- 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.
You mean like how all the cell phone makers caught up with Apple's iPhone?
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.)
Agreed. What strikes me as perhaps noteworthy is that I can remember when Hyundai started selling cars in the United States, and it took quite awhile (from memory, until the early 2000s) before anyone was taking them seriously. Meanwhile, Tesla seems to have become entrenched in the mindshare of the American populace much, much more quickly (in the same way that the iPhone did relative to Android).
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.
Engineering a reliable car is hard. Even Nissan and Toyota, who spent decades wiping the floor with cars from the big 3, struggled when it came time to apply that expertise to building full size trucks.
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.
Name a major smartphone maker pre-iPhone that's still a major smartphone maker now. Being first with an inferior product (Tesla certainly isn't in that category) is irrelevant to the discussion at hand and the parent poster didn't claim Apple was first, just that they lead the market (overcoming all the incumbents at the time) in the early days before Android caught up and passed them.
Tesla is inferior to all luxury brands in all aspects except being electric and self driving. When compared to Volvo, Mercedes and their ilk, Tesla are behind on prestige, interior styling, after-sales support, economies of scale, supply chain management, navigating world wide bureaucracies, etcetera. It remains to be seen if Tesla will catch up on these faster than the other brands can catch up on self driving and electric vehicles.
Right, except in the hard tech areas. I suspect it will becomes a bigger differentiation when setting the standard. Focusing on chrome would be a waste of immediate effort. It makes more sense to work on the commonalities of the energy infrastructure that augment the existing landscape than on what chrome goes best with the seat's heated-leather-ass-warmer. The luxury brands won't have the energy generation and storage solution to match. The competition has an enormous supply chain problem that's just getting worse unless they jump on board with Tesla's charging standard.
In Europe they have standardized on a different charger design, I don't see how charging can be a major differentiator once electric cars become common. A charging station is extremely inexpensive compared to a gas station and those are ubiquitous
Hi, can you give me the sources/reasoning behind your statement?
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've driven many cars from most major luxury brands (including Porsche, Mercedes, BMW, Ferrari, Bentley, Jaguar, Lamborghini, even Bugatti). At it's price point, there's no other car I'd personally rather drive. Maybe my characteristics for a car are different than yours. But as far as comfort, performance, feature set, and styling I vastly prefer the P100D over any other car in its price category (aka $100-150k range).
0-60 time is a little important to me (but no, I don't need Tesla's level stats). Getting on a freeway and merging in traffic is an example of where it's useful. I'm not one of those drivers who thinks it's ok to not be going traffic flow speed by the end of the entrance ramp, so having an electric car that can easily do that is something I value. Many hybrid / EV vehicles strain to do it at times in my experience (I've test driven most of them on the market today).
Apple was the first company to make the smart phone as we now know it. The entire concept across the smart phone spectrum today, is directly derived from what Apple did with the first few iPhone iterations - in every possible regard. Every competitor that came after for years did little more than copy the iPhone's features.
Tesla is a vertically integrated company, so they have squeezed all the margins out of their supply chain. The big automakers all share their supply chain and have to feed it with margins at every level. Same story with SpaceX - vertically integrated.
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.
Personally I think Musk doesn't think this way. I think he sees the secondary aspects of Tesla's work on cars (e.g., the battery plants and larger infrastructure of the electric car industry and positioning on standards bodies) as the actual big fish to hunt for.
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.
I believe Musk means it when he says he wants to wean humanity off of fossil fuels. The big fish you talk about are definitely means to this end and not the goal itself.
> Tesla is a vertically integrated company, so they have squeezed all the margins out of their supply chain. The big automakers all share their supply chain and have to feed it with margins at every level. Same story with SpaceX - vertically integrated.
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.
Tesla uses the same Tier 1 suppliers as any other automaker, so I don't really see why the Tesla production would be more vertically integrated. They have their own batteries but so do traditional automakers have their own ICEs and other key technologies.
Everyone is missing the point on vertical integration. It's to iterate faster. Even in atoms not bits? Yes!! This is nearly the gigafactory motto, the machine that builds the machine etc.
>GM can't be the only guys racing to bring Tesla experience to it's existing brand followers.
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.
Absolutely. Big autos have huge engineering know-hows as well as resources to poach talent.
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.
Electric drivetrains alone were never really regarded as a major competitive threat to the big carmakers. What has lit a fire under their ass is is the combination of electric, autonomous, and on-demand. This is disruptive, this scares them.
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.
Tesla has also opened the patents for their socket and charging designs. I can see a future where Tesla isn't necessarily selling a ton of cars, but is licensing technology and selling infrastructure (such as access to charging stations). This makes the purchase of Solar City make even more sense- they may care more about moving into the utility market than the car one.
I strongly suspect that's the strategy. Reusing supply chain/parts to build competitive new energy infrastructure, licensing commercialized technology to major manufacturers in order to fund R&D, and using early adopters/status products to "beta test" the next generation.
