When electric vehicles entered the public mainstream, they did so on the back of a wave of a transformative promise that transportation would never be the same again.
Stock prices soared. Startups sprouted overnight, and it seemed that every investor was eager to throw billions of dollars at any company showing a battery-powered prototype.
To many, the cries of the EV revolution were world-changing. For others, though, these were familiar echoes.
The bold claims and rapid investment rate echoed the same pattern that saw the dot-com boom and the cryptocurrency frenzy.
Electric vehicles were unknowingly following a well-written script that has been the modus operandi of the tech sector for generations.
This is not to say that the EV market will bottom out, but rather it highlights the need for a cool head and sensible investment.
This article looks at what EV enthusiasts can learn from the products that have gone through this same cycle before.
The Anatomy of a Hype Cycle
The repeating pattern of revolutionary technology is also known as a hype cycle, and it follows a highly predictable pathway.
The trigger is the breakthrough idea that creates a groundswell of public interest. Its potential incites the imagination to the point that, when it arrives, everybody is already convinced that the next “big thing” is here. This peak of activity is soon followed by a wave of disillusionment when the inflated expectations fail to measure up.
Once the initial disappointment has settled, the niche moves onto the slope of enlightenment. This stage is more grounded, and realistic uses for the technology emerge from the rubble of broken hopes and promises.
From here, the technology reaches the plateau of productivity. This is the stage where the new technology finally becomes useful and profitable.
This cycle is evident in all technology surges through the years. While the timeline differs, the stages through which the hype cycle moves are predictable. The trick is to understand the pattern and wait for the right moment to invest and find success.
Dot-Com Déjà Vu: When the Internet Promised Everything
Looking back, the dot-com bubble is the most recent mirror of today’s EV boom. In the late 1990s, if you appended any business plan with .com, you were essentially guaranteeing yourself venture capital funding. There were companies with no revenue courting billion-dollar valuations based on nothing more than their potential.
A leading example of the eagerness of investors to throw money at dot-com businesses is Pets.com. The site launched in 1998 and spent over $300 million only to go bust in 2000. The site failed because it spent money too quickly without planning for long-term sustainability.
Conversely, Amazon focused on establishing early customer service departments and played the longer game, outlasting its early counterparts and growing into the trillion-dollar company it is today.
The current gold rush in the EV market closely mirrors this cycle, with massive funding being awarded by investors taking a gamble on companies with little in the way of production capacity. Revolutionary battery technology and autonomous driving features are the buzzwords of choice.
While EVs’ practicality remains years away, investors are keen to offer their backing in the hope it comes through.
Electric vehicle companies are making bold claims of industry transformation much like dot-com companies did thirty years ago.
The Renewable Energy Rollercoaster
Another niche that experienced the boom-bust cycle was renewable energy. In the 2000s, solar panels were all the rage. Manufacturers gained billions in investment, as even governments got behind the cause, pushing green energy initiatives spearheaded by solar technology.
Solyndra was founded in 2009 and received $535 million in federal loans. However, it only lasted two years before filing for bankruptcy in 2011.
The company fell victim to the same cycle, with demand first soaring due to government involvement and artificial incentives, then drying up when governments changed. Companies such as Solyndra were left high and dry.
This trajectory closely mirrors that of the EV market, where there is growing reliance on government assistance programs and regulatory changes.
Past cycles have shown that companies that rely too heavily on external policies walk a fragile line that all too often collapses.
Digital Entertainment’s Evolution
All tech industries follow the same pattern. In the early 2000s, digital entertainment had its turn to survive market consolidation. The initial boon was driven by improved internet speeds and the rise of smartphones. The market was flooded by developers creating all manner of games and apps.
The resulting consolidation hit the best online casinos in the US, just as it hit crypto tokens and dot-com businesses. Overconfidence and the initial rush of unbridled optimism saw early success for selfish companies out for personal gain.
But ultimately, the resulting period of consolidation saw gaming companies with a focus on user experience, support, and regulatory compliance achieve long-term growth and sustainability. These companies found success by focusing on giving genuine value to their customers.
Netflix is a prime example of a company that was able to navigate the cycle and survive the early rush by being willing to adapt its approach when it realized the winds had changed.
The company moved from renting DVDs to streaming movies, then pivoted again to producing original content. Netflix studied the market and adapted in anticipation of change, while others waited until it was too late.
EV Market Reality Check: Where We Stand Today
There are already clear signs that the electric vehicle market is entering the consolidation phase of its cycle. Tesla’s early charge triggered massive investment in startups nationwide, with Rivian and Lucid Motors being two examples of multi-billion-dollar valued companies with little deliverable value.
Now, battery constraints and semiconductor shortages are leading to delayed timelines across the industry, with many smaller companies spending more money than they are making by delivering cars.
Meanwhile, established names in traditional automotive channels, such as Ford and GM, are making their move, leveraging experience and contacts to compete and dominate.
The Ford F-150 Lightning is a showcase example of how established companies should be patient, study the market as they adapt to new technology, and launch to great success.
The additional pain point for the EV niche is the reliance on infrastructure. Cars need to be charged, and while times are changing, electric charging ports are not yet the standard across the country, meaning the market depends heavily on external factors to reach its full potential.
It also means that there is room for a company to come along with a new, creative solution and get its foothold in the niche.
Lessons for Investors and Industry Watchers
History has shown that companies that focus on solving customer problems and can pivot when necessary have the greatest chance of surviving technology bubbles.
Creative minds and visionaries are great at the start. However, surviving through consolidation requires a strong leadership team at the helm.
Sustainability and financial stability are more important than initial growth during the early phase of the cycle, as funding quickly becomes scarce when the first round of pinches sets in and early sentimentality is no longer enough.
Smart companies entering the EV market now must balance innovation with practical delivery and careful spending. The promise of regulatory change and government mandates is tempting, but it will never carry more weight than establishing strong business fundamentals.
