We’re currently in an automotive renaissance. It’s not just EVs, it’s autonomous driving, alternative fuel sources and ride sharing. The entire auto industry is being reinvented in front of our very eyes; it’s why many analysts are referring to the future of this industry as “Auto 2.0”.
For the past few years, Tesla’s (TSLA) been the front runner of Auto 2.0 – creating the “first” mass market EV, pioneering the first public autonomous driving system, building the first nationwide EV charging network, ect…
“Legacy” car brands like GM, Fiat-Chrysler and Ford have been stuck chasing after the runaway racehorse known as Tesla, which they aren’t too good at. However, it turns out that the Germans are world class “catch up” players, and are now nipping at Tesla’s heals.
While Tesla may have kicked off the EV race, and benefited from their early dabble in the industry the big boys are finally catching up. So, what happens when they do?
Tesla’s flagship SUV (officially a CUV) is the Model X. It’s a luxury EV with autonomous driving capabilities, seating for up to 7 and a range of around 250 miles. It starts at $79,500.
Just a few days ago, Audi (AUDVF) announced their new, all-electric 2019 E-Tron SUV. Like the Model X, it’s completely electric, seats up to 7, and has a range of about 250 miles. It starts at $74,800 and is an obvious competitor to the Model X.
“The novel thing is that you get everything you would expect from an Audi SUV and it has zero emissions,” said Anthony Foulk, Audi senior product manager at the launch event.
The E-Tron is designed to use a new network of “quick charge” 150kw EV chargers. With the new SUV, Audi expects the ability to add 180 or so miles of range in about 30 minutes of charging time.
Similarly to Tesla, ElectrifyAmerica, a company wholly owned by Volkswagen Group (VWAGY) (which is also the parent of Audi) announced plans to roll out 500 of the 150kw charging stations every year for the next four years in the US, building a nationwide network of public EV Chargers.
This is just one example of the many; others include Porsche’s Taycan, or the Mercedes-Benz EQC line, which the company hopes to have 10 different EQC models for sale by 2022. There’s also the Mini E, on going on sale in 2019, or the BMW iX3 Electric which will be released in 2020… the list goes on.
Finally, it looks as if automakers have caught up to the runaway racehorse known as Tesla, and have begun reeling it in.
In a recent study by PA Consulting, the firm found that while Tesla is the #1 electric automaker, it will fall to seventh place in the next two years. Production issues with the Model 3 and an uncertain profit outlook were factors in the lower ranking for Tesla, PA Consulting said. Bigger car brands like Daimler will move up in rankings when they begin releasing their EVs to the public in 2019-2021, which have been under development for years.
So, there’s no doubt that while Tesla is king of the hill, they’re soon going to get overtaken by much larger auto companies. What’s going to happen then?
Sam Abuelsamid, a research analyst with Navigant Research, says, “We are now getting manufacturers building EVs that have experience in delivering vehicles to customers and providing proper after-sales support, which is something that Tesla has struggled to do.” It’s no secret that Tesla has it’s problems. From production struggles to problematic after-sales support, the company has its set of issues.
These issues are to be expected by investors – the company is a “startup” in the car world – so of course it’ll have growing pains. For consumers however, these issues are problematic. Many don’t want to be early adopters, and have to “work out the bugs.” Tesla’s are known to be a bit unpolished, especially for customers switching from ICE luxury cars.
|Model X Interior
So, Tesla has three main issues. Their luxury cars don’t match the quality of German luxury cars like BMWs. They’ve got issues with after-sales support. Finally, they can’t build cars efficiently. These issues are OK for a startup – but customers don’t want to deal with these problems.
As the larger car brands enter the market, catch up with Tesla, and overtake them, Tesla revenues will plummet as 6 reputable car brands eat up market share.
Companies like Dialamer and Volkswagen won’t have any issues producing cars because they’ve got decades of infrastructure and supply networks already there. They’ve also got dedicated sales teams, support teams, mechanics, and networks already in place.
If you were a customer choosing between a $70,000 car that may not arrive for months, and may not have any support, or a $70,000 car that works perfectly, with a support system that you’ve come to expect from a reputable company, which would you choose?
I’d go with the “legacy” companies 100% of the time.
They’ve also got alot more dealerships then Tesla. In Auto 2.0, dealerships serve as EV charging hubs, creating a nationwide network, while continuing to operate as dealerships. By mid 2020, expect to see any automaker who is serious about EVs having charging stations at every one of their dealerships.
Volkswagen currently has about 650 U.S. dealerships. Audi has 290 U.S. dealerships. BMW has 341 U.S. Passenger Car and BMW Sports Activity Vehicle centers. For comparison, Tesla has about 100 retail locations.
What happens to Tesla when manufactures catch up? Tesla looses.
The company is a little kid, while Audi, BMW and the rest are adults. The little kid may have a lot of energy, but at the end of the day, the adults get 100x more work done then the kid. The big automakers have the infrastructure to create and sell EVs as fast as people will buy them. Even better, they already have great consumer reputation. As soon as the early 2020’s come about, and EVs go mainstream, Tesla’s going to take a backseat to “legacy” brands.