Only about 2,500 roasters result in total, but it was enough to get Tesla to phase 2 of its plan. According to Elon Musk, the new technology takes a few versions to optimize before reaching the mass-market, and Tesla was competing with 150 years and trillions of dollars spent on gasoline cars.
The second phase of this master plan was to use the money to create a more optimized, mid-priced, mid-volume vehicle dubbed the Model S, which hit the market in 2012, and Tesla followed up with their first SUV the Model X in 2015.
The Model S and Model X reached a volume of around a hundred thousand vehicles sold in a year at their peak in 2017. while it wasn’t all smooth sailing for Tesla and delivery estimates were delayed, Tesla eventually brought these great products to market that were loved by owners.
Despite trying something new and surprising customers with electric vehicles that many thought impossible to create with such high specifications, Tesla was ridiculed and made fun of all along the way.
In November of 2015, former Daimler Chairman Edzard Reuter said that Tesla was a joke and can’t be taken seriously compared to the great car companies of Germany, musk was called a pretender.
Even Bob Lutz, former vice chairman of General Motors and Chrysler, who was highly respected by Elon Musk, has predicted Tesla’s demise multiple times over the years.
In September of 2018, he said that Elon Musk doesn’t know how to run a car company, and he called Tesla an automobile company headed for the graveyard.
Back in 2015, Lutz stated that Tesla was in trouble, Tesla mainly needed to create car dealerships to survive, and the company had no secret sauce related to its battery technology.
Despite all the naysayers, Elon Musk bet the entire company on the third phase of his master plan unveiling the Model 3 in 2016 as a low-priced high-volume vehicle.
Automakers started to turn their heads after Tesla acquired over 325,000 reservation pre-orders for the Model 3 at $1,000 apiece.
Elon Musk also warns shareholders, customers, and other stakeholders that Tesla would be entering production hell to produce this vehicle.
The real challenge was designing the car to be highly manufacturable and bringing up the Nevada factory to produce a massive number of batteries and the factory in Fremont to assemble the cars in an automated fashion.
Musk was criticized for over automating and admitted later that the company was weeks away from bankruptcy due to delays, and other hiccups with the manufacturing process.
In the end, however, Tesla was able to survive and ramp up Model 3 production to a sustainable level and created the machine that builds the machine. Essentially, the gigafactory production system using computer-aided software design.
As it stands today, Tesla’s electric vehicles have acceleration specs that blow their gas-powered competitors out of the water.
New software features such as sentry mode, which continually records video around the perimeter of the vehicle. Dog mode to regulate heat levels in the vehicle, autonomous driving features such as highway driving and over-the-air updates, and even braking distance of the vehicles.
Many of these features would not be possible without the giant battery at the core of each Tesla vehicle.
Tesla’s keen focus on battery technology has allowed them to quickly catch up to the range of many internal combustion engine vehicles.
Automate your competitors who previously laughed at Tesla have not been able to achieve the same range as a 2012 Model S in their production cars.
Tesla also owns and operates the largest network of supercharger charging stations worldwide, and keeps the prices as low as possible for owners who are charging away from home.
An interesting thing happened after Tesla set a goal to begin vehicle production a year after starting to build the first wholly-owned Chinese Giga factory.
Tesla hit its deadline bringing up Giga Shanghai within 11 months and producing vehicles at a run rate of around 1000 per week at the end of 2019.
Furthermore, model Y Tesla’s low-cost SUV built on the same platform as the Model 3, was unveiled in March of 2019 with plans to begin to ramp up in late 2020.
Of course, with Tesla’s history of missed timelines, customers and investors would likely not see this vehicle before mid-2021.
However, thanks to Tesla’s past failures, and drastic improvements in factory and vehicle design, the model Y beginning deliveries in March of 2020 exactly one year after it was unveiled.
Tesla is now the second-largest automotive company in the world by market cap worth 130 billion dollars, just behind Toyota despite producing just 367 thousand vehicles last year compared to Toyota’s 10 million vehicles.
