This new SUV shows how car companies can't compete against Tesla

[Mayhemm]

Tesla probably has until 2022-2023 until we see someone make a truly competitive vehicle. That vehicle will probably be built in relatively small numbers just to test the waters....

And then they will complain about how "they tried" but "nobody wanted it" and they "couldn't afford to keep building it". They seem to think that simply putting a battery in something instantly makes it as good as anything else on the market and they should be able to compete at the same level. There was more innovation in my 10th grade science class than there is at any of these companies.

I am a Tesla promoter, however the Audi design looks better ...

Does anybody else think that thing looks like it's running about 32" wheels?

Yes, with a Tesla, you pay more initially, but you don't pay for gas or maintenance. So, you say, you could stretch your budget upwards, but subconsciously, you think the gas car is cheaper, when in some instances, you end up paying for a Tesla, but you drive something that is so much less.

I used to believe this, but Tesla's recent back-room changes to their service policies have changed my mind. EVs are simpler, they have less wearable parts, they should be less expensive to maintain. However, that doesn't mean they will be. Tesla charges far too much for a company "not making money on service". In many cases, amounts greater than or equal to ICE maintenance schedules. I agree, it shouldn't be this way, but it is.

Even when the Model 3 is in full production at 500,000 cars a year, that's still smaller production than the numbers for smallest company selling mainstream cars in the US (mass produced cars as opposed to limited production exotics) which is Subaru.

Subaru today makes about 900,000 cars a year. And that's the smallest. Mazda, Kia, Hyundai, Nissan, and all those other car makers you see on TV all make more than 1 million cars a year.

Please keep in mind that even after Model 3 is in full production, Tesla will only be making a total of 3 vehicles. Subaru and the others you've listed each make at least half a dozen. They have a line of cars. A line of SUVs. Not a single model of each.

The Audi is arguably better designed, both interior and exterior. Porsche has both beat hands down.

The Audi and Porsche are announcements, not products.

"Tesla's Model X — which is expected to debut this fall — will feature greater levels of utility along with better range than the Audi's 310 miles on a single charge."

Reference to Model X's range puzzles me.

Me as well. But, as others have said, they are probably estimating a NEDC system rating.

My greatest fear is that Model X will not have enough range and I'll have to cancel my reservation. To suit my needs, its range needs to exceed that of Model S, not simply match it.

 

[hpham007]

Model 3 is absolutely going to kill the i3 dead dead dead.

That's like saying the 2018 iPhone is going to kill the current Samsung Galaxy phones. Do you think BMW will still be producing the exact i3 with its current specs when the Model 3 comes out? Nobody knows yet they continue to make bold predictions.

 

[wdolson]

Please keep in mind that even after Model 3 is in full production, Tesla will only be making a total of 3 vehicles. Subaru and the others you've listed each make at least half a dozen. They have a line of cars. A line of SUVs. Not a single model of each.

I have heard the Model 3 is planned to be at least two different body styles, possibly more. Tesla will essentially have two platforms in production: the Model S/X and the Model 3. I think Subaru has 3 or 4 platforms total. I believe the original plan was for the Model S and X to have more similarity than they do. They ended up diverging more than they wanted to.

That's like saying the 2018 iPhone is going to kill the current Samsung Galaxy phones. Do you think BMW will still be producing the exact i3 with its current specs when the Model 3 comes out? Nobody knows yet they continue to make bold predictions.

True to some extent, though small electronics go through faster life cycles than larger machines. The time it takes to recover the R&D costs on a new phone is usually substantially shorter than the time it takes to recover the R&D costs for a car. Sometimes car companies cut their losses and drop a car model, or completely redesign it before the costs are recouped, usually when sales are poor or there are design problems that require some major redesign. Usually a company will want to at least break even on a car design before they make major changes.

The i3 is a very small car like most of the other BEVs out there. It's competition is more in line with the Nissan Leaf than even the Model 3. The Model 3 will likely be better compared to the Ford Fusion and Toyota Prius plug ins, which are hybrids, but likely to be about the same size. The Model 3 will be a pure BEV and the other two hybrids of course, but there will be no pure BEVs in the Model 3's class unless someone enters that niche soon.

Traditional car makers are slowly beginning to learn the lessons from Tesla. Even before I knew anything about Tesla, my thought was the best location for the batteries was under the floor, but so many hybrids put the batteries in the trunk instead. It's almost like they have been trying to punish anyone who wants batteries in their car. I notice some of the latest designs are putting batteries under the floor like Tesla does, but they have been slow to adapt.

