TheStreet: Tesla Has One Big Problem

[anionic1]

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

This is 100% right on. They created something that showed the world how much better EVs can be and they polished the brand off with massive engineering prowess and a side of sexy. They could sell anything at this point and people would buy it.

 

[Ehninger1212]

This is 100% right on. They created something that showed the world how much better EVs can be and they polished the brand off with massive engineering prowess and a side of sexy. They could sell anything at this point and people would buy it.

Like.. whistles, belt buckles, surfboards and tequila?

 

[Sirfun]

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.

Most of us here on this forum agree with that last sentence. Tesla will have #1 spot, but there will be many other players. I have seen lots of positive information from Hyundai that they are taking the transition to EVs very seriously. My main interest in them is not as a consumer but as an investor. But also, when other players come up good options and specs for their vehicles, it has an influence on Tesla. I really want V2H in my Cybertruck.

 

[HaulingAss]

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.

You claim Tesla will not be able to supply all EV's the world demands. That is invariably true. At a minimum, there will be niche players (and likely a lot more than that). Currently, there are a lot of small players and yet there is still plenty of unmet demand.

Common sense tells us EV makers will continuously grow production until supply and demand balance out. But we know that when that happens, it won't happen for all companies equally. Some will continue to grow sales while others have their sales eroded when competitors offer more value generally, whether that comes in the form of higher quality for the same price, the same quality for a significantly lower price, hitting the preferred styling, a longer range for less money, etc.

But you failed to explain what upper limit for Tesla's market share you think exists (as a practical maximum), and what defines (or causes) that limit. It's obviously a number of years away and we can only guess what that limit is, but I'm curious what you see as the limiting factor and what you think is the maximum market share any one manufacturer could conceivably have.

To be clear, that's two questions, maximum possible market share in a mature EV market and what causes that limit. The quality of your answer will inform whether you truly understand what is going on in the auto market or whether you are just repeating what you've heard elsewhere.

 

[Crissa]

The upper limit for Tesla's market share is currently the number of cars it's able to make, divided by the total amount of EVs made.

Market share is meaningless when the market demand is larger than the total supply.

-Crissa

 

[HaulingAss]

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

Tesla's have a much better user experience than any EV out there today.

I never cared much about which brand ICE car/truck I drove. I thought the F-150 was probably a little better than a Silverado, and it seemed like it cost slightly less when comparing like for like MSRP's, but the difference was small. Give me a good deal on the Silverado in a color I like and I might just pick that. Same with Honda, Toyota, Nissan, Hyundai, Subaru, etc. Sure, you can always nitpick little differences, but they are all very similar technologies at similar price points with similar controls and levels of quality. Some people might have a slight preference for one over another but the deal they are offered (a couple thousand less dollars) might end up ruling the day.

We have a very different situation in the EV market today. One manufacturer really does offer a higher quality and more satisfying user experience. An ID4 or Mach-e doesn't compare favorably (at all) to a Model 3 or Model Y in terms of what it's actually like to live with it and drive it everyday. And let's not even talk about the buying experience! Worlds apart, that's just a fact.

 

[HaulingAss]

The upper limit for Tesla's market share is currently the number of cars it's able to make, divided by the total amount of EVs made.

Market share is meaningless when the market demand is larger than the total supply.

-Crissa

True, the question contemplates the ultimate maximum market share a single maker can have in a mature market (where there is more production capacity than demand).

 

[Crissa]

True, the question contemplates the ultimate maximum market share a single maker can have in a mature market (where there is more production capacity than demand).

We don't know what the demand side will even look like then. So it's impossible to guess.

-Crissa

 

[HaulingAss]

We don't know what the demand side will even look like then. So it's impossible to guess.

-Crissa

There's a lot of things we don't know but the question was in response to the claim that Tesla couldn't be the sole supplier of EV's, ever. That it's impossible. And while that's true because there will always be niche players at a minimum, making specialty products that volume manufacturers don't want to mess with, the point of the question is to explore what factors (other than niche players) dictate that one manufacturer cannot be so superior that they become the one big dominant supplier.

Because that claim was made as if it's an unwritten rule that the automotive market of tomorrow will look much like the auto market of the 1960's-2020 with the largest market share held by a single maker being somewhere above 20%. My question is what prevents that number from rising to 60% or 80%? Because the claim that was made is that couldn't happen.

The question is, why not?

 

[FutureBoy]

There's a lot of things we don't know but the question was in response to the claim that Tesla couldn't be the sole supplier of EV's, ever. That it's impossible. And while that's true because there will always be niche players at a minimum, making specialty products that volume manufacturers don't want to mess with, the point of the question is to explore what factors (other than niche players) dictate than one manufacturer cannot be so superior that they become the one big dominant supplier.

Because that claim was made as if it's an unwritten rule that the automotive market of tomorrow will look much like the auto market of the 1960's-2020 with the largest market share held by a single maker being somewhere above 20%. My question is what prevents that number from rising to 60% or 80%? Because the claim that was made is that couldn't happen.

The question is, why not?

I think there are various segments to look at here. EV passenger cars is pretty solidly Teslas market to lose. There are others out there but the majority of people looking for an EV want a Tesla. Not everyone can afford one yet. Tesla cannot yet produce enough to keep up with demand. So this isn’t a done deal but currently the far superior front runner is Tesla.

But on the long haul truck segment, Tesla has not yet shipped. There are a couple other manufacturers also trying to get an EV product out. And there are other technology solutions out there (hydrogen being one). So we don’t really know yet who will be dominant here.

