Science of Success: Who’s Winning the EV Market in 2025?
17:28 Share

This episode is brought to you by Google Gemini. With the Gemini app, you can talk live and have a real-time conversation with an AI assistant. It's great for all kinds of things, like if you want to practice for an upcoming interview, ask for advice on things to do in a new city, or brainstorm creative ideas. And by the way, this script was actually read by Gemini. Download the Gemini app for iOS and Android today. Must be 18 plus to use Gemini Live.

Electric vehicle sales are growing. According to Cox Automotive, EV sales in the U.S. were up 11% in the third quarter year over year. In 2025, they estimate the same sort of growth since the market expects at least 15 all-new products. But the road ahead for EVs isn't quite so smooth. Early last year, electric vehicles were speeding off the lot.

Back then, there was a lot of pent-up demand for EVs. That's Sean McLean. He's a journal reporter based in Los Angeles and has been covering cars for over eight years. I asked him how he would describe the EV industry last year. I would say the best description is blinded by hope. There was a lot of assumptions made about hunger for EVs, and almost the entire auto industry overestimated how many people wanted these things.

Six months into this year, the check engine light was blinking on the EV industry. For Sean, the first sign came from, well, a sign on the side of the highway. I was driving south of L.A. down to Orange County, and I saw one of the biggest Ford dealers down there, and they had this big billboard on the side of the 405 highway, basically saying 125 EVs on the lot. It struck me that, like, if L.A. has a bunch of EVs just sitting on the lot waiting to be sold, something's wrong.

Dealers were the first sort of canaries in the coal mine. It went from dealers have too many EVs to the factories are producing too many EVs. And then they started cutting production. And that's when I think it really shifted. Where had EV makers miscalculated?

First, price. Typically, EVs cost around $56,000, according to Cox Automotive. For that amount of money, you could also buy a BMW 3 Series. With interest rates up to 7%, EVs can cost a serious chunk of change.

Second, charging. Range anxiety is real. And charging, as Sean put it, is not always convenient. If you cannot charge at home, buying an EV is not a rational decision. It's an emotional decision. Because if anybody who's used any of these fast chargers knows, depending on when you go and how big your EV tank is, you can pay $40 to fill that thing up, which is about what I pay in gas. So it's not a real savings unless you can charge at home.

Third, consumers. That first wave of people hungry for EVs had largely already bought their cars. But companies are still investing big in the EV market. Nearly every American automaker has an EV. And there are plenty of startups. And they're all trying to zip past the country's leader in EV sales, Tesla. So who's going to win the EV race?

From The Wall Street Journal, this is the Science of Success, a look at how today's successes could lead to tomorrow's innovations. I'm Ben Cohen. I read a column for the journal about how people, ideas, and teams work and when they thrive. Today, we're looking down the road for the electric vehicle market. How will automakers overcome roadblocks in 2025 and start to profit on their EV bets? Start your engines. Okay, your electric motors. Because that's after the break.

If your business needs a new application, then developers will have to write code. A lot of code. If an application needs to be modernized,

Then you'll need time, resources, and caffeine. If this sounds daunting, then use Watson X Code Assistant. Built with IBM's Granite code model, it's AI designed to multiply developer productivity so you can generate code quickly. Learn more at ibm.com slash code assistant. IBM, let's create. ♪

Imagine we're having this conversation a year from now. What do you think the state of EVs will be then? What are the big headwinds and tailwinds of success that you are looking at? Well, the number one headwind is price. Let's be honest. I mean, people are shopping for cars everywhere.

based on how much they can afford to pay every month for a vehicle. So if they cannot bring down the price of these EVs by, say, $15,000, because on average I would say that's the gap between a gas model and equivalent EV. So if those prices can't drop by $15,000, they're going to have and continue to have huge headwinds on getting people to buy these things.

So a year from now, we may be in the same state. However, if you look forward to 2026, maybe 2027, that's when you're going to start to see some of these more affordable models come out from other manufacturers. You're going to see EVs in the $30,000, $35,000 price range, which is entry level these days in the auto industry for a new car.