Another problem I have with electric cars from traditional car makers is they seem to think 10 year old girls are buying them or something. Many of them look like they were designed by the same people who design toy cars for girl's dolls to rise in. Again, it's almost like they are trying to punish people who want to drive electric vehicles, or at least make them stand out. Maybe they think people who want EVs want make a bold statement to the world about what they are driving, but while there are some super eco champions who do want to scream their car choice evey where they go, there are a heck of a lot more people who might want and efficient vehicle, but don't really want to rub it in anyone's face.

That's one of the things I love about Tesla, they look like normal cars. If you know what to look for, you can spot a Model S out in the world, but to the casual person out there, the Model S looks a lot like many other contemporary cars in the same size class and the Model X looks a lot like other CUVs out there (though there is more variation between brands, so it stands out a little more).

Our neighbor up the street has a BMW i3 and personally I think it looks ridiculous.

 

[ecarfan]

My greatest fear is that Model X will not have enough range and I'll have to cancel my reservation. To suit my needs, its range needs to exceed that of Model S, not simply match it.

Because the X is a taller car than the S it will have a higher CD. It will also be slightly heavier. The X will have slightly less range than the S for a given battery size. Tesla has been clear about that.

 

[brucet999]

…there will be no pure BEVs in the Model 3's class unless someone enters that niche soon.

I notice some of the latest designs are putting batteries under the floor like Tesla does, but they have been slow to adapt.

That's one of the things I love about Tesla, they look like normal cars.

I think Volkswagen eGolf meets your definitions of a Model 3 competitor quite well, although it suffers at present from a quite limited 83mi range.

 

[wdolson]

I think Volkswagen eGolf meets your definitions of a Model 3 competitor quite well, although it suffers at present from a quite limited 83mi range.

The Golf is usually grouped in the Compact category with the Ford Fusion and Honda Civic, which I guess is where the BMW 3 series falls. The Golf still puts the motor in the same place as the ICE engine instead of down between the wheels, though it does boast good cargo space. The downsides are the poor range and wimpy acceleration (a failing of just about all electrics and hybrids from ICE makers). Traditional car makers have billions invested in ICE power plants and they know them well. Electric cars that are too good compete with their ICE cars and they don't want that. At the moment just about all of them are losing money on every EV they make, so they aren't too motivated to convert over to EVs any time soon.

Tesla has shown you can make a pretty compact electric motor that can accelerate you at least as well as most ICE cars, and if you want to shell out for the P90D, you can accelerate better than everything except exotic sports cars. There's a lot of talk about the acceleration of the top end P85D/P90D, but even the rear wheel drive only 70 and 85 have acceleration times better than most ICE sedans out there.

The eGolf seems to be targeted as a compliance car intended to meet California's ZEV standards, though it appears to be available in some other states now. It's still not universally available around the US.

 

[brucet999]

The Golf is usually grouped in the Compact category with the Ford Fusion and Honda Civic, which I guess is where the BMW 3 series falls. The Golf still puts the motor in the same place as the ICE engine instead of down between the wheels, though it does boast good cargo space. The downsides are the poor range and wimpy acceleration (a failing of just about all electrics and hybrids from ICE makers).

The eGolf seems to be targeted as a compliance car intended to meet California's ZEV standards, though it appears to be available in some other states now. It's still not universally available around the US.

I drove an eGolf and found its acceleration and handling to be very much like its diesel and gasoline variants. Battery is under the floor while the battery cooling, motor, reduction gears, drive components and AC are all in front just like its ICE versions. It is, indeed, a BEV that looks and behaves like a regular car.

And yes, it is a compliance car available in select states that have ZEV rules similar to California, but it seems to me to be a "normal looking" competitor to the Leaf.

 

[dgpcolorado]

...I used to believe this, but Tesla's recent back-room changes to their service policies have changed my mind. EVs are simpler, they have less wearable parts, they should be less expensive to maintain. However, that doesn't mean they will be. Tesla charges far too much for a company "not making money on service". In many cases, amounts greater than or equal to ICE maintenance schedules. I agree, it shouldn't be this way, but it is...

I am very troubled by this as well. It is my main concern about buying the Model 3.

 

[sub]

I test drove the egolf and the i3 back to back, the egolf almost put me to sleep it was so blah. Ended up leasing an i3 for two years to wait for model 3, I'll probably have to extend it a year but I would rather do that then be stuck in a longer lease I didn't want. I may also pick up an S or X instead in the mean time. The i3 is different for sure, it turns everyone's head in my small town. I doubt I will see another one locally before I no longer have this one. One thing I like about the different looks is that everyone asks me about it and it gives me an opportunity to maybe convert someone to EV. I drove uglier cars as a teenager, I can tough this out for 2 years!

