“Crush it!”

I was test-driving a Tesla Model S 75D under the watchful eye of Kristin, the “owner-advisor” tasked with accompanying me while I took one of Elon Musk’s battery-powered luxury cars for a spin on the Far West Side of Manhattan.

Among their many virtues, electric cars generate maximum torque immediately, producing jaw-dropping acceleration—the instant-on of an iPhone versus the slow boot of a laptop. While midday Manhattan traffic does not afford many opportunities for drag racing, Kristin suddenly had me take a sharp right onto a nearly deserted straightaway.

“You just crush it—like a can,” she elaborated, glancing helpfully at my right foot.

As I stomped down hard on the accelerator pedal, my entire upper body was thrown back into the tan leather seat. I felt a sensation in the pit of my stomach previously experienced only when going into free-fall on a roller coaster: butterflies, with just a hint of nausea.

It’s an exhilarating ride. Yet with a Model S weighing in at roughly $80,000 to $138,000, depending on range and options, this particular ride is also beyond the reach of most consumers.

But the rush of electric acceleration is making its way to the mainstream. This year is shaping up to be a critical one for electric vehicles—or EVs—say HBS alumni in the auto industry, with the newly released Chevy Bolt and Tesla’s own soon-to-be-released Model 3 promising to make EVs as affordable as conventional fuel-powered ones. Advances in battery technology, the promise of better charging infrastructure, and evolving trends in foreign markets all indicate that EVs are approaching a global tipping point.

But with political winds imperiling government incentives in the United States and China alike, the window of opportunity could be closing. Which means that if EVs want to conquer the mass market, they’ll need to, well, crush it.

Until recently, the EV market had a high end and a low end—but no real middle.

On the one hand, there was Tesla, which entered the market from the top. On the other, there were so-called compliance cars—typically underpowered and unprofitable—made to satisfy California’s stringent zero-emission vehicles (ZEVs) mandate, which stipulates that to sell their products in the state, automakers must commit to making 15.4 percent of their fleets zero-emission by 2025. In between there was virtually nothing, aside from a few underpowered compact hatchbacks like the Nissan Leaf and the BMW i3, neither of which could go more than 100 miles without needing to recharge.

But there’s a reason that so many auto executives are now pinning their hopes on that long-dormant middle market: the falling price and rising power of lithium-ion batteries, the most expensive component of EVs.

GM has already begun rolling out the Bolt, a hatchback that can travel 238 miles on a single charge and costs around $30,000—a combination of range and affordability that promises for the first time to make electric cars an attractive option for mainstream consumers, not just environmentally conscious buyers and early adopters. Tesla’s forthcoming Model 3 boasts a 215-mile range and a $35,000 pre-incentive asking price.

Virtually every major automaker now has an ambitious global electrification agenda. Ford plans to spend $4.5 billion dropping electric powertrains into 40 percent of its lineup by 2020, while the Volkswagen Group intends to launch more than 30 new electric models by 2025. “Within mainstream, old, dinosaur auto companies, there’s no lack of enthusiasm about electrification,” says John Rich (MBA 1999), director of product planning and strategy at Ford’s Asia Pacific operations in Shanghai and a panelist at HBS’s “Moving the Future” transportation conference this past February.

Just as significantly, charging infrastructure is set to get a boost. According to Rich, the lack of infrastructure—and, in particular, of public rapid-charging stations capable of recharging a vehicle’s battery in minutes rather than hours—has been a “primary inhibitor” of mass-market adoption.

Juan Camargo (MBA 2012), senior manager for value strategy at Cox Automotive—which owns Autotrader and Kelley Blue Book—phrases this in terms of what he calls “the cross-country test.” To wit: “Are you really going to want to wait eight hours to recharge your vehicle?” says Camargo, who positioned the first Cadillac hybrid for the American market in 2013 before joining Cox. “Probably not.”

