TheStreet: Tesla Has One Big Problem

[Crissa]

As I have said before, Tesla will likely remain king of the high-end EV market, while others swoop in and capture the mid to low-end range, and may even chip away at the high-end.

Capture? Chip away?

That implies a limit to sales. EVs aren't really competing against each other so much as against ICE vehicles. The only reason there are cheaper options than Tesla right now is because if they can't meet Tesla specs, they can't demand Tesla prices. That's not very profitable.

Tesla has no plan to remain the high-end price, expect to keep their demand to a level they can actually produce.

-Crissa

 

[SpaceDoc]

We can count on SpaceDoc to swoop in with the gloomy Tesla prognosis. Every take is negative, as sure as the sun rises every morning.

He seems unaware that industry analysts have been predicting for many years that competing EV's would wipe Tesla out by 2019. Now they don't even bother to say they will "kill Tesla" just that competion will mean Tesla is "not the only game in town", LOL!

Nothing gloomy or negative about it, just a dose of reality for the fan boys/gals.

I follow the EV and alternative energy industry pretty closely.

I am a big Tesla fan, and an even bigger SpaceX fan!

 

[SpaceDoc]

he's delusional to say that Tesla isn't the only player in town. it is. bar none. And no matter what Mary says, GM has nothing in the pipe.

The links I provided would prove otherwise. And that was with a simple 1 minute google search.

There is nothing I said that was wrong, it was just counter to some folks opinions.

I didn't say anything bad about Tesla. Tesla is obviously the dominant player right now, but they simply will not be able to meet worldwide demand for EVs on their own. Thus other players are and will continue to enter the field, and many of them will be successful. Pure logic.

 

[SpaceDoc]

Capture? Chip away?

That implies a limit to sales. EVs aren't really competing against each other so much as against ICE vehicles. The only reason there are cheaper options than Tesla right now is because if they can't meet Tesla specs, they can't demand Tesla prices. That's not very profitable.

Tesla has no plan to remain the high-end price, expect to keep their demand to a level they can actually produce.

-Crissa

True in the short term, but not in the mid to long term. Soon EVs will be competing against other EVs as states and countries mandate (as they are starting to do) that new vehicle purchases must be EVs, and as Tesla continues to make appealing EVs they further legitimize EVs as a desirable choice for the consumer.

And cheaper options are just that, cheaper options. As a consumer that wants to switch to an EV, but can't afford a Tesla, you won't buy a Tesla, you'll buy something else. The relative profitability is a separate issue and not easily knowable. I am thinking that large Asian automakers can sell at a loss for a while, just to capture market share.

 

[Cybertruck Hawaii]

When demand exceeds supply, it’s also called raining cats and dogs with money falling down from the sky.

 

[Crissa]

The Chinese credit crunch will kill anyone trying to sell at a loss this year.

-Crissa

 

[CyberGus]

There is nothing I said that was wrong, it was just counter to some folks opinions.

Everything you say is wrong if it contradicts my opinions
?

 

[charliemagpie]

High Margins & High Turnover = Goldmine.

And when it's a Big Ticket Item, It's raining money.

High Margin, High Turnover, Big Ticket Item. A very rare combination.

 

[HaulingAss]

And cheaper options are just that, cheaper options. As a consumer that wants to switch to an EV, but can't afford a Tesla, you won't buy a Tesla, you'll buy something else. The relative profitability is a separate issue and not easily knowable. I am thinking that large Asian automakers can sell at a loss for a while, just to capture market share.

Most automakers are public companies and thus, their profitability is knowable. ICE manufacturers can disguise the loss on EV's somewhat with ICE sales but as EV sales grow to be a bigger part of the pie this will become increasingly difficult.

The mistake you are making is thinking that a cheaper EV today will be a cheaper EV tomorrow. As Crissa has pointed out, those cheaper EV's are cheaper because that's all people are willing to pay for them. They are sold in low volumes and subsidized by ICE sales. More expensive Tesla's are already insanely profitable because Tesla knows how to make superior EV's for less money. That's not the fan boy talking, that's just a fact. I don't see a single competitor that will be able to compete with Tesla on price in high volumes. It doesn't take a brainiac to see where this is headed.

 

[electricAK]

It's interesting to think about the future playing field for EV's. I'm sensing in this discussion that we're envisioning the future EV market as being just like the current ICE market. But that may not be how it turns out.

Here's one new dynamic that could play out:

Current ICE market: customer has a choice between a $25,000 vehicle with cheaper interior and fewer features, and a $45,000 vehicle that looks/feels nicer. For the budget conscious, that's an easy decision to go with the cheaper option. Thus you'd expect cheaper vehicles to have far more sales.

Future EV market: customer has a choice between a $25,000 EV with 200mi range, and a $45,000 vehicle with 400mi range. Who cares about the features and the interior trim materials? With EV's your dollars are going almost directly into purchasing extra range, which is an extremely important make-or-break tangible feature. The result: the customer is much more likely to finance/lease/buy-used the $45,000 vehicle.

So if we're thinking about future demand and competition, I'm not so sure Hyundai (or similar budget car company) will be able to succeed the same way Tesla can.

