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Tesla’s Model 3 and the death of plug-in hybrids: ‘Full electric is a much more elegant solution’
Tesla took a big bet when it decided to launch the Model 3. Being a vehicle designed for the mass market, the sheer scale of the sedan’s production was something that Tesla has not dealt with before. It took more time than expected and a trip through “production hell,” but the Model 3 has now been ramped, with Elon Musk noting that producing 5,000 of the vehicles per week is currently no big deal for Tesla.
The market’s reception to the Model 3 has been encouraging. The vehicle has been performing well in the United States, ranking among America’s best-selling passenger cars. In September alone, the Model 3 became the 4th best-selling car in the US based on sales volume. Based on revenue, the Model 3 was even more impressive, ranking first among passenger cars sold in the country. Tesla does not seem to be planning on pulling back from its Model 3 push either, as the electric carmaker has started rolling out exhibits of the vehicle to Europe and Asia this month.
Amidst the evident success of the Model 3 and Elon Musk’s high-stakes bet on the electric sedan, another class of vehicles has begun to show notable signs of a decline — the plug-in hybrids. Plug-in hybrid electric vehicles (PHEV) are equipped with both an electric motor and an internal combustion engine. Popular cars in this class include the Chevy Volt, with its all-electric range of up to 53 miles, and a total range of 420 miles with a full battery and a full tank of gas.
PHEVs have mostly served as the “gateway” vehicles for customers looking to make the jump to electric transportation. Being equipped with a gasoline engine, owners need not worry about any of the initial drawbacks of pure EVs, such as limited range. Plug-in Hybrid and Electric Vehicle Research Center director Gil Tal noted to Bloomberg that in a way, PHEVs are like the “training wheels” of the electric car movement. That said, Tal noted that as practical, capable EVs like the Model 3 emerge, consumers might simply skip PHEVs and adopt all-electric cars instead.
“A full electric (car) is a much more elegant solution. It’s very simple to build and very low maintenance. It’s just a much more simple story. Plug-in hybrids are just the training wheels in the industry’s preparation for electric cars,” Tal said.
The death of plug-in hybrid electric vehicles became more real recently, with GM announcing that it was closing several of its plants across the United States and Canada. Among these plants was GM’s oldest factory at Detroit-Hamtramck, which produces the Volt. In a later statement, GM confirmed that it would be discontinuing the production of the Volt, with the company focusing on developing all-electric cars like the Bolt EV instead.
GM has announced that it is discontinuing the production of the Chevy Volt. [Credit: Chevrolet]
In a way, the apparent death of the PHEV seemed to have been predicted by Elon Musk eight years ago. In a statement to the media during the opening ceremony of the Fremont factory, Musk likened PHEVs to amphibians during the process of evolution. And just like amphibians, Musk noted that the number of PHEVs would likely decrease as the market moves into the full-electric era.
“(PHEVs are) similar to an amphibian. In the transition from the oceans to land, initially, there were a lot of amphibians. Now there’s not that many amphibians. So the only reason you’d ever need that gasoline engine is if the battery pack does not have enough range, if the recharge times are really slow, and all those things will get solved. So there’s a medium-term role for a plug-in hybrid, but in our view, not a long-term role. I think there’s a role for plug-in hybrids today and there’s a role for electrics, but I think long-term, it all goes electric.”
The seemingly impending death of the plug-in hybrid is not just the result of electric cars like Tesla’s Model S, 3, and X. Earlier this year, a Forbes report earlier this year noted that the efforts (or lack thereof) of manufacturers such as GM are partly to blame for the decline of PHEVs. Inasmuch as the Volt was warmly received by owners and well-reviewed by critics, for example, the vehicle remained a rare sight among GM’s dealerships across the United States. GM’s TV advertising campaigns have not featured the Volt, or its all-electric sibling, the Bolt EV, either.
That said, GM appears to be taking its EV initiative seriously this time around. Earlier this month, for one, VP of global strategy Mike Ableson boldly declared during a press conference that GM is looking to “lead the industry in EVs sometime in the next decade or so.” The next years will determine if these words will be true.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
Tesla stock closes at all-time high on heels of Robotaxi progress
Tesla needs to come through on this one Robotaxi metric, analyst says
