Tesla Competitive Advantage Comes From 5 Things



100% Electric Vehicles

Published on April 29th, 2015 | by Zach

17

Tesla’s Competitive Advantages — 5 Big Ones

April 29th, 2015 by
 

Tesla has several big competitive advantages, imho. I’m going to discuss 5 below, but 3 tangible ones and 2 intangibles. [Full disclosure: I’m long TSLA… for obvious reasons.]

Tesla’s huge competitive advantages, imho, are:

1) The battery supply chain it is building for itself (and maybe some friends)

Tesla Gigafactory

I thought it was obvious before, but it seems that many mainstream investors and analysts are just picking up on the fact that batteries = a big part of Tesla’s business advantage. But are their batteries really better than the competition?

Yes.

Well, it certainly seems to be so. Tesla’s battery packs are routinely estimated to be a good tier cheaper than other EV batteries. Part of that is thanks to the quality of Panasonic’s cells, but part of that is also Tesla’s continual improvement of the packs and the battery chemistries.

Tesla’s constant work to improve its batteries is one side of the cost-cutting calculus, but another important side is simply scale. Scaling up production results in greater manufacturing efficiencies, manufacturing improvements, and cost reductions. Tesla is scaling up its production big-time via the under-construction Gigafactory, and no competitor (other than BYD, perhaps) is showing that anything similar is in the works.

GM has announced the Chevy Bolt, which could theoretically compete with the Tesla Model 3 (on range and cost), but it is targeting ~30,000 sales a year rather than Tesla’s target of ~500,000. Why they huge disparity? Perhaps it’s the battery supply chain….

And note that Tesla’s batteries are valuable far beyond electric vehicles, and it is doing quite well winning stationary energy storage contracts. That just further boosts its battery production scale and competitive advantage.

2) Its wonderful Supercharger network

tesla-superchargers-germany

Another thing that Tesla really “gets” that others haven’t demonstrated to understand is that electric car consumers want ubiquitous fast-charging stations. Not somewhat scattered charging stations. Not slow-charging stations. But ubiquitous fast-charging stations. Other automakers have left this to the market to solve. Tesla has built its own Supercharger network (or networks), and nothing else compares to it/them.

Furthermore, rather than meddle with an annoying, penny-counting pricing system, the price of these charging stations is rolled into the price of Tesla’s cars, and Tesla drivers get the psychological relief of a lifetime of free Supercharging. While the cost may be the same (or even more), the convenience and the way we think about these things gives Tesla the strong upper hand.

Again, there’s no sign that another electric car manufacturer has picked up on the importance of the Tesla Supercharger network, as none of them are implementing anything that genuinely compares.

If the Chevy Bolt and the Tesla Model 3 come out at the same time with the same specs, I’m choosing the Model 3, in large part because of the Supercharger network.


 

3) Software that is several leagues above the competition

electronics and software tesla

Another reason I’m (theoretically) choosing the Model 3 is because Tesla’s approach to software is a tier (or more) above the competition. It used to be that cars were big machines with small computers in them. In the future, cars are going to be computers on wheels, and Tesla is leading us there. Its software team rolls out over-the-air updates like we get on our smartphones, tablets, and computers, continuously improving owner vehicles.

Even a “recall” can be done virtually, Tesla has shown.

With an electric car, the improvement capabilities that come from better software are beyond imagine. I think it’s safe to say that cars of 2025 and 2035 will be very different animals than cars of 2015. If I were to put my money on who most leads us to those computers on wheels, I’d put it on Tesla (oh wait, I have).

4) A reputation for building superb products that “wow” people

Above are some of the tangible ways Tesla has set itself apart from the competition, but there are a couple of “intangible” strengths the company has developed as well. One is that it has developed a reputation for producing superb products. The Tesla Roadster transformed the image of electric cars from small, slow vehicles to blindingly fast vehicles of desire. An early investor, after driving away in his hot new sports car (I think a top-of-the-line Porsche) following the test drive of a Roadster prototype called the Tesla crew to angrily complain to them about how they had just ruined his expensive new gasmobile toy for him.

As if that wasn’t enough, Tesla produced the cheaper Model S sedan that ended up winning just about every big auto award. After some updates, it also set the record for quickest production sedan in history, with a 0 to 60 (mph) acceleration that beats even some supercars. It’s simply on another level.

Based on these initial two products, but especially the latter, people who “don’t like electric cars,” adore Tesla. With this reputation for excellence, again, who’s going to buy an affordable Tesla competitor when a comparable Tesla is on the market?