That said, Tesla’s accomplished such feats all without spending any paid advertising dollars, but how can it compete with the so-called big boys, the large entrenched automaker incumbents, their massive budgets?
We’re going to go through a multitude of car companies to see if any of them can rival Tesla. Gene Munster, once an analyst and now a venture capitalist who has been very positive on Tesla, was recently asked in an interview which automaker is in second place?
His first answer was that he couldn’t think of anyone, but after being asked multiple times, he said that it could be Ford. However, he cautioned that it would become essential to look at the balance sheet of these legacy automakers, something we’ll do in a moment.
Ford is already preparing its third electric vehicle, the Ford Transit delivery van to hit the market in 2022. Unfortunately, Ford’s first two vehicles, the electric F-150 and the Mustang Mach II, have not yet hit the market.
Ford seems to be carefully dipping their toes into the EV space with the Mustang Mach II, which will start at $45,000 slightly above the price of the Model Y and perhaps nine months after the model Y starts getting into the hands of customers.
The Model Y is technically Tesla’s fifth-generation vehicle, and the Model Y factory lines are built on Tesla’s third major iteration of factory design and built on the same platform as the model 3.
Tesla has had so much experience improving the Model 3. So the model Y will likely be very refined off the bat, including highly advanced software that is already functioning on Tesla’s other vehicles.
Ford is on its first electric vehicle. From the concept, we’ve already seen a lack of software refinement as the company spends negligible amounts of money on research and development relative to its size and budget. We’ve also criticized the Mach-E for having a front face with a creepy clown smile.
However, Ford has an overall branding issue with this vehicle. They don’t want to cannibalize the very profitable gas car Mustang business, so they created a vehicle that isn’t a Mustang, and won’t appeal to Mustang fans.
At the same time, it won’t appeal to those who aren’t interested in Mustangs, thanks to branding confusion.
The vehicle also has a plastic knob glued to the main center screen, which as another moving part and takes away from the bitmap real-estate.
Ford claims to have 20 years of electrification experience, but as Elon Musk says, “designing concept cars is easy, designing something to be mass-produced as hard.”
Tesla has a Giga factory Nevada capable of producing 30 gigawatt-hours of batteries per year, whereas for doesn’t have a Giga Factory and therefore needs to purchase batteries from an outside source.
Tesla’s advantage of being vertically integrated allows them to optimize for efficiency and reduce costs, which means Ford might be losing money on the Mach II to compete with Tesla and is subsidizing the losses with their internal combustion fleet.
We’ve heard from multiple Tesla short-sellers that Tesla has structural issues, but it appears that Ford has much more significant structural problems than many people believe.
First off, on a positive note, Ford has about thirty-five billion dollars of cash on hand, which is more than the company’s entire twenty-six billion dollar market value.
Ford would be worth more if it didn’t have an automotive business attached to all that cash. That said, Ford behaves more like a bank than an automotive company. They borrow 140 billion dollars of debt to lend out and fund car loans.
Ford has 52 billion dollars of credit debt payable within one year, backed by auto loans. Only 14 billion of debt is related to automotive, which is a lot considering its twenty-six billion dollar market cap.
That is over half their market value is just automotive debt. The other 140 billion is simply a risk that is not funded by deposits like a traditional bank, so they have to leverage themselves to make money.
Investors are worried that if Ford’s electric ambitions don’t pay off, it could spell bad news. However, a transition to a whole new business line has been historically tough for large, slow-moving companies, especially Ford, who is planning to replace its profitable ice vehicles with money-losing electric vehicles.
On top of that, Ford has a slew of middlemen dealerships who don’t benefit from selling electric vehicles which don’t break as much as compared to ice vehicles and could hurt their only source of income, service revenue.
To make matters worse, Ford has a global pension plan underfunded by six point three billion dollars as of December 2019. Finally, Ford’s bread and butter and where most of their profit comes from are from the F-series or the F-150 pickup truck, which will be under attack by Tesla’s cyber truck.
