CORRECTION: I unintentionally switched miles/kWh for kWh/mile in the video.
While Tesla is booming, other companies seem to be struggling to gain a foothold in EVs. Tesla set the bar for what to expect from an EV, but established automakers can’t seem to release brand new EVs that hit that bar. And EV startups, which look capable of delivering compelling EVs, are still getting up and running with their own infrastructure. And that leads to a question that’s been rattling around in the back of my mind for months now: is Tesla’s success actually slowing down the broader EV market with expectations that others can’t match for years to come?
Before you get into a flame war, hear me out. Living up to the name of the channel, this isn’t something I’ve made my mind up on, but it’s something I think is worth having a conversation about. I’m really interested to hear what everyone else thinks, but this is something that’s been gnawing at me for a while. And it’s something that I really hope Tesla and the community is open to talking about. Even if it’s just saying that I’m nuts.
Tesla may not have produced the first electric vehicle, but they sure popularized them. Before Tesla there were market forces that fought to keep electric vehicle technologies hidden away behind closed doors. Just look at General Motors EV1, which came out in 1996, but was killed off in a controversial way in 1999. I’d suggest watching the movie, “Who killed the electric car?,” it’s a great documentary around that car’s demise. And it’s also that car that inspired Elon to start Tesla.1
Tesla managed to reignite interest in electric vehicles by side stepping the entire auto industry, avoiding legacy business needs, and building out the whole user experience on their own. From creating their own batteries, to the car itself, as well as the charging infrastructure. And looking at those pieces is probably the best way to break this down.
The heaviest, expensive, and probably most important piece of the puzzle, is an EV’s battery pack. This is one area where Tesla has had a significant lead over the industry for some time. And not just in the battery pack design itself, but also the cell chemistry, performance, and production capacity needed to build EVs at scale.
The Nevada Gigafactory is getting very close to the promised 35 gWh of batteries per year.2 And now they have the Gigafactory in China ramping up, along with the upcoming Gigafactory in Germany that’s going to start construction in 2020.
Looking at the competition, you have VW partnering with Northvolt on cell production at Volkswagen’s Salzgitter plant.3 The exciting part of this move is that Volkswagen is trying to own their own cell production lines, much like Tesla does. The downside is that they’re only expected to be able to produce about 16 gWh on this pilot line at the end of 2023.
And just recently GM announced that they’re building their own Gigafactory in Lordstown, OH in partnership with LG Chem.4 Again, it’s a similar arrangement as Tesla and Panasonic or VW and Northvolt. It’s a great sign and very exciting, but the downside is the timing. It’s expected to be able to produce 30 GWh when at full capacity, but construction isn’t starting until mid-2020.5 And it will take time to ramp up to full capacity, so it’s going to be several years before that plant is fully operational.
If you listen to some of the headlines like, “Look out, Tesla. GM is building its own gigafactory – Very soon, Tesla won’t be the only gigafactory in town,” then you might think this is a problem for Tesla. But in reality, it’s a necessity for any competitor to build and partner with suppliers for the massive battery demands required for EV production. And in both cases, we’re looking at several years from now before those plants are fully operational and working at capacity. Their future capacity is where Tesla is today at Gigafactory 1, and Tesla isn’t standing still. By the time these plants are up and running Tesla will have four Gigafactories. Three if you take out the Buffalo factory, which is really only producing solar cells.
And that’s not even accounting for Tesla’s current battery performance. Tesla’s current battery cells and packs are recognized as one of the best battery systems in the world. According to one expert:
“This is the best, most advanced large-scale lithium battery ever produced on the planet and is years ahead of the anything currently in work.”6 – Jack Rickard
And they’re planning a Battery and Powertrain Investor Day early in 2020, which is when they’re expected to announce advancements around their battery chemistry, longevity, and motor efficiency. Which leads me to the next point.
