Gibran Jessa

Senior Project Advisor

Skylar Powell

Document Type

Project

Publication Date

Spring 2025

Keywords

electric vehicles (EVs), automotive industry, firm performance, return on assets (ROA), return on equity (ROE), innovation strategy, EV-only manufacturers, fixed effects regression, OLS model, Innovator’s Dilemma, value networks, radical innovation, incremental innovation

Abstract

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.

Department

Management

Type

Text

Rights

Copying of this document in whole or in part is allowable only for scholarly purposes. It is understood, however, that any copying or publication of this document for commercial purposes, or for financial gain, shall not be allowed without the author’s written permission.

Language

English

Format

application/pdf

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