A rough ride in the development of electric vehicles
Tesla has long been the one to watch in the electric vehicle (EV) market. But following a recent drop in share prices and an executive overhaul questioned by some, the company’s polished exterior may be cracking. Even characteristically confident CEO Elon Musk admitted that 2018 was fraught with challenges. As startups and incumbents alike move into the electric vehicle lane, will Tesla be overtaken?
A triumph in transportation
It’s easy to see last year’s disappointing fourth quarter earnings as a sign that all is not well at Tesla Motors, but let’s not forget the company’s monumental impact on the automotive industry. In 2008, the Tesla Roadster proved that electric power could go hand in hand with high performance. In 2015, the Model S became the world’s best selling EV for two years running. The following Model 3 proved so popular that it propelled Tesla’s profits to $4bn. Even after failing to meet its expected revenue in late 2018, the company retains an 83 per cent share of the battery electric vehicle market. While from day one, Tesla has embodied innovation, the auto leader is now in a difficult position – and not just because its competitors are catching up.
It’s a testing time for Tesla
Jaguar, General Motors, Mercedes, and Volkswagen are just a handful of the legacy automakers vying for Tesla’s crown, with various new EVs hitting the market in 2019 and 2020. Tesla are certainly EV pioneers, but they have made their move. The honeymoon period is over, and their opponents are now in a position to compete. What they have that Tesla does not are vast, scalable supply chain networks, and trusted brands.
It’s not just established businesses who are speeding ahead in electric vehicle development. Acura and Zotye are two relatively young, Eastern companies that have created their own electric cars, and there’s an endless list of other global startups crowding the market.
Aside from an avalanche of adversaries, Tesla’s got other problems to contend with. Despite retaining a majority market share, there is a distinct lack of confidence in the company’s future evidenced by a drop in shares of as much as 4.8 per cent. On top of that, concerns over lack of demand place a rather large question over ROI. Industry experts have also questioned the reality of mass EV adoption within the next couple of years, citing the transition to electrification as a major challenge.
Tesla’s survival strategy
Tesla needs to retain its mass market share, fight off competition, restore shareholder confidence and encourage new buyers. One way to do this would be to release products that leave competitors in the dust – not only in terms of charge time, range, and design, but also affordability. Unfortunately for employees, achieving this will include cutting seven per cent of the business’s workforce. As well as internal changes, Tesla’s continued efforts to build a reliable electric infrastructure will also help the company to remain relevant. Another issue for Tesla is image – it’s up to Musk to channel his personal confidence into stakeholders and, in short, tone down his erratic nature.
In 2019, Musk has promised a surge in production of the Model 3, as well as three new product launches. If they each deliver on quality and price, then Tesla stands a chance of defending its position. Given that the price of the Model 3 has just been lowered by $1,100, Tesla seems to be moving in the right direction. And, even if EV sales aren’t growing at the projected rate, they are increasing nonetheless. Tesla’s position as the forerunner in electric vehicles might be under threat, but it’s safe to say that they won’t go down without a fight.
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