The move to electric vehicles is the auto industrys biggest transformation since cars replaced horses early last century. Just about every traditional automaker is going through its own reckoning with the EV transition, one that presents huge opportunityand existential risk. So far, it has been rough.
Buyers havent turned up in the numbers the industry projected just a few years ago. Now many automakers are racking up heavy losses on their EV businesses. Many traditional automakers have had trouble cranking up their EV factories and getting the battery technology right. Some carmakers are now slow-walking their plans for new factories and scrapping some future electric models. Some have dubbed this the EV winter.
And yet, battery plants and electric-car factories are still going up across a swath of the Midwest and South. Dozens of new battery powered models will hit U.S. showrooms this year, backed by multimillion-dollar ad campaigns.
As messy as the EV story is today, automakers cant afford to rip up their EV strategies. Thats because two forces that pushed the legacy automakers down the electric path in the first place arent letting up. Elon Musks Tesla and a slew of surging Chinese players are mobilizing to extend their leads in what many industry players still see as the future of transportation.
You might be wondering why the EV transition has been such a slog for traditional carmakers like General Motors, Ford Motor, and Volkswagen. An electric car still has four doors and brakes and a dashboard. It is actually a simpler design mechanically than a combustion-engine car, and can be assembled more quickly. Why would legacy carmakers need to spend gobs of money and mental energy to figure this out?
First, it requires a massive rewiring of supply chains. Swapping out the guts of the car from an engine and transmission to battery and motors is like a combo heart-and-lungs transplant. And the stuff the automakers need for the transition to EVs is generally not the stuff that they are good at. Batteries, motors, and electronicsthose are the domain of big Asian suppliers like LG and Panasonic and Chinas CATL. If the world gravitates to electric cars, GMs or Toyotas mastery of cylinder blocks, pistons, and valve trains eventually wont matter.
Second, the batteries are still egregiously expensive, accounting for as much as one-third of an EVs cost. The companies are betting that this will change, battery costs will fall, and they will be able to profit handsomely from all that growth as the world switches over to electrons. But claims of some imminent breakthrough that will slash battery expenses never seem to pan outgetting costs down likely will continue to be an incremental grind over years.
For now, EVs remain 1015% higher than a comparable gas-powered car in the U.S., and there arent many available for under $40,000. Those higher prices are perhaps the biggest hang-up for car shoppers who are still nervous to make the leap to a fully electric car.
The other big drag on consumer acceptance of EVs is worries about charging. There arent enough public chargersespecially in the United Statesand wont be for a long time. The ones that do exist are often broken, cant connect, or dont sync with the app. A J.D. Power survey in 2023 found that one in five EV drivers who stopped at a charging station left without powering up at all.
But what if both of those problems were solved? Just look at China.
Beijing put in place a strategic plan two decades ago to leap ahead of the rest of the global car business. It made a massive bet that incumbent automakers like VW and GM wouldnt fully embrace EVs, because their bottom lines were anchored to combustion-engine cars. That also was the same bet that Elon Musk was making around the same time.
Now a slew of Chinese car brands enjoy huge advantages that allow them to churn out stylish, quality, affordable EVs. They are leveraging a lower-cost supply chain, access to raw materials for batteries, government funding, and cheap labor to offer EVs at prices around 30% below those of their large global rivals. And Chinas network of the most powerful fast chargers mainly used along highways is roughly 20 times larger than that of the U.S.
As a result, EVs and plug-in hybrids account for about half of all new-vehicle sales in China, the worlds largest car market. That compares with 20% in Europe and about 10% in the U.S.
In China, domestic automakers have seized a ton of market share from the multinational players. Now the Chinese companies are expanding overseas, the spillover effect from a glut of car-making factory capacity. A decade ago, China shipped very few vehicles to other countries. In 2023, it surpassed Japan as the worlds largest vehicle exporter, extending that lead last year with nearly five million cars shipped.
Political and business leaders in Europe and the U.S. feel pressure to check Chinas onslaught. Last year, both the United States and European Union slapped tariffs on Chinese imports of electric vehicles and batteries. President Trump has vowed even more.
This state of play leaves GM, Ford, and other global car titans with a choice. Does the EV slowdown in their home markets mean they can scale back on tens of billions theyve already directed to new supply chains, EV designs, and factories? Will they stop working hard to get battery costs down? Will they stall, again, on developing an affordable EV for the masses?
Doing those things could stem the steep losses on their EV operations and maybe lift their stock prices. But auto executives know what happened the last time American carmakers ignored shifting market dynamics. Japanese automakers in the 1970s and 80s blitzed the U.S. market with smaller, fuel-efficient imports, and eventually set up shop with American factories. The Detroit automakers barely survived and have never regained that lost market share.
Some executives see the China threat as even more dire, and arent taking comfort in the idea that tariffs will protect them long term. They say that eventually, if Chinese carmakers are the only ones offering good, affordable EVs, consumers will seek them out. Thats why auto executives arent ripping up their EV plans. Dozens of new battery powered models will hit U.S. showrooms this year, backed by multimillion-dollar ad campaigns.
In Europe, its no longer a theoretical risk. In just a few years, Chinese car brands have grabbed 20% of the European market for electric cars. More are coming.
On a cold morning in February 2024, news crews gathered at Germanys port of Bremerhaven on the North Sea to watch as more than three thousand cars rolled off a massive blue-and-white cargo ship emblazoned with the letters BYD, the Tesla of China It was the maiden voyage for the BYD Explorer No. 1, the Chinese automakers first chartered vessel. Another seven car-carrying ships already were on order. BYD was now cranking out so many cars at its home factories that it had begun ramping up exports to Australia, Brazil, Israel, and other Europe, with plans to open a factory in Hungary by 2026.
North America could be next. BYD has confirmed plans to build a factory in Mexico. In a 2024 interview with Yahoo News, BYD executive Stella Li said the automaker had no plans to enter the United States. But the read-through for U.S. car executives was plain: a BYD plant in Mexico would give the company a potential beachhead for U.S. expansion.
If that thought wasnt daunting enough for rival carmakers, the interviewer finished the conversation by asking Li what she thought of recent decisions by some global automakers to delay or cancel EV-related factories and investments because of the shaky demand picture.
If yu are not investing for electric car, you are out. You will die, she said. You have no future.
Reprinted by permission of Harvard Business Review Press. Adapted from Inevitable: Inside the Messy, Unstoppable Transition to Electric Vehicles by Mike Colias. Copyright 2025 Mike Colias. All rights reserved.