And when that happens, maybe things will change. Okay, speaking of making these cars more affordable, let's talk about taxes and subsidies and tariffs. There's a $7,500 federal tax credit. We don't know what's going to happen to it when President-elect Trump takes office. But if he does get rid of that EV tax break, how dramatic do you think the consequences would be for the EV industry? I think it very much depends on what's going on.

which automaker you're talking about. As it is, Ford has already told us they're losing billions of dollars on their EV business, even with a tax credit. And most of the startups, Rivian and Lucid, I guess, are the big two right now. They all lose money on every vehicle they sell. And then you have Tesla. Tesla currently can make money on each EV they sell. And Hyundai and Kia, the sort of sister Korean car makers, say that they make money on their EV business as well, even without the tax credit. But look, it's not going to be great

for the industry as a whole because...

There definitely is a certain amount of EV demand out there that is happening only because there is a tax credit that brings down the price of these vehicles. Okay, so let's go through the big players and the startups and talk about what it's going to take for any of them to cross the finish line here. I feel like we have to start with Tesla. The stock is way up. Market cap is over a trillion dollars again. But that seems to be more about Elon Musk, the CEO and the world's richest man, and his relationship with President-elect Trump more than Tesla itself. So why...

What is the deal with Tesla these days? Are they still the king of EVs in the U.S.?

Well, there's still about 50% of the EV market in the US, but down from 70%. So there's way more competition out there. Tesla's automotive business, which is the core business, is still very much under pressure. It's under pressure on profitability. It's under pressure on revenue. It's under pressure on price per vehicle. However, as you rightly point out, there's this huge Elon Musk halo over the entire company that sort of gives it this massive valuation. And

And depending on who you talk to, around 90% of that valuation is based on his bet on robotics and AI. And Musk himself has talked about his latest video call, the RoboTaxi, this $35,000 vehicle. He said he's going to sell it without a steering wheel.

That is his push for the future lineup of Tesla, that he will sell cheap self-driving cars without a steering wheel. He said that selling an affordable EV with a steering wheel was, quote, a silly idea.

So for Tesla, the future kind of depends on whether or not that sort of space age vision of robotic vehicles ferrying us around without a steering wheel becomes a reality or not, and in which timeframe it becomes a reality or not. Because their core business of selling cars with steering wheels is definitely under a lot of pressure these days. Switching gears a little bit here, why is everyone from Elon Musk to Jim Farley, the CEO of Ford, so freaked out about China?

The holy grail for the auto industry is figuring out how to sell cheap EVs, put them out quickly, digitalize them, for lack of a better word. So this idea of the software-defined vehicle where you can update it and change it drastically over the internet the same way we do with our mobile phones. China is light years ahead of the rest of the industry in that regard. The vehicles are cheaper. Light years ahead. I would say, depending on who you talk to in the auto industry...

several years to several generations of iterations of technology ahead. Wow. So they are afraid of that. Look, like Xiaomi. Xiaomi used to be a maker of cheap mobile phones and then they branched into other small electronics. They recently put out an EV. Now it's not for sale and they've only...

non-production versions. But basically, they put out a EV that is faster, basically, than any other vehicle on the Nuremberg Ring. Wait, what's the Nuremberg Ring? It is kind of like the test track in Germany. Anytime you hear about

you know, some hyper car or new hot sports car or even the Civic Type R. They all put it on the Nürburgring and brag about how fast it went around that lap as a way to say our car is cool. It's crazy. So this is a company that made cell phones and now they're making one of the most impressive EVs. I feel like it's like a company that made toasters putting a rocket on the moon or something.

I think that's exactly what it feels like to the auto industry. For the longest time, the auto industry sneered at Tesla and then sneered at all these new EV makers coming in saying, you can't do this. The car industry is tough. It's low margin. There's a reason why so many new car brands die within a few years. There's just this belief that you couldn't compete with the major car companies. We're seeing some signs of it with Rivian and Lucid and Tesla has certainly proved that they can do it.

but the speed at which the chinese have done it with evs i think has everybody alarmed here and you mentioned xiaomi byd is the other big name in china right now so byd is the largest electric vehicle maker in china right now and regularly competes with tesla for the number one spot in the ev industry in the world and they went from being a battery maker

And I think famously used to go door to door knocking on automakers doors to try to get them to buy their batteries. And now in the period of a couple of decades have become a challenger to Tesla on a global scale. That's so interesting. There's still a lot of space to look at with startups.

You know these big EV startups, especially the ones in the U.S., better than just about anyone, I think. So I want to run through a few of them with you. You mentioned Rivian before. I'm now starting to see them on the streets of New York. I always notice when I see them.

