Everyone is discussing whether Tesla is able to reach 500K cars per year. But I’d like to discuss a more interesting scenario. Can Tesla get 70% of the car market (total car market worldwide, not just EVs). Can this happen?
Tesla is the leader in the electrics right now. People almost equate EVs with Tesla. As Tesla sales grow traditional car makers will follow. But consumers will still want Tesla. It could be a repeat of iPhone story. When iPhone started becoming popular everyone else followed but iPhone is still a default choice for consumer. People associate smartphones with iPhone.
Here are things that could make it possible:
Network effect: Supercharges are the the biggest reason to choose Tesla vs other EVs. Over time Supercharger network will grow and it will be hard for other auto-makers to catch up.
Economies of Scale: With Gigafactory Tesla is poised to achieve cheapest battery costs. It may be hard for competitors to catch up, making Teslas cheaper than competitors.
No ICE legacy: Traditional automakers are build around ICE drivetrain. Engineers there build their careers by becoming experts in some aspects of ICE drivetrain. It’s hard for such organization to switch over to building EVs.
An important element of the Tesla-as-iPhone-of-EVs idea, is that iPhone is a minority supplier, by units, to the market. While being a majority consumer of the profits from the market.
Here is one recent source indicating iPhone was 15% worldwide unit share in Q1 2016:
iPhone Drops to 15% Market Share as Smartphone Market Goes Flat
Meanwhile, we have this article from Feb 2016 discussing market share vs. profits:
Apple's iPhone: Market Share Vs. Profits
15% unit share gets 91% profit share. Not a lot of motivation there to increase unit share - there's not much profit left to take, and it takes a lot of units to get access to that remaining 9%.
At the very least, we can conclude that Tesla will be different from iPhone, as it is unlikely that we'll see Tesla pursue a pricing and branding strategy in which Tesla prices it's entry level cars in a given segment higher than fully optioned cars in the same segment from other makers (if only because, Tesla has had the opportunity to do so for the last 4 years, and is clearly not pursuing that kind of pricing strategy).
If Tesla were to achieve 70% market share, then they would also be different in that besides having the name synonymous with the category, they would also represent 2 in 3 new cars on the road (rather than 1 in 6 new phones being bought).
But "mindshare" - if we take as a given that the iPhone in some sense has mindshare and defines the category, can Tesla achieve an analogous position? In my own mind, Tesla is already there. Besides the ~400k reservations for Model 3, the number of people already driving EVs that indicate they want to switch to a Tesla when it becomes affordable to them, tells me we're already there.
The number of people I've talked to in parking lots and at EV events, that are ready to buy a Tesla when it becomes affordable (it's always expressed as "buy a Tesla", not "drive an EV"). It may easily be the case that people are saying buy a Tesla, when they mean "drive an EV when there is an affordable full function option", and it could be any of a variety of makers of the car. I think their language is exactly expressing what they think is true today (that it will be Tesla providing that full function EV, and they are having a hard time waiting).
Back to the original premise. I struggle with the idea anybody could achieve 70% market share in the car industry. It's such a big industry and so important to the manufacturing economies of so many countries, I don't see it. The biggest car makers today are, I believe, on the order of 10% worldwide market share. Here's a couple of links:
Global car sales by manufacturer 2015 | Statistic
Global sales will hit 88.6 million in 2015, pushed by U.S. and China, IHS predicts
Toyota sold 10M units on 88M worldwide units. That's about 11% market share.
So I struggle with 70% share.
If we rephrase, and ask the question, can Tesla achieve worldwide market share, in units, large enough to make them the highest worldwide market share auto company? My answer to that is drop dead easy. If the Toyotas of the world don't get busy designing and providing compelling and fully functional electric vehicles, they're going to be selling manufacturing assets to Tesla for pennies on the dollar in bankruptcy court.
