Last week, Swedish car brand Volvo announced that all of its 2019 car models would be either hybrids or powered entirely by electric batteries — a startling abandonment of the traditional internal combustion engine. The news of a major car company’s making such a firm commitment to electric cars sent shockwaves throughout the investing market. Tesla, Elon Musk’s high-tech car company that is seeking to be the global leader in the electric car market, saw its stock value drop 7 percent on the day of Volvo’s announcement.
Up until now, Tesla has been the largest and most visible producer of electric vehicles, even briefly surpassing General Motors as the most valuable car company in the United States in April 2017. While Tesla still has a head start, Volvo’s announcement — coupled with the potential for other large car companies to follow suit — indicates that many automakers have the ability to dominate the rapidly growing electric car market. Tesla cannot rest on its laurels.
The impending fight for control of the electric car market in many ways parallels an oft-forgotten part of technological history – the War of the Currents. The War of the Currents refers to the series of events in the late nineteenth century during which competing electrical transmission systems developed. The two major players in this war were the Edison Electric Light Company, which pioneered a direct current, or DC, system, and the Westinghouse Electric Company, which purchased the patent for Nikola Tesla’s alternating current, or AC, system. These two companies engaged in a war of commercial competition and intense propaganda campaigns to eventually determine which system would prove superior.
Thomas Edison introduced his low-voltage DC in 1882, and in 1886 development of Tesla’s AC system in the United States began. Though Edison’s DC system had arrived on the industrial scene first, Westinghouse’s system was initially more efficient and marketed precisely to Edison’s clientele. Thus began a ruthless competition between these two electrical powerhouses and others, which would witness everything from the electrocution of animals to the development of the electric chair. Ultimately, Tesla’s AC system would largely prevail over Edison’s DC system.
Once it became clear that his system would not be adopted by most American households and businesses, Edison left the electrical power business to explore other scientific opportunities. The Edison Electric Light Company — facing AC-based competitors including not only the Westinghouse Electric Company, but also the Thomas-Houston Electric Company — eventually began to adopt the AC model. The Tesla company should hope that, as its namesake’s AC system did, its own technology eventually proves to be the more economical option for the future of the automobile industry.
There are striking parallels between the War of the Currents and the opening volleys currently being fired by Tesla and Volvo. It has been easy for investors and consumers to be taken with Musk’s vision for Tesla and with the success that the company has achieved thus far; yet, we are still in the early years of the electric car industry. Although Tesla was the first major electric car company that saw success due to its sleek and powerful electric vehicles, this head start does not necessarily indicate that Tesla will always lead the market. There is still time for competitors to arise, as Volvo has, and for Tesla to falter in the heat of competition as Edison and his DC system did. Just recently, concerns arose when Tesla’s first quarter results demonstrated that it will not be able to maintain its momentum or ensure the success of its upcoming affordable Model 3.
The Tesla company would be wise to take the lessons of its namesake to heart. During the War of the Currents, Westinghouse and Tesla were in the position that Volvo is in today — preparing to take on a giant in a vast, rapidly growing industry. Instead of becoming complacent with its status, Tesla must seek to improve its electric car technology in order to make its vehicles more affordable to the wider population. Only in this way will Tesla be able to prevent companies such as Volvo from overtaking its dominance.
As Volvo ties its company’s future to electric cars, it is clear that the automaker sees great potential for these environmentally friendly cars, siding with investors who valued Tesla so highly in the first place. Moreover, other car brands including General Motors and Mercedes-Benz have already started exploring new options to incorporate electric and hybrid cars into their fleets. Clearly, this war has only just begun.
Grant Olson is a junior in the College. Past as Prologue appears every other Wednesday.