Just What Is Tesla’s Advantage? We’ll Find Out As VW Ramps Up $23k Competitor

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That Tesla has a sexy car out there ready to roll right now is true. They’ve got Elon Musk, possibly the best manager of public opinion on the planet. But, underneath that, what do they actually have that’s a sustainable competitive advantage? It’s very difficult indeed to see that they’ve got anything in this world of mass manufacturing. Build quality certainly ain’t it for example. And we’re going to find out real soon now too, as Volkswagen has announced they’re to ramp up production of a $23,000 competitor.

What does Tesla have to beat this?

Volkswagen intends to sell electric cars for less than 20,000 euros ($22,836) and protect German jobs by converting three factories to make Tesla rivals, a source familiar with the plans said.

Yes, obviously, announcing that you’re going to make something available doesn’t mean that people will buy what you’re going to make available. But VW isn’t to be trifled with despite that diesel engines thing:

Known as the “MEB Entry,” Volkswagen reportedly wants to convert three German production plans to produce the electric vehicles (EVs) and plans to produce 200,000 models. Can it get there?

For anyone who thinks of Volkswagen as a small-time producer, think again. While the name isn’t as popular here in the U.S. as Ford or General Motors’ (GM – Get Report) Chevrolet, Volkswagen produced just under 11 million units in 2017. To put that in perspective, the annual sales rate in the U.S. continues to hover around 17 million units.

OK, so we know that VW can do mass manufacturing.

Also reportedly on the way is a midsize EV called the I.D. Aero, which will reportedly be built on the assembly line where the Passat is built today. It is unclear whether the alleged I.D. Aero will fully replace the Passat and take up the plant’s full production capacity, though the board is expected to discuss retooling three of VW’s plants to manufacture EVs.

They can also do market segmentation.

OK, so what is it that Tesla has which is a competitive advantage? Sure, first mover advantage. Some interesting technology in terms of self-driving to varied levels. Pretty darn good brand. And?

Well, that’s the thing.Those aren’t what aid in making the leap through to mass manufacture. There are myriad car companies that can claim some or even all of those things. But which don’t have the institutional knowledge of how to build hundreds of thousands of cars well, properly, and at a price that people want to pay.

That of course being the one thing that VW does have. We know very well that VW can make stuff at reasonable prices and make it well. Making a profit as it does so.

This has always been my at least concern over what Tesla is trying to do. Sure, I can see electric cars. I tend to think fuel cells and hybrids are a better technological option but that’s just my opinion. I can see that people think the Tesla models are pretty cool and that helps, of course it does. Fully autonomous cars are going to be fabulous.

But, but. Mass manufacturing is a seriously difficult thing to get right. And we’ve no real indication that Tesla has any greater skill or expertise there than other wannabes. And we know very well they’ve got less than the current – or at least some of – major car companies. Which has always been the worry.

Can Tesla scale up? And will they be able to do that faster than someone who can already do the scale can electrify? My guesses at answers have always been maybe and no. Which is why I’ve never been very confident that Tesla’s going to succeed – as a mild expression of my worries.

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Bloke on M4
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Bloke on M4

“OK, so what is it that Tesla has which is a competitive advantage? Sure, first mover advantage. Some interesting technology in terms of self-driving to varied levels. Pretty darn good brand. And?” It seems to me that to beat the existing players you need to either a) have some patents that buys you a decade (like Dyson vs Hoover) or b) find your competitors half asleep and not taking the tech change seriously (like Apple vs Sony). Everyone’s been looking at electric for years. Biggest selling electric is the Nissan Leaf. Renault make them. And you’re right about the building.… Read more »

jgh
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jgh

Twenty Three Thousand bleeping dollars???? I bought my current car for £495.

Exactly like when I went looking for an electric add-on to my bicycle. Figures floating around the one grand mark. For my bicycle that I paid twenty quid for.

Bloke on M4
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Bloke on M4

Just remember that the more mugs paying that for the shiny car, the better the £500 car will be for you. And I really believe people are mugs today. I bought a brand new car in 1990 for £8K. But that was a considerable improvement over the cars from 5 years earlier – electric windows, central locking, servo brakes, rustproofing. They’re £20K today for an equivalent size car. That’s £2K over inflation. And OK, they’ve improved, but not by much and there should be some efficiency savings in there. I suspect a massive amount of money goes into marketing, gloss,… Read more »

MrYan
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MrYan

Don’t forget the cost of regulations (or working around them in the case of VW). All the crap the EU technocrasy dream up has a direct cost on what we pay. 2 people per year die of having their heads connect with the bonnet of a car so we need to drop the engine down so it acts as crash structure. Times that by every stupid decision from Brussels and there’s your £2K/annum inflation.

Hallowed Be
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Hallowed Be

I saw a breakdown by a reverse engineering firm of the three. Seems in trying to break the mould and get that competitive advantage, they have ignored a lot of industry best practice (for manufacture). That’s fine if you end up with a product that’s better and even could be ok if it’s cheaper than equivalents. But if its worse and more expensive- that’s a problem.

Hallowed Be
Guest
Hallowed Be

I saw a breakdown by a reverse engineering firm of the three. Seems in trying to break the mould and get that competitive advantage, they have ignored a lot of industry best practice (for manufacture). That’s fine if you end up with a product that’s better and even could be ok if it’s cheaper than equivalents. But if its worse and more expensive- that’s a problem.

jgh
Guest
jgh

Twenty Three Thousand bleeping dollars???? I bought my current car for £495.

Exactly like when I went looking for an electric add-on to my bicycle. Figures floating around the one grand mark. For my bicycle that I paid twenty quid for.

Bloke on M4
Guest
Bloke on M4

Just remember that the more mugs paying that for the shiny car, the better the £500 car will be for you. And I really believe people are mugs today. I bought a brand new car in 1990 for £8K. But that was a considerable improvement over the cars from 5 years earlier – electric windows, central locking, servo brakes, rustproofing. They’re £20K today for an equivalent size car. That’s £2K over inflation. And OK, they’ve improved, but not by much and there should be some efficiency savings in there. I suspect a massive amount of money goes into marketing, gloss,… Read more »

MrYan
Guest
MrYan

Don’t forget the cost of regulations (or working around them in the case of VW). All the crap the EU technocrasy dream up has a direct cost on what we pay. 2 people per year die of having their heads connect with the bonnet of a car so we need to drop the engine down so it acts as crash structure. Times that by every stupid decision from Brussels and there’s your £2K/annum inflation.

Bloke on M4
Guest
Bloke on M4

“OK, so what is it that Tesla has which is a competitive advantage? Sure, first mover advantage. Some interesting technology in terms of self-driving to varied levels. Pretty darn good brand. And?” It seems to me that to beat the existing players you need to either a) have some patents that buys you a decade (like Dyson vs Hoover) or b) find your competitors half asleep and not taking the tech change seriously (like Apple vs Sony). Everyone’s been looking at electric for years. Biggest selling electric is the Nissan Leaf. Renault make them. And you’re right about the building.… Read more »