Why Major Automobile Makers Have Been Ignoring Tesla's Challenge

Consumers pay a great deal of attention to what Tesla does. In Consumer Reports, they give its models top ratings.

Investors pay a great deal to Tesla, too. They have put the value the company at $31B, close to that of GM’s -- though Tesla’s revenues are a tiny fraction of GM’s.

Source: finance.yahoo.com

Yet Toyota, GM, and Ford have been ignoring Tesla’s challenge.

Though they have made their own foray into electric cars, they don’t seem to be in a rush to compete head-to-head with the pioneer of fancy electric car manufacturing.

There is a good explanation, according to a Harvard Business report.

Tesla isn’t as disruptive as Wall Street believes it to be, argues the report. “Think of it this way: all-electric vehicles accounted for just 119,710 of the 16.5 million sold in the US in 2014—seven tenths of one percent of the market.”

Apparently that’s a tiny market. “Established carmakers are paying little attention to EVs not because they are clueless but because so few people want EVs. (And they aren’t completely ignoring EVs; consider the all-electric Nissan Leaf and Chevy Volt, each of which outsold Tesla in 2014). Tesla is betting that preferences will change—that someday millions of people will want electric vehicles.”

That’s a big bet. But even if Tesla proves to have bet right, it may not win the electric car race -- as it is very unlikely to be able to match the scale of established automobile makers. It’s them who will end up “colonizing” the electric market.