How does being a fully EV automotive firm affect performance?

This study investigates whether being a fully electric vehicle (EV) manufacturer affects firm performance, using a panel of 15 global automakers from 1999 to 2023. Three EV-only firms—Tesla, BYD, and Rivian—are compared against traditional manufacturers using two financial metrics: return on assets (ROA) and return on equity (ROE). Guided by Clayton Christensen’s theory of disruptive innovation and the distinction between radical and incremental innovation, the analysis explores the short-term trade-offs of adopting a fully electric strategy. Results from fixed-effects regression models reveal that EV-only firms experience a statistically significant 22.27 percentage point reduction in ROA, reflecting lower operational efficiency. While the ROE estimate is also negative, it is not statistically significant, suggesting greater variability in shareholder outcomes. These findings suggest that while EV-only firms are positioned for long-term transformation, they face real short-term performance costs tied to capital intensity, vertical integration, and evolving value networks. The study highlights the strategic and financial risks of radical innovation and offers practical recommendations for managing these trade-offs through scalable operations, strategic partnerships, and transparent investor communication.