Why Tesla is poised for success

Hassan
Hassan
Feb 7 · 5 min read

Background

Back when I had started my degree in Electrical Engineering at Concordia University (Montreal, Canada), there were many “potential” companies that students could work. During that time, Tesla had just released their Model S. Although it was a revolutionary car in terms of electrification of transportation, the car was still out of reach financially for many individuals. In fact, in Canada, the Model S starting cost was between $64,500 to $89,900.

This was like almost 8 years ago. A lot have changes since. In fact, a SUV vehicle titled as Model X was released in 2015. Moreover, Tesla have been pumping out a much affordable version Electrical Vehicle (EV) called the Model 3. In 2019 alone, the company delivered 367,200 cars. Compared to 2018, that figure has increased over 50%. Guess what? They aren’t stopping, they’re projecting double digits % growth in terms of vehicles delivery in 2020.

But why Tesla? How did a company disrupt the car industry, an industry known for its difficulty to penetrate the market? Let’s take a look in this week’s post.


Analysis

Electrification IS The Future.

There’s no hiding it. With global warming being an existential threat, there’s no way gasoline as a bright future in transportation. In hindsight, I think everyone knew that EVs would be on the road. The question was rather “when”. Can you imagine a world where emission gasses are killing our planet, and the very own transportation we utilize daily is “part” of the problem? That seems like a dystopia world that Elon Musk refused to live in, and thus founded Tesla in 2003. The vision was there, the execution was there, and competitors like Ford failed to transition towards EVs in time, and thus allowed Tesla to blossom with Model S, Model X, and eventually Model 3.

Figure 1: The Model 3. Photo by Eduardo Arcos on Unsplash

In less than 20 years, a research paper published in 2019 on Bloomberg estimated that 57% of passenger cars on the roads would be EVs. Thus, there is so much opportunity for a company like Tesla to continue to grow in the coming decades due to the sheer numbers of demand for EVs.

Can you believe that there is presently no car, besides Tesla’s cars, that competes with Tesla’s Model S delivered in 2012. 8 years later, still no competition to the said EV. The competition is behind, and Tesla is moving forward indeed.

Full Self Driving (FSD) Cars.

Ok, it’s called Full Self Driving, but it’s not achieved that level yet. In fact, it’s achieved Level 4. Without going too technical on you, Level 5 automation is when you can jump into your car, read a book (or scroll through your Instagram?), and your car drops you at your destination — with no intervention of the driver. Level 4 requires some sort of intervention, but it’s pretty close to Level 5. Why does all of this matter though? What’s the point of FSD, and how is it related to Tesla’s success?

Well, there is no car company in this planet, besides Tesla, that has developed such technology. We know that this technology will exist, and that there is demand for it. I mean, in almost every single sci-fi movie there is a scene where the transportation vehicle brings you to point A to point B. Putting side fiction stories for a minute, I think we have to visit the idea of allowing anyone with a driver’s license to control a 2-tonnes machine that can exert an insane amount of force to anyone or anything. It’s estimated that approximately 1.25 million people die globally due to car accidents, or 3,287 deaths a day. This is why this technology is needed. It’s for the safety of our kids, families, friends, and communities. Maybe decades ago this mode of transportation made sense because artificial intelligence’s technology was not developed as it is today, but where we are going this will be unacceptable.

Figure 2: Tesla Model 3 interior. Photo by Bram Van Oost on Unsplash

So what are the options for competitors to implement such technology to their fleets? Really, the only option right now is to hope that Tesla licenses their FSD technology to partners. In other words, Tesla will profit for every vehicle sold. In their latest earnings report, the company reported to have gathered data of over 3 billion miles from Tesla fleets around the world. The more data you have, the more you can analyze, the more “fuel” you can feed your AI machine, the smarter the AI machine gets. It’s a feedback loop that is crazy.

Batteries.

One word. Batteries. Yes, it’s that thing that “powers” your EV. Tesla produces their own batteries, in their own “Gigafactories”. Competitors, as of 2020, do not. This is a huge difference maker. I’d argue that this is the reason Tesla has been able to capitalize on the EV market, capturing up to 17% of EV sells in 2019.

This is almost the same story as the FSD chip developed by Tesla. Tesla could sell their batteries to other car manufacturers, which would net them additional profits without selling their own fleets. This is thus a competitive advantage. Can you really expect Ford to develop their own batteries? When they start mass producing electric vehicles, which is a challenge of its own, they will no doubt outsource battery manufacturing to another company specialized in batteries.

Figure 3: Tesla car being energized by one of many Tesla charging stations across the world. Photo by Dario on Unsplash

The key here is to investigate the input costs for manufacturing and outputting an EV. If you can lower your input costs, then you can lower your EV cost, and thus allow the greater masses to purchase the vehicle.

The Brand’s Culture.

Millennial are going crazy over the Tesla brand. The Internet power is “real”. Elon Musk is regarded as a savior to our global warming crisis, investors are cutting checks to Tesla like no tomorrow, and the brand has established its culture in the 21st century. The world is ready for a change in an industry that has been dominated for decades through gasoline-powered vehicles.

I think just like how Apple disrupted the music industry, and then the smartphone industry, Tesla is about to do the same in the car industry and then ultimately in the energy industry. It’s not just about cars anymore. It’s about turning the world green, utilizing renewable energy resources. From powering Australia to installing solar roofs on homes, Tesla has established a special place in many peoples’ hearts. I suspect it will continue to do so.

Hassan

Written by

Hassan

Positive vibes only. 💜💛

More From Medium

Related reads

Related reads

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade