For over 10 years we’ve been hearing about the competition that will come after Tesla, but all the record data and facts we have prove that’s just plain wrong.
Every year, every month, every week and every day, the same mantra is repeated over and over again: traditional automakers or even new battery electric vehicle (BEV) makers will grow faster than the Californian challenger, as if a repeated assertion without supporting facts would one day become reality. It’s a mantra that doesn’t seem to be going away, even though all the facts are against it over the months, quarters and years.
Introduction
Facts that the industry, the media and the general public love to overlook, misunderstand, misinterpret or intentionally ignore. This article will attempt to explain why it was obvious from the start that there was no competition to Tesla in the past, there isn’t today, and there won’t be. not in the foreseeable future for three simple reasons. These three reasons will explain why, and the data shared in this article will confirm that anyone who is still waiting for the competition to come and take on Tesla will be waiting a long time, if not forever.
Tesla is the company that dominates the present and the future powerhouse of the mighty automotive industry, not only in terms of units sold, but also in terms of revenue, profit and margin. Despite supply chain challenges and CoVid-related production shutdowns in China, Tesla is the company that shipped the most BEVs in the past 12 months and the second quarter of 2022. All German automakers combined are smaller than Tesla in terms of BEV units soldrevenues and profits, whether we consider the data of the brand or the group of VEB.
More importantly, Tesla is also the fastest growing company in terms of units shipped, sales and profit margins, indicating that the gap between the competition and Tesla is widening. and not shrink in the future as many had predicted. Today, Tesla makes a profit of €10,360 per vehicle sold, while its oft-cited German rivals Mercedes-Benz earn €8,770, BMW €3,965 and Volkswagen €3,373 per vehicle.
The Volkswagen Group, whose CEO said in July 2022 that he wanted to overtake Tesla in 2025, only makes a third of the profit per vehicle sold, which is a huge difference to VW’s ability to compete and keep up. the pace in the near future. The same goes for American automakers Ford, GM or Asian manufacturers like BYD.
They all have the structural disadvantage to have an internal combustion engine vehicle business that they want to keep as long as possible to continue financing their operationsor a region-dominated internal combustion engine vehicle customer base, which reduces their influence in the global market.
The top three reasons the competition isn’t catching up with Tesla are software excellence, battery supply and the pace of innovation. Each reason alone is difficult to fight, but the whole is invincible.
Software Excellence
Software is like the blood that flows through our veins and carries information to every cell in our body. If you only supply blood to certain parts of your body and not all cells receive it, we wouldn’t expect them to function properly, would we?
What is true for our body is also true for vehicles. They simply don’t work as intended if certain parts are not connected directly to our brain or a central computer, but are isolated. Traditional car manufacturers have not designed hardware and IT infrastructure of their vehicles in such a way that they communicate with all the necessary parts of the vehicle, which is part of why they are no match for what a Tesla can do.
Another reason is that the old automakers are led by executives who succeeded in a world where internal combustion engine sales and driveline performance were critical and a differentiator. The current leaders of car manufacturers are literally incompetent in the world of VEBswhich are mostly software-driven, and should have been licensed ten years ago.
A carmaker that wants to catch up with Tesla needs to be more a software company than a hardware company, but all the senior executives of the old automakers try to avoid this change by trying to hide their incompetence. It doesn’t matter how big this change is, because they know they will have to leave the company to make way for competent executives with a background in IT.
Unlike large, traditional automakers, many smaller startups have embraced the challenge of mastering software excellence. Many of the features customers expect are available in their vehicles because they’ve learned from Tesla that it’s possible if they plan for it from the start.
Startups are much more likely to gain market share than incumbents, and if they can overcome scalability and manufacturing challenges, they have a better chance than traditional big brands.
Battery powered
When Tesla announced plans to build the world’s largest automotive battery factory in the Nevada desert in 2014, the entire industry laughed at Elon Musk. A few years later, they all stopped laughing and today deeply regret their reaction and their decisions and the fact of not having followed the example of Elon Musk in 2014.
Today, eight years later, the automotive industry as a whole does not have an adequate and critical supply of lithium-ion batteries for their BEVs, and this shortage will not disappear in the decades to come, as the demand is growing faster than supply capacity is being built.
The exponential growth of one of the biggest industries in the world is difficult to understand and to be adapted for senior executives accustomed to a centuries-old, slow and constantly growing automotive industry. Their inability to foresee the future is further proof that they are not cut out for this job.
Today’s executives claim low VEB shipments aren’t their fault because they’re caused by suppliers who can’t deliver the critical component, but what they should have done, and what ‘they do is build their own battery supply chain network – a monumental task that will take decades, but is essential for survival.
Do we really have to tell the leaders of car manufacturers that it is impossible to build a single electric vehicle without batteries? Many automakers sell millions of vehicles but don’t have the capital or profits to make their own batteries, and anyone who can’t is at the bottom of the food chain.
Tesla, the small California electric car maker that didn’t get the necessary supply award in 2010 because no one believed in its vision and the exponential growth of battery electric vehicles, now sits atop the food chain.
While the entire industry assumed that its Tier 1-3 suppliers would take the risks Tesla took to produce batteries in anticipation of exponential growth, automaker executives made serious strategic mistakes that they should be held accountable. The longer they are delayed in being held accountable for the serious mistakes they have made, the less chance automakers have of succeeding in the future or of surviving.
The pace of innovation
Elon Musk’s response to one of my articles a few years ago that “all that matters in the long term is the pace of innovation”, is wisdom that no previous automaker seems to have understood. A company that is not able to accelerate its innovation and product iteration has lost its ability to survive in a world where a company like Tesla is driving customer demand.
Innovation in batteries and software is key to the future of the industry, but rather than having to do it, traditional automakers have outsourced software and batteries to suppliers who have very different business objectives. A supplier wants to make sales with an established and mature product on which it can optimize its production costs and profits while minimizing the risks associated with new innovations.
After 100 years of experience, one would expect auto industry leaders to understand this simple fact, but instead they have relied and continue to rely on a supply network that has different goals than manufacturers in an era of rapid transition to BEVs.
Until the automotive industry masters the supply of batteries, software superiority and the pace of innovation, we will see it fall further and further behind the dominant market leader, Tesla. This trend will continue until the first traditional car manufacturers regroup, merge or disappear. At the end of this process, Tesla will likely take the majority of the profits and +50% of sector revenue, while becoming an even more dominant provider of autonomous technologies in vehicles and robots. artificial intelligence is already part of their vehicles; all they’re doing now is expanding that service, which is giving Tesla profit margins of over 80%. A figure that has never been seen before in the automotive industry.
In the past, we’ve seen Tesla grow more than 50% year over year, while incumbent automakers continue to reduce overall sales but sell poor products and lack supply, production capacity and innovation. It’s already known that these scaling issues won’t go away easily or quickly, so it’s safe to predict that Tesla will widen the gap between itself and its competitors.
This will help the US automaker extend its lead, and it will make it harder for incumbents to retain current customers, or even win back old customers. All of these signals point in the same direction, and it doesn’t look good for the car brands we grew up with as children.
I warned the world in 2015 of what would happen to Tesla in 2022, and I’m warning it now of what will happen to them in 2030.
Don’t tell me later that I didn’t tell you what’s going on!