Can batting a hornet's nest yield honey?
In an extraordinary example of leveraging a still-relatively niche product’s placement and popularity, Tesla is goading upscale automakers to devote billions to follow it into developing upscale all-electric cars due for launch between 2017 and 2021.
Not to overstate the case, global regulations are also pushing the likes of Mercedes-Benz, Audi, Porsche, BMW, Infiniti, and potentially others, but Tesla’s Model S is defying particularly the Germans as a rising star for it, and a sore spot for them.
The Silicon Valley startup has consistently said it wants to change the way automobiles are powered from petroleum-based to electric, and having all but invited others to come chase it, competitors are at work taking the bait.
Presently, the Model S is in a class of one. Ordinary EVs get under 100 miles range, most cost under $35,000, but Tesla is offering 208-265 miles range with its large, fast cars costing $72,000 to around twice that.
Tesla is also easy on the eyes for government regulators. It’s already in compliance, selling back green car credits to competitors, and an underlying driver to all automakers is not pure capitalist market forces, but rather global mpg and CO2 regulations.
In California, which influences around a quarter of the U.S. market with its Zero Emission Vehicle mandates agreed to by other states, rules beginning 2017 through 2025 call for tightening fleet averages. These go beyond federal Corporate Average Fuel Economy (CAFE) regulations also in place from 2017-2025.
To further balance this story, it should be noted Tesla is not the only EV in town, and other plug-in hybrids and pure EVs like Nissan’s Leaf are proving what electrification can do.
But with regard to Tesla, according to green car analyst Alan Baum, other factors are in play for upscale makers to stay abreast of a general electrified vehicle market. While electric cars’ viability in the eyes of some still weighs in the balance, the ego-driven Germans know they must give it a go just as they may have other vehicles that may sell at a trickle. It’s part of their entire image.
“The German automakers consider themselves to be at the peak of technological advancement and they want to be players/leaders,” said Baum.
But if Tesla did not exist, competitors would have less incentive to develop big, fast, powerful luxury EVs. They could more easily stick with potent plug-in hybrids which some have argued can serve as greenwashed guzzlers in disguise, or little EVs like BMW’s $42,275-and-up i3 if they wanted. Presently at least Audi, Porsche and Mercedes are building all-electric Tesla fighters and BMW and Infiniti should not be counted out either.
Tesla is an American company but as unlike a Detroit automaker as it can be. This year in June it made all its patents free in an open invite to competitors, not that any of the competitors mentioned are known to be taking its offer.
Tesla’s new age way of building markets in any case flies in the face of a traditional take-no-prisoners exploitation of a market lead. In its heady Silicon Valley style, Tesla says it welcomes followers into the EV space it’s creating hoping to build synergy with room for all. Of course Tesla thinks it can only benefit in the long run, and it does have a head start and is managing its reputation very well.
Could this however become a case of “be careful what you wish for?” Will more-experienced and deeper pocketed competitors put a hurting on Tesla – still financially in the red and trading on hope and sizzle – as it strives to morph from relative niche player to bigger leagues with its Gigafactory, Model 3, and more?
As much was suggested in April this year by the head of Mercedes-Benz USA who contradicted the contrarian Tesla saying it was nearly a flash in the pan, selling trendy toys but with much to learn.
“Tesla is great, but you’ve got plenty of well-established brands that mean luxury, like Porsche or Mercedes-Benz, and how long do you think we’re going to wait and let Tesla be out there alone [selling premium electric cars]?” said Steve Cannon. “So, good job, Tesla, but will they be able to maintain that with the others of us out in the market? That remains to be seen.”
From one worldview, some have postulated it may be all over for Tesla as a competitive carmaker in a few short years after throwing cold water on sleeping giants, but could there be method to what traditionalists might call madness?
Indeed, the high-stakes wave Tesla is surfing has been part of its allure for some time now. Unspoken are questions as to who is smarter – the new kid on the block from the Left Coast, or existing titans.
With competitors’ vehicle developments just in early stages, there are more questions than answers and how the next several years will all play out will likely be full of twists and turns.
Odds are while Tesla keeps trying to push as much volume as it can, the big players now rumbling will not dive into the EV waters as head first as Tesla for whom EVs are all or nothing.
Unclear in all of this is energy storage – batteries – which are simultaneously the enabler and Achilles’ heel of the modern electric car.
These ostensibly “high-tech” cars are all being developed around lithium-ion chemistry when research labs and automakers are racing to relegate this to history.
So far the same issue hasn’t stopped Tesla, but whether evolving battery tech will create wrinkles in the picture is also an open question. To be sure technology is always marching onward, but EVs are not a mature technology like internal combustion, and a paradigm-changing leap in energy storage could mean a successive EV generation may age less gracefully unless upgraded as Tesla has said will happen eventually for Model S.
Also unknown is how these up-market cars will influence a growing down-market arena. Will they create synergy for “the masses” which ultimately is Tesla’s intent?
By themselves, even a stable full of limited-production electric luxury status symbols may not move the car market needle very far from petroleum dependence unless volume sellers also come along, perhaps riding on the shoulders of the bigger ticket vehicles.
In any event, Tesla appears to be getting what it has sought to inspire, and following are overviews of five known competitors preparing not to let Tesla have all the fun to itself.