Not saying TSLA has no risk: for one thing, they still have not figured out how to scale up production. But in general, I think we tend to overestimate the incumbents' advantage. Most incumbents have too many old interests that hold them back. There is an article [1] about German automakers' unwillingness to commit to EVs because the profit from ICEs are way way higher than that from electric ones because of ICE's complexity.
(Similarly, this is the reason why most of the wind farms in China are not connected to the national grid, because the existing power plants do not want to shut down and lay off workers.)
[1] http://www.spiegel.de/international/business/german-governme...
The point is that they popularized the electric car by getting it right, just like Apple popularized the smartphone by getting it right.
Tesla may or may not be around to reap the rewards of their popularization of the electric car, but they've definitely made an impact, and done their part to push automotive thinking forward by at least a decade IMO.
Yes, there is some institutional inertia that holds back the incumbents. However, there is also a huge store of knowledge about what to do and what not to do.
Here's a somewhat relevant story from my time at Boeing. When the 737-7/8/900 was being designed, some young bloods looked at the vertical stabilizer and said "Oh my God! Look at all this useless structure! We'll use cutting edge FEA and CATIA and show those old pencil-and-paper slide-rule jockeys how it's done." Everything looked great, and they started building the new aircraft in Renton. Except that during flight testing, they found that the new vertical stabilizer assembly was cracking. They had to stop the line (very expensive), remove assemblies from built aircraft (very expensive), and pay penalties to airline customers for delivery delays (astronomically expensive). If memory serves, they had to take a $1B writedown. There were also public firings of high-level executives.
I have first hand sales experience with luxury brand vehicles (read: RR/Bentley price class). Technology oriented US customers love Tesla. Sure, top notch luxury is nice, shiny and gives a unique experience, but at the end it is a different kind of experience from that a Tesla customer seeks. At the end, they buy both.
I wonder why the downvote for my question. It was not the tone, I hope.
The fixation on this is odd. I see plenty of Teslas and very fast imports around here in north CA but they always seem to be taking it easy...
The whole integrated/shared thing has been going back and forth in different industries at different points in time. Apple has been getting more and more integrated recently whereas earlier wisdom in PC industry was to use shared components.
Musk is betting that it's time to integrate the automotive industriy. If he is right, Tesla will balooon to the size of Apple. The electric part is not the most important here.
Tesla cars are nice, but they didn't need to make the entire pipeline. They're doing that because they want to reuse the pipeline and tech in other industries.
Vertical integration doesn't guarantee better prices just because you don't rely on third party suppliers. There are other benefits, such as monopolizing a certain part of the supply chain (like batteries in the case of Tesla) but it also requires very high investments (Gigafactory). Those investments can pay off in the future but can also turn out to be very expensive mistakes - you basically wager long term pay offs against flexibility.
This has been pointed out many times on these boards, and I agree with it.
Tesla (Musk) got this EV ball rolling, for real, and deserve immense credit for that. But it sounds too often here that Tesla has "won". Building cars is hard, capital intensive, and there are many massive companies diving into this. And despite what you may have heard, companies like Ford, GM, Fiat aren't staffed with idiots.
One thing that may work for in favor of Tesla though, is the fact that self-driving car will fundamentally shift people's relationship with cars. Out goes the needs to have best-handling, best crash protection, best-feedback providing cars.
Value of those engineering know-hows will be greatly diminished because computers will be doing the driving. Instead, there will be more emphasis on comfort, software, and efficiency.
There isn't going to be one or two electric car manufacturers. There will be dozens.
Google's autonomous driving efforts alone weren't taken too seriously either, but when rumours of Apple's interest in the space began to swirl, that's when the carmakers (including Tesla) got the message and suddenly all started scrambling to come up with a strategy to develop an autonomous OS. Fast forward 3 years and here we are, with stodgy old GM in a position of confidence.
Tesla's own charger network also presents a slight advantage for potential buyers, other brands [for the moment] rely on home chargers, dealership sockets and third-party vendors like Chargepoint or Volta.
http://analysis.energystorageupdate.com/lithium-ion-costs-fa...
Even more scary is collusion of giants trying to kill Tesla. Say the Japanese automakers group together to share the risk and costs of building the same infrastructure.
My primary concern is the margin per unit. Only a handful of automakers today have been able to sustain their margins, namely Porsche which supposedly makes the most margin per car. If you wonder outside the luxury segment, you find razor thin margins and heavy competition.
Tesla and Elon Musk deserves a big award for bringing the EV market to people who succeeded in capitalism. But as you saw with Ford, just because you were first won't guarantee your place. Heck, without bailouts, there would be very few American automakers left.
And this is really where my argument for maintaining high margin per unit is essential for long term survival. That can only be accomplished by moving upwards, not downwards. The accumulative cost & risk of selling 2.5 model 3 vs 1 p90D can't be ignored.
Having said that the market seems undecided between the bears and bulls on the upcoming Tesla earnings report.
Very few? In fact, just one. Ford.
Someone would have bought the companies and continued making cars.
No way the supplier network would have survived a dual bankruptcy.
