StealthP3D
Well-Known Member
Those projections are quite bullish, in 2026 the industry median will still be behind Tesla by 23 (out of 50) index points. While I don't know how the index is calculated, it matches with my perceptions of the EV's I see hitting the market. The fact that the rest of the industry will eventually catch up to where Tesla is today is not what knocks Tesla out of their dominant position as long as Tesla continues to innovate faster. And how could a bigger, less efficient bureaucracy, with much higher costs, ever start innovating faster than a more nimble, modern company with better access to the best talent? Tesla has lower debt loads, no anchor of ICE production and sales, are vertically integrated without dealerships, flatter, more efficient management structure, software and data expertise, no advertising expenses, I could go on and on. Legacy auto and other startups have precious few things that could be considered an advantage, looking forward.
This means that not only can Tesla design and build better cars, the rest of the industry has a higher cost to produce relative to Tesla and that gap is not narrowing but growing wider. This is the most important metric that determines competitiveness in the high-volume markets. If you can't produce high quality cars for less, you can't offer the consumer the most value. Not only do volumes suffer, but also profit margins and the combination of these two things re-enforce one another which leads to a cascading effect. This is why I see Tesla growing into a dominant powerhouse in the auto markets.
One wildcard in how dominant Tesla will be in the auto market is at what point of EV adoption does the adoption curve start to flatten. Because I believe in the theory that EV's are an inherently a better ownership/user experience, with lower costs, and that will lead to it being increasingly difficult to sell ICE vehicles in any significant volume. This means I think the EV market share growth will not flatten much until over 80%-90% of ICE vehicle sales are displaced. Even then, EV's will continue to gain market share, just at a slower pace. Inability to source raw materials quickly enough will probably flatten the curve a little throughout, but that bodes well for superior profit margins (at the expense of slower unit growth).
The automotive market has had many decades in which the biggest players were on roughly equal footings in terms of costs to produce. Yes, you can take issue with that statement but I'm speaking in very broad, general terms compared to the dynamics we see in the very early stages of setting up. Volume begets efficiencies and lack of volume makes it increasingly difficult to compete. Tesla is already more efficient at making cars than legacy auto, Tesla was forced into being more efficient than legacy auto so they could compete with cheaper ICE cars while using EV's that inherently cost more to make, especially when volumes were so much lower. The efficiency that was forced upon them simply to survive is Tesla's superpower. Tesla doesn't have enough quarters of profit growth to prove just how efficient they are, but the trend is clear, and it becomes clearer if you understand Tesla's other inherent advantages (which are numerous and durable). This sort of dominant dynamic has not existed since the early days of automaking, and the difference is stark.
All that said, it's obvious this is still not understood by the market. I attribute that to people ascribing too much value to legacy autos long experience in automaking, even as that legacy experience is working against them as we make the transition to EV's. And remember what I've said about the best profits in the market coming from identifying the largest disparities between perception and reality and acting upon them? This is one of those times. Buy and hold until common perceptions align with the reality on the ground. My intuition tells me this is going to be bigger than many bulls expect, and that it will continually keep getting better, constantly surprising the people who dismissed Tesla as not knowing what they were doing or who they were up against. The corner has already been turned and the momentum is palatable. Sure, there will bumps along the way, but the overall growth will be massive and as close to unstoppable as you will ever find.
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