How EVs Disrupted an Empire
Ten years ago, few in the automotive world foresaw the electric vehicle’s (EV) potential to overturn their business models, reshaping the competitive landscape so thoroughly that survival itself would hang in the balance. Had they grasped the magnitude of this disruption, they might have embraced change with urgency instead of resisting it. But for legacy automakers, whose brands have become cultural monuments over decades, embracing such a fundamental shift felt perilous until the inevitability became undeniable. And by then, change came not as a choice but as a necessity—forced, unyielding, and often too late.
Internal combustion engines (ICEs) are marvels of engineering. For over 150 years, they have been refined into masterpieces of mechanical ingenuity—symphonies of power, reliability, and efficiency that were unimaginable a century ago. The companies that built them, with names like Daimler, Benz, Ford, and Toyota - named after their iconic founders, were equally monumental. The founders and their successors crafted not only engines but entire industries, perfecting their machines and carving out realms of expertise that became untouchable. For decades, the internal combustion engine defined their empires—and their identity.
To challenge such a dominion head-on seemed impossible. You don’t conquer an empire by brute force; you render its strongholds obsolete. This is the lesson of technological progress. It is a history of displacement: internal combustion replaced steam, petroleum sidelined whale oil, airplanes usurped ocean liners, and digital cameras annihilated film. The electric vehicle follows in this tradition, displacing ICEs and transforming automakers from mechanical craftsmen into something new entirely.
The revolution lies in where value is shifting. For ICE vehicles, the engine was king—a tightly engineered marvel composed of thousands of components, painstakingly refined over generations. Making a great engine was hard, a feat of expertise and precision that protected automakers from competition. But EVs are radically different. Simpler by design, they comprise just a few hundred parts. At their core are an electric motor, a battery, and a shell—a configuration that is both easier to assemble and more suited to automation.
This simplicity changes everything. The motor and battery—particularly the battery—now dominate the cost and value equation. EV buyers prioritize range and charging speed, elevating battery performance as the critical metric. Yet, batteries are becoming commodities, and the expertise to produce them lies not with the traditional auto giants but in Asia, with companies like LG, Panasonic, and Samsung. Making batteries demands chemists, not mechanical engineers, leaving legacy automakers without the dominance they once wielded in engine design.
As automakers turn to importing batteries and motors, the question arises: What remains of their role? The core expertise that defined their supremacy is increasingly irrelevant. Contract manufacturers like Foxconn—the maker of iPhones—now aspire to build electric cars, offering standardized "boxes-on-wheels" powered by outsourced components. The empire's once-priceless territory has shrunk to a commodity.
The future of automotive value lies not beneath the hood but in the box itself. EVs are emerging at a moment when computing power is cheap, sensors are abundant, and software is king. These advances transform the EV from a simple means of transport into an interactive, adaptable platform. Cameras, sensors, and processors handle tasks from battery management to autonomous driving, creating opportunities to differentiate vehicles in ways ICE cars never allowed.
This new frontier places automakers in unfamiliar territory. Success no longer hinges on perfecting mechanical marvels but on leveraging software, integrating hardware, and creating seamless user experiences. The car becomes less a machine and more an ecosystem—a device that drives, communicates, and adapts. Companies that once thrived on gears and pistons must now master silicon chips and code.
The EV revolution is not merely about propulsion; it’s about redefining what a car is. For legacy automakers, survival demands reinvention, a willingness to abandon their most sacred expertise and compete on entirely new terms. In this new world, the power to lead rests not with those who perfected the engine but with those who imagine what comes next.
The question is no longer whether EVs will prevail—they already are. The question is: Who will thrive in this transformed landscape? And who will join the ranks of once-mighty empires, remembered only as monuments to a bygone age?
Software - The Steering Wheel of the Future
The rapid evolution of computing power, declining sensor costs, and advancements in artificial intelligence have solidified software as the primary differentiator for consumer devices. Cars, once defined by their mechanical prowess, are now being reshaped into "software-defined vehicles." Over the past five years, the rise of safety features and early driving-assistance technologies has paved the way for software’s central role in the automotive industry. This trend is accelerating, with AI-driven innovations leading the charge.
Automation is transforming the value proposition of cars. Level 3 automation—where vehicles handle most driving tasks but occasionally require human intervention—and Level 4 automation, the foundation for fully autonomous robotaxis, are gaining traction. Industry forecasts suggest that within 15 years, half of all new cars sold will feature these capabilities. Japan’s Ministry of Economy, Trade, and Industry (METI) projects global robotaxi revenue could reach a staggering $550 billion by 2035.
The rise of software in vehicles, however, is not without its perils. Modern cars already surpass airplanes and smartphones in software complexity, with tens of millions of lines of code. As higher levels of automation become the norm, this complexity will only deepen.
