Taking Tesla head on.
Elon Musk must be hearing the sounds of horsepower of the big boys in the automotive industry in his dreams or possible nightmares. Ford has announced the Mustang MACH-E. Porsche has announced its entry level Taycan 4S and VW, among other German producers are actively moving into the EV space. VW has indicated it plans to sell 3 million units a year. This compares to Tesla’s total sales of 816,155 since its start of production in early 2013 until the end of Q3, 2019. Recent sales are close to 100,000 units per quarter. (1). In addition, the Japanese and other North American producers are actively entering the EV market.
Now granted Porsche is just entering the EV space and at a much higher price than the Tesla S, but then again Porsche has not tried to sell to everyone. The Tesla S has a better range but at the end of the day when one is putting out 6 figures for a car, a Porsche is still a Porsche and a history of producing cars that people dream about.
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On the other end of the scale is the Tesla Y, to be released next year based on the Tesla 3 platform, and Ford’s new entry, the Mustang MACH-E. Projected horsepower is 332 for the Ford and just over 400 for the Tesla Y. The Ford is expected to be just under $44,000 compared to an expected price of $48,000 for the Tesla Y base model. However, the Mustang will have a tax credit of $7,500 for the first 200,000 units. We will have to see if the Mustang brand will carry weight going forward since the vehicle does not carry any of Mustang history or cache, other than the name.
It will be interesting to see how the EV market evolves as more and more options enter the game. The difference is That Tesla is a ground-breaking, visionary startup but some of the fit and finish issues as shown on YouTube may be an Achilles heel. The new entrants have a long history in automotive manufacturing and name recognition.
But wait. Elon Musk has just made a foray into the heart of American vehicles. The pickup. Just revealed is an eye-popping, radical design that looks like a pyramid on wheels. A stainless-steel body that claims to stop some small arms fire and unbreakable glass that cracked during the reveal. Ooops. But then Apple had some glitches on a launch. The pricing is competitive to a Ford-150. It is a question if the radical design will be accepted in the market. Elon has said that a more traditional design may be possible but remember when a Hummer was seen as a status symbol. Time will tell if this leap into the future (aka “the DeLorean”) is a flash in the pan or a visionary move.
Tesla has announced gigafactories in Berlin and Shanghai so getting into the backyard of two significant markets and home of major competitors like BYD, Porsche, BMW among others. So, what is the future of Tesla? To build the new factories will take a lot of capital. That will mean raising long term debt which will reduce the earnings per share of the company. Obviously, Elon has a lot of balls in the air, including his space ventures. One option would be to leave the making of vehicle platforms to those who have been doing it for decades and focus on what they do well. Batteries and drivetrains. Then again this does not take into effect the Trump-factor, but we will see what the future holds.
Alastair Neill is the President of Trinity Management, a consulting company specializing in business development activities in rare earths, specialty metals and start-up of technology-based ... <Read more about Alastair Neill>