What does Rivian do well? What do they not do well? Well, look, I think you pointed to it. Rivians don't look like anything else on the street. But the real secret for Rivian's appeal is under the hood. They've managed to build a vehicle that can off-road like a Jeep.

but also go around a track like a Porsche 911. It's just kind of like a ridiculous over-engineered piece of kit that they cost about $100,000, but you feel if you buy one, if you can buy one, you feel like you're getting a deal because it is a ton of car.

They kind of position themselves as the Patagonia of car companies for the sort of the wealthy outdoors type. I imagine becoming the Patagonia of car companies is quite expensive and they have burned through a lot of money bringing those cars to the streets of New York where I could be impressed by them. Only about $19 billion since 2021-ish. Yeah, it's expensive launching a car company. It's expensive building a vehicle.

that is both a high-performance pickup and a sports car. There's a reason why the auto industry doesn't build cars like that. It's not that they can't. It's just that they're obscenely expensive and almost impossible to sell at a profit. But one of the ways they're trying to solve this problem that they've created is by partnering with a very traditional car company. They are now in a deal with Volkswagen. What in the world is Rivian doing with Volkswagen? So Rivian's

The key issue is that they don't sell enough vehicles. In the auto industry, you can produce, depending on the factory today, between 150,000 to 300,000 vehicles. If you're not producing that many vehicles a year from that plant, you're usually losing money.

Because the margins of the auto industry are so low, your cost per vehicle has to be low, and so that means volume has to be high. Rivian is on pace to produce, what, 50,000 vehicles or some odd this year? They're bleeding cash, and if they were able to produce the maximum amount of vehicles there, they might break even. Now, what Volkswagen does is potentially over the next couple of years...

is not just add 100,000 vehicles to their price per vehicle pool, like the denominator. It adds potentially millions. There is a world in which Rivian's costs come way down with a partnership with Volkswagen. And it becomes less of an issue for Rivian

whether it sells 50, 100,000 or a million vehicles a year because the denominator is so large with Volkswagen. And they're super cool cars. They are very cool cars. I don't know if you need a pickup truck or an SUV that can do 0 to 60 in three seconds, but if you can afford it, it's nice to have. Yeah.

We've talked a lot about companies. Let's talk about the technology in these cars. What tech do you see coming around the bend that you are excited to see in more cars over the next year, over the next five years, even over the next decade? The thing we're going to see a lot more of are these quote unquote extended range EVs, which is just a fancy name for a plug in a hybrid that has a big battery in it.

You're going to see EVs that travel, say, 100, 150 miles in all EV range. And then you'll have these tiny gas engines that will kick on and recharge the battery on the go. And so you'll be getting some manufacturers are estimating anywhere between 600 to 700 miles of total range driving as opposed to 300 today with just an EV. You're going to see a whole lot more of those is my prediction. Okay, last prediction from you. Other than Tesla...

What is the one company that you are watching most closely in the next year? From the EV standpoint, I would say I'm looking most closely at Rivian and Tesla for different reasons.

And I'll start with Rivian. Rivian I'm looking at because they've come out with a good-looking vehicle, a practical vehicle that everybody wants but can't afford. And they're coming out with new vehicles in the next couple years that everybody want and might be able to afford. That's sort of where Tesla was like a decade ago, wasn't it? It does. But Tesla had...

more access to capital, more access to cheap capital. So whether or not Rivian makes it or not, I think is a really interesting question. Now, Tesla has made a broad bet that the auto industry is on the precipice of a

change. Tesla thinks that we all want to buy self-driving vehicles that don't have a steering wheel, that we don't want a car, and that their technology is ready for the roads. And I think on both counts, it's huge question marks. You know, look, I don't like owning a car in LA. I don't like driving in LA. I already use Waymo here, and I probably would use Tesla's Robotaxi service. Is that true in Lincoln, Nebraska? Or Bismarck? You know, like in middle America? Like, I don't know. And I don't

think that's an obvious answer. Sean, thank you for coming on today. Thanks for having me, Ben. And that's the science of success. This episode was produced by Charlotte Gartenberg. Michael LaValle and Jessica Fenton wrote our theme music. We had help from Danny Lewis. I'm Ben Cohen. Be sure to check out my column on wsj.com. And if you like the show, tell your friends and leave us a five-star review on your favorite platform. Thanks for listening.

Sean, are you a better cars reporter because you don't like driving cars in L.A.? I think I'm a better cars reporter because I have a healthy disdain for the automobile. To me, the ultimate vehicle is something that doesn't break down and is the right tool for the job. So maybe, but maybe I'm also just telling myself that.