Of course, Ford made an investment in pickup truck designer Rivian, which we’ll talk about soon. But their investment likely won’t replace billions of dollars of profit the Tesla has specifically targeted trying to make a better vehicle than the F-150 in every way.
Of course, very few people are taking the cyber truck seriously. With potentially over five hundred and thirty thousand pre-ordered deposits, it’s no longer a laughing matter for Ford.
General Motors is the largest auto company in the US besides Tesla. Still, it is similar to Ford and a host of other automakers when it comes to credit loans, pension plans, unions, and dealerships.
General Motors spun the banking portion of its business into an Alie Bank in September of 2010 after the financial crisis. Nevertheless, GM still has a division called GM Financial, which has 89 billion dollars of loans, 35 of which is due in the short term.
GM also has about 10 billion dollars of underfunded pension obligations. However, General Motors has been in the electric vehicle game for quite some time; they have sold over 200,000 EVs, which means their US tax credits have started to get phased out.
Of the four best-selling EV’s in the US and 2019, numbers 1 2 & 4 were Tesla’s, and the third was GM’s Chevy bolt which has had lackluster demand. In 2016, even Bob Lutz called GM’s bolt a compliance car that GM is only selling to comply with California regulations.
Furthermore, GM had admitted that it had no plans to put up any more money into setting up DC fast-charging stations, which allow electric car drivers to charge their vehicles on the go. Moreover, GM CEO Mary Barra reportedly had her supply chain used Tesla suppliers even if they cost more.
Instead of fighting Tesla off with better products, they simply tried to bottleneck the suppliers and slow them down to try and damage the company.
Elon Musk has said that the rate at which Tesla can produce vehicles is as fast as the slowest part because you can’t ship a car that’s missing a part.
In the past, Tesla has had many delays, which forced them to bring a lot in-house, and become even more vertically integrated, which in turn has made Tesla a more robust and more agile company. Kind of a backfire for GM.
General Motors, in 2020, decided to commit more resources to the electric car game with what they call Altium batteries, claiming to be cheaper and have more range than a Tesla.
Funny enough, GM says that its batteries contain modules that can be swapped out if needed. This is something that Elon Musk has just said that Tesla would be moving away from since the modules have always been in Tesla batteries but were never actually used for the swapping out feature, and are now merely a source of extra cost.
General Motors’ so-called Altium batteries are off the pouch form factor and use Cobalt as an expensive and unethical material that GM claims to be cutting down by 70%.
But Tesla has already made great strides in reducing Cobalt to a minimum to eliminate it, something that Tesla will be able to achieve in China with its partnership with cattle, CATL, and different battery chemistry that doesn’t include Cobalt.
The buzzword name Altium alone makes it appear that marketing is taking the reins from the engineers at General Motors as the name tries to mask the fact that GM’s batteries are nothing special and are inferior to Tesla’s.
That said, GM is said to be building its battery factory similar to Tesla’s Nevada Giga Factory, but in partnership with LG Chem to produce 30 gigawatt-hours of batteries.
Tesla, on the other hand, is beginning the construction of its third Giga Factory in Europe. Still, at least General Motors has a plan to supply its vehicles with batteries that are in tight supply nowadays.
At the same time, GM plans to continue with the Chevy Volt and resurrect the Hummer as its next electric vehicle.
General Motors believes that making the same vehicles, but having them be electric is what consumers want, whereas Tesla designs their vehicles from the ground up to be electric.
Keeping in mind that the Hummer had a previous life as a gas-guzzling, worse fuel economy of all time vehicles, but will somehow impress consumers as an electric vehicle even though regular electric vehicles have been struggling with range.
However, GM believes it can make a 400-mile range battery, likely using a 200-kilowatt-hour battery in a small vehicle and aiming for 2021.
