Risk of Electric Cars: why you shouldn’t buy one in the next 5 years.

I recently just got my driver’s license and two options lie in front of me: an electric car, or a traditional gasoline-powered car. In the status quo, I would pick the gasoline-powered car in a heartbeat.

Electric cars are separated into two categories: plug-in hybrids, which are powered by gas and electric, and purely electric cars (EV). It is not advisable to buy a hybrid, because the leading indicator is that countries around the world are implementing policies that support the sales of EV cars. China and India are implementing the policy to support the sale of EV cars in 2030. European countries follow with similar laws and regulations. With these regulations, companies would be more likely to support EV cars. Furthermore, a hybrid car is also 20% more expensive than its counterparts that run on gasoline. A hybrid is the worst option based on price and future policies.

The value proposition of EV car companies, is differentiation, and they advocate for green cities and is priced higher than plug in and gasoline. Tesla motors currently dominates the EV market with 62.52% market share. Differentiation advantage will soon evaporate with more companies developing EVs. As discussed in Comm 101 tutorials, companies like Mercedes Benz are coming in and taking market share. Mercedes aim to have all its cars EV by 2022 and many other companies are following. When supply shifts to the right the price comes down. With the competition, there will be better models in the future, with a higher quality at a lower price. For gasoline-powered cars, with less suppliers in the future the supply will shift left being more and more expensive in the future. The owner of tesla even owns two gasoline cars, and calls one his “first love”. The mass quantity of gasoline-powered cars are here to stay.

When I am buying a car, I’m not looking just for the automobile, but the good service that is provided as well. In the status quo, the lagging indicators of these electric-car companies are in jeopardy. Faraday Futures, an electric car powerhouse, is mounted in debt, while the asset of its billionaire Chinese financier frozen by the government. Tesla Motors just fired hundreds of people in October based on performance management. The production of its new Model 3 is currently only at 260 units, far less than expected 1500 units projected. When these companies are having trouble now, it is difficult to see how they will maintain a good customer service while also keeping high profit margins when different car companies invade the market.

Within the next five years, gasoline-powered cars are the best option. I will consider EVs when they dominate the market with cheap prices and stable customer service.

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