The Tesla Advantage — is it real?
I will start this stream of thought with a disclaimer: I am not a Tesla ‘fanboy’. Unfortunately, in this day and age, you have to either declare or disclaim any allegiances before people accuse you of bias. I am, simply, a lover of efficiency and, thus, a lover of electric vehicles and believe that they will change the world we live in.
Why Electric Cars?
As a product, an electric car is simply better than an internal combustion engined car. The reasons are many, which I have detailed in this post here, so I will focus instead on the company that is synonymous with electric cars: Tesla.
Tesla Who?
Well, if you’ve been living under a rock for the past few years, Tesla are the world’s most high profile producer of battery electric vehicles. They also make solar panels and battery packs for energy storage. What is really interesting about the company is that, essentially on their own, Tesla have made the concept of an electric car ‘cool’. This strategy actually seems to be working for the company. In Q3, 2018 Tesla delivered 83,500 vehicles. In these numbers, consider this: The Model 3 sells only in North America and, currently, only above $50,000. The other two vehicles, the Model S & Model X are sold in some global markets and sell for over $100,000 a piece on average. Selling so many cars at such a high price is some achievement whichever way you want to look at it.
All of this begs the question: how have we come to a situation where the biggest electric car company in the world is some petulant Californian startup run by a seemingly crazy, tweet-happy, pot-smoking billionaire whose name and personality would fit into any James Bond plot? What has happened to the Toyotas, Hondas, BMWs and Mercedes-Benzes of the world? I think I have the answer, and it’s not a short one. Let’s talk about Tesla’s distinctive advantages to understand more.
The ‘Want’ Factor
As with most successful innovations, Tesla has managed to make their products desirable. Rather than trying to launch the most affordable and similar-to-a-regular-car electric vehicle, Tesla decided to go top-down. While other manufacturers tried to make decent, cheap electric cars, Tesla slammed a gigantic screen on the dash and added crazy easter-eggs. Tesla fans talk about Autopilot semi-autonomous driving and over-the-air updates. People don’t talk about Nissan or Hyundai. They do talk about Tesla.
Compare it to a Nissan Leaf — that’s a car that needs you to be dedicated to the cause of electric cars. It’s not pretty, has a limited range of approximately 150 miles to a charge, is not particularly fast or engaging to drive. It’s an appliance. A good one, but an appliance nonetheless. A Tesla, well it’s just a good looking car that competes with other cars in its respective class. Yes, the Model X is a bit of an odd shaped thing, but they added those complicated, some say unnecessary, doors to it. I bet you that the first thing that every Model X owner shows off are the crazy falcon wing doors. The point is, people want a Tesla whether they need one or not. They want you to see the impressive touchscreen with the Santa Claus mode. If cars were purchased as an appliance, everyone would have the most reliable and identical white colored Toyota. Cars are bought with emotion, and want is one of the most powerful ones out there. Nobody I know is getting hot under the collar for a Volkswagen e-Golf. Yet, thousands of people are stretching their budgets for the Tesla Model 3.
The Range
There is no Tesla car that you can currently purchase with less than 200 miles of driving range. Apart from the Chevrolet Bolt and the new Jaguar i-Pace, there is no other electric car that you can purchase today, in November 2018, that will do 200 miles or more. Some of Tesla’s models will run over 300 miles on a charge. All the weight and cost disadvantages aside, Tesla simply made a product that is usable without having to worry, similar to the traditional way that cars are used. Once again, the inherent compromises in other cars come into view. You could get another EV, but it’d have to be your second car because road trips become virtually impossible with an hour long stop every two hours. Yes, most owners will use about 5 or 10 percent of the range available daily. Yes, they will only do road trips twice a year. However, that’s the same argument as having a huge engine under the hood of your gas-powered car. People almost never use what is available to them in a car, but they do want it to be there when they need it, even if that’s for a single day in the year.
Superchargers
Tesla have spent a huge amount of money and time building up their supercharger network. At the time of writing, the global network stands at 11,234 chargers in 1,359 locations. A majority of these are in the US and Canada with ongoing expansion in all of the markets served directly by the company. With the range part of the equation mostly served by selling cars with large battery packs, Tesla has also covered the road-trip anxiety part of owning a car. Punch in your destination on the Google Maps based navigation system built in to each car and the car will tell you where you need to stop and for how long. This seems like a bare-bones-basic requirement, yet only Tesla is doing it convincingly. A recent attempt by me to navigate from New York City to Chicago while sitting in a Tesla Model 3 at their showroom revealed 4 required stops. I could search each stop for food, rest and shopping options. At that point the car was showing about 50% range. Start the same trip with a 100% charge and it would likely be 3 stops. That’s about normal even in a gasoline powered car. I have made this trip in a Honda Civic and we stopped three times! I’d even say it’s healthy to do so over 12+ hours of driving, if only to give your bladder some relief. So while one might have to plan stops more carefully to suit the range of the car, it’s not as inconvenient as one might think.
The fact is that such a network exists, it’s easily accessible, built in to the software of the car, exclusive and cheaper than gasoline. No company in the world comes even remotely close to such a seamless and complete setup.