 

[brucet999]

I test drove the egolf and the i3 back to back, the egolf almost put me to sleep it was so blah.

The eGolf is certainly not exciting, but you can comfortably seat an adult in the back seat.

 

[wdolson]

I test drove the egolf and the i3 back to back, the egolf almost put me to sleep it was so blah. Ended up leasing an i3 for two years to wait for model 3, I'll probably have to extend it a year but I would rather do that then be stuck in a longer lease I didn't want. I may also pick up an S or X instead in the mean time. The i3 is different for sure, it turns everyone's head in my small town. I doubt I will see another one locally before I no longer have this one. One thing I like about the different looks is that everyone asks me about it and it gives me an opportunity to maybe convert someone to EV. I drove uglier cars as a teenager, I can tough this out for 2 years!

I had a friend when I was a kid who's parents seemed to find the worst cars. They had a Pacer for a while and when my friend and his brother reached driving age, they went out and bought a lemon yellow Vega for them. That Vega was a horrible piece of junk. The i3 does look better than some of the messes put on the road in the 70s.

 

[brucet999]

I had a friend when I was a kid who's parents seemed to find the worst cars. They had a Pacer for a while and when my friend and his brother reached driving age, they went out and bought a lemon yellow Vega for them. That Vega was a horrible piece of junk. The i3 does look better than some of the messes put on the road in the 70s.

He he Talk about damning with faint praise!

 

[jvonbokel]

First off, wdolson, just want to say I enjoyed both of your posts, and largely agree with you. I'm rooting for you to get a Model S soon!

I think BEVs are finally here to stay, but it's still early in the revolution.

Well put. Tesla's stated goal is to accelerate the transition to sustainable transport, and I believe they're accomplishing that already and are continuing to accelerate. That said, it won't really pick up steam until the other manufacturers get on board.

Right now BEVs are only 0.1% of the market. That niche was growing at something like 50% a year there for a little while, though this year appears to be down because the price of gas dropped. Even when the Model 3 is in full production at 500,000 cars a year, that's still smaller production than the numbers for smallest company selling mainstream cars in the US

One thing I would note is that if you track sales of individual plug-ins, you'll see the Volt and Leaf have both suffered substantially from their impending transition to a new design. The plug-in model Prius is having the same problem. That said, I think gas prices are a factor as well, as other plug-ins sales are slowing down or growing less as well.

Tesla may get big enough to produce as many cars as some of the smaller mainstream car makers by 2030, but they won't be able to produce enough cars to challenge the biggest: Toyota, VW, and GM for at least a few decades. The big companies are sitting back and playing a wait and see game while dabbling with alternatives such as the Audi concept but most of the alternative attention is on hybrids because they can still make a lot of money on them.

Batteries are potentially going to be a limiting factor for other manufacturers. They may have Tesla beat on manufacturing experience, and they may be able to close the gap on engineering quickly, but the gap in battery capacity (production capacity, that is) is not so easily bridged. That said, it's not impossible. Toyota, VW, and GM may be able to afford to build multiple battery factories in parallel, or pre-pay some existing suppliers to do so, where Tesla cannot (at present).

Btw, I think Tesla's stated goal (or Elon's) is ~1m annual production by 2020, so your 2030 estimate could either be a typo or a suggestion that you think they're unlikely to meet that goal. I'm uncertain myself, but optimistic as both a TSLA investor and an inhabitant of this planet.

 

[jerry33]

One thing I would note is that if you track sales of individual plug-ins, you'll see the Volt and Leaf have both suffered substantially from their impending transition to a new design. The plug-in model Prius is having the same problem. That said, I think gas prices are a factor as well, as other plug-ins sales are slowing down or growing less as well.

I'd suggest that people mainly by the Prius and Volt to save money, while people mainly buy the Tesla for it's driving experience, so the gas prices are going to affect the Prius and Volt sales way more than the Tesla.

 

[wdolson]

First off, wdolson, just want to say I enjoyed both of your posts, and largely agree with you. I'm rooting for you to get a Model S soon!



Well put. Tesla's stated goal is to accelerate the transition to sustainable transport, and I believe they're accomplishing that already and are continuing to accelerate. That said, it won't really pick up steam until the other manufacturers get on board.



One thing I would note is that if you track sales of individual plug-ins, you'll see the Volt and Leaf have both suffered substantially from their impending transition to a new design. The plug-in model Prius is having the same problem. That said, I think gas prices are a factor as well, as other plug-ins sales are slowing down or growing less as well.



