Because they can’t.
They are in trouble. BIG trouble. Tesla has them between a rock and a hard place.
Why is that? And how did it happen?
Lots of people have mocked Tesla for “bleeding cash”. But there are no free rides here. Making that volume of EVs is not as easy as flipping a switch on assembly lines currently making ICEVs.
New battery and powertrain tech has to be engineered. Manufacturing for those parts has to be established. Supply chains for new types of raw materials have to be established. Platforms that accommodate efficient EV operation have to be engineered. Branding and marketing strategies have to be figured out. Shipping, sales, and service logistics and training have to be established. And in the end, the product can’t just be any EV. It has to be competetive with a Tesla.
Existing makers have two choices. Build all new factories and logistics, operating in parallel to their existing operation. Or they can start ripping out ICE facilities and retooling them.
Option A will cost a lot of money. We already know roughly how much new factory it will take to catch Tesla, and how much it will cost - it’s roughly the time and money that Tesla spent, minus some savings for being more efficient about it than Tesla has been. Even if you can do it 30% more efficiently than Tesla has done it, you are still talking about 11 figures. And when you are done, you will begin cannibalizing an ICE operation which you are still paying full dollar to operate. Drawing away ICE volume would be bad news. Lower volume means lower margins. That means that the minute your EVs becomes competitive, you will slowly start making less and less money on ICEVs, as the volume drops and economies of scale reverse. The margins on ICE will dry up much faster than the margins on EV will grow. There will be a gap. During this gap, you will still be pouring cash into EV factories and logistics, while your profits have suddenly dried up. Option B isn’t any better. You basically trade some time and money in EV bring up, for even worst damage caused faster to ICE profits, since now you are reducing your ICE capability and spending money to tear out existing ICE operations.
The worst of it is battery supply, and sales and support logistics.
Nobody besides Tesla and BYD currently controls their own battery cell supply chain. And those two now dwarf all the rest of the world’s battery supply. You could pay LG triple price to secure their entire supply and push out their other customers. But now your battery price is highly uncompetitive and you STILL don’t have as many batteries as Tesla. You can’t buy your way out of this problem, you have to build your way out, and that will cost time as well as money. And again, that up front investment will come well ahead of any prayer that it can pay it back in profits.
Things are even worse for sales and support logistics. Their entire business model is based on Franchise dealerships. Franchise dealerships are effectively, a way of subsidizing the sales and support logistics of making cars, via the heavy cost burden of routine service and non-warranty repair. But routine service and non-warranty repair in EVs is much lower. In fact, for Tesla, it’s virtually non-existent. This is why Tesla wisely avoided the Franchise dealership model - there is no routine service cost to subsidize the sales and warranty logistics. Instead of routine service subsidizing sales and warranty operations, Tesla is subsidizing them in the price of the car. But the existing makers have given themselves a contract and legal thicket to cut through in order to decouple themselves from dealership franchises, and it’s not clear how they could transition to EVs without fixing this first. They may well have planned on “inventing” necessary maintenance so that there was still some profit center for franchise dealerships to work with, but Tesla has thrown a wrench in that by demonstrating it is not necessary. If they have a higher cost of routine maintenance than Tesla, their cars will be seen as inferior and people will buy Teslas instead. If they match Teslas lack of maintenance, their sales operations will go out of business and they will have to spend even more money to build a non-franchise sales and service operation just like Tesla had to do. Again, signing up for more money, more pain, and more of the same struggles they’ve just finished mocking Tesla for.
Despite all the mockery they have thrown at Tesla for burning cash and being unable to generate profits, the minute they start this transition, they find themselves in the same position they mocked Tesla for - staring at a massive chasm of time and money that stands between them and re-established profitability.
Now normally, this “chasm” wouldn’t be a big deal for the big players in a big, strong, healthy market. They would have years of profit saved up in a massive war chest, billions at the ready to spend in this without going into debt.
But most of the auto industry is currently not big and strong and healthy. Auto sales have been contracting. Many people are already moving to EVs, and without options for the major players, they have already gone with Tesla, or BYD in China, etc. robbing the major makers from a sale. Sales have also contracted due to ride sharing, which along with increasing traffic is causing more and more people in big cities to opt for not owning a vehicle. Trade wars and high tariffs are also hurting. And the cost of trying to keep up with rising emissions standards on ICE cars has driven up prices and driven down profits. As a result, many of the major makers, again despite mocking Tesla, are in massive debt. Arguably, several of them are in even worse debt and cash flow positions than Tesla. The difference is, Tesla spent that money crossing the chasm of EV unprofitability, and is now arriving on the other side. Many of the major makers are already in worse financial shape, for their relative size, and they have yet to begin crossing that chasm. This means that to begin the crossing of that chasm is to take a major financial risk. If you don’t have the money to survive the crossing, you end up in the same bankruptcy abyss that so many predicted for Tesla. That’s a terrifying trigger to pull for an auto industry executive.
Rock and a hard place - keep making ICE and slowly watch your profits get eaten by Tesla, BYD, Nio, etc., OR risk a dangerously expensive crossing through a transition period of cash burn and negative margins.