Tesla Technology Gives It Big Cost Lead – Berenberg Bank.
“(underestimates) the full extent of Tesla’s technology advantage, which manifests in the entire electronic architecture design”
Tesla Motors Inc is seen by many as a sitting duck for the Germans, once they get their electric car act together. But according to Berenberg Bank, Tesla has a big inbuilt advantage because of its electronics which traditional manufacturers will have great difficulty in matching.
This also gives them a huge price advantage over the Germans, and other traditional manufacturers.
“Imminent competition from traditional (manufacturers) is often cited as a key threat to Tesla, but this underestimates the full extent of Tesla’s technology advantage, which manifests in the entire electronic architecture design,” said Berenberg Bank analyst Alexander Haissl.
“This is a decisive barrier for legacy carmakers. Tesla’s centralised, integrated, technology-driven architecture enables flexibility and OTA (over the air) software-upgradability across the entire domain,” Haissl said.
Traditional carmakers’ software systems are excessively complicated and inflexible and make upgrades and enhancements expensive. Traditional manufacturers will have to modernise but they have, unlike Tesla, contracted out this ability.
“(Manufacturers) would also have to take back in-house much of the ECU software development that was previously outsourced to suppliers,” Haissl said.
This promises a big price advantage for Tesla.
“While tech features like SatNav and telematics are provided as standard on Tesla’s Model 3, in equivalent premium internal combustion engine cars, these are offered as aggressively priced options – $1,700 for BMW 3-Series models for example. To compete, (traditional manufacturers) are likely to be forced to include such content as standard, which will cut profits and margins. Even if they do, overhauling the entire architecture remains a crucial obstacle, and will take years of development. In the meantime, Tesla will in fact be offering a superior product at equivalent selling prices, a reality that is greatly underappreciated by critics,” he said.
Meanwhile, Tesla’s annual meeting was well received by investors, who added $5 billion to its market capitalisation. CEO Elon Musk said it was “quite likely” its goal of making 5,000 Model 3s a week by the end of June would be met. The negative Consumer Reports magazine evaluation based on poor braking was met by an online upgrade. Musk also said there will not be another fund-raising event this year, although nobody else seems to believe this.
Morgan Stanley said the 5,000 Model 3 production rate won’t be met until this time next year, and Tesla will raise $3 billion in equity in the third quarter of this year.
Tesla has said in the past it will build 1 million models a year by 2020, but last year Morgan Stanley said this was not even nearly obtainable and forecasted it will reach 500,000 Model 3 deliveries a year no earlier than 2024.
In 2017, Tesla delivered 101,312 Model S and X vehicles.