Batteries are potentially going to be a limiting factor for other manufacturers. They may have Tesla beat on manufacturing experience, and they may be able to close the gap on engineering quickly, but the gap in battery capacity (production capacity, that is) is not so easily bridged. That said, it's not impossible. Toyota, VW, and GM may be able to afford to build multiple battery factories in parallel, or pre-pay some existing suppliers to do so, where Tesla cannot (at present).

Btw, I think Tesla's stated goal (or Elon's) is ~1m annual production by 2020, so your 2030 estimate could either be a typo or a suggestion that you think they're unlikely to meet that goal. I'm uncertain myself, but optimistic as both a TSLA investor and an inhabitant of this planet.

Everywhere I've seen Tesla's projections were for 500,000 cars a year by 2020. Subaru is the smallest mainstream car maker selling in the US and they produce just shy of 1 million cars a year. I was giving them another 10 years to get to 1 million, but they would probably make it sooner than that if they can ramp up from about 50,000 to 1/2 million in the next 5 years.

There is some buzz out there about new models of the Leaf and Volt which probably are hurting sales, but I agree with Jerry33. Tesla's have a mystique about them that makes them less sensitive to oil prices than other alternative cars. Tesla sales probably wouldn't be quite as strong if they cost more to run than an ICE, but they would probably still be selling cars.

Tesla has been very smart to lock down their supply chain for their batteries. This allows them complete control over the design, production, etc. However, the LG Chem plant in Michigan is making batteries for Ford and GM cars and they are poised to expand production as the Bolt comes online.

 

[jvonbokel]

Everywhere I've seen Tesla's projections were for 500,000 cars a year by 2020.

Some quick googling reveals I was mistaken. I think the 1M by 2020 was a cumulative total. You're correct that the goal is 500k annual production by 2020.

I'd suggest that people mainly by the Prius and Volt to save money, while people mainly buy the Tesla for it's driving experience, so the gas prices are going to affect the Prius and Volt sales way more than the Tesla.

There is some buzz out there about new models of the Leaf and Volt which probably are hurting sales, but I agree with Jerry33. Tesla's have a mystique about them that makes them less sensitive to oil prices than other alternative cars. Tesla sales probably wouldn't be quite as strong if they cost more to run than an ICE, but they would probably still be selling cars.

I won't argue with either of you on that. I think it's a combination of the two factors. I know that other models, such as the i3 and the Fiat 500e have continued to grow their sales over the last 12mo, albeit only very slightly. I think most EV buyers know that any drop in oil/gas prices will likely be temporary on the time frame of a car's lifetime. Unfortunately many *prospective* EV buyers may not have as much foresight.

Side note: I sometimes like to joke that if my Tesla ran on $6/gal whale oil, I would still want it. I wouldn't be able to afford it, but I would still want it purely for the driving experience that it provides, which not coincidentally, comes from the electric drive train. Environmentalists don't tend to like that joke, but it's my way of getting through to car enthusiasts who aren't as moved by the environmental or cost advantages of driving electric.

Tesla has been very smart to lock down their supply chain for their batteries. This allows them complete control over the design, production, etc. However, the LG Chem plant in Michigan is making batteries for Ford and GM cars and they are poised to expand production as the Bolt comes online.

One article I read (granted, not to be taken as gospel) said that GM was planning on something like 30k/yr in production for the Bolt. That could be that they don't expect demand to support a higher level of production, or it could be that they're unable to secure enough battery supply to push beyond that. I think it's a little bit of both, and that between now and 2017, they'll realize the demand will be higher, and they'll work to increase battery supply, but it might be too late.

 

[FlatSix911]

Soon To Push Fall EV Sales Much Higher – The Tesla Model X

August EV Sales Stay Flat In US, As Anticipation For A Fall Surge Grows

Looking ahead to the next six weeks, there is an unprecedented amount of good news, and new plug-in products coming to the US market:

* – 2nd generation of Chevrolet Volt
* – 2016 Nissan LEAF (~105-110 miles)
* – the first full month of Tesla 90 kWh Model S deliveries
* – Tesla Model X– the first long range, all-electric utility vehicle – that has 240 miles of range and a 0-60 time has low as 3.2 seconds (Signature specs/details can be found here)
* – Audi A3 Sportback e-tron, priced aggressively from $37,900
*- first full month of new, slightly upgraded 2016 Cadillac ELR sales
* – Volvo XC 90 – PHEV SUV, and much over-subscribed as well in Europe
* – cheaper base version of the Kia Soul (e-trim from $31k)
* – cheaper base version of the Volkswagen e-Golf (SE trim from $29k)

 

[gillfoto]

Nice first piece, look forward to follow up.

