Tesla has several big competitive advantages, imho. I’m actually going to discuss 5 below, but I want to particularly highlight 3 of them, hence the title. [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)
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?
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
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
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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