Where many companies went the route of designing some rather funky electric vehicles that would speak to the eco-friendly crowd, they seemed to miss the point that creating stylish and highly desirable cars would pull in a much wider audience. While cars are a means to get from point A to point B for a lot of people, cars are also seen as an extension of ourselves. There’s an emotional angle that drives someone to want a specific car that goes beyond just the MPG or the drivetrain. Tesla understood that and designed cars that not only outperformed most of the internal combustion engine competition, but also had styling that resonated with potential buyers. They look cool. They’re super fast and fun to drive. Up until Tesla, that was missing from pretty much every other plug-in hybrid or EV on the market.
In the past couple of years we’ve been seeing that start to change. There are a lot of EVs on the market that look really good. That are fast and fun to drive, but then … as soon as you look under the hood (sorry, Dad joke), things kind of fall apart. All you have to do is look at the mile/kWh for a car. I know I should use kilometers, but I’m in the US and am using the EPA range estimates in miles. Miles or kilometers … this still illustrates the differences.
Here’s a list of EVs in production or coming to market soon. It’s not every EV, but it’s a good cross section of the bigger players. If you look at the mile/kWh, you’ll notice that Teslas dominate the upper end of the most efficient vehicles out there today. And if you break it down by broad categories — like Hatchback, Sedan, and SUV — the differences become more stark. In Sedans, Tesla dominates hands down. And in SUVs the massive Model X outperforms the still to be released Ford Mustang Mach-E. There’s only two competitors that have cars on the market that do an excellent job with energy efficiency right now, and that’s the Chevy Bolt and the Hyundai Kona. It’s just shocking to me that three of the cars that were held up as “Tesla Killers” are three of the worst performing vehicles on the list. Especially when you consider that the just released Porsche Taycan Turbo clocks in with a low 201 mile rage with a 93 kWh battery pack. That’s only a 2.16 mile/kWh. Its direct competition is a Tesla Model S with a 100 kWh battery pack, 348 mile range at a 3.48 mile/kWh.
Why is this important? With EVs still being so new to a lot of people, range anxiety is something that has to be addressed, and cars with longer ranges of 300+ miles can do that. Releasing a brand new $150,000 Porsche Taycan Turbo with 147 fewer miles than the comparable Tesla Model S Performance, which is also over $50,000 cheaper, is kind of crazy. And if you compare the long range Tesla Model Y to the Ford Mustang Mach-E, you’ll see similar ranges, but the Tesla battery pack is 24 kWh smaller. This is a huge gap in efficiency, which will not only mean the Mach-E will cost more to run, but also to manufacture. For EVs to really catch on they have to reach price parity with gasoline vehicles. The Mach-E battery pack is going to be much more expensive than the Model Y, which eats into the sales margins for Ford since they have to be aggressive on price.
This one can’t be undersold no matter how you look at it. One of the biggest things EV detractors point to is the lack of good EV charging infrastructure. This is something that Tesla took into consideration from the beginning of the company and is why they built their own charging network. As of right now, Tesla has over 14,000 Superchargers at 1,600 Supercharger stations around the world7 … and they’re not slowing down adding more. And these are fast charging stations where you can usually get most of the charge you need in about 30 minutes.
Elon has talked about how important a thorough charging and service infrastructure is to sales.
Compare the number of Tesla Superchargers in the U.S. to other available fast chargers and the difference is dramatic. Tesla accounts for 57% of the fast chargers available.8 The next largest network is EVgo with 20%. And even though Tesla has offered other car makers access to their network, nobody has taken them up on the offer, which is why Morgan Stanley has referred to the Superchargers as a competitive moat.9 No other car manufacturer builds and owns their own, extensive charging infrastructure, which means those companies are dependent on third parties to fill in the gaps.
Companies like VW are involved in Electrify America, which was started by VW as a result of their emissions scandal.10 No matter what spurred that project, it’s great to see VW contributing to building out EV charging infrastructure. Other companies, including VW, are also jumping into Ionity, which is building out charging stations across Europe.11 It’s great to see progress being made, but it’s going to take years for the industry to catch up to where Tesla is at today. And again, Tesla isn’t standing still.
