Should Tesla Motors be the leading or primary car manufacturer? Or should other car manufacturers step up to take a significant role in electric vehicle development, as Tesla is doing? Or should even other start-up car manufacturers participate in the undoing of the incumbent car industry? That’s a set of questions which led to an exchange between myself and Paul Scott (co-founder of Plug-in America) to have an interesting exchange of comments on Quora. I think the ideas we expressed deserve more airplay than the Quora posting, so here I am attempting to represent the ideas fairly.
Let’s start by breaking apart this question that’s rich with suppositions and ideas.
For the most part the electric vehicle record of other car makers is lackluster. It’s like they’re dabbling with electric vehicles rather than betting the company on the future. Among the few high points — the Chevy Bolt being the first affordable 200+ mile range EV — the BMW i3 and its revolutionary approach to carbon fiber for the masses — The Renault Zoe and its high power AC charging — There are various forms of underwhelm. I have a Kia Soul EV, and think it is a truly excellent electric car, but Kia hasn’t followed through with a significant manufacturing/sales push. The Nissan Leaf started off great, but it did not remain competitive against the newcomer EV’s.
Tesla, on the other hand, is single-handedly showing the rest of the car industry the route to large scale adoption of electric vehicles coupled with solar and energy storage systems. Tesla knew that The Market thought electric cars were slow boring ugly golf carts that could barely make it to the corner grocery store. That’s why Tesla is making super-fast super-long-range electric cars with excellent features, and that’s why Tesla has built such an expansive electric car charging network.
Tesla Motors IS dominating electric car sales TODAY
Looking at the Inside EV’s sales score-card I see that in 2017 Tesla had the #1 (Tesla Model S) and #3 (Tesla Model X) electric car models in the USA. The Chevy Bolt came in at #2. What that means is, with an expensive luxury car and a pile of debt burdening its financials, Tesla Motors sold 1/4th of the electric cars in the USA in 2017. Between the S and X, Tesla sold 48,375 electric cars in 2017 in the USA, out of 199,000 total sold, or about 24% of the total. Add in the 2017 Model 3 sales and Tesla is over 25% of the EV market.
That’s for an upstart with a financial balance sheet bleeding in debt. (see Tesla Motors running at a loss for another quarter doesn’t mean Tesla’s imminent collapse into bankruptcy)
Tesla is just getting started. The Model 3 is just beginning its rise and looks poised to give Tesla a significant uptick in sales – they “simply” have to solve a production bottleneck. If the announced other models – Tesla Semi and the Gen2 Roadster – live up to the announcements, Tesla Motors is gonna become a large scale automobile manufacturer. A few years ago they predicted 5 million sales per year by 2025, which seems utterly nuts given Tesla’s sales are just now breaking the 100,000/year threshold. On the other hand the company just gave Elon Musk a compensation package predicated on getting to a $650 billion market cap, and 15-20x the current sales/revenue volume. (see Tesla puts golden handcuffs on Elon Musk for at least 10 years of leadership) Either the company is completely bonkers or they’re serious about this goal.
Market potential of electric cars and the solar/storage combination
The idea that electric cars are more expensive than gassers is hampering sales and adoption. While it’s true the up-front purchase price is at a significant premium over equivalent gasoline powered cars, that’s not the entire story. Fact is there are significant fuel cost and maintenance savings for electric cars, as well as quality of life savings, that in some cases can make up for that price premium. As the bang-for-the-buck rises, the rise of the 200+ mile range affordable EV’s, the equation of cost/benefit is tilting towards EV’s.
As the price premium shrinks and as the utility increases, we’ll see some day not so far away when the economic balance will shift towards EV’s. The EV will be the most pragmatic economically feasible automobile choice on the market. When that happens, will we see a big shift to EV’s?
Consider that a typical single family home has enough roof space for enough solar panels to power not only the home but one or two electric cars. That’s a compelling story – and I keep seeing EV owners say they’re in this to free themselves of “The Man”, meaning the domination by the oil industry as the provider of fuel for our transportation.
Tesla Motors knows this fact, and is heading full-steam-ahead towards implementation of that vision. Do we see the other car makers presenting the same vision and working on its implementation? In certain ways, yes, but not to a depth similar to what Tesla is doing.
Given all this – it’s not hard to predict Tesla Motors could continue holding a dominant position in electric car sales, that electric cars will become the dominant automobile, meaning Tesla would be the dominant car manufacturer. Maybe. Who knows.