Over the past several years, though, engineers have pushed the quick-charge capabilities of lithium-ion batteries well beyond what was once thought possible. And last November, the US Department of Transportation announced plans to establish 48 national charging corridors covering nearly 25,000 miles of highway in 35 states, with automakers such as GM and utility companies like Pacific Gas & Electric agreeing to accelerate deployment of charging stations along the routes. At some point, says Rich, “people will want to be in the business of creating charging stations and solutions, much like people wanted to be in the business of creating gas stations.”

Automakers, which have a vested interest in making that happen sooner rather than later, are not standing idly by. Ford, for example, is testing wireless charging technology, and last November, the automaker signed an agreement with BMW, Daimler, and VW to build a high-speed charging network covering long-distance travel routes in Europe.

That last bit of news is telling: While electric cars are finally gaining traction here in the United States, much of the action lies elsewhere.

In the global market, electric vehicles have become a government imperative. European Union member states, for instance, are preparing to implement the Alternative Fuels Infrastructure Directive, which mandates the buildup of publicly accessible charging points and the adoption of common standards for charging connectors. China, which outstrips both Europe and the United States in terms of EV adoption, wants to put 3 to 5 million electric vehicles on its roads by 2020.

China’s central government has also opened the state-run power sector to private capital to spur the growth of charging infrastructure. And government officials are furiously promoting what they call new energy vehicles (NEVs)—a catchall term that includes electrics, hybrids, and fuel-cell vehicles—through a variety of means. As a result, local EV manufacturers have sprouted like mushrooms after a rainstorm.

Freeman Shen (AMP 184, 2013), the founder and CEO of the Chinese electric startup WM Motor, puts the personal passenger vehicle market at around 28 million. Chinese consumers bought nearly half of all electric plug-ins sold worldwide last year, with Chinese automakers shouldering approximately 40 percent of global EV production. Most of that market, says Shen—who oversaw the acquisition of Swedish carmaker Volvo by the Chinese auto giant Geely—is dominated by low-speed vehicles that possess even more limited utility than American compliance cars. “They’re golf carts,” he says.

But Tom Bartman (MBA 2014), a former research fellow at Professor Clay Christensen’s Forum for Growth and Innovation, thinks that the smaller, scrappier Chinese automakers may turn out to be the true disruptive innovators of the global EV market. By manufacturing inexpensive electrics and investing heavily in product development, Bartman contends, these low-end manufacturers could grow under the radar of more established automakers until they become “too big to fight—or too big to beat.”

But the Chinese market—like its European and American counterparts—is being sustained in large part by government subsidies. Until recently, credits from China’s central government amounted to almost $8,500 per vehicle, with provincial governments often matching them. The Chinese further promote EVs through additional incentives such as exemptions from driving restrictions that are meant to alleviate congestion and air pollution, along with free license plates—no small inducement when plates for internal combustion vehicles are awarded by lottery in cities like Shanghai and Beijing, and can fetch more than $14,000.

But government largesse has its limits. China has already spent $4.6 billion on its various programs, and a 2012 report from the Congressional Budget Office predicted that federal incentives would cost the United States about $7.5 billion by 2019. China appears to have hit its ceiling: The central government reduced subsidies on individual cars by 20 percent this year, and plans to slash them by another 40 percent by 2020—though it is replacing them with a carbon-emission credit system, similar to the one employed under California’s ZEV mandate, that will continue to support the manufacture of electric vehicles.

In the United States, federal incentives are set to expire for individual manufacturers once they sell 200,000 qualified plug-ins domestically—a number that Tesla and GM could hit within the next year. Sales of all-electrics would undoubtedly slump were the Trump administration to end the federal tax credit program altogether, as some EV advocates fear. And many states have already phased out their own programs. “Those funds,” says Cox’s Camargo, “are drying up.”

The Chinese market is evolving quickly in the face of sun-setting subsidies. Shen, for example, is using technology developed by a German firm he acquired to produce two basic platforms for eight different vehicle models, including a station wagon and an SUV, to be released at the rate of one a year beginning in 2018. It’s an ambitious plan, but Shen is attracting plenty of support: WM, whose name derives from the German Weltmeister, for “world champion,” has already raised more than $1 billion in funding.

