Volkswagen shutting down factories. Tesla and Chinese brands stealing market share. Europe’s legacy carmakers are facing a squeeze like never before—and it’s getting tighter. As I dove into Bruce Usher’s “Investing in the Era of Climate Change,” his observations on the struggles of incumbent automakers in the U.S. sounded hauntingly familiar to what’s unfolding in Europe. He lays out six reasons why traditional automakers failed to adapt to the electric vehicle (EV) revolution, and it’s clear these points apply across the Atlantic as well.
Let’s break down Usher’s analysis, because there’s plenty here for anyone interested in understanding why legacy automakers are losing ground, and how Tesla and Chinese brands capitalized on it.
1. Missing the R&D Boat 🛠️
While Tesla and Chinese startups poured resources into EV development, legacy automakers in Europe and the U.S. initially allocated small R&D budgets to EVs. They treated EVs as side projects, while traditional internal combustion engine (ICE) vehicles received the lion’s share of investment. Usher doesn’t mince words—he believes this lack of focus delayed crucial expertise development. In short, legacy automakers snoozed, while Tesla and new players hit the accelerator.
2. Failure to Control the Battery Supply Chain 🔋
One of the biggest missteps? Not vertically integrating into battery production. Batteries account for up to 30% of an EV’s total cost and are the most challenging component to produce at scale. Tesla understood this early, partnering with Panasonic to secure its battery supply chain and even building its own gigafactories. Traditional automakers, meanwhile, opted to rely on third-party suppliers. Without a guaranteed offtake agreement from a car manufacturer, battery makers struggle to reach the scale that drives costs down. And so, as battery prices dropped for Tesla and other innovators, traditional automakers watched costs spiral and supply remain uncertain.
3. Sticking to Old Platforms 🚗
Instead of building new EV platforms from scratch, legacy automakers tried to adapt their existing ICE platforms for electric models. Here’s the problem: an EV is fundamentally different, with far fewer moving parts—100 times fewer, in fact. Starting from zero would have allowed these companies to design simpler, more efficient manufacturing processes, cutting costs and improving quality. But by sticking with old frameworks, legacy brands limited the savings and performance benefits they could offer consumers. Tesla, on the other hand, started fresh, which is why its EVs became a benchmark for efficiency.
4. Stuck with Dealerships 💸
Traditional automakers relied on their dealership networks, but this structure creates a conflict of interest. Dealers earn a significant portion of their profits from maintenance services, and EVs simply need far less service than ICE vehicles. Tesla sidestepped this by going direct-to-consumer, which not only saves costs but also provides a more consistent customer experience. As legacy brands continue to struggle with this outdated sales model, their dealerships remain a barrier to the smooth EV ownership experience that consumers increasingly expect.
5. Starting at the Bottom Instead of the Top 🏆
Tesla began with high-end models—the Roadster and Model S—building a premium image that appealed to early adopters willing to pay for status and innovation. Then, it released more affordable models, backed by an aspirational brand reputation. By contrast, traditional automakers aimed to launch cheaper EV models immediately, focusing on low prices. Unfortunately, many of these early models underperformed in terms of range and quality, undermining their market appeal and casting doubt on their EV credibility.
6. Ignoring the Charging Network ⚡
Tesla recognized the importance of charging infrastructure early on, creating a proprietary network of Superchargers to give its drivers reliable, fast charging. Legacy automakers, however, tried to pass this responsibility onto independent charge point operators (CPOs). This hands-off approach resulted in a fragmented, inconsistent charging experience for consumers, and CPOs struggled to make the business model work. Tesla’s seamless charging experience set it apart, while legacy automakers lost credibility as they failed to address consumer concerns about range and charging availability.
A Lesson for Incumbents—and Investors
Each of these points tells a story of missed opportunities and strategic missteps. Legacy automakers’ decisions might have seemed logical in the short term, but cumulatively, they set the stage for the struggles we’re seeing today. The Tesla and Chinese EV success stories underscore that EVs require a different approach to manufacturing, supply chain, sales, and infrastructure. Legacy automakers tried to fit a round peg into a square hole, adapting ICE-era strategies to an EV world, and it’s proving costly.