The User Experience
When you look at the numbers and the data available, it’s easy to see that Tesla is years ahead of the industry in battery production capacity, battery pack technology, EV car design, and charging infrastructure. I’ve said this before and gotten a lot of flack for it, but Tesla is a lot like Apple in how they’ve designed the entire user experience. They haven’t just designed a car. It’s the whole user lifecycle from purchase, to delivery, to driving it day to day. Every other car company has been designing cars in smaller user experience silos for decades. Ford designs and builds the car. Dealerships buy inventory and then sell it off, but really profit from the maintenance of those vehicles. Gas stations are yet another separate business. Each one concerned about their own profit margins. Each one with their own motivations around what they need to do in order to make money. And sometimes those motivations don’t align with each other, which is why you see cars like the Chevy Bolt or Nissan Leaf sitting on dealership lots for extended periods. The salesmen have no motivation to push cars that will need little to no maintenance from their dealership. The sales margins alone are razor thin, so why push them?
When you look at the whole process as one experience, it changes your perspective on product design. The reason Apple’s iPod dominated the MP3 generation wasn’t because they were the first to market. It was because they took into consideration the music buying experience as well. The ease and joy of buying individual tracks on iTunes with a couple of clicks and loading it seamlessly on your iPod set them apart in a big way. And customers approved with huge sales numbers. No other MP3 was ever able to dethrone the iPod even though those products were well made. (The Zune says hello.) The only thing that dethroned the iPod was the transition to smart phones.
We’re seeing this right now with Tesla’s entire user experience. As a Tesla owner I have no worry whatsoever about driving anywhere I want to in the United States because of the Supercharger network. But with any other EV, even a good EV like the Chevy Bolt or Hyundai Kona, you can’t say the same thing with confidence. The non-Tesla fast charging infrastructure is not nearly as robust. Last June the New York Times put out a questionable article on the state of the EV charging infrastructure. They road along with someone from EVgo in a Chevy Bolt from Los Angeles to Las Vegas, which is 540 miles round trip, and it added 5 hours to the typical trip because of charging stops. Ben Sullins put together a great rebuttal by doing the same trip in his Tesla, and it probably won’t surprise you, but the results were radically different. I drive 400 miles one way to visit my parents in upstate New York and have only seen about 20 minutes added to the normal length of the trip. While the New York Times has a very good point they tried to make, the setup of the article was questionable. Why was the Chevy Bolt picked when the Tesla Model 3 is the best selling EV in the United States by a very wide margin?12 Why not test the trip with both? Then they could have illustrated the stark difference and why a robust charging infrastructure is so important to EV ownership. It would have strengthened the point of the article.
All of this raises the major concern for me around EV adoption in general. Tesla is doing a great job around the user experience and their sales are reflecting that. I worry that established auto companies, which have been very slow to respond to EVs, may become even more gun-shy when they release EVs to very low sales numbers. I worry that they’ll see those low numbers as a lack of demand instead of recognizing that the full user experience is what’s holding them back.
And Tesla isn’t standing still. They’re continuing to make improvements to their products that is keeping them ahead. Until the competition can catch up in that regard, the EV transition for established automakers could end up being dead on arrival. With the legacy auto business methodology and infrastructure in place, it’s looking like only new EV entrants will find success, like Rivian. Jumping back to the smart phone analogy. Blackberry, Nokia, and Motorola aren’t leaders anymore. The upstarts in the smart phone arena now dominate, like Apple, Samsung, and Xiaomi. And don’t forget how Microsoft called it quits and exited the smart phone software space.
That’s the thing that’s been lurking in the back of my mind for some time now. Elon has said numerous times how Tesla’s whole purpose is to spark the transition to electric vehicles. He’s put out open offers for other companies to use the Supercharger network,13 but there haven’t been any takers. I wonder if Tesla should be more proactive in licensing certain technologies to third parties to really help kickstart some competition. By licensing they’d be opening up new revenue streams, as well as helping to speed up the transition to electric transportation.
Like I said in the beginning, this is still something I’m thinking about. This isn’t a fully formed opinion yet, but more of a musing … it’s something I’ve been thinking about a lot. What do you think? Are any of you concerned about the speed of EV adoption? And to be clear, I’m not concerned about Tesla’s future, but the speed at which the EV market may grow.