How Tesla’s Model 3 Is Melting ICE Markets

Tesla’s Model 3 triggered the Osborne effect in the auto industry and is causing the internal combustion engine (ICE) market to melt, The Driven shared and explained just how this happened. In the article, the author takes us back to 2017 where the global new car sales began their downturn, and that increased in 2020 due to the pandemic. Although it has rebounded in many markets this year, it’s not above the levels of 2019.

The author shared data from EV Volumes and noted that globally, new plug-in electric vehicle (both battery-electric and plug-in hybrids) sales were up 43% year-on-year. This equals a jump to 3.24 million EVs in 2020 from the 2.26 million in 2019. The author analyzed the graphs and pointed out that the uptake is following a typical uptake curve of all of our most ubiquitous current technologies.

A second graph that showed the share of US households using specific technologies from 1900 to 2015 reflected this as well–look at the travel section. In 2015, travel has taken an uptake. EVs are most certainly following this path and if they are, it won’t be long before ICE vehicles go the way of the horse and carriage. This, he pointed out would be much faster than the current industry predictions of 30-50% new EV sales by 2030.

Three Trends And The Osborne Effect

Although, not every country is at the same point on that EV uptake curve. The author shared three trends and how these trends were taken together is a clear example of the Osborne effect, which is defined as a social phenomenon of customers canceling or deferring orders for the current soon-to-be-obsolete product as an unexpected drawback of a company’s announcing a future product prematurely.

The three trends the author touched upon happened in the EU and Australian markets. The first trend, Norway, plans to end all new non-EV sales in 2025 and it’s close to meeting that goal already. Monthly plug-in vehicle sales in July were 84.7% and the bulk of that was battery-electric vehicles (61.4%)

The second trend shows that many nearby EU countries are following Norway’s lead closely. Sweden had 37.6% of plug-in EV sales in July. Germany had 23.5% and the UK had 17.1%.

And Australia reflected the third trend. Plug-in EV sales have risen from 0.57% in 2020 to almost 2% in July 2021. These may sound like tiny numbers compared to Norway, but these numbers do reflect The Osborne Effect.

Tesla Is The Catalyst

The author pointed out that new ICE car purchasing has been delayed by the people waiting on the arrival of mass-market EVs from manufacturers which are trying to slow down Tesla’s sales. Due to this, the manufacturers have been feeding the Osborne effect by continuously announcing upcoming EV models yet delaying their introduction or only manufacturing them in limited numbers.

GM, Ford, Volvo, and VW have set dates within a range of 2025–2035 to end ICE vehicle production, and others such as Stellantis and Toyota are setting dates for the electrification of their vehicles. Consider all of this in the background, however. In the foreground, Tesla is doubling its 2020 output of EVs and will most likely reach 1 million this year. Giga Berlin and Giga Texas will be operating soon as well. The author pointed out Tesla’s other successes such as its deal with BHP to provide nickel and its dominance in EV tech.

Some Thoughts

I agree with the author. We are seeing the Osborne effect here and Tesla is definitely the catalyst for this effect in the vehicle market. It’s only a matter of time before ICE is completely phased out. One question the author posed was that would electric cars will be so common that eventually, we will no longer use the world electric to describe cars? I think so — but not in our lifetimes. I think by 2100, maybe, but who knows?

I think that the EV transition is happening faster than the industry predicted or is expecting we need it to do so. Sandy Munro even explained that for the U.S., we need to reach 51% of all sales being EVs by 2028, not 2030. I think the Osborne Effect will definitely help us reach that goal.

“Now, I said that in 2019. And I said it again in 2020. And then in 2021, I said that I think I’m going to have to move it up — it’s going to have to be 2028. I’m going to tell you right now, boys and girls, 2028 is going to have to be the correct number. Otherwise, there won’t be an OEM in North America. Because the rest of the world is moving much, much faster than we are here.” —Sandy Munro

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