There was a time when Tesla's chance of building a sustainable automobile business was slim to none.
Even after the company had built its first product and delivered Roadster number one to Chairman Elon Musk in 2008, the electric-car maker had probably less than a 50% chance of surviving in the cutthroat capital-intensive auto industry.
But 2015 presents quite a different picture. The market of fully electric cars with over 200 miles of range still belongs entirely to Tesla. Even more, most concept electric cars from traditional automakers are years away and fail to deliver any notable superior specifications.
Did Tesla solidify a permanent space for itself as the leader of electric vehicles while the big dawgs continued to bet on hybrids and plug-in hybrids?
Model S. Source: Tesla Motors.
Ignoring Tesla is no longer an optionIn business, a first-mover advantage in a given market doesn't always work out handsomely. But as Tesla's head start in a market that is proving to be incredibly hot continues to grow, its early move is starting to look like a formidable advantage.
The list of reasons competition simply can't ignore Tesla anymore continues to grow:
- Model S is now outselling all other models -- gas-powered or not -- in the high-end premium sedan market in North America.
- The vehicle is seeing success globally as well. In 2014, Europe accounted for 30% of sales and in Q2 orders in Europe increased 50% from the year-ago quarter. And orders in Asia doubled between Q1 and Q2.
- Year-over-year sales growth rates for Model S are accelerating.
- Model S is lauded by a numerous renowned auto experts and consumer rating agencies across the world as one of the best vehicles ever made.
- Structural advantages of a fully electric car make it inherently safer.
- The reach of Tesla's brand has grown far faster than its vehicle sales.
- The company's Gigafactory, or the world's largest battery factory aimed at making a $35,000 Tesla possible, is ahead of its initial schedule, with cell and pack production scheduled to begin next year.
- Tesla's Supercharger network has already enabled long-distance travel to almost anywhere in the U.S. and Western Europe.
- Tesla's Model X, a fully electric SUV, launches Sept. 29 and it aims to redefine the high-end SUV market with falcon-wing doors, uncanny storage space, the center of gravity of a sports car, and superior acceleration.
Case in point, the shifting mentality toward Tesla over at Porsche. Earlier this year, the Porsche CEO Matthias Muller said in an interview with The Wall Street Journal, "I cannot say anything about Tesla. I don't know anything about Tesla." More recently, however, Muller admitted Porsche has "great respect for Tesla" and that "[t]hey are the only one who have brought an electric vehicle on the market that you have to take seriously."
The competition Even as Tesla's vehicle sales continue to soar and the company expects more 50% plus growth year-over-year growth this year and next, traditional automakers have shown off nothing more than concept cars to compete with Tesla. A number of large auto manufacturers are talking high-end fully electric sedans or SUVs now -- but all are at least two years out.
General Motors comes closest to being in direct competition with Tesla, aiming to launch a 200-mile range electric vehicle in the $30,000 range -- a category that will share space with Tesla's planned Model 3.
Estimated specifications of concept models shown off by competition mostly fall behind Tesla's current models in terms of acceleration and lack any game-changing value propositions that Tesla couldn't easily match by the time these concept cars actually make it to market.
But autos are about far more than specifications. Buyers will be looking to brand, safety, reliability, service, charging infrastructure, and -- these days -- even software. Well-capitalized peers can possibly match and even exceed Tesla in some of these areas. But it won't happen overnight. Tesla has been relentless in its service center and charging infrastructure expansion, and it maintains a high level of control over the computers and software that run its vehicles.
Tesla's 17-inch touchscreen runs homegrown Tesla software and an in-house-built computer. Image source: Tesla Motors.
And Tesla's brand is perhaps its strongest asset, already associated with fully electric cars by millions of consumers across the world. Along with Tesla's appreciating brand is a growing potential market of interested buyers. When it launched Model S, its market was limited mostly to wealthy early adopters. Buyers had to go out on a limb on speculation, hoping charging infrastructure would follow suit and praying the company wouldn't go under.
But now, Tesla buyers can count on free long-distance travel, standard-setting safety, industry-leading electric range, excellent service, an eight-year unlimited-mile warranty on the battery and motor, and over-the-air software updates that actually make the car better.
The article Dragging Competition Reinforces Tesla's Head Start originally appeared on Fool.com.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns and recommends Tesla Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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