Then what about the large equipment manufacturers? Electric cranes, mining trucks, diggers, etc are coming. Some are currently for sale. Tesla is not even looking in that market as far as I can see. Maybe they will as batteries become more widely available. But right now it’s anyones game.

How about delivery trucks? Or school busses? These are vehicles that Tesla is not yet touching. And there are some other players out there. So this is definitely not Tesla’s market.

Basically it seems like there are available markets for companies to work. That Tesla isn’t even trying at the moment. If a company could get established they might have a chance if they do a good job and continue to innovative. But if Tesla takes over their own market so completely that they solidly own their market, don’t be surprised if they start innovating other segments as materials and workers become available. Better be ready by then or get knocked out.

 

[> spieltmit]

Like.. whistles, belt buckles, surfboards and tequila?

THERE IS A SURFBOARD?????

 

[FutureBoy]

THERE IS A SURFBOARD?????

Haven’t looked but the operative keyword should probably be WAS instead of IS. Every time some new doodad gets announced, it’s sold out before I ever see it. If there is something new on the site, it’s gone. Makes one wonder how people have enough money to throw at these toys, with enough time to stalk the Tesla site constantly to find any new items. Are there so many trust fund babies out there to take up all these items? How did I come to be born without a silver spoon?

 

[SpaceDoc]

You claim Tesla will not be able to supply all EV's the world demands. That is invariably true. At a minimum, there will be niche players (and likely a lot more than that). Currently, there are a lot of small players and yet there is still plenty of unmet demand.

Common sense tells us EV makers will continuously grow production until supply and demand balance out. But we know that when that happens, it won't happen for all companies equally. Some will continue to grow sales while others have their sales eroded when competitors offer more value generally, whether that comes in the form of higher quality for the same price, the same quality for a significantly lower price, hitting the preferred styling, a longer range for less money, etc.

But you failed to explain what upper limit for Tesla's market share you think exists (as a practical maximum), and what defines (or causes) that limit. It's obviously a number of years away and we can only guess what that limit is, but I'm curious what you see as the limiting factor and what you think is the maximum market share any one manufacturer could conceivably have.

To be clear, that's two questions, maximum possible market share in a mature EV market and what causes that limit. The quality of your answer will inform whether you truly understand what is going on in the auto market or whether you are just repeating what you've heard elsewhere.

LOL! Nice. You basically just agreeded with what I’ve said in some of my prior comments. And I’m glad you have the qualifications to judge my responses. It warms the cockles of my heart. ?

As to your questions, here’s the answer. There is insufficient information at this time. The points as I have outlined them follow logically. A ball park “maximum possible market share” for EVs, assuming they will eventually replace all ICE vehicles, is all current auto sales in developed economies, plus any new demand by consumers in developing economies, minus resource constraints (physical and environmental), as further influenced by government mandates and subsidies. There are a few other factors we could probably throw in there, like the negative impacts of climate change on each country’s GDP year to year, and reduction in associated business and consumer spending power, but maybe this bit is outside the scope of this discussion for now.

Tesla is not the end all, be all, despite the comments and wishes in this forum. They have a head start for sure, but not for long. How they handle that as a company dictates how long that lead lasts and what their ultimate slice of the pie is.
As is often the case with whole new industries, the first to market is not always the winner in the long run, as competitors capitalize on the efforts of those that create the technology in the first place.

Case in point …

https://www.nytimes.com/2021/10/31/business/electric-cars-china-europe.html

 

[SpaceDoc]

I think there are various segments to look at here. EV passenger cars is pretty solidly Teslas market to lose. There are others out there but the majority of people looking for an EV want a Tesla. Not everyone can afford one yet. Tesla cannot yet produce enough to keep up with demand. So this isn’t a done deal but currently the far superior front runner is Tesla.

But on the long haul truck segment, Tesla has not yet shipped. There are a couple other manufacturers also trying to get an EV product out. And there are other technology solutions out there (hydrogen being one). So we don’t really know yet who will be dominant here.

Then what about the large equipment manufacturers? Electric cranes, mining trucks, diggers, etc are coming. Some are currently for sale. Tesla is not even looking in that market as far as I can see. Maybe they will as batteries become more widely available. But right now it’s anyones game.

How about delivery trucks? Or school busses? These are vehicles that Tesla is not yet touching. And there are some other players out there. So this is definitely not Tesla’s market.

Basically it seems like there are available markets for companies to work. That Tesla isn’t even trying at the moment. If a company could get established they might have a chance if they do a good job and continue to innovative. But if Tesla takes over their own market so completely that they solidly own their market, don’t be surprised if they start innovating other segments as materials and workers become available. Better be ready by then or get knocked out.

Great points.

Ford is coing on strong in some of these segments.
I follow some van life vids on YouTube and was wondering if you could do that with an EV van.

Guess what? Ford is making them for 2022. The very same vans that some vanlifers use, the Ford Transit. I’m sure the range will suck to start, but it will only get better over time.

https://www.ford.com/commercial-trucks/e-transit/?gnav=header-electrified-vhp

 

[Crissa]

Cars and trucks are large, durable objects which require a factory specifically made for each model line.

That means to get market share, you have to build a factory - high barrier to entry. But as you said, there will always be niche and third party suppliers. So to get a piece of the market, all someone has to do is build a factory.

The fact that they're big, heavy things and their factories wear out just means that incumbents also face these high barriers just to stay in the market. It's not like a piece of software or a prescription medication that can be easily shipped to all corners of the Earth.

-Crissa