Did Ford Just Crush Tesla Motors?

[Robert.Boston]

I was talking today with a senior exec at a major energy company that owns several retail energy supply companies. They had originally had an all-renewable offering through their utility-branded retail arm, but it wasn't doing well. So they bought a well-recognized retailer of renewable power and consolidated all their green offerings into that label; it's doing very well.

This makes me think that Tesla is even better positioned than I had thought. When you think "Ferrari" or even "BMW", it evokes a swath of thoughts, including ICE sounds and other gear-head connections. Can such a company ever really shift its market image to be considered a contender in EVs? My client's experience in energy marketing would suggest the answer is, no. Tesla, however, is a through-and-through "green" brand name, and a luxury marquee as well. A truly unique and valuable market position.

 

[VolkerP]

I see the point of missing credibility of a mixed green-and-not-green product portfolio. But selecting an electricity provider involves far fewer emotions (and $) than selecting a car IMHO.

 

[Kevin Sharpe]

This makes me think that Tesla is even better positioned than I had thought.

Not in Europe.... the Renault-Nissan Alliance will have 5 BEV's in full production this year and many more announced... they are also actively involved in deploying Fast Charge AC and DC infrastructure long before Tesla deploy their proprietary system.

 

[ckessel]

Not in Europe.... the Renault-Nissan Alliance will have 5 BEV's in full production this year and many more announced... they are also actively involved in deploying Fast Charge AC and DC infrastructure long before Tesla deploy their proprietary system.

I'm somewhat worried about Tesla long term just for this reason. They will be (or have been) beaten to market for mass market EVs. The Roadster is such a limited run car that while it counts as getting to market for image/concept, it doesn't really count for market presence. The Model S isn't mass market either, nor the Model X. By the time Bluestar gets to market, Tesla is going to be competing with well established EVs from major vendors. That's not a trivial hurdle to overcome.

Tesla sounds like it can be profitable without the Bluestar, but can it be profitable after committing the money required to bring Bluestar to market if the Bluestar sales lag? I'd like to think so, but I just don't know. The EV landscape at that point isn't going to be the open field it is now.

 

[Mycroft]

Competition will not prevent Bluestar from being profitable. The only thing that will do that would be the unwillingness of the general public to buy EVs. If the public doesn't buy EVs at all, then yes, Tesla is doomed. If the public does buy EVs, then Tesla will do just fine.

The amazing Models S and X will sell out. Before Bluestar is rolled out, the public will have a LOT of experience with the Tesla brand and their Mercedes/BMW priced vehicles. I think that when Bluestar is rolled out, the public will be more than ready for Lexus/Acura priced, high quality Tesla cars.

 

[Kevin Sharpe]

The EV landscape at that point isn't going to be the open field it is now.

Giving the competition time to deploy 'low cost' EV's in volume, with ubiquitous charging networks built on agreed standards, is going to be really tough for Tesla.

 

[Robert.Boston]

Not in Europe.... the Renault-Nissan Alliance will have 5 BEV's in full production this year and many more announced... they are also actively involved in deploying Fast Charge AC and DC infrastructure long before Tesla deploy their proprietary system.

Sorry, I failed to get across my point. When you think Renault-Nissan, what are the first three adjectives you'd write down? When you think Tesla? All of the ICE makers have a perceptual legacy that shapes their company's image in people's minds. The may offer EVs -- maybe even very good EVs -- but it will be a challenge for them to reorient the public to think of Renault-Nissan as "the EV company." Tesla is the EV company, and its inherent market image reads very differently than Renault-Nissan or other ICE makers trying to break into the EV space.

Again, this links back to my friend's story about the energy marketer -- they could try to sell renewable power through standard retail channels, but they have far better success selling it through a retailer that is deeply branded as a green power company. As he said, when you're looking to buy organic produce, you don't think about going to Costco. I pointed out that Walmart is the largest buyer of organic produce at wholesale, but it doesn't really moot the point: Whole Foods does very nicely by playing to a particular niche where they are intrinsically branded.

 

[Kevin Sharpe]

but it will be a challenge for them to reorient the public to think of Renault-Nissan as "the EV company."

I'm watching Renault EV ads every day on mainstream TV... by the time the Model S launches in Europe we could have hundreds of thousands of EV's on the road here.

IMO it's a mistake to think that Tesla can own the EV space or even dream about matching the marketing budgets of these guys... I think they will remain a niche player... possibly US only given some of their design decisions.

 

[JRP3]

If Tesla is the Porsche of the EV world I think they'll do fine.

 

[Kevin Sharpe]

If Tesla is the Porsche of the EV world I think they'll do fine.

hard to imagine without the connection with VW or the Qatar money...

 

[Doug_G]

I'm somewhat worried about Tesla long term just for this reason. They will be (or have been) beaten to market for mass market EVs. The Roadster is such a limited run car that while it counts as getting to market for image/concept, it doesn't really count for market presence. The Model S isn't mass market either, nor the Model X. By the time Bluestar gets to market, Tesla is going to be competing with well established EVs from major vendors. That's not a trivial hurdle to overcome.

But history suggests the opposite result. Kodak was a pioneer in digital imaging, but was still driven bankrupt because of it. They never went "all in" on digital technology. Some electron tube companies invested in transistors but were still killed off by transistor startups. Not one survived.