Another new dynamic: Tesla is building cars meant to last many hundreds of thousands of miles. You could consider this a "lifetime" vehicle. Other manufacturers have settled into making cars that die around 250,000 miles. So why would a customer buy a car from Ford or GM or (any OEM competitor) if they can get a "lifetime" Tesla that costs more but also has more range?

I just don't see anyone really competing with Tesla's demand.

 

[CyberGus]

To use a sports metaphor:
GM and the others are skating toward the puck; Tesla is skating to where the puck will be.

 

[SpaceDoc]

Most automakers are public companies and thus, their profitability is knowable. ICE manufacturers can disguise the loss on EV's somewhat with ICE sales but as EV sales grow to be a bigger part of the pie this will become increasingly difficult.

The mistake you are making is thinking that a cheaper EV today will be a cheaper EV tomorrow. As Crissa has pointed out, those cheaper EV's are cheaper because that's all people are willing to pay for them. They are sold in low volumes and subsidized by ICE sales. More expensive Tesla's are already insanely profitable because Tesla knows how to make superior EV's for less money. That's not the fan boy talking, that's just a fact. I don't see a single competitor that will be able to compete with Tesla on price in high volumes. It doesn't take a brainiac to see where this is headed.

Glad to be provoking such an interesting discussion. ?

And I am super glad Tesla is “insanely profitable”.

Simple FACT though… Tesla alone will NOT be able to satisfy WORLDWIDE demand for EVs. Where will all those other EVs come from?? Also, will all the hundreds of start ups and current automakers around the world rollover and die, just so the glorious Tesla can rule the entire market for EVs?

I am thinking a couple of levels above the comments here, as far as I can tell. I’ll ease up and we can let history decide.

If you’re interested, the website GreenCarReports.com covers the whole EV market, not just Tesla, so it’s a nice place to start for a broader perspective.

 

[SpaceDoc]

It's interesting to think about the future playing field for EV's. I'm sensing in this discussion that we're envisioning the future EV market as being just like the current ICE market. But that may not be how it turns out.

Here's one new dynamic that could play out:

Current ICE market: customer has a choice between a $25,000 vehicle with cheaper interior and fewer features, and a $45,000 vehicle that looks/feels nicer. For the budget conscious, that's an easy decision to go with the cheaper option. Thus you'd expect cheaper vehicles to have far more sales.

Future EV market: customer has a choice between a $25,000 EV with 200mi range, and a $45,000 vehicle with 400mi range. Who cares about the features and the interior trim materials? With EV's your dollars are going almost directly into purchasing extra range, which is an extremely important make-or-break tangible feature. The result: the customer is much more likely to finance/lease/buy-used the $45,000 vehicle.

So if we're thinking about future demand and competition, I'm not so sure Hyundai (or similar budget car company) will be able to succeed the same way Tesla can.

Another new dynamic: Tesla is building cars meant to last many hundreds of thousands of miles. You could consider this a "lifetime" vehicle. Other manufacturers have settled into making cars that die around 250,000 miles. So why would a customer buy a car from Ford or GM or (any OEM competitor) if they can get a "lifetime" Tesla that costs more but also has more range?

I just don't see anyone really competing with Tesla's demand.

I don’t disagree with most of your thoughts, though I will point out two issues. Range is not static. I’d expect it to increase at all price levels over time as technology matures and cost per mile drops. At a certain point that will cease to be a major factor for most buyers, just like range for ICE buyers is not necessarily a factor when buying a vehicle now. Also, most people commute well under a hundred miles a day, so range may be less of a issue than we might think.

Last, the real limiting factor for widespread adoption (and sales) is the limited charging infrastructure. Especially for city and apartment dwellers. You will either need to build out charging to the street/parking lot level, or have charging stations where the time it takes to charge is roughly close to the time it takes to fill up a gas tank, or some combo of the two. This also requires a massive upgrade of the worldwide electric grid. All of these things are in play now.

The exact future landscape is unknowable at this time, but Tesla will definitely be an important if not dominant player, as will many other companies that emerge from the pack.

Interesting times.

 

[Ehninger1212]

One of the biggest advantages I see Tesla have is Brand power. People want Tesla's, Period.

 

[anionic1]

Tesla certainly does have a "problem" being able to produce enough vehicles to keep up with orders. It's going to take a few years to catch up fully and to be able to supply enough vehicles for new demand that will be coming. At least this is a good "problem" though.

I think it is far better than the situations that nearly all other manufactures are in where they either don't have enough orders to keep their production lines humming apace, or they've had to shut down production entirely because of serious dangerous defects, or their projected production numbers are so low as to not really be of any meaningful consequence.

Its just insane that anyone would say there are any other manufacturers even close to where Tesla is right now. And the crazy thing is, people keep saying that Tesla isn't so far ahead. But no one else seems to be even attempting to build out the supply and production lines at anywhere near the capacity of where Tesla is. And yet the more Tesla produces, the more they seem to get behind.

The next couple of years are going to completely change the vehicle landscape. In ways that very few traditional auto insiders seem to even recognize.

The cost of living may damper that future demand. If housing/rent/inflation keep outpacing wages to the degree get are right now it would seem less snd less people could afford that $50k+ vehicle even if it is electric.