Good point. Scalability is a must for any Blockchain network to experience massive adoption within the mainstream world. Ethereum is missing that key part, which limits its demand over the long term. With greater transaction capacity and lower fees, Ethereum could attract a larger mass of users than before. Only then it could prove to be a strong competitor against Bitcoin or any other cryptocurrency in existence today. Even so, it's very unlikely that Ethereum will replace Bitcoin in the future, as the latter has first-mover advantage across the crypto market.
Which is why, it'll be quite hard to take down Bitcoin's popularity and adoption which has gained over time. Despite this, Ethereum could prove to be a nice complement towards Bitcoin, as it gives people the choice to decide from one crypto to another. The world's most popular smart contract platform will serve well its purpose of delivering censorship-resistant dApps, while the pioneer cryptocurrency will serve well its purpose as an unstoppable store of value. Each cryptocurrency has their respective advantages/disadvantages. There are also a considerable amount of differences between the same. In this sense, comparing Bitcoin vs Ethereum is like comparing apples and oranges.
Still though, there has been talks about Ethereum "flippening" Bitcoin in the future. If this indeed happens, then expect to see a change in the whole crypto industry. Bitcoin's popularity might diminish because of this event, while Ethereum will soar towards new heights both in demand, as well as, mainstream adoption. We all know that crypto behaves in strange and bizarre ways. Which means, that anything is possible in the uncertain world of crypto. Just my opinion