Why Tesla is Under Threat.
And it’s not from Elon’s Tweets.
‘To accelerate the world’s transition to sustainable energy’. This is the mission statement of Tesla. It is utterly awe inspiring. However, it is also the most likely reason that Tesla is not poised to take over the World’s automotive market in the longer term. It could be fixated on a flawed mission.
Since 2003, Tesla has developed into an internationally recognised brand. It is almost wholly responsible for the acceptance of electric cars a mainstream proposition. It has also become infamous for dramatic valuation shifts in response to tweets by Elon Musk.
A tweet can, (and it have in Tesla’s case), wipe off $14 billion of a company’s stock market value; but a tweet does not necessarily reduce the inherent worth of a company and its potential. Moreover, this should be taken in consideration with the fact that Tesla has yet to make an annual profit. Thus the value bestowed upon a company will be of continual amusement to those of us who are not traders and shareholders. But this is not the primary discussion that concerns this article.
There are deeper things to be understood about Tesla before we decide on its role in the future automotive market. Consumers are increasing drawn to the brand. It is difficult to attribute this directly to Tesla’s mission. People do not universally make such costly decisions as a car purchase based on its environmental impact. However, Tesla has some perfectly timed and unique selling points that have let to its current success and position in the car industry.
Tesla has had 17 years to pay attention to its charging infrastructure. As a result, they have been able to mitigate, in part, a major limitation of electric car uptake; range. Speed is another factor integral to Tesla’s success, or more precisely, acceleration. The torque attainable with an electric motor is outstanding when compared to internal combustion engines of a similar weight. Combined with energy dense lithium batteries, electric cars have supreme acceleration. Suddenly, the electric car has developed an appeal to those who had a taste for the thrill of driving. Sub 3 second figures, for an acceleration from 0–60 miles per hour, are phenomenal. The G-Force experienced is within the realm of roller coasters. The numbers are within the realm of supercars, supercars that still command super-high prices compared with the cost of a Tesla.
Crucially, since the introduction of the Model 3 (Tesla’s lower cost model) the price of entry to the Tesla Universe has reduced. This is where Tesla’s most powerful strength lies; running costs. Even with crashing petrol prices, charging an electric car costs less than to fill it with a tank of petrol. Some cities, such as London, offer significant parking discounts and full congestion charge exemptions for purely electric cars. With the new lower priced Tesla, driving into London has turned from a prohibitively expensive transport option, to a viable consideration for commuters. Such an important factor, the perceived long term cost benefit of an electric car, is not to be underestimated when it comes a car purchase decision.
There are flaws, however, in the ethic of Tesla’s mission. It does not address the most important requirements for a car company. Moreover, other manufactures are catching up quickly to Tesla’s revolution. There is no reason that within their own mission statements other car companies could not incorporate targets for a transition to sustainable energy.
Toyata, the World’s largest car manufacturer, was producing ‘hybrid’ cars much before Tesla. The hybrid of electric and internal combustion power sources was more appropriate for the time at which their hybrid Prius model was introduced. Ambitiously, for a car company, they have even loftier aims than Tesla. Their sustainability policy states they are contributing “to the sustainable development of society and the world”. They seek to reduce the emissions generated during the entire lifecycle of a car to zero. BMW, another car manufacturing giant, has had a fully electric model in its line up since 2013. It has marketed its i3 model with a price point similar to the less expensive, and only recently released, Tesla Model 3. The unique selling points of Tesla suddenly seem less unique and their principles less revolutionary.
More importantly, other car makers are well ahead, in areas that Tesla yet has many advances to make. I have driven Teslas, and fast as they are, they lack something; the feel of precision engineering and the feel of a satisfying drive. This is an elusive car quality. Some will never be able to appreciate the differences in a drive between a top of the range BMW versus that of the most base model offered by Toyota, for example. Car magazines and reviewers may better enlighten on the emotional aspects of driving should this be something you wish to further appreciate. In the present market, cars in the premium sector attract buyers based on factors including brand prestige, visual appeal, and handling. Passionate drivers most appreciate an attention to detail to the handing and driving characteristics of a well-engineered machine.
When Bill Gates’ choice of electric car was announced to be a Porsche Taycan, in a recent interview with Tech Vlogger Marques Brownlee, and not a Tesla, eyebrows were raised. We all took note of the car choice of one of the richest men on the planet; as did Elon Musk it seems. Musk responded to tweets on the matter by referring to his past conversations with Gates as underwhelming. The Porsche Taycan, however, is a far from underwhelming car. It is very fast, engineered with the renowned Porsche obsession, and incorporates an appealing rapid battery charging technology.
When one of the World’s richest men buys an all-electric car, and it is a Porsche, we need to consider that cost saving factors of going all-electric may not be the only reason for buying electric. Nor can we only credit Tesla for their mission for sustainability, which is now of course shared and being actioned upon by other car manufacturers. There are likely other factors that contributed to his choice. Namely the existence of choice.
Herein lies the main threat to Tesla. When it is no longer uniquely positioned to offer its mission objective, and when it does not offer a unique product, the inherent value of Tesla as a car manufacture has to be questioned. The promise of its future success is not so certain. This is not to detract from its achievements in the field, many of which I am sure are inspirational for other manufacturers.
There are some matters of concern for all car manufacturers. An important consideration for car industry in general is the prospect of Artificial Intelligence. This is another technology that is not unique to Tesla. The prospect of autonomous vehicles may even make car branding irrelevant. When not the drivers of a car, most people would be content to be the passengers of any car that has a reasonable level of comfort. If fact, fast accelerations times, for example, become almost unattractive as a passenger. This is one of the greatest challenges that all car makers will face; convincing us that we need to buy one model or brand over another based on traditionally flouted specifications. However, as the fatal failures of Tesla’s autonomous vehicles have shown, we have not attained great enough safety of such technology, yet. This will likely change, when a company can promise perfect safety of its passengers.
Tesla is no longer unique. Other car companies have decades more car making experience and are catching up rapidly to the few areas in which Tesla once had a lead. It does not command a cult following and has yet to demonstrate Apple levels of innovation. A Tesla is no iPhone and Tesla will have to innovate far beyond its current form to lead and survive in the automotive industry.
