Loading...

Tesla vs the Rest

March 4, 2024
18
92
0
FinMeUp
Author
FinMeUp

Who's winning the race? Let's find out.

When it comes to Electric Vehicles (EVs), there is one name thats stands head and shoulders above the rest: Elon Musks Tesla Incorporated. To date, Tesla has been operating mostly free of competition, but its rear-view mirror is quickly getting crowded. 

EV start-ups and legacy automakers are now entering the market at an aggressive pace. Question is: Will Tesla continue its dominance, or will the competition gear up and gain significant market share? This article investigates electric vehicles, Teslas current competitive advantage, and financial comparisons between Tesla and its biggest rivals.

Q1 2022 - Most sold EVs in the US
Tesla Model Y - 52,051
Tesla Model 3 - 47,682
Tesla Model S - 9,250
Ford Mustang Mach-E - 6,957
Hyundai Ioniq 5 - 6,265
Kia EV6 - 4,901
Tesla Model X - 4,899
Nissan Leaf - 4,401
Kia Niro - 3,549
Volkswagen ID4 - 2,926

 

Why electric vehicles?

In 2019, 2.2 million EVs were sold, representing 2.5% of global car sales. In 2020, the overall car market contracted, but EV sales bucked the trend, rising to 3 million and representing 4.1% of total car sales. In 2021, EV sales more than doubled to 6.6 million, representing close to 9% of the global car market, and more than tripling their market share from two years earlier. Why is the automobile market is transitioning at such a pace?

Pollution: Efforts to mitigate climate change and reduce emissions are key factors driving EV production and popularity. The largest source of climate pollution in world? Transportation. This is perhaps the biggest driver behind the transition from fuel transportation to electrical transportation. 

Electricity: The electricity that charges and fuels batteries of EVs comes from power grids, which rely on a range of sources from fossil fuels to clean renewable energy. Because electric vehicles are more efficient in converting energy, electricity across the board is cleaner and cheaper than its fuel alternative, even when that electricity comes from the dirtiest grid. 

Charging: Though the charging infrastructure still needs development, it is a being built at a rapid pace. As more electric vehicles hit the market and are used more broadly, new recharging solutions including home charging stations, as well as public charging locations in shopping centres, parking garages, and workplaces are being constructed to meet the all-growing demand.

Enjoyable, safe driving: One of the first things people notice about electric cars is how quiet they are. This, coupled with the fact that they have instant torque, makes them a joy to drive. They also have a lower centre of gravity, which provides both driving and safety benefits.


Teslas Competitive Advantage

[Refer to image 2: Teslas growth]

As competitors begin to pour into the electric vehicle market, we must examine if Tesla has a competitive advantage and whether it can retain its dominance in the industry.

First-mover advantage: Tesla has been around the EV industry a lot longer than its competitors. It enjoys brand recognition, word-of-mouth advertising, and a much more expansive charging network thanks to its time in the market.

Autonomous driving: Its estimated that Tesla has amassed roughly 2 billion miles of data through its Autopilot driver-assist feature, each and every inch of which has strengthened its self-driving algorithm through machine learning. 

Battery power:  At some point, we've all experienced a bit of worry when our phones get low on battery. This is not too dissimilar to range anxiety experienced with electric vehicles and is one of the biggest consumer gripes. How far can it go? Not very far between 110km and 600km depending on your model. One of the main reasons behind Teslas success is the ability of its cars to simply drive further. Many people call Tesla a battery company that sells cars, with this type of dominance its easy to see why.

Charging stations: EVs need to be charged, and right now doing that is perhaps the biggest issue with owning an electric vehicle. That's why Tesla has stolen a march on the other auto manufacturers simply because early on it developed its own dedicated charging infrastructure.

Vertical integration: Tesla has a high degree of vertical integration, estimated at around 80%: The company produces vehicle components as well as builds proprietary stations where customers can charge their vehicles. Vertical integration is rare in the automotive industry, where companies mainly outsource components to suppliers and focus on engine manufacturing and final assembly. When done right, this is a massive advantage for Tesla, as it allows the company to run a much more streamlined approach.

Last year, automakers such as G.M. and Ford closed one factory after another sometimes for months on end because of a shortage of computer chips. Yet Tesla racked up record sales quarter after quarter and ended the year having sold nearly twice as many vehicles as it did in 2020 unhindered by an industrywide crisis. When Tesla couldnt get the chips it had counted on, it took the ones that were available and rewrote the software that operated them to suit its needs. Larger auto companies couldnt do that because they relied on outside suppliers for much of their software and computing expertise. 

Brand evangelicals: Slightly less tangible than its other competitive advantages, but no less important, is the almost cult-like following Tesla garners. Fans of the company and the stock truly think Tesla is on the brink of changing the world for the better, and theyre putting their money where their mouth is as deliveries and the stock continues to soar. 

 

Teslas main competitors

General Motors: General Motors has not been shy about its plan to overtake Tesla as the top U.S. EV seller by the mid-2020s. GM has announced $35 billion in planned EV investments through 2025. 

Ford Motor: Bloomberg recently reported Ford is planning to spend an additional $10 billion to $20 billion on top of the $30 billion it has already pledged to spend on EVs by 2030. 

Volkswagen: Volkswagen predicts 50% of its U.S. sales by 2030 will be EVs and the firm is spending tens of billions to push this target. It also is aiming to produce 1.5 million electric vehicles by 2025, in anticipation of the EUs new emission targets.

Nio: Nio, often referred to as Chinas Tesla, manufactures premium electric vehicles for the international market. NIO delivered 91,429 EVs in 2021, up 44.3% year-over-year. Its rapidly growing delivery numbers and improving financial metrics have provided investors who seek a Tesla alternative a viable option.


Comparing Financials

[Refer to figure 3: Market caps]

Teslas market cap is seriously impressive, especially considering how little vehicles they currently sell compared to legacy automakers. Teslas market cap currently exceeds the market cap of the other 9 competitors in the top10, combined.

[Refer to figure 4: Comparing financials]

In this segment, we will compare the basic financials of Tesla and its competition. Financials include revenue growth, gross profit margin, debt, and cash. All amounts are in thousands, USD.
 

Conclusion

Electric vehicles are getting better in every way with features and functionality that easily match their traditional petrol and diesel counterparts. Overall, EVs are cleaner, greener, and offers less hassles thanks to having fewer moving parts to go wrong.

What makes Tesla so appealing? Well, many things, but all in all, Tesla represents a big jump in innovation and integration, all packaged up into a well-designed product that has big consumer appeal.

Though Tesla is the clear front-runner, competition is stepping up to the plate. Market share is the name of the game. Who will thrive and who will fail in this compelling and exciting new industry?

Final thought: If you ask the little boy on the street to choose between a Tesla and a Toyota, which one is he likely to choose? Its Elon Musks Tesla vs the Rest. Only time will tell who will reign supreme.


Related Tags:
6 min read
Share this article:

Related Articles

All articles
Top