Tesla should rightfully dominate the car industry?
That’s the point made by Paul Scott in response to my answer. I’ll get to my answer in a minute – but I want to do Paul’s answer the justice it deserves: “In my opinion, it would serve us well to have Tesla dominate the entire process of manufacturing the cars, generating the electricity, and operating the charging network throughout the world.”
He went on to point out that Elon Musk see’s clearly the problems of energy and transportation, and is designing Tesla Motors to provide an excellent answer. And with the Supercharger network, Tesla has indeed opened the door for other automakers to participate in that network, but to date none have done so.
Another commentor, Carol Gaytan, wrote at length about how the other car makers are dragging their feet regarding electric cars.
The public NEEDS for there to be significant competition for Tesla Motors
My contention is there’s a big risk to us all if Tesla Motors actually becomes the dominant car manufacturer. Sure we need Tesla to take a proper position among the big automobile manufacturers, but it needs to be one of several such companies. If Tesla were to become the dominant automobile manufacturer, would Tesla turn to Evil and abuse their position?
I’ve written about these worries before :- Tesla Motors monopoly over Service builds loyalty; will Tesla ever turn Evil?
Control over repair
There are existing cases where Tesla Motors has prevented folks from doing their own repairs or customizations. For example someone might buy a salvage-title Tesla Model S, then buy parts and generally refurbish the car to make it road-worthy again. Tesla has stepped in on a couple such cases and remotely disabled the car, or sent cease-and-desist letters to these car owners.
The principle in the car industry is that while manufacturers do provide certified parts, they do not directly provide service. It’s the car dealers and the 3rd party repair shops who provide service. The manufacturers will provide official training materials and probably certify the mechanics, but there’s no monopolistic control over car servicing.
Tesla Motors, on the other hand, directly provides car service, and as I said is taking steps that smell like monopolistic control over the repair process. As Carol Gaytan points out in her comment, there are plenty of Tesla owners who are doing their own repairs, and even some brave souls who’ve gotten deep into modifications and customizations. But at the end of the day, it’s the Tesla service centers that are providing the bulk of the repair services.
For Tesla’s part in this – Elon Musk has said his instructions to the Tesla Repair business is to not seek to be a profit center. In other words, Tesla is not seeking to use that semi-monopoly on repairs as a mechanism to gouge its customers. Instead it’s a tool for building loyalty, because the repair business is incentivized to give the customers a wholesome repair experience.
Control over recharging
Similarly, car manufacturers do not operate refueling stations. Can you imagine the potential for manufacturer abuse if a gasoline car had a custom refueling nozzle size/shape that only existed at manufacturer-owned refueling stations? That’s the situation with the proprietary Supercharger network and Tesla’s cars. That network can only be used by Tesla cars, and the best refueling experience for Tesla’s cars is at those stations. This is another example of control based on proprietary implementations.
It’s not like Tesla is exerting complete 100% control over recharging. Tesla supplies a full range of adapters for non-Tesla charging services. Famously, Tesla has offered the other car manufacturers to join the Supercharger network, but to date none have done so. That seems to put Tesla on the high moral ground, but in my analysis I don’t see why the other car makers would want to support Tesla’s charging network. Wouldn’t that put the other car makers in the role of propping up Tesla’s prestige?
Tesla’s Aura of Goodness
In general, Tesla Motors has a huge aura of goodness. That aura is well deserved based on the win-win-win-win proposition Tesla offers its customers and the society as a whole. The corporate mission is reinventing the energy and transportation system, and I (and many others) are fully on board with those goals.
But the question I’ve pondered for years is whether a day will come when Tesla Motors turns to Evil.
To avoid that day, I’m certain that Tesla Motors needs competition. If we end up with a situation that Tesla Motors has taken over the automobile market, it seems likely to me that Tesla will turn to Evil.
Is Elon Musk an altruist? I doubt it. He’s a capitalist industrialist. He see’s this business of providing energy and transportation solutions as a means to build a huge megacorporation, and to become immensely wealthy.
Maybe I’m wrong. Maybe the points made by Paul Scott and Carol Gaytan are accurate. Maybe Tesla Motors will stick to the wholistic corporate goals they currently have. The future hasn’t happened yet, and we can’t tell what the future holds. I just know that the history of corporations is full of examples where large corporations abused their positions of power in detriment to us all.
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