Beware the Coming Carnage in the
Electric Vehicle Industry
Car
buyers are no longer beating down dealers’ doors to get in line for the latest
electric offerings, regardless of how smart the cars may be.
EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V
AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1
Nov 18,
2025
If you ever doubted that
the electric automobile industry was rapidly becoming a pedestrian and
commoditized business of wrapping steel around smarts, where the software was
everything of value and the shell was simply the latest look-alike clone, the
signs couldn’t be any clearer than they are today. We are reaching the point
where the carnage is about to hit every car manufacturer who
is trying to make a go of it in electric vehicles (EVs). The public is
increasingly taking a pass. All the German manufacturers are backing away from
their electric-only focus. Mercedes just reported almost a 20 percent
year-over-year sales slump.
Buyers are simply no
longer beating down dealers’ doors to get in line for the latest electric
offerings, regardless of how smart the cars may be. Tesla’s recent profits fell
almost 40 percent and, while they sold more cars in the third quarter year-over-year,
they earned less money per car due to price cuts and low interest loans.
However, as I suggested many years ago, it’s likely when all the dust
settles that Tesla will be the last U.S. player standing that’s
making a real business out of EVs and also trying to hold off the Chinese
onslaught, even without being able to sell the highly-profitable clean-air
credits to all the other carmakers or the other prior government incentives.
Mercedes, for example, is getting killed in China by BYD and Xiaomi, with sales
off 27 percent in the third quarter.
The tariff problems are
substantial for all the foreign automakers, but even if you put the current
tariff issues aside for the moment and ignore the expiration of the EV credit
that incented domestic sales for quite a while earlier this year, the fact that—according
to the Kelley Blue Book—the average price of new cars has risen above $50,000
(driven largely by EVs and luxury models) has nothing to do with the realities
that the vast majority of car dealers are seeing every day in their stores.
This “real world” scenario is reminiscent of the fact that the continued surge
in the stock market is a grossly misleading metric for what life is like for
the average American at the grocery store, gas station, or local greasy spoon
restaurant. Inflation continues to rise, prices at the pump keep jumping, and
every shopper sees the truth regarding the sad shape of the economy despite
Trump’s daily lies.
The real early warning
signal for the car guys isn’t simply the slowdown in new EV sales, which have
not been successfully altered by aggressive price cuts that are simply cutting
into the dealers’ profits. It’s what you see in terms of the product sitting on
the floors of the showrooms these days. They simply can’t sell anyone on the
idea of buying a used EV. Upfront in the store, they may have positioned all
the fanciest high-end versions of the 2025 and 2026 models, but if you step
into the second or third tiers of demos and used cars, the asking prices for
the 2023s and 2024s EVs are simply shocking. These are typically low mileage
trade-ins that the dealers had to grudgingly take in to make a new
sale—typically not an EV—and the prices look to be around half of what they
were originally listed and sold for. Depreciation in luxury cars has always
been a dramatic hit in the first year (right after the buyer drives the car off
the lot), but these prices are absolute fire sales, and they still can’t move
them.
The truth is that if you
ask an honest dealer what’s going on, they will admit that the EVs are tough
and costly to service; their unhappy owners are still plagued by the scarcity
and wait times of charging stations—even though range anxiety is largely a
fiction for folks driving six-figure vehicles to begin with—and the dealership
owners hate taking these cars back in trades because they can’t do anything
with them other than sending them to auction. The very last thing a Cadillac
dealer wants to see sitting on his lot is a used Tesla. Dealers make a material portion of their
overall income from the sales of pre-owned vehicles and there’s simply no buyer
appetite right now for taking in or taking over someone else’s EV problems at
any price.
But if anyone is going
to come out of these dramatic dips in demand, it’s likely to be Tesla because
Elon’s interest and business have always been about the software and the
massive amounts of driver data that his systems were capturing. I’m sure he’s
interested in selling plenty of cars (although he’s already more likely
interested in selling them to fleet operators of trucks and robot taxis), but
the long run view—typically tech-centric—is always the same, and that’s a
winner-take-all game.
There’s never going to
be a future for the majority of the manufacturers in the U.S. to try to build,
maintain or enhance their own unique control and software systems. It’s just a
matter of time before they begin to license Tesla’s tools and systems just as
they’ve all been buying credits from Tesla for some time and since they’ve
already begun to provide adapters for their vehicles to use Tesla charging
stations. The ultimate value and the critical margins are in the software and
the captured data which informs and strengthens the Tesla algorithms—not in the
platform/shell that they’re housed in. At the same time, in a very new and
rare twist, it appears that Tesla may be getting ready to license Apple’s
CarPlay for its vehicles.
Interestingly enough, in
a completely different industry, we’re finally seeing a similar phenomenon
where meeting the need and demand for increased access and expanding the reach
of the “software” is far more important to all the parties than exclusivity,
competitive considerations, or the platform on which the product is delivered
and enjoyed. Microsoft is adopting this expansion strategy in the computer
gaming industry, where it has bought two leading game studios in order to grow
its multi-platform content offerings. But its most dramatic move has been the
recent Halo announcement. Microsoft’s Xbox has been the exclusive home of
the Halo video game for the last 25 years and Halo’s success has
been responsible in part for the successive launches of four generations of
updated Xbox consoles.
But Microsoft just
announced that the 25th anniversary version of Halo will also be
available for Sony’s PlayStation. Sony and Nintendo are Microsoft’s most
important direct competitors in the game space. It’s clear that the new MSFT
plan is to provide its games, software and other properties everywhere and make
them available on all of the various platforms. Selling software, data and
games is a lot more lucrative than building cars or consoles. These days, it’s
not clear that it makes sense to manufacture anything.
In fact, following the
many earlier examples in the mobile phone industry, where Facebook and others
struggled and rapidly failed to introduce their own proprietary phone hardware,
or the fitness field, where dozens of players entered and quickly exited the
dedicated hardware device competition, I wouldn’t be surprised to
see Microsoft step away entirely from its console hardware offerings and focus
all of its attention on its desktop computers and its online offerings.
Since Microsoft Windows
is installed on about 75 percent of all desktops worldwide, it’s a pretty short
step to turn them all into mini-Xboxes as well. An early indication is the
development of a new genre of video games that sits on your desktop just above
the task bar (taking up only a fraction of your screen) so that you can keep
one eye on the action and jump back and forth from work to wasting time in no
time at all.
This takes multi-tasking
to an entirely new level and is a significant step up from the old one-button
fake spreadsheets we used to use to hide our screens from roving supervisors.
But it’s also a reminder as well that—for too many of us—multi-tasking is
simply another word for trying to do a lot of things all at once and doing each
of them poorly. The critical key to success is to focus on being productive, not just being busy.