5) A reputation for wanting to serve customers in a direct, honest way — not just take their money

Another important intangible is that Tesla has shown repeatedly that it cares more about providing the customer with good service, a good product, and honesty than making a little more money off of them. That kind of reputation for integrity and morality is something long lacking in the automobile world, and there’s no doubt that customers have found it to be very refreshing and desirable. If tesla keeps it up, it’s going to gain more and more brand loyalists, and I haven’t seen any sign that other automakers have figured out how to adjust their business approaches to compete in this “human” side of the equation.

The Future Is… Tesla

Excluding the 2 subjective points at the end, I’m not seeing another automaker offer something comparable for 1, 2, or 3, let alone 1, 2, and 3. These are critical pieces of the electric vehicle future. If other manufacturers don’t quickly catch up by making some big (many would say risky… I wouldn’t) moves, they are going to end up 1) waiting a long time until they can catch up to Tesla in EV sales (assuming they ever can)… just looking at the supply side of the equation, 2) having to pay Tesla to use its Supercharger network, or simply offering inferior products year after year, and 3) offering inferior products year after year (and perhaps someday revolutionizing the software side of their business).

It’s hard to see any other manufacturers as being serious about electrification when they are so far behind Tesla on 1–3. Or, they are simply far too slow-moving to compete in this new sector, which is no better for their businesses and shareholders, but at least lets them off the hook a bit morally. In either case, though, it looks like Tesla dominates the future of automobiles.


 

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy since 2009. Aside from his work on CleanTechnica and Planetsave, he's the founder and director of Solar Love, EV Obsession, and Bikocity. Zach has long-term investments in TSLA, SCTY, FSLR, SPWR, SEDG, & ABB. After years of covering solar and EVs, he simply had a lot of faith in these companies and felt like they were good companies to invest in as a portion of his retirement strategy. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



  • I agree with most of those 5 points, but I would add a couple:

    Ground up EV design, with one of the lowest drag Cd’s of any car on the road.

    Smart business plan: build a top of the line, no compromise, great looking – and yes, expensive; so you can pay for the development costs, and have a car that people lust after – and you have a halo car for all EV’s. Because, what Elon Musk wants to do more than anything else is, show how good EV’s are.

    EV’s are what we would build if we started with a fresh design, now, with what we know what we know.

    Direct sales is very smart, too. Car dealers are in a strange place, and there are good reasons why nobody really likes to buy cars from them. Same goes for paid advertising – who watches ads, anyway?

    • Good stuff. πŸ˜€

    • neroden

      So that’s two extra competitive advantages. I just realized while reading another article here that Tesla has *another* competitive advantage:

      Tesla has released adapters so that you can plug your Tesla into practically any socket in the world. The main charge cord design makes it easy to make additional adapters for even more outlets (and there are some pretty cheap ones available from third parties). I can plug into stove outlets, dryer outlets, RV outlets, whatever, and I can get the maximum draw possible from the outlet.

      By contrast, if you want to charge faster than 3.3 kw in a Nissan Leaf, they expect you to install an overpriced “charging station”. The same is true of every other electric car in the US market today.

      This is an example of giving the customers what they want rather than imposing artificial obstacles.

      The only competitive disadvantages I see for Tesla right now are a shortage of service centers, and a high starting price.

      • Dragon

        I was surprised to realize that the small EVSE included with Tesla, along with the larger versions you typically mount on the wall, are really just there to communicate with the car and perhaps provide redundant current regulation or safety features. EVSEs ultimately feed AC power to the car and the car has an on-board converter to change that AC to DC and charge the batteries. The onboard converter on original LEAF is 3.3kw but I believe on later models or with certain upgrade packages it’s 6.6kw. The converter on Tesla is 10kw with a “dual charger” option on some cars to double it to 20kw.

        You can buy a third party small, portable EVSE on a cable for LEAF just as Tesla includes with the car, so that’s not a big advantage for Tesla but it is convenient and saves $300-$400. The 10kw (40A at 240V) on-board Tesla charger is nice, but you really don’t need over 6.6kw (or probably even 3.3kw) when charging overnight whereas on the road, 6.6kw or 10kw are way too slow. I’m sure there are occasionally cases where the extra 3.3kw speed will be appreciated but I think they’ll be rare.

        Tesla only includes adapters for 10-15 and 14-30 outlets. Other adapters must be purchased for $45 each and they’ve discontinued some of them which is annoying. So with any EV you’ll need to buy third party adapters or make your own to cover the wide range of outlets out there, and you’ll need to carry your own portable EVSE.

  • Ken

    Well done, Zach.

