What Traditional Automakers Cannot Catch up with Tesla
The advantages Tesla enjoys over its competition runs a lot deeper than people are aware of.
That is actually a lot less likely than many people believe. People tend to think the other big automakers only need to get their act together and they will make better EVs than Tesla which is a less experienced car maker.
It is true that when it comes to a lot of the manufacturing process, Tesla is behind the competition.
However when it comes to the key technologies of an EV, Tesla is far far ahead of their competition. Tesla has all the key technology inhouse.
Tesla makes their own batteries, and own electric drive train. The other automakers don't. That means the key technology that can separate an EV from another, is not something the big automakers have a strategic position on.
Say Tesla's competitiors put in a better battery and a better electric motor. So what? These will be sold by third parties which Tesla can buy from. Hence the way these automakers have organized themselves they have no ability to get an upper hand hand on Tesla.
A much bigger problem for the big automakers is that Tesla is in fact the leading battery and drive train maker in the world at the moment. And they got the biggest volume.
Doesn't matter how good you are at painting car bodies, fitting doors, or installing luxury seats if you cannot provide superior battery technology and electric motors.
We have been told that the big auto makers where going to crush Tesla for a while now. What happened when Audi, Jaguar, Porsche and others came out with cars?
Sure they made nice cars, but they just couldn't touch Tesla on price and range. Why? Because Tesla batteries are cheaper and denser. They motors are also more efficient giving better range.
Thus for things like acceleration, top speed, and range, it is impossible to beat Tesla at the moment without making a significantly more expensive and heavier car.
Next problem is, how are they going to catch up, when Tesla develops new models cheaper and faster than them? Yes they have an edge in manufacturing over Tesla, but not in the car design process. There the roles are reversed.
This is no joke. Elon Musk really understand how to develop new technology fast. Look at the speed at which SpaceX makes new rocket designs and the much lower cost at which they do it. The key to this very rapid development is almost complete vertical integration with very rapid iterations.
Tradtional automakers or space companies for that matter don't work like that. They have a slow length process where there is little iteration and instead lots of upfront specification and planning. E.g. one example is changing a blinking status symbol on the dashboard. That takes 3 weeks of negotiation and updates with suppliers to fix in traditional automanufacturing. Tesla does that in 10 minutes, because all the electronics and software is made in house. There are nobody to send over thick new specification documents to.
So the question is what will happen first. Will Tesla catch up to the manufacturing quality of established automakers first, or will established automakers change their whole operations develop new cars the way Tesla does?
I would say the former is far more likely. Large companies don’t fundamentally change the fundamentals of how they operate. This is the problem. There is a paradigm shift going on and these existing automakers are stuck in a mode of operation optimized for small gradual refinement of well established technology. But that is not the EV world. It is more like a startup scene where you got to try all sorts of new things and quickly innovate and experiment.
And even if they could do that against all odds, they have made enormous strategic mistakes. They have no large scale battery factories. So even even they made a better car than Tesla, how would they scale up production? It takes many years to get all these Giga factories up and running. Tesla has even secured raw materials for these factories to make the batteries. They have made long term strategic choices over many years and made huge upfront investments. The other car makers are too late to the game.
Even if they do everything right today, it will take them at least 5 years to catch up to where Tesla is today. But where is Tesla in 5 years? By that time they will have profits, volume and market recognition which will make them hard to unseat.
But who knows. Elon Musk is kind of a volatile personality. He could quite possibly screw up. Anything is possible. But I would not bet against Tesla.