Other automakers are doing their best to keep up. Many are engaged in joint ventures with Chinese manufacturers: GM plans to spend $4 billion on electrification in China by 2020, for example, while VW intends to roll out 15 NEVs over the same period.

And the interest is mutual. BYD, the leading manufacturer of plug-in cars in China (and, by extension, the world), is in the process of certifying a small electric SUV with the US Environmental Protection Agency. GAC Motors, one of China’s top 10 automakers, debuted a similar vehicle at the Detroit auto show in January, with plans to enter the US market by 2019. And Shen, who intends to focus on the Chinese market at first, has every intention of eventually coming to the United States.

Chinese penetration of foreign markets could take a variety of forms. But Ford’s Jeff Jones (MBA 2007), who oversees the Lincoln brand at the company’s Asia Pacific operations in Shanghai, expects that as the quality and cost-efficiency of its electric cars improve, Chinese manufacturers will begin snapping up traditional American brands.

Regardless of locale, electric vehicles stand to benefit from two of the hottest trends in transportation: the rise of autonomous vehicles and ridesharing.

Given the immense financial and technical resources required to develop a clean, fuel-efficient internal combustion engine, any startup that wants to build its own autonomous vehicle pretty much has to go the electric route. And with the McKinsey Global Institute estimating that autonomous vehicles will exert a global economic impact ranging from $200 billion to $1.2 trillion by 2025, there ought to be plenty of new players on the horizon.

Moreover, ridesharing makes the cost easier to bear by spreading it among large numbers of people.

Pam Fletcher, GM’s executive chief engineer for electrified vehicles, points out that the Bolt was not just designed to be an electric vehicle. It was also designed to be the company’s platform for autonomous driving technology, with both a small external footprint and a roomy interior—the ideal configuration for urban ridesharing applications.

“Most ridesharing opportunities tend to be in urban areas where size matters, where parking is expensive and elusive,” says Fletcher, who attended the School’s Women on Boards Executive Education program last year. “And when you look around the globe, many cities are fighting congestion, and are concerned with air quality and noise pollution. Electric plugs right into that.” Indeed, GM plans to introduce an on-demand ridesharing service here in the United States based on autonomous Bolts—presumably in partnership with Lyft, the ride-hailing startup in which GM invested half a billion dollars last year.

Shen, at WM in China, is thinking along similar lines. In fact, his entire business model hinges on selling drivers smart, cloud-connected, mass-market electrics ready-made for ridesharing. Those cars won’t just warn drivers when they need to recharge. They’ll communicate with similarly cloud-connected charging networks to make a reservation at the nearest available charging station. And they’ll gather data on maintenance and usage that can help their owners get the best deals on insurance, or the highest resale value.

Those owners, however, probably won’t be individuals. Ridesharing, says Shen, is taking off even faster in China than it is in the United States. And it’s doing so in part for cultural reasons. In China, Shen explains, ownership has historically been less important than usage rights. Consequently, consumers are less interested in buying a car than they are in gaining access to a convenient and affordable transportation service. “The ride service itself is more important than owning the car,” he says.

As a result, while he hopes to sell 100,000 of each WM model annually, Shen emphasizes that the primary goal at WM Motor is not to sell more cars. Rather, it is to “gain more users for our service”—even if that means reducing the total number of cars in production.

If all goes according to plan, then, fleets of autonomous, battery-powered electric cars will soon cruise the streets of major cities around the world, silently ferrying carloads of commuters—just as individual drivers will undertake long-distance trips in all-electrics without a second thought, thanks to cheap, high-capacity battery packs and easy-to-find, universal fast-charging stations.

Until that day arrives, however, the global market for fully electric vehicles will likely continue to grow unevenly and somewhat unpredictably, alternately buoyed and buffeted by shifting oil prices, government policies, and consumer tastes.

Cox’s Juan Camargo sees an analogy in the gradual adoption of internal-combustion automobiles.

The latter existed for decades before finally becoming a mass-market good with the introduction of the affordable and reliable Model T. Several more decades passed before long-distance travel finally became commonplace thanks to the creation of an interstate highway system—all of which, Camargo muses, “is kind of what’s happening with EVs now.”

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