Meanwhile, Tesla currently offers 390 miles of range in the current Model S, which uses a 100-kilowatt-hour battery pack.
So either the electric Hummer has a terrible range or has enough batteries to send a price much higher into the premium range.
Keeping in mind the GM currently has a 29 percent market share of the US truck market, it will also have to face off against the Tesla’s cyber truck starting at $40,000, and whose most expensive version is $70,000 that has 500 miles of range.
Finally, General Motors is planning to spend 20 billion dollars over the next five years to launch eleven new all-electric vehicles, including at least 20 new models by 2023. During their presentation, they had to remind people that this was quite real.
While it might not be complete vaporware, this indeed reminds me of the market response to Apple’s iPhone, which launched as many smartphones as possible so that there would be something out there for everyone.
This contributed to high overhead in managing all of the different products, and a loss of focus.
It’s interesting to see that in Tesla’s case, the Model Y took years to come out even though it was built on the same platform as the model 3. Tesla was able to focus on a small number of products and refine and optimize them relentlessly.
GM’s plans to have 20 new models over the next three years are expensive and spread out their resources. Especially now that GM’s tax credits are getting phased out, they forgot to use the tax credits to fund their next set of vehicles. Instead, they seemingly wasted them on the money-losing Chevy bolt.
It’s going to take a lot for GM to compete with Tesla on battery price and range, despite what the media may have you believe. GM hasn’t even released their new battery product yet, and already the media is writing Tesla’s obituary.
Toyota is an unusual situation as they’re the largest automotive company globally, but they also have defined benefit pension plans, a hundred billion dollars in loans, and of course, dealerships.
Tesla used to make electric power trains for Toyota, which shows that they aren’t so easy to make.
However, more recently, Toyota hasn’t participated in the electric vehicle theme as they’ve been focused on hybrid vehicles and hydrogen fuel cells.
Fool cells, as Elon Musk calls them. This is the Toyota Mirai, the first fuel cell-powered vehicle from Toyota. Now there are several reasons why fuel cells make sense; they burn cleanly, have a decent range, and don’t take long to refill with hydrogen.
Compares to electric vehicles, which have low range, take too long to charge, and cost too much.
Well hang on a second here, Tesla’s Model Y SUV crossover vehicle is better than the full cell vehicle and range price and very much so in performance.
Also, owning a Tesla and waking up every morning with a fully charged vehicle is much more relaxing than finding a hydrogen fueling station.
Furthermore, it costs about 8 to 10 dollars depending on electricity prices to fully charge a Tesla, but a hydrogen equivalent could be upwards of $60.
There’s no real advantage of hydrogen over ice cars even, except for maybe the clean-burning fuel. Unfortunately, most people make decisions based on monetary economics, not on being green.
However, in 2020, Toyota would like to introduce a massive fleet of battery electric vehicles over the next couple of years.
They released this rendered drawing of their plans, but maybe Toyota has a few tricks up their sleeves to take their battery electric vehicles from pre-concept to mass production.
Toyota shared this roadmap showing that by 2050 they may have a small fleet of BEV’s or battery electric vehicles. This is a little bit embarrassing for a company that has been known for out manufacturing the US car companies back in its heyday.
Volkswagen is the number three largest automakers in the world, but tied with Toyota for selling about 10 million vehicles per year, and has billions of dollars on cash on hand and the same dealership issues of the legacy automakers.
After the diesel gate scandal, Volkswagen’s punishment was to invest billions of dollars into an electric charging network, Electrify America. Still much smaller than the Tesla supercharger network, but this put Volkswagen ahead of other automakers.
They are planning a whole slew of new offerings, but Volkswagen has multiple subsidiaries that aim to hit different market segments with their offerings.
Nevertheless, Volkswagen can improve its vehicles over time and remain a significant player in the auto industry. That said, Tesla will have a product in each of these segments as well. Next year, the Porsche will be up against the new Roadster, which will have over 600 miles of range.
