatically over the next years, radically transforming the energy market.
Some uses of hydrocarbon cannot be easily replaced by renewable electricity but most can. When a cheaper substitute is available, demand and price drop.
The only way the consumer price of oil is going to go up over the next few years is if governments come their senses and put in place a carbon tax or equivalent. (And that's reason #3 -- the environmental movement will demand that the world use fewer hydrocarbons, forcing less demand, forcing prices before the carbon tax to go down.)
Assuming they can maintain that level of supply as demand drops. Some the economies of scale they operate with will be lost as demand slows and then the logistics that requires large and ongoing investment may slow considerably, although much of the latter is probably outside the 20 year horizon.
It could play out very differently on the consumer side though. If electric vehicles became 50% (or some arbitrary significant percentage) of the market then a lot of local gas stations will close, the ones that remain may have to start charging higher prices (again losing the logistics and scale advantages of today). There may be some tipping point where the whole retail side of the industry finds itself in a death spiral where gas stations are charging more and in less locations, making oil powered cars less convenient and driving more people to electric vehicles.
You can get this at any dealer, just pay sticker price. They'll love you.
This really has nothing to do with it. An optioned out Model X costs as much as a house. The type of person who can afford that couldn't care less if gasoline were $10/gallon. It's a status symbol, on top of just being a great car. It wont be until they are competing in the sub $30k market that an EV purchase will ever be driven by economics.
Plus, millennials seem to greatly prefer the Tesla buying experience over traditional dealerships.