Tesla CEO Elon Musk recently sent a company-wide email stating, “We have made the difficult decision to reduce our headcount by more than 10% globally.” That comes out to over 14,000 employees.
Musk stated that this new batch of layoffs is due to a “duplication of roles”; however, there is a more plausible culprit. For the first time in the company’s history, its stock has been down over 31% year-to-date, as reported by Business Insider. Furthermore, Fast Company reports that sales have fallen by 8.5% each year since 2020. The company’s analysts describe this as a disaster, as some of Tesla’s competitors—such as Hyundai, Kia, Toyota, and BMW—have increased their sales in Q1.
But Tesla isn’t alone. Ford, for example, has recently announced a delay in rolling out its new line of electric pickups and SUVs. Ford explained that it will first work on adding gas-electric hybrids, citing a slower-than-expected EV sales market as the reason for the change.
EV Market Shift Isn’t a Reason to Panic
Over the past few months, we have all heard about how the slowing EV market keeps us from hitting our CO2 emission-reduction goals. But there is no reason to panic, as the industry is following the natural product adoption process.
Any marketing or sociology course will likely include Everett M. Rogers’s idea of the “adoption curve.” It details who and to what degree consumers adopt a new technology or product. Any population can be split into five categories: innovators, early adopters, early majority, late majority, and laggards.
The Adoption Stages
Innovators make up about 2.5% of the overall population. They’re eager to try anything new, not scared off by risk or the idea of failure. You can find them on crowdfunding sites like Indiegogo or Kickstarter, investing in products still in their conceptual stage.
Then you have early adopters, who make up a whopping 13.5%. They’re willing to work around or ignore kinks in a product. But unlike innovators, they’re not as willing to risk failure. Thus, they’ll test it out before preaching it to the choirs. Think of them as the first people to own a Blackberry or iPhone. Were there bugs? Yes. Did they care? No. Did they preach about the usefulness of either product? Also, yes.
Then, you get to the early and late majority, who together make up 68% of the population. The only real difference between the two is that the early majority is more trustworthy of data that shows a product or technology does solve a problem, at which point they are willing to try it out.
Lastly, there are laggards, who make up the remaining 16%. These are the few who refuse to try new tech even if a product is objectively better than its predecessor. They won’t naturally adopt it; rather, they must be convinced of its use and value time and time again before they even think it might be worth a look.
Where Did the Consumers Go?
So, how does this connect back to Tesla and EVs?
Simple. Environmentalists, journalists, and market analysts alike were excited about early growth because they looked at sales data driven by innovators and early adopters. Now, we’re confronted by the reality of persuading the majority—which takes time. We jumped the gun in our excitement. That’s all.
Let’s be frank: EVs have kinks that the majority do not want to deal with. Consumer Reports’ latest annual car reliability survey found that “EVs from the past three model years [have] 79% more problems than conventional cars.” The most common issues are with the battery and charging system, which would be the equivalent of a traditional car having an issue with its gas tank.
If you’re wondering where the majority is comfortable, that’s hybrid and plug-in hybrid electric vehicles (PHEVs). The latter vehicles can run on battery power for an average day around town and then switch to a gas-electric mix if they have to go further. When Pat Ryan, CEO of the car shopping app CoPilot, spoke with NPR, he stated, “The mainstream has adopted hybrids, so hybrid sales are white-hot.” Also, some PHEVs qualify for federal tax credits.
Using iPhone’s Roadmap for EV Expectations
Going back to the iPhone example, we can use its adoption as a roadmap of expectations for EVs. Innovators bought the product in 2008-2009; the early adopters then naturally came in with the iPhone 3GS as the product still had some bugs but nothing that would risk failure. And then with the iPhone 4, the market exploded in 2012. The early and late majority saw the mountain of evidence on how having constant access to their emails and the internet added something to their personal or professional lives but without the bugs. But that was after three years of innovators and early adopters acting as the guinea pigs.
With EVs, we are currently in limbo between the early adopters and the early majority because of persisting issues with charging speed, range, and overall reliability—just as the iPhone was before the 4’s release. In order to have the same boom as the iPhone, EV automakers need to do what Apple did—a complete upgrade.
The iPhone 4 introduced what are now staple features, including the retina display and Facetime. Overall, it had over 100 new features and upgrades. Steve Jobs effectively took an iron to all of the 3G and 3GS’s wrinkles (antenna gate notwithstanding), such as spotty network connections and issues caused by the battery. Sound familiar?
So, as EV production begins to roll back to a more realistic pace, please note that this is the combination of the natural adoption cycle and the need for automakers to take an iron to EVs’ proverbial wrinkles.
