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Tesla Focus Means Victory Versus Complacent Mainstream

Tesla Focus Means Victory Versus Complacent Mainstream.

“Tesla will be given a near-monopolistic opportunity to gain market share and outcompete the incumbent automotive industry”

Tesla Inc will win big in the race to sell electric cars to the world because the competition from traditional manufacturers has been complacent and Elon Musk’s upstart company from Palo Alto, California will win a near monopoly of the market.

Tesla is out investing the competition, which hampers itself by seeking to save money by building on legacy engineering rather than developing new and focussed technology.

That’s the view of Hamburg, Germany-based Berenberg Bank, which also rates the readiness of Tesla’s competition. Daimler’s Mercedes looks best prepared, followed by Volkswagen and BMW. General Motors, despite its Chevrolet Bolt, Ford, and FCA don’t get strong ratings.

“(Manufacturer) complacency about electric vehicle (EV) technology is worse than perceived. Despite more talk of developing EVs for mass-market adoption, a lack of real action and strategic commitments betray their underlying conviction, with no clear pathway to high-volume EV production before the mid-2020s,” Berenberg Bank analyst Alexander Haissl said in a report.

“Tesla will be given a near-monopolistic opportunity to gain market share and outcompete the incumbent automotive industry,” Haissl said.

Haissl said traditional auto makers have shown little vision for 20 years and their investments have concentrated on lowering costs and integrating existing production rather than going for dedicated, high-volume production of new electric vehicles.

“To contrast Tesla with even the most forward looking (manufacturers), we estimate Tesla will invest $32.7 billion over the next 5 years – roughly 40% more than Daimler and Volkswagen combined have committed for their EV projects,” Haissl said.

Tesla’s battery advantage is not being narrowed either.

“Tesla/Panasonic continue to exhibit a clear advantage on cell and pack technology compared to all peers, on chemistry, cooling and cost. Clear visibility about high-volume cell-sourcing strategies continue to elude traditional manufacturers, although we expect announcements for large facilities to eventually emerge to resolve the key issue of battery supply constraints,” Haissl said.

The bank also examined the EV strategy of some of the big car makers –

  • Mercedes-Benz – “High investments, but strategy for battery cell sourcing is not the most competitive”.  Mercedes has announced total investment of 10 billion euros ($11.4 billion) in electric engineering and its EQ brand, and the same amount in battery capacity. This is the highest amongst the traditionals. Battery cell sourcing is not the most competitive.
  • Volkswagen – “Larger investments into battery capacity could be necessary”. To supply its electric fleet by 2025, VW needs about 150 gigawatt hours of battery capacity a year, and capacity planned so far isn’t enough. One major advantage for VW is its huge scale for better economics.
  • BMW – “risk of making the same mistake twice”. BMW’s i3 made the company a front-runner because it was designed from scratch to be electric. Its stance has almost been reversed, and it has slipped into wait and see mode.

“Wait-and-see strategies can only be explained by hoping for better battery technologies, as it would allow existing platforms to be retrofitted with batteries that give significantly stronger range performance. This in turn could reduce the need to invest in developing dedicated platforms. This is risky if the EV market grows very quickly. Tesla threatens its core market. BMW’s line-up looks thin with Mini-E in 2019 and X3 in 2020. “Overall, we see the risk that BMW is making the same mistake twice on EVs – being too early with the i3, and now basically giving up the strategy of dedicated models/platforms and production concepts”.

  • Renault – “Well positioned in mass market offering”. Renault Nissan was a first mover with the Zoe and Leaf, with good battery cell sourcing from LG Chem. But its batteries produce less energy than Tesla/Panasonic.
  • FCA – “EVs to remain niche”. Like Ford and General Motors EVs are likely to be just a niche.
  • Ford – “Investments focussed on plug-in hybrids, but no EV strategy”. The current EV, the Ford Focus electric, is not competitive on price versus range and it looks unlikely that Ford will catch up in the foreseeable future. Unless Ford materially increases its efforts on the pure EVs, the gap is expected to widen.
  • General Motors – “Chevy Bolt solid but no clear EV strategy”. The Bolt is not enough to retain market share once competitors launch new models. GM’s focus has been to keep costs and risks low, which explains “…why the battery pack is supplied by LG Chem and entire drive-train by LG Electronics. From our perspective GM does not have a clear strategy on EVs…..”

The idea that Tesla, because of its lead, will dominate the EV market isn’t shared by all.

The Center of Automotive Management in Bergisch Gladbach, Germany has said a possible shortfall in battery availability could stymie the fight back from BMW, Volkswagen and its Audi and Porsche subsidiaries, and Mercedes, but believes they will probably get their act together in time.

The Center for Automotive Research at the University of Duisburg-Essen has said Tesla better get used to the idea that the Germans will soon be matching its products.

Dr Dean Dauger, computational physicist and President of Dauger Research Inc of Huntingdon Beach, Calif., said earlier Tesla will win a long period of ascendancy mainly because of its decision to make its own batteries. Dauger said the Germans have no way of getting their competitive electric vehicles before 2025 at the earliest in any great numbers because they simply won’t have access to enough batteries at competitive prices.

Tesla is building a so-called Giga-factory near Reno, Nevada, designed to double the world’s production capacity of lithium-ion batteries. It has said it will produce 35 gigawatt hours of cell production and 50 gigawatt hours of pack production by 2018.

In the report, Berenberg Bank said the traditionals need to act.

“More drastic measures to create shareholder value may need to be considered – including, for example, spinning out their EV divisions to better focus on technology development and improve capital allocation. However, this would first require a transition to dedicated production lines rather than integrated production,” the report said.   


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