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Originally posted by james.hendrickson
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Most people think Tesla's competition are other EVs. The truth is Tesla's real competition is the Internal Combustion Engine fleet. The purpose is to get you to transition to clean energy by making it cheaper to operate, safer, convenient, and fun/quirky. Of course governments are forcing this transition as well, with deadline by 2030s in EU/China in which ICE cars are banned from being sold.
Legacy Auto
They are designing EVs to compete with Tesla, and not to cannibalize their ICE offering by making them too good. The mission is entirely different.
So you see how there's a conflict of interest with legacy auto. They try to Osbourne Tesla as much as they can by putting out wild numbers like "350 miles range" three years before production but end up with 192 miles EPA. They don't focus on the real bottle neck and cost of this entire transition which is battery production. Their software engineers are borderline 3rd rated drop outs because they spend their entire existence relying on OEMs to make the tech for them while they are just a packaging companies.
So when it comes to legacy auto, there's no competition because financially they designed to not be competitive. They are in a very tricky situation in which the entire EV business rely on high margins from production and software to make profits, not service and parts. Currently legacy makes very low margins on their actual cars because they rely on third party heavily. From buying seats/infotainments to having dealers distribute their cars, every little step is money on the table being made by others and not the auto maker themselves because parts are where the margins come in. So what do you have? Cars that are giving them negative margins while charging customers 1.5-2x the cost of Tesla's.
New EV start ups (Luicid/Nio/Xpeng/Nikola/many others).
So these companies will make more compelling products than Legacy auto. However, I put these companies at about 5% success rate at staying alive, and 95% bankruptcy rate. Historically we see that new auto makers end up bankrupt. Most has to do with not able to survive the initial warranty period as it's a severe cash drain. This and the fact that people are wary of trying out new brands as bankruptcy rates are high.
NEW EVs however are at even more of a disadvantage because the service center infrastructure must be robust to generate sales. So most of the new cars coming out are more expensive than a Tesla(sometimes 2x more expensive than Tesla's model S). So the # of people who can afford them already reduced to almost nothing, and then you have the chicken and the egg problem due to a lack of service centers. It's a very tough road ahead in which Tesla almost went bankrupt 3 times and they had zero competition in the space. New EV companies have Tesla to deal with, so it's extra hard and frankly it's stupid cubed just to even try. HOWEVER, Tesla even though had revenue, was only awarded a couple of hundred million dollars when they IPOed. Due to their success, the new EV start ups are awarded with tens of billions of dollars so the capital market is very lucrative for them, and this is a pretty good competitive advantage vs Tesla's early days. The sentiment however can shift very fast as most of the valuation is based on nothing but speculation. So it might be rosy today, but if they have manufacturing problems/no demand, we can see valuation evaporate overnight.
Tesla's competitive advantage
1. Manufacturing: This is the biggest competitive advantage of Tesla as it is the key to scale and transition the world to clean energy. None of the companies above are trying to solve one thing, which is to scale batteries to the point in which to satisfy 65 million sold cars a year. Tesla with Panasonic is manufacturing 40% of total battery output in the world and currently they can only hit 500k produced this year. However Tesla is working on simplifying manufacturing and battery production to scale to multi millions in just a few years. This will reduce cost significantly, improve margins, but mostly just to satisfy demand. Currently powerwalls have month long back order/semi trucks can't be made, all due to battery shortages. So ask yourself how can the competition even compete when the real limiting step no one is actually working on?
2. Software: From quirks, to Netflix, to full self driving. Tesla has the best software and monetizes this better than any legacy auto. Possible ride hailing service coming later this year
3. Data: Use to train full self driving and pull information to reduce insurance cost for Tesla owners. Leveraging data to reduce accidents and reducing the cost of ownership even on an insurance level.
4. Continuous improvements: Constantly improving parts/production process and introducing them into the production line at lightening speed. Munroe have tore apart a Model Y from June and noticed 13 different improvements to the octovalve compared to the April tear down car. This continuous improvement is mostly used to increase the pace of innovation and prevent ip theft for having any usefulness.
So yeah the competition argument is perhaps the weakest when it comes to Tesla because usually other companies can come in and disrupt something severely lacking that Tesla is doing and run away with the first place trophy as Tesla fails to fill that gap. Currently Tesla has knocked out all the short coming and then some, leaving very little room for competitors.
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