The thing is, if you have an established, bread-and-butter business, it's awfully hard to justify investing in a risky alternative technology instead. You can make more money NOW by investing in your existing ICE technology. Your salespeople don't see the advantage of this new-fangled EV, and only see its limitations. Even if you decide to make an investment, you're still running up against major internal headwinds. It's always much easier to justify investing those billions in a product refresh of an existing ICE car, rather than risk it all on some strange new technology that might not be profitable for years.

Meanwhile the startup EV company is slowly and steadily gaining market share and reputation, improving their product, and lowering their price point (and probably also being helped out by skyrocketing gas prices). Eventually the market hits an inflection point where the average customer sees the new technology as definitively superior, and the bottom drops out on the ICE. The previous generation of dominant companies go bankrupt, and new companies take their place.

I'm not saying this will definitely happen, but history tends to repeat. Right now Ghosn is pushing Nissan in the right direction for long term survival. They could very well make it through. But unless he stays with Nissan and keeps successfully pushing the company in that direction, Nissan could very well be at risk. The other automakers are IMHO only gently dipping their feet in the water. There's a very big risk they won't be around in 20 years.

 

[stopcrazypp]

The only worry is with Bluestar (depending on the volume target and how big the BEV market is by the time it is out). The "trump cards" that Tesla has are leading $/kWh and weight/volume kWh density (as well as a willingness to do unconventional body designs for more utility over other vehicles, judging from the Model S and Model X). If Tesla can maintain it, the Bluestar should do well in the market just based on the range/price.

 

[EVNow]

But history suggests the opposite result.

But history also has a lot fo examples of very successful transitions. Take any large diversified company - you will see that they started out small in one field but were able to keep up with major technological changes and flourished or atleast are doing decently. Look at Sony - they managed to transition from all analog TV to digital (But they couldn't jump on to digital personal music players). IBM did quite well transitioning from small business machines to large computers.

 

[Doug_G]

IBM did quite well transitioning from small business machines to large computers.

But ultimately not so well in the other direction. They managed for a time to be a leader in personal computers, but they messed it up and eventually withdrew.

IBM has only survived because they were very diversified so other business units could carry the company. So your point is taken about diversification. The thing is, automobile companies are NOT diversified. They have a broad range of more-or-less similar products all based on the same technology. They may sell SUVs, luxury cars, trucks, crossovers, yada yada, but they're fundamentally different versions of the same product. If they miss jumping on a disruptive new technology they'll die.

 

[Larry Chanin]

IMO it's a mistake to think that Tesla can own the EV space or even dream about matching the marketing budgets of these guys... I think they will remain a niche player... possibly US only given some of their design decisions.

Hi Kevin,

I agree that it would be dangerous if Tesla management became over confident that its brand will rein supreme among electric vehicles. I think Tesla is aware of the need to continually innovate, hence their stated policy of attempting to introduce a new model to market about every year.

I also agree that they can't match the marketing budgets of other established car companies. But I'm sure you agree that at this stage of their development it wouldn't make sense for them to attempt to mount a conventional mass market advertising campaign. Right now the novelty of a high performing, stylish electric vehicle is assisting Tesla in obtaining free advertising sufficient to create a decent sized backlog. With the current limited production rates, spending money on conventional advertising would merely create a demand that couldn't be fulfilled.

It is true that currently Tesla appeals to a niche market. While remaining a niche player is not Elon's stated objective, from a business perspective there of course is nothing wrong with remaining a highly profitable niche company. It remains to be seen whether there will be sufficient continued development in performance and cost of batteries to permit Tesla to enter into the mass market with a car that both sells and supplies adequate returns. If the timing is not right to launch a mass market vehicle as planned by 2015-2016, then they should simply consolidate their gains in the niche market and introduce the mass market car when the technology supports that objective. True they may forfeit first mover advantage, but there is no sense sinking the company by forcing the premature release of a vehicle that is unprofitable.

Finally, it would of course be wise if Tesla agressively pursued both the roll-out of a North American fast charging network, and seriously considered the legitimate charging needs of its overseas market. I believe there is still time for them to address these two important prerequisites to success.

Larry

 

[stopcrazypp]

Finally, it would of course be wise if Tesla agressively pursued both the roll-out of a North American fast charging network, and seriously considered the legitimate charging needs of its overseas market. I believe there is still time for them to address these two important prerequisites to success.

Judging how the "Combined Charging System" is done (J1772 in NA, Mennekes in Europe, same connector footprint), a possible route is two different sockets/chargers (one for the NA market, one for the European market).

 

[VolkerP]

The "trump cards" that Tesla has are leading $/kWh and weight/volume kWh density.

It remains to be seen whether there will be sufficient continued development in performance and cost of batteries to permit Tesla to enter into the mass market [...]

There is a contradiction between these two statements. If Tesla has the lead, other manufacturers will fail to compete against Tesla in any performance/price/range combination. They are only limited by the amount of customer-desirable models they can bring to market and by EV acceptance. No need to wait for anything.

 

[Larry Chanin]

There is a contradiction between these two statements. If Tesla has the lead, other manufacturers will fail to compete against Tesla in any performance/price/range combination. They are only limited by the amount of customer-desirable models they can bring to market and by EV acceptance. No need to wait for anything.

Hi Volker,

Even IF Tesla remains the leader in $/kWh, it remains to be seen whether by 2015-2016 that number will be low enough to sustain a car price low enough to attract the typical mass market customer, versus rabid EV early adopters, such as ourselves willing to pay much higher markup. Established companies such as Nissan, which has many offerings, can certainly sustain initial losses a lot better than a start-up company with just two (Model S and X).

Larry