The battery cells inside the Gigafactory are created by Panasonic. So far it looks very unlikely that the Gigafactory will be able to produce battery cells at a substantially reduced cost when they're relying on subcontractors for all parts. Innovation in batteries is really hard. We've had lithium-ion batteries for nearly 50 years now, and they're just not improving that quickly. We'll get 5% a year improvements for the next decade if we're lucky. The Gigafactory won't change this. So I don't see how the Gigafactory will be a lasting competitive advantage.
No source, but I saw some comments here or on Reddit saying that getting batteries in the large quantities you need for EVs is very difficult. Tesla's Gigafactory allows them to not have to compete for that supply, which may give them a price advantage over others buying from Panasonic.
Battery manufacturers are already preparing for the electrical car revolution. Even if li-ion cells are supply constrained today, they won't be 5 years from now.
The gigafactory and charger network give Tesla some barrier to entry but I don't think the costs will make a giants blink.
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.
> 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.
While ford had the cash to survive the Great Recession without a bailout, it would have not survived the collapse of the supplier networks when GM and Chrysler went under.
Would these purchasers have completed the purchase in time to keep the suppliers in business? If GM folds then the part supplier may feel fairly confident that someone else will purchase the assets and start ordering again, but their bank who lends them the money they need to weather the storm may be far less confident that the deal gets sorted out fast enough for the supplier to stay in business. Now multiply that by a hundred.
No way the supplier network would have survived a dual bankruptcy.
Perhaps one of these [1] in the boot would reduce stress. It gives about 4 miles of range per hour of charge [2], so only for reducing stress, not for actual planned use!
I owned a Leaf for 2 years. "Winging" it really, really, sucks. Especially when you have your family with you, who don't share your enthusiasm for electric vehicles. :D
I just bought a Volt for this reason. My wife will be able to stay electric 90+ % of the time, but this weekend's 150 mile round-trip out of town and back for her will be stress free. I'm not sure even being in a Tesla would be as convenient since I don't think there's a supercharger directly on the route.
Yeah, that's a good point. For some reason I was thinking of the Bolt with more like 200 mile range, which could still make this trip, but it would be close once you add in the bit of driving she did at the destination.
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.
GM has a long track record of fumbling new products. I expect Tesla will suffer from competition, but it will be BMW or Toyota that does the damage.
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.
There are plenty of non Tesla chargers here in Kansas City. I can charge my Nissan Leaf on a chademo charger in 1/2 hour. So I'm wondering if Teslas own charger network makes that much difference.
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.
Chademo is about 1/3rd the speed of a supercharger in practice. I've never seen a full power Chademo and most have been 40-45kW. I get 120kW each time I hit the supercharger near me at <35% battery.
As a Model S owner, I may be biased, but Tesla's competitive advantage goes beyond electric drivetrain and self driving. Other things that work for Tesla that owners love and makes it very difficult to switch
- Supercharging infrastructure. My road tripping has actually gone up because of this
- 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.
Incumbent automakers are cash cows, not startups. Tesla will spend all of it's money on the Gigafactory. GM will destroy new product lines that threaten it's current profits.
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...
There's a lot of companies out there, and dismissing them outright is the same brand of arrogance that lets startups win over incumbents, but reversed.
> 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
Just so we are clear, the Bolt is a hatchback, not a tiny hatchback. At 56 cu ft, it's a hair 2 cu ft) less than a Model S. The footprint isn't significantly smaller than that of the Model 3.
Bolt's website calls it a subcompact car. Despite what it's actual volume is, it looks like a small car and is classified as one. The Model S is classified as and looks like a luxury full size sedan. Yes, the Model 3 is comparable to the Bolt, but it's not being shipped yet. So comparing the distance of a Model S and a Bolt isn't a fare comparison as the Model S is bigger and heavier, hence my earlier comment in reply to the comparison. If you think comparing the EV range of a 3,500lb subcompact Bolt as being good compared to a nearly 5,000lb full sized sedan then fine, we can agree to disagree.
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.
I think Elon Musk is ok with that. Actually, I believe that is why he started Telsa, and opened up a lot of their patents at some point. He wanted to kick-start the electric market, not have a monopoly in it.
The talent at GM, Ford, Mercedes, BMW, Porsche, Toyota, Nissan, VW, etc. is immense. The only factor for those companies is focusing it, which all of them have proven they can do.
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.
I think the counter-argument would go something like "Tesla is a technology company like Apple, leading to superior product design and user experience due to more talented people and a high level of vertical integration. Thus, in the actual long-term competition of Uber/Daimler vs Lyft/GM vs Google/Ford vs Baidu/BMW (already collapsed) vs Tesla, Tesla will win due to its ability to best develop a digital vehicle experience at an affordable cost, fastest.
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.
I don't think Tesla has any sort of talent edge in the self-driving car space. Their original autopilot was mostly built on tech from MobileEye and from what I've heard Tesla doesn't pay great either, and unlike SpaceX their mission is not unique.
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.
Does Tesla not pay well by industry standards, or is that when comparing them to software companies? Seems like they work their employees very hard, though, so maybe they lose out on talent– on the other hand there was a time when Apple worked its employees hard and they were still able to retain top people.
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.