Nice first piece, look forward to follow up.

Up until the last couple of weeks, this is exactly how I've viewed and would have described the competitive response to Tesla. However I've been reading The Innovator's Dilemma recently, and I'm beginning to formulate an alternative explanation that I find more satisfying.

I'm still working on it, but the idea is that in the explanation above, we end up with something akin to malevolence or incompetence as the explanation for the competitive response. And I find that dissatisfying, if for no other reason, I've never encountered a human being that was actively and consciously, from their own point of view, being incompetent / blind / stupid (or malevolent for that matter, but I tend to think we're more likely to see a little of that in the wild). So if we don't go with incompetence as the explanation, what could explain Audi being so far behind? And seemingly not understanding it?


You'll need to read the book, and I'll need to develop the idea further, but the germ is that with a disruptive innovation, you have new customers and a new market from the established market. And for companies in the established market, their internal decision making processes from the individual contributors, through front line and middle management, and on up to the executive staff are all geared to make decisions in support of their existing market. Typically there is a margin issue with disruptive innovations, where the disruption has lower gross margins than the current product, and thus the decision making is geared to sustaining current margins. Not an issue here.

One idea I'm still toying with is that Audi's customer isn't you and me - the end consumer / purchaser of their car. In fact, outside of Tesla, the customers of the car manufacturers are the dealerships. That is at least true in the USA, and it causes me difficulty in explaining how the distribution channel could have captured the manufacturers in Europe or anywhere else that lacks dealership laws (maybe one of my international friends can help out).

But at least in the US, dealerships buy cars from manufacturers. And the dealerships therefore 'control' the resources of the manufacturers.


I'll develop this idea more completely another day, but the conclusion for me right now for investing purposes, is that Tesla stops being disruptive and becomes innovative (using Christiansen's terms) the day they have third party dealerships that they sell to. And on that day, I will need to reevaluate Tesla as a car company, instead of as a disruption to the car industry.


Back to Audi - the insight also provides a way of thinking about Audi's decision making that doesn't cast them as incompetent - it casts them as a company that is closer to their customers, a company that is very good at understanding and providing what their customer's demand. And I find that more satisfying, while also shaking my head in despair at their inability to realize the existential threat to their company that is alive and afoot in the world. That is the ultimate message for me from Innovator's Dilemma - good decisions, good business management, all in support of one's customers are the very same set of values and decisions that put you out of business in face of disruption.

- - - Updated - - -

Basically the image of the Audi projects a Racing Car, which has no real value. The Tesla X with form and function has hidden value.

I prefer the Tesla.

But more importantly, which ever picture your prefer,
One is a picture, the other is a car in production (or will be in a month or so).
Huge difference.

 

[jkn]

One idea I'm still toying with is that Audi's customer isn't you and me - the end consumer / purchaser of their car. In fact, outside of Tesla, the customers of the car manufacturers are the dealerships. That is at least true in the USA, and it causes me difficulty in explaining how the distribution channel could have captured the manufacturers in Europe or anywhere else that lacks dealership laws (maybe one of my international friends can help out).

If I buy a car from a local dealer, I'm protected by local laws. If I order it from California, I'm perhaps(?) protected by Californian laws. Buyers here don't know Californian laws, so they buy from local dealer. There is also some paper work to be done and taxes to pay, if you import car you self.

In Finland local dealer advertised (and I guess sold tens of) MS before Tesla shop opened. They still advertise on their www pages.

If I remember correctly, companies had legal (tax ?) reasons to buy from dealer instead of importing themselves.

Dealers deal with local laws, advertising, languages,... Europe is many small different markets instead of one large.

 

[wdolson]

If I buy a car from a local dealer, I'm protected by local laws. If I order it from California, I'm perhaps(?) protected by Californian laws. Buyers here don't know Californian laws, so they buy from local dealer. There is also some paper work to be done and taxes to pay, if you import car you self.

In Finland local dealer advertised (and I guess sold tens of) MS before Tesla shop opened. They still advertise on their www pages.

If I remember correctly, companies had legal (tax ?) reasons to buy from dealer instead of importing themselves.

Dealers deal with local laws, advertising, languages,... Europe is many small different markets instead of one large.

Each US state has their own laws too. The car selling laws are particularly complex state to state. Some states have deliberately passed laws making it tougher for Tesla to do business there. For example, Tesla is not very popular with a lot of business interests in Michigan.

I don't know how things work in Europe. I know some countries have embraced Tesla with open arms such as the Netherlands and Norway, but other countries have been more difficult for Tesla to break into.