By: Khanh Le
The start of the modern-day automobile dated back to 1885 when Karl Benz — who also founded the household-popular Mercedes-Benz in 1926 — successfully built the first gasoline internal combustion engine (ICE). Since then, the global automotive industry has grown to amass an annual projected revenue of 2.7 trillion dollars as of 2021. A subcategory on the rise are electric vehicles, both plug-in (long-range battery and an ICE) and fully electric, as the industry sold 3.1 million units out of the 63.8 million total units sold globally. Showing no sign of stopping, the industry boasts an exponential growth forecast. The leader of this movement is Tesla, who has sold just a hair less than half a billion units; this number is more than double the next rival, Volkswagen. Tesla does so by offering only 4 passenger vehicles: the luxury oriented sedan of S and SUV of X; and the more consumer-friendly sedan of 3 and SUV of Y. With such promising growth, many traditional manufacturers — with the likes of Audi, Porsche, Ford, Mercedes, and many others — are flocking to take a piece of the industry pie. Despite Tesla’s current advantages, they will face some fierce competition from other manufacturers in just a short few years.
The history of electric cars dates back much farther than most think. With that said, Tesla was the first to recapture the consumers’ attention in recent history. The first commercial electric passenger vehicle dated back to the 1890s, alongside even the first ICE vehicles. By the early 1900s, electric cars became the rage, accounting for over a third of all units sold annually. With that being said, the affordable 1908 Ford Model T, in conjunction with the discovery of cheap oil in the 1920s, marked the beginning of an end to electric cars. The industry saw many ups and downs until 2008 when Tesla debuted the Original Roadster, making it the first “cool” electric car with great looks and good performance in a world of Priuses. In 2012, Tesla introduced the highly coveted Model S and created a big buzz in the automotive industry. After the launch of the Model X in 2015, which stood in the same luxury segment as the Model S, Tesla gained a sizable popularity, even ruffling its feathers against the giants of Porsche, Mercedes, and BMW. Tesla’s success begins with its risky decision to reignite (pun fully intended) a dead market well before any manufacturers could respond with similarly competitive offerings.
With that being said, the electric vehicle industry is still very much an open market for great competition as Tesla is far from being perfect. Tesla is the new manufacturer with luxury-oriented and high performance models, making them highly desirable status symbols for the wealthy. Everyone wants the next new thing, especially when that thing is oh-so expensive. Tesla models are also filled with gizmo and quirks that dazzle buyers and keep them entertained for quite some time. Not only does Tesla offer exotic products, Elon Musk is without a doubt a highly influential man, imparting changes in all sorts of markets and cultures. With that being said, Tesla still clings on to several critical mistakes. The company suffers greatly with quality control (keeping each unit sold equally high quality). It also has a public relation (PR) conundrum on its hand, partly because it does not even have a dedicated PR team. The manufacturer has made countless blank promises, many of which either are delayed by years and postponed outright. Quintessentially, Tesla vehicles are expensive toys, or perhaps expensive tech, with wheels attached, rather than robustly engineered vehicles with great tech on board.
This comes as a threat for Tesla in the future as veteran manufacturers introduce newer and more exciting models, similar to what Tesla had done before. Take Porsche’s Taycan for example. It is engineered for the driver to feel great while driving the car with Porsche’s racing prowess, and to feel great with its sumptuous interior. Take Mercedes’ newly-launched EQS for another example. Engineered to be the electric brethren of the pinnacle S-Class, the EQS boasts an ultra luxurious experience with an optional gigantic screen and loads of tech. Both examples are new kids on the block, and they pose challenges to Tesla in the long-run as the next status symbols with new bragging appeals. In marketing speak, Tesla’s image as the pioneers is falling, reducing parts of Tesla products’ current appeal.
Side note, Tesla new buyers are unable to redeem the federal tax credit of 7500 dollars while other manufacturers’ customers can. Not that it would matter for those luxury buyers anyway. What is 7500 to 150000?
However, for now, Tesla still dominates one major area: battery ranges and charging networks. Range anxiety, or the fear of running out of electricity in dire situations, is a major concern for consumers. Having a longer battery driving range means wonders for an electric vehicle, and Tesla is the reigning champion in this regard. The brand makes some of the longest running models, capable of driving much farther than their respective competitors of the same segment and performance capabilities. This is also in part due to the cars’ ability to use their batteries much more efficiently. The brand also features the Supercharger, a proprietary network of ultra-fast charging stations, which bolts much farther ahead of competing networks. Although EPA-quoted ranges (ranges that the EPA has approved for a particular car through the agency’s standards and testings) are not definitive in the real-world, it is undeniable that Tesla’s early adopter advantage has yielded the company big competitive advantages of great ranges and a winning charging network for its users.
However, the giants of the automotive industry are also slowly catching up. The number of chargers globally grows at an exponential rate, doubling in number every year. Furthermore, many are betting on solid state batteries that promise denser energy storage, significantly increasing ranges. Many upcoming, but not yet available, options promise Tesla-rivalling ranges. In a decade or even less, the market will saturate new buyers with many longer range models and a plethora of charging options from different networks. Big ranges and a vast charging network are undoubtedly shielding Tesla from competition in the short run, but will the shield stand the test of time? Tesla’s advantages here are not intellectual, but rather by just being in the industry for longer. Over time, the shield will inevitably weaken as outside firms, and even governments, jump in.
Make no mistake, this impending and exciting competition will also happen in non-luxury segments. Comparisons so far were made focusing on the upper echelons of the automotive industry, but similar advancements are happening in more consumer-friendly spaces as well. Brands like Kia, Hyundai, Volkswagen, or Toyota have already made plans to take this newly (re)emerged market for a spin. The market saw movements in the luxury segment at first due to the high cost of entries for suppliers, but those barriers will soon break down as the market develops, allowing for cheaper options coming from more brands.
Tesla has done wonders to shake the automotive industry up by electrifying consumer interests and offering technologically and culturally-shifting options. However, Tesla’s success means traditional manufacturers will want to compete and take up Tesla’s market spaces. Tesla’s competitive advantages are strong, but do not forget that traditional manufacturers have much bigger financial resources for research and development, much more experience in building high quality vehicles, and consumer appeals that come from having stronger brand identities. Consumers already see benefits from this competition as Tesla introduces new and improved battery design and ups their build quality, and as more and more brands jump in the market. There is bound to be more.
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