Moving along to Rivian, which is an 11-year-old private company startup that focuses solely on electric vehicles and has the same advantages as Tesla when it comes to the lack of dealerships, unions, pensions, and a gas card division.
Rivian’s initial plans were to release the R1T, a pickup truck, even though the surprise robot iLook didn’t bode well for some employees. The R1S SUV for a niche market targeted outdoorsy people, and many people saw this company as the next Ford, so Ford ended up investing in Rivian.
However, Amazon also stepped in with an investment in ordered a hundred thousand delivery vans to Rivian roadmap.
However, these vans will be delivered over ten years, so about 10,000 vehicles per year. Keeping in mind that Rivian has yet to bring any vehicle to market
Tesla went through the three phases of its master plan, starting with the low volume, high priced vehicles, and it appears that Rivian may be about to enter that phase.
Of course, now, with three products to worry about the small companies being spread more thinly, thanks to Amazon.
As Elon Musk has alluded to, it’s not about throwing more money at vehicles; it’s about real talent, which Riven has yet to prove. And if they want to achieve scale, they will have to go through the same struggles that Tesla went through to make the model 3.
It’s interesting to see that the legacy automakers have experience with scale, but not with electric vehicles and that the startups have experience with electric vehicles. Still, none was scaling to the mass market.
While the Rivian R1T looks like a traditional pickup truck, it will likely be entering the market at the same time as the Tesla cyber truck.
The Rivian starts at $70,000, offering two hundred and thirty miles of range, and has yet to reveal the pricing for up to four hundred miles.
Whereas Tesla’s cyber truck starts at forty thousand for two hundred and thirty miles of range, and the highest-end cyber truck is priced the same as the lowest Riven, but it’s expected to have more than double the range.
Part of the reason is that Riven is using expensive up to 180-kilowatt-hour batteries, and has four motors in its vehicles. Tesla can achieve better performance by being more efficient with its batteries and using a maximum of three motors in its highest and version.
The timing for Rivian will be critical for the company. It may pose an existential risk if Rivian has trouble competing against Tesla’s advanced technology and dent-proof stainless steel frame.
While Tesla’s focus on dethroning before Ford F150, the best-selling car in the U.S., Rivian may be a niche player. Rivian’s main focus niche was for the outdoor, adventure-oriented market segment,
However, Tesla took a direct shot at Rivian and aimed to be more practical with a six and a half foot bed compared to Rivian’s 4.5 footbeds.
Interestingly, new startup electric vehicle companies get more credit than the legacy automakers. At least traditional auto has mountains of cash.
They can try to make electric vehicles and fail, and still have enough cash to try a few more times again. It’s much more difficult for a startup to get a second chance.
Bollinger, which was started in 2015, is aiming to produce the world’s first all-electric. On an off-road truck, it might be tough to hit that goal with Rivian and Tesla on its tail. Even more so, the pickup truck starts at $125,000 and only has 200 miles of range.
Most startup companies are starting where Tesla did back in 2008 with the first Roadster, which would technically put them about 12 or more years behind Tesla.
Also, for the same price as the Bollinger starting price, one can purchase two of the highest-end cyber trucks, each with 500 miles of range.
Now let’s have a look at some Chinese auto companies, starting with Nio. The main reason Nio is so prevalent in the United States is that the companies publicly traded on the stock exchange. Nio sold a total of just over 20,000 vehicles in China in 2019, doubling its prior year’s sales.
Although Nio started with a bang and was said to be the Tesla of China. Nio has not yet lived up to this reputation with Chinese consumers.
Nio has a strange business model, which partially focuses on providing areas where people can sit around called Nio house. This is expensive for real estate and rent and doesn’t contribute at all to the business.
Nio also uses large battery swapping machines to quickly charge up a vehicle’s battery by swapping it out with a fresh one. This is something that Tesla had piloted in California but decided to move away from the idea, especially as Tesla superchargers continued to get faster and faster.
