Tesla Inc. reported a bigger-than-expected $702 million loss in the first three months of the year, pushing the electric car-maker back to the capital markets for as much as $2.7 billion to shore up its dwindling cash reserves.

The red ink comes amid falling U.S. sales for electric vehicles and a struggle to show sustainable profits. So why are other automakers following its battery-powered business model?

As part of its “zero-zero-zero” strategy, General Motors Co. is promising a zero-emission electric-vehicle future as well as an autonomous vehicle-driven promise of zero crashes and zero congestion. Ford Motor Co. is making a Mustang-styled Tesla-fighter while also pouring $500 million into EV truck-maker Rivian Automotive of Plymouth. And Volkswagen AG is ending development of gas-engine powered vehicles by 2026.

Despite the headwinds facing EVs, automakers are betting on an uncertain future for a variety of reasons: fear of Tesla dominating “Generation App” millennials, activism of green CEOs, and the perfect marriage of batteries and autonomous cars. But the most immediate reason is government — not consumer — driven.

“First, there is a regulatory push in Europe and China that is driving players to introduce electric vehicles to fulfill their requirements,” says John Murphy, auto analyst for Merrill Lynch. Global governments — including California, the most populous state — are dictating specific drivetrains for the first time in auto industry history.

Tesla has been the runaway sales leader in EVs while charging a premium that often exceeds $100,000 for its cars. Its Model 3 was the best-selling luxury car in the United States last year, and the $40,000-plus EV has vaulted to the top of the sales charts in Europe as the California-maker has expanded overseas.

Yet, sales are down sharply this year in the U.S. as the initial Model 3 rush has subsided. So has the $7,500 federal subsidy for electric cars, scheduled to phase out over the coming year.

More ominously for automakers, total EV sales are down even as competitors entered the market. Sales of GM’s Chevrolet Bolt are down, for example, and Jaguar I-Pace sales — the first direct Tesla-fighter from a European luxury-maker — have been disappointing.

I’ve experienced the hesitation of potential EV buyers myself. The owner of a Tesla Model 3, I have been swarmed by friends who want to experience the car’s unique abilities. But when they learn of the compromises an EV owner must endure — garage charging upgrades, long waits at charging stations, range anxiety — their enthusiasm for ownership cools.

Indeed, Tesla-mania tracks early predictions that the Toyota Prius hybrid — a runaway sales success in the early 2000s — would lead to a hybrid sales wave. Didn’t happen. In truth, people just wanted the trendy Prius. Other hybrids like the Ford Fusion and Chevy Volt never caught on and have been retired.

“People don’t see EVs as a better solution for their needs than gas-powered cars,” says veteran auto analyst Rebecca Lindland of RebeccaDrives.com.

Still, automakers are betting the farm on EVs: “We’re committed to an all-electric future,” trumpets GM’s website. “It’s a simple equation: More electric vehicles on the road means fewer emissions and cleaner air for all.”

At its headquarters this year, VW brand strategy chief Michael Jost told an auto summit that “the year 2026 will be the last product start on a combustion engine platform.”

Much of this is regulatory, to be sure.

“On some level, they have to say that,” says Lindland. “Governments are mandating that they have to build EVs even though demand hasn’t grown significantly.”

What’s more, Volkswagen is trying to turn the page on its emissions cheating scandal. “It’s penance for past sins on Dieselgate,” says Merrill Lynch’s Murphy.

But there is also a concern among GM’s Cadillac and other luxury brands that they are losing out to what analyst Lindland calls “Generation App” — a rising group of worldly, earth-conscious buyers weaned on iPhones who will ultimately aspire to electric chariots.

Adds Murphy: “You’re looking at a marketing game to attract customers even if they don’t yet buy EVs. There’s concern among luxury-makers that Tesla may be taking market share from them.”

A big reason Tesla struggles is because — despite its promise to build a $35,000 Model 3 — the high cost of batteries destroys profit margins below $50,000. Merrill Lynch estimates EVs have to be in the $55,000-$60,000-plus price range to drive reasonable profit levels.

“It’s tough to understand why any automaker would significantly push econoboxes in the $30,000 range unless they need to meet regulatory requirements,” says Murphy.

Makers of those $30,000 econoboxes say, however, that there is legal risk in addition to regulatory. Specifically, they fear that governments will target Big Auto with lawsuits as they did Big Tobacco, suing them for such environmental damages as hurricanes and fires allegedly caused by carbon dioxide emissions.

“We consider that to be a real business risk, so we’re working very hard to be — not part of the problem — but to be part of the solution,” Honda Motor Co.’s vice president of environmental vehicles, Steve Center, told Autoline. Honda makes the $23,000 Insight plug-in and plans to electrify most of its lineup by 2030.

Don’t discount the personal activism of CEOs in wanting to be part of that solution, too. Tesla CEO Elon Musk is an outspoken green activist who has made saving the planet part of his company’s mission statement. His activism is echoed by two new EV partners — Ford Chairman Bill Ford Jr. and Rivian founder R.J. Scaringe.

Scaringe and Ford see eye-to-eye on green activism. “We believe the world needs to electrify,” says Scaringe. Happily, Rivian also meets Merrill Lynch’s investment threshold for $60,000-plus vehicles. Rivian is also attracting investment because it holds a key to perhaps the biggest door Tesla has unlocked: autonomy.

“The reason that Tesla’s valuation has been so high is because of its potential,” says analyst Lindland. “Investors see that potential in electrification and in self-driving cars.”

And sure enough, markets reacted positively to its stock sale plan this week despite the dilution in overall shares. Musk has been as much a missionary for robot cars as for battery power.

Rivian’s trucks — with their “skateboard” battery construction opening enormous storage space — have attracted Amazon investment for its autonomous delivery potential. GM has made Cadillac its lead EV brand, but close behind is its investment in Cruise Automation, a West Coast-based ride-sharing competitor to Waymo and Uber that the General intends to staff with driverless Bolt EVs.

These ride-sharing services — including one unveiled by Tesla last month — all test exclusively with EVs. Merrill’s Murphy has been bearish on Tesla’s profitability: “But in reality Tesla has changed the game, and everyone is chasing Elon.”

Henry Payne is auto critic for The Detroit News. Find him at hpayne@detroitnews.com or Twitter @HenryEPayne. Catch “Car Radio with Henry Payne” from noon-2 p.m. Saturdays on 910 AM Superstatio