I'd be a Bolt owner today if I thought I could road trip in it at a reasonable level of stress.
[1] https://www.amazon.com/Honda-EU2000i-Generator-Inverter-Stor...
But I think the larger point is still valid: the charging infrastructure is still not nearly as widespread as gas stations and charging still takes longer than re-fueling. For us, the compromise of a range extender is still the best of both worlds. We can run electric most of the time, but we can still use the Volt as a "regular car" for road trips.
The big advantage Tesla has, as far as I can see, is the charging network. Someone else is going to have to bite the bullet and put up a few thousand charging stations.
First, they're not organized into a coherent network. When making a long trip, you may need to go well out of your way to hop from one CHAdeMO location to the next, or just not be able to do it altogether. Tesla's network is not entirely ubiquitous yet, but it covers 95% of cases now.
Second, somewhat related to the first, they tend to be installed in small numbers, often just as single units. That makes it almost impossible to rely on them. If you arrive at a single CHAdeMO unit and it's broken or in use, you're screwed. Tesla Superchargers are usually installed of groups of 6 or more. For site-wide outages, the car will tell you and route around the broken sites.
Third, they are ssllooww. Charging in half an hour sounds nice, but that's a Leaf, with a tiny battery. Plug a Tesla into a station like that and you're looking at a couple of hours. Most CHAdeMO stations max out at 50kW or less (I believe many of Nissan's are only 20kW!), while Superchargers do up to 120kW. Recharging time on road trips is generally acceptable with Superchargers, but with CHAdeMO you're looking at doubling or tripling that time, and it'll start to become a significant portion of your total travel time.
Most people want to be able to make long trips. It's the #1 question I get about my Tesla. So far, no other manufacturer has shown anything capable of long trips. The Bolt could do them, if it had a reasonable charging network and could charge quickly, but it doesn't and it can't.
- A software engineering mindset, which results in regular infotainment updates, constantly improving features and a vehicle that gets better with time
- No dealer network - which leads to a customer first mindset.
Remember, incumbent auto makers are not fast moving or innovative at all. They are all cash cows. Although they can predict that a move to EVs will keep them alive long-term, such a move will always be done with a small fraction of GM's resources and labour in the coming decades, and Tesla with Elon's burning desire to destroy them are probably going to win.
Remember, GM can't sell these two products on the same lot: One which is a cash cow, and one which only exists to combat some distant threat of GM becoming obsolete.
Also you're forgetting that Tesla cars are just better in every sense. Better brand, faster, longer range, novelty...
> better brand
GM/F/Honda/Toyota/etc are reliable, BMW/Audi/Lexus/etc are luxurious and have a package that's been very carefully tuned
> faster
Doesn't matter to 90%
> longer range
Debatable, also price constrained
> novelty
Not what you look for in a massive purchase that you want to last 10+ years
> debate
to be had.
GM and any other electric carmaker will be buying their batteries, powertrains, or both from Tesla after they flop with their own native lineups.
I think you should give GM a little more credit...
My money is more on Ford being a risk factor to Tesla than GM.
Musk has been working on increasing battery production for years. I don't see other car manufacturers outpacing Tesla for the simple reason of not having enough batteries.The cars look like a brand awareness device for the power company.
If there are no Tesla cars in ten years then Tesla the power company probably won't mind much.
What Tesla has, is talent + a big headstart. The talent part is not unique at all. The clock is ticking rapidly on the headstart, and Tesla is well aware of that.
As an example of software advantage, Tesla is currently getting more real-world training data for autonomous vehicles than every other company combined.
As an example of hardware advantage, Tesla will be producing more lithium ion battery capacity from its gigafactory than the entire world could produce a few years ago.
As an example of product advantage. Well, have you been inside a Tesla?"
Or something like that I think... :P
But who knows, maybe Faraday Future will reveal a pixie-dust powered anti-gravity sphere that will make everyone else irrelevant.
Having a network of cars collecting data is great, but they may not actually be able to collect all of it simply because it is super high bandwidth, whereas those with test cars can stick a rack of disks in the car and collect all of the data.
Regarding the data collection, that's a great point. I hope that's not the case though, as I would think the data is far more valuable than the bandwidth it's carried on. Though, I suppose the capacity simple doesn't exist to send it over the air the way you can just store locally and physically offload. Then I guess it comes down to whether the compressed data from an enormous number of vehicles still gives a significant advantage.
- Incumbent auto giants entrance diminishing Tesla's margins.
- Incumbent expertise and brand that diminishes Tesla's appeal.
- First mover disadvantage: rest of auto industry sees large initial ROI by piggybacking off Tesla
GM can't be the only guys racing to bring Tesla experience to it's existing brand followers. Luxury makers like BMW, Benz will woo the lion share of the market Tesla originally pioneered. First movers rarely do well here unless they've cemented their brand position in the luxury space such as Ferrari, Lamborghini etc.
tl;dr: When the status quo catches up to Tesla, it will put downward pressure. Tesla's winning strategy should be to limit quantity and artificially inflate unit price. It is not equipped to take on dozen automotive brands in the long run.
Please correct me where I'm wrong.