  • Shane 2

    Musk hasn’t promised that the Model 3 will have access to the Superchargers.

    • MorinMoss

      If Musk expects to sell 500,000 per year by 2020, it’s almost a given.
      Large numbers of middle-income families on a trip with kids are not going to buy if they can recharge in a reasonable time.
      And Tesla needs to have a competitive advantage of the 2nd Gen Volt & Leaf and the forthcoming Volt.

    • He has said at least a few times that they would. Whether or not you take that as a promise is up to you.

    • Dragon

      There’s no way model 3 won’t have access in some way. There is some tiny possibility they’ll have to pay per charge rather than have unlimited charging (honestly I think that would be a good idea to prevent people who happen to live near a supercharger from trying to use it daily) but there’s no way they’ll be excluded from superchargers entirely.

  • Dragon

    Something else that’s extremely important about the supercharger network is reliability. Tesla rarely puts in fewer than 8 chargers in a location so even if one or two go down, there’s all those others. Wait times are rare. Down time is rare. Every other charger I look at reviews on on plugshare.com has periodic complaints that it was full for a long time or the one or two terminals available were all out of service. Being unable to count on chargers makes long trips through sparse charger areas basically impossible or at least extremely risky in any EV other than Tesla.

    Tesla also keeps increasing their charger power. The originals were 90kw which is about 191 miles of charge per hour. Now a lot (most?) can charge at 120kw and eventually they’ll be 150kw. Using them at higher power is only compatible with newer cars, but still.

    • Yeah, good points.

    • neroden

      Well, an entire charging site can go down, and this has happened on occasion (they do have single points of failure at the moment, such as the utility connection). But Tesla is spacing the Supercharging sites about 100 miles apart, and the cars mostly have 230 miles of range… so you can drive to the next one if you have to. Really comprehensive.

      And in a pinch you can always charge at a slower charger — probably faster than any other electric car can. Such as the entire 70 amp / 90 amp Sun Country Highway network in Canada. Most of the other electric cars max out at much lower charging speeds.

      • Dragon

        I was considering a trip up to Oregon and realized that north of Reno, the superchargers are spaced so you really need to charge to 95% or better in an S 60 to safely make it between each charger. This is due to terrain – you need around 10 miles of range for every 1000 foot rise in elevation. With large elevation changes between chargers, they put them 100 miles apart, while with little change they put them 140 miles apart, but either way you’re looking at 160 miles absolute minimum range to get between them at 55mph with no cold or headwind. In an S 85 or 90 you could do it a lot more comfortably but you still wouldn’t have the 320 absolute minimum range needed to skip a charger.

        In more traveled areas they have the chargers closer and you can skip one even in an S 60, though since charging is much faster at lower states of charge, you really don’t want to skip one if you don’t have to.

        While an entire charger site can go down, I doubt it’s any more common than the electricity to your house going down and it will certainly be a high priority to fix. Of course it would really suck if it happened and at these out of the way locations you’re not likely to find other good alternative power sources. At least with the latest firmware update they show you in real time on the map if a charger is down so you can make alternate arrangements before it’s too late.

  • EmuBob

    I am motivated to buy a Tesla for further reason. And that is to reward Elon Musk for risking his fortune to do what no-one else has done and do my bit to strengthen Tesla. All of the major auto manufacturers could easily have produced a practical EV years ago, but with the partial exception of Nissan they ignored any environmental responsibility and just kept pushing their polluting products. For years they produced EVs sufficient to meet regulatory requirements but clearly deliberately designed to fail in the general market. Impractical and ugly to the point of derision, they can only have been designed so that they would never be bought by the average person.

    And then came Elon Musk. With one practical and desirable car, he has made the ICE auto obsolete. Now the major auto companies are scrambling to catch up. I for one am prepared to pay a considerable premium for a Tesla 3 over a GM, Ford or any European EV. When people look back from 2040 or 2050 they will see that the world owes the elimination of auto fossil fuel pollution to Elon Musk.

    • claude laval

      Right on EmuBob…Remember the documentary ”who kill the EV” the story of GM who kill over 20years ago the EVone. What a shame and the time lost…

  • WhatWouldYodaDo

    Also they are better at milking the government for subsidies and special treatment.

    • Povel Vieregg

      What is your motivation to pass around this lie? Look up what has been said about this. None of their loans was specifically for them, but for anybody. However unlike the rest, they did not get an enormous government bailout. I don’t get why people hate on Tesla, especially Americans. It is the most American car of all. No other manufacturer makes as much of their car in America as Tesla. If you care about American manufacture you should care about Tesla.

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