Unlike a buggy smartphone app, software malfunctions in vehicles carry life-and-death consequences. This raises the stakes for automakers venturing into software development—a domain unfamiliar to many legacy companies. Already, software-related recalls are on the rise, reflecting the growing challenges of ensuring flawless performance. For instance, recent high-profile delays by Volkswagen and Stellantis in launching EVs underscore how even industry leaders are grappling with these hurdles.
Despite the risks, the transition to software-defined cars holds enormous profit potential for those that succeed. This shift unlocks a lucrative opportunity: recurring revenue streams from subscription-based services. These could include advanced automation tiers, enhanced safety features, and even entertainment-focused systems. In the future, a car’s ability to generate profits will depend less on its physical components and more on the digital services it offers.
This shift also offers a broader benefit: as automakers tackle the monumental challenge of perfecting vehicle software, the lessons learned will ripple through the tech industry. The stringent safety standards in automotive software will likely lead to more robust, error-resistant applications across other domains.
The future of cars is more about algorithms and less about engines. Automakers that can master this transition will thrive in a world where value lies in the intangible—in code, in user experience, and in seamless connectivity. Not all companies will navigate this terrain successfully, and those that falter risk becoming relics in a world they once ruled.
Energy Storage on Wheels
EVs are more than just cars—they’re energy storage units on wheels. In the U.S., household vehicles spend a staggering 95% of their time parked. Considering how expensive cars are, this underutilization is a colossal waste. By comparison, we spend far less on computers but use them far more productively.
If automakers can transform parked cars into productive assets, they could justify higher price points for their vehicles. This shift could also unlock new profit opportunities, especially as cars evolve from mere transport machines into multifunctional energy tools.
As renewable resources grow, so do fluctuations in electricity supply. When the wind stops blowing or black clouds obstruct the sun, supply dips sharply, often at odds with demand. The result is supply and demand moving out of phase, creating instability. Aligning the supply and demand fluctuations—bringing them in phase—is one of the major challenges facing the grid in the years ahead. EVs could help solve this problem.
One plan to address grid challenges is to integrate EV batteries into the energy system. During periods of low demand and high supply, EV batteries can charge, absorbing excess electricity. Conversely, in high demand and low supply situations, EV batteries can discharge and send electricity back to the grid, helping to balance supply and demand. This system allows EVs to charge when electricity is cheapest and discharge when it is most expensive, creating a monetary benefit. This benefit could either transfer directly to customers through payments or flow to automakers, who may pass it along indirectly.
Such a technology positions automakers as energy traders, managing charge and discharge on behalf of their customers. A more comprehensive solution could involve complete home energy management systems with EVs at the center—solar panels on the roof, smart appliances, and heating and cooling systems could all be synchronized to optimize electricity use and costs. This type of integrated solution represents a profound shift in the traditional role of car companies, transforming them into key players in the broader energy ecosystem.
By 2030, 145 million electric vehicles of various kinds are expected to be on the road. Beyond passenger cars, vehicles like electric school buses—which are used only part of the day—can also act as valuable grid assets.
Companies like Mobility House are already exploring this potential. Partnering with automakers like Renault and Mercedes (both investors), Mobility House serves as an intermediary between car owners and the grid. It charges vehicles when renewable generation is high and power is cheap, then sells electricity back to the grid during peak demand. This is classic energy trading. To alleviate customer concerns about battery degradation, automakers involved in these systems offer identical battery warranties to all users, regardless of whether they participate.
EVs can also offer significant value to households during blackouts. The U.S. grid is increasingly fragile, strained by rising electricity demand and battered by extreme weather. Weather-related power outages are rising, making backup power a value proposition for homeowners.
Ford has capitalized on this with its F-150 Lightning EV, marketing it as a solution for blackouts. It offers 3-10 days of home backup power and has highlighted other ways the vehicle can add value, such as powering tools at remote construction sites or enhancing outdoor experiences during camping with electrical comforts.
Such features demonstrate how EVs can serve more than just transportation—they can act as mobile power stations, catering to diverse needs and redefining what car ownership means.
What This Means
The emerging trend reveals a stark reality: the traditional auto business is no longer just about manufacturing cars. It’s about what a car can be beyond a mere vehicle. They are no longer just building automobiles—they are creating automated, intelligent systems. And that presents a profound challenge. Legacy automakers have spent decades perfecting what a car was supposed to be—a sublime mechanical creation, admired for its movement, its design, and the premium you paid for superior handling and speed. But now, these companies must pivot to excelling in entirely different realms: energy and software.
This transition demands a complete redefinition of their expertise. Automakers must now compete in industries dominated by giants who have spent the past decades mastering their craft. Tech companies lead in software; energy companies excel in managing and trading power. Automakers stepping into these domains risk being outpaced by established leaders.
For those unable to adapt to this software-centric, technology-driven future, the consequences are dire. The stakes aren’t just about losing market share—they’re about survival. Companies that fail to realign face the very real risk of obsolescence in a rapidly evolving world.