Fossil fuel is a finite resource that makes the world a dirtier, hotter place — but are automakers ready to give it up?

At an event at its Hawthorne, California, headquarters last night, Tesla announced the Powerwall and Powerpack, self-contained battery cabinets designed for homes and businesses that can store solar energy, recharge off the grid when rates are low, and power a home during an outage. The Powerpacks will use cells produced by Tesla’s Gigafactory, a Nevada plant currently under construction that the company expects to produce 35 GWh worth of battery cells every year by 2020 — greater than the entire world’s cell manufacturing capacity in 2013.

Trying to solve the chicken-and-egg problem

It’s a lot of batteries — way more than Tesla needs for its growing car business. That’s because Tesla needs production to reach a scale so great that it can solve the electric car business’ chicken-and-egg problem: to lower the price of EVs, you need to mass produce batteries, the single most expensive component. But you can’t do that until more people buy EVs, which they can’t do until the price goes down. It risks leaving the industry in a stalemate.

Tesla’s Elon Musk is clearly aiming to make Tesla a mass-market company, but he’s nowhere near that goal yet. The Model S, which can cost well over $100,000, remains a niche product, but the upcoming Model X and mass-market Model 3 are expected to significantly expand the company’s total footprint. By 2020, it hopes to be producing 500,000 cars per year, and "a few million" per year by 2025. (That compares to just 10,030 in the first quarter of 2015.)

Much of that projected volume comes from economies of scale, which is where Musk and large portions of the remainder of the auto industry have fundamentally disagreed on strategy. Tesla wants to ramp scale as quickly as possible — both in batteries and in infrastructure — which helps explain why it opened its patent portfolio to competitors. At a talk during January’s Automotive News World Congress in Detroit, he doubled down on the Gigafactory, promising that it would have an enormous impact on battery costs. "It will, guaranteed. If it doesn’t, I should be fired," he said. But some legacy automakers are focused on where the money is, and today — particularly with gasoline prices well below their historic peaks — buyers simply aren’t paying much attention to EVs and hybrids.

"There has to be customer demand for these vehicles."

"There has to be customer demand for these vehicles," Ford CEO Mark Fields told The Verge during an interview this week. "In 2010 or ‘11 there were probably 10 or 12 electrified vehicles, and either conventional or plug-in hybrids, and they made up about 2.5 percent of the total industry. Year to date, there are over 55 electrified vehicles in the industry, and year to date, through the first quarter, they take up… 2.5 percent of the industry."

Not only are automakers citing a lack of demand for EVs, some say that government initiatives designed to decrease reliance on fossil fuels should back off until demand materializes. A federal mandate that vehicle portfolios hit 54.5 miles per gallon on average by 2025 is up for "midterm review" in 2018, and Fields — along with the heads of several other major automakers — are hoping that the requirements will change in the face of weak EV and hybrid uptake. "We need to check the feasibility of reaching those goals. We need to check the customer affordability, the customer acceptance of those technologies, the impact on jobs, those type of things," Fields says.

The question is whether automakers and their battery suppliers are hindering adoption by failing to make Gigafactory-level investments that would spur lower costs, improved battery scale, and better ranges — the kinds of ranges that meet or exceed what comparable fossil fuel cars can offer. (Musk has challenged others to build Gigafactories, but no one has made any commitments yet.) There’s at least some cursory effort underway: Chevy just recently committed to manufacturing the Bolt, an all-electric concept that debuted at this year’s North American International Auto Show and promises over 200 miles on a charge for around $30,000. Even Elon Musk, ever an antagonist of the legacy auto industry, seemed to be impressed ("Sounds like they’re going to do something significant [with EVs] with the Bolt," he said) — but considering that battery and hybrid adoption remains in the single digits, the commitment to affordable, high-range full electrics will have to get much larger before the pendulum swings.

Tesla still has a lot to prove

Of course, Tesla has a lot to prove: the Gigafactory has yet to produce a single cell, the Model 3 hasn’t reached the assembly line, and its annual sales are a rounding error away from zero compared to global giants like Toyota, Volkswagen, and GM. But barring an enormous investment in hydrogen infrastructure and ultra-efficient hydrogen production, car companies are going to have to figure it out, one way or another — even if they ultimately twist the EPA’s arm into lowering 2025 mileage requirements at the 2018 review.

No one questions Musk's opinion of fossil fuels, but back in Detroit, he made his stance clear. "I think we’re really going to regret the amount of carbon we’re putting into the atmosphere."