Data, Updates and Autopilot
Obsolescence is a problem that faces most cars, particularly in the modern era. A car from five years ago might have blind-spot warning or radar cruise control, but you will find newer models that do these things better. Your in-car infotainment is almost certainly going to be out of date by the time you trade in. In a Tesla, though, updates are automatic. So if the company finds data that suggests a tweak to the way in which the sensor data is interpreted and used, your car will get that tweak. It’s almost unheard of for a car to get better through its years of use. Many Tesla users have posted their experiences on YouTube about how things improve as they go along. While most of these are restricted to improved user experience and functionality rather than mechanical improvements, these updates definitely aren’t a bad thing for resale value at all.
Recently, Toyota announced a recall for 2.4 million Prius vehicles to fix a software fault that might cause cars to stall while driving. If there is a defect in a Tesla that is software rectifiable, it can be done instantly. You may not even know that it existed because it would be fixed while you sleep. In the case of Toyota’s recall, the time, money, effort along with the need for a large and effective service network are all enormous. Teslas will only need to recall cars for physical faults not software ones. And with electric cars, a lot of the work is done by software. Aside from tires and suspensions that your average neighborhood garage can cater to, the complicated mechanicals are mostly maintenance free.
To add to all of this, Tesla cars just completed 1 billion miles of driving with their semi-autonomous autopilot engaged. It is hard to even begin wrapping your mind around that quantity of information. The access to such real-world data is, in itself, worth some of the stock market valuation that the company boasts. This number is also on a rapidly rising graph as the delivery of large quantities of vehicles only truly began in July, 2018. Tesla’s semi-autonomous Autopilot system is currently the most complete and developed self-driving system. The system can manage freeway driving and, recently, has been updated to even choose lanes and exits as and when necessary. Put all this together and it is clear that Tesla will, for many years, have more data than other car makers and this tool will enable them to continuously improve their products and stay ahead of the curve.
Gigafactory
Once criticized for being a vanity project, Tesla’s Gigafactory is a great asset in their continuing growth. Once fully complete, Gigafactory 1 will have the largest footprint of any building in the world. Their Nevada based factory houses battery production by their partner Panasonic along with production of drive units and other electronics for the actual cars that they produce. Anyone following the EV world will realize that the cost of batteries is the single largest factor in the pricing of a vehicle. Tesla have stolen a march on their competition and, by all accounts, currently produce the lowest cost battery cells in the world. This enables them to improve their pricing, margins, the size of their packs, everything. Tesla is likely to be, or has already become, the first company to achieve a pricing of below $100 per kWh for batteries. It will take a long time for the competition to come close to this pricing. Current data suggests that the next best priced battery from LG Chem is at least 25% more expensive, leading to a thousands of dollars difference in the cost of manufacturing. Apart from costs, having production in-house tremendously helps Tesla’s design and innovation efforts. The development of their own type of cell for the Model 3, known as a 2170 cell, is just an example of how they can do this, launch it and mass produce it before the competition can even blink and realize what’s happened. And while they are blinking, a Chinese Gigafactory is under construction to help the brand grow in the world’s largest automotive market.
The Community
Finally, Tesla’s ardent fan base is an advantage that, frankly, not many people saw coming. However, as electric cars transitioned from somewhat of a cult to a genuine mainstream product, those who got on the bandwagon early are proud to scream from the rooftops about it. You cannot be an auto enthusiast and not see a Tesla channel on YouTube, competing for your attention. It’s absolutely mad to think of a car company being so popular on social media with so many people viewing daily, sometimes mundane, experiences of the driving lives of Tesla owners. It is simply fascinating and probably deserves its own article written by someone who understands psychology and group behavior. A lot of people who have never sat in a Tesla probably know more about the car than any other car on the market and will likely understand how to use the car and all its features as a result. The term free marketing comes to mind and Tesla are milking it. In fact, their referral program, which makes the marketing probably not free per se, is evidence of how much the company believes in its customers as cheerleaders and spokespersons for their brand. To put all of this in perspective, the Tesla Model 3, America’s number one selling car by revenue and number five by sales volume has not yet featured in an advertisement. Ever.
The Future
So, as Tesla gets their financial act together, impressing those previously skeptical, what do they have going forward? March 2019 will see the launch of the Model Y, a mid-sized SUV, the kind of car that the world has been lapping up in millions literally. Their flagship Model S & X vehicles are due to receive a thorough update in 2019 as well. This vehicle is almost certain to be a high volume product. Tesla also aims to launch a Semi truck which they have shown to the world and continue testing. An insanely quick 2 seater Roadster has also been displayed and will be sold in the next couple of years. Tesla is also building a factory in China and increasing their production in the US. All of this sounds like a company with the wind in its sails.
In Summary
Tesla are here and they are here to stay. The recent improvements in their financial health and steady production so far through Q4, 2018 suggest that the worst is behind them and they can focus on more traditional tasks like incremental improvements in quality, cost, efficiency and production volumes. The world probably has to thank this company for pushing the agenda of electric vehicles forward into the mainstream. Personally, I am looking forward to walking around my neighborhood and not having any fumes blown in my direction. That time may be far off, but for now, the revolution has begun and it’s only just gathering pace.
Sources:
1. https://cleantechnica.com/2018/09/09/tesla-model-3-becomes-1-best-selling-car-in-the-us/
4. https://www.usatoday.com/story/money/cars/2018/10/05/toyota-prius-recall/1532120002/