On the other hand, battery swapping stations are expensive, and expensive to maintain and have many moving parts prone to breaking more often than a supercharger with no moving parts.
The other thing was startups, even in China, is that they run into some of the same problems that Tesla had when it first started. They have to provide their service centers, something that legacy automakers already have.
Tesla’s Elon Musk has said that service centers and superchargers have been critical to selling vehicles in a specific area. Without these two things, consumers don’t want to buy cars.
Because Nio needs to open service centers with very few cars on the road, these service centers become very expensive to maintain, as they wait for business to build up and warranties to run out.
Again, this is something that had limited Tesla’s growth and expansion for many years. Nio also has an atrocious balance sheet for an automaker, with only 137 million cash down from 3 billion at the end of 2018.
Luckily for Nio, the Chinese government of the city of Jefe bailed out Nio with a 1.4 billion dollar capital injection in exchange for building a new headquarters in the city.
So the Chinese aren’t so quick to let Nio go bankrupt; that said, in the last 12 months, Nio lost 44 dollars per share, which is a lot for this $3.00 stock. It’s lost about 15 times the value of the entire company in the last year.
BYD is a Chinese company founded in 1995 that makes everything from cars to buses, sky rails, forklifts trucks, batteries, and even solar panels.
They also made money from smartphone components and assembly services and made gas cars and electric vehicles.
Warren Buffett’s Berkshire Hathaway reportedly owns 8 percent of BYD, and BYD does have a bus Factory in California and sells buses to the US government.
BYD does move much quicker; it seems than the other automakers from around the world. However, due to its vast array of different products, BYD doesn’t have the same type of focus as a company like Tesla.
Elon Musk was once asked about their car, and he said, have you seen their car? I don’t think they have a great product. In a recent interview, Warren Buffett said that one day Charlie Munger the vice chairman at Berkshire called him and said we need to buy BYD because the person who runs it is better than Thomas Edison.
Of course, Buffett responded by saying that it isn’t good enough, but they eventually bought part of the company. Buffett says the BYD has so much business to do in China that I will likely focus on his home country for the foreseeable future, which could give Tesla further lead in other parts of the world even as Tesla begins to compete in China.
BYD is very much a Buffett company and expects to grow revenue solidly over the next five years.
In 2018, the company made about seventeen billion dollars in revenue and 380 million dollars in profit for the full year. The company is smaller than Tesla by revenue but does have big ambitions.
In November of 2019, BYD announced a partnership with Toyota to supply batteries to them. However, BYD has plans to spin off its automotive battery division in 2022, removing key vertical integration that has worked very well for Tesla.
This allows Tesla to design battery packs that work well with the powertrain, and the rest of the vehicle, something that BYD intends to give up.
This would make them less competitive against Tesla directly. However, it appears that be BYD plans to produce over 120 gigawatt-hours and to supply other companies with batteries, a different business model than Tesla.
We’ve tried to look at some of the major car companies in the world, and those new startups are players with emerging products in the EV’s space to see who can take on Tesla.
Of course, there are many other players in the industry, let us know in the comments if you believe we missed the right potential Tesla killer company.
The current legacy automakers have deep pockets experience and scaling and plenty of service centers, albeit tied to the dealership model that consumers despise.
There are multiple layers of bureaucracies that make them slow-moving and unwilling to risk their current very profitable pollution car business.
They lack expertise and electric batteries and technology compared to Tesla and even some of the other EV startups.
On the other hand, we have these startups working solely on low volume, high priced electric vehicles, but with limited resources.
Although they look similar to Tesla, they resemble more the Tesla from 10 years ago, but with a slower pace of innovation.
Finally, there is a class of Chinese carmakers sheltered by the Chinese government. Still, they are now up against Tesla Motors and China, which the Chinese government has also taken a liking to.
In conclusion, a lot of the companies talk a big game but have yet to deliver a compelling product, and so at this time, there are no real rivals to Tesla.
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