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While there have been some eye-catching announcements from Tesla Motors over the last few months, there have also been some major changes behind the scenes. A number of key personnel have left the company and it now goes beyond the joke from Elon Musk suggesting that the likes of Apple were a “graveyard for Tesla employees”. On the same day that the company announced it would be rolling out 500,000 vehicles a year by 2018 and up to 1 million cars by 2020, the vice presidents in charge of production and manufacturing left the company.
The rapid rise of Tesla has surprised even the most ardent fans of Elon Musk. This is a company which has gone from zero to hero in less than a decade and literally dragged the electric car market kicking and screaming into the next development stage. In many ways, the rise of Tesla has forced more traditional motor companies to invest heavily in electric cars as a means of keeping pace with the “new kid on the block”.
The success of Tesla has allowed a number of key staff to leave for other companies where perhaps their salaries are higher and they have more input. Whether these will turn out to be greener pastures remains to be seen because, despite these setbacks, Tesla continues to roll out positive announcement after positive announcement.
Is Elon Musk overpowering?
In some ways the influence of Elon Musk is both the main strength and the achilles heel of Tesla Motors. There is no doubt whatsoever that the company would be nowhere near its current position without his foresight, his investment, and his enthusiasm for the business. However, he also has many other ventures to look after and he has made many enemies in the U.S. political and automotive scene and he does seem to be THE main man.
We never really hear of Elon Musk’s ability to keep his workforce focused and enthused but maybe behind the scenes he can be overpowering? It would be foolish to suggest that the company is really all about Elon Musk because he does have some trusted lieutenants and advisers behind him. However, all the same, what is Elon Musk’s real management style?
Lack of skilled personnel
This week Elon Musk has issued a call to veterans of the automobile industry who could help him reach his target of 1 million vehicles annually by 2020. The 2018 target to produce 500,000 vehicles per annum has been brought forward by two years, much to the surprise of investors.
As we have said on numerous occasions, betting against Elon Musk is a very dangerous pastime because he usually delivers on even some of his more extreme promises.
While the latest challenges certainly centre round a lack of skilled personnel to fulfil short to medium-term targets, there are also many other issues ahead for the company. This continuous drip feed of key personnel leaving the company is worrying, although with Elon Musk at the head you could quite rightly argue that the company could not be in better hands.
On a recent visit to Norway, chief executive officer of Tesla, Elon Musk, seems to have let the cat out of the bag with reference to Tesla’s future solution to solving public transport issues. While he was a little reluctant to give too much away, it seems as though Tesla may be planning an Uber type service involving autonomous electric buses.
Would this work?
There is no doubt that despite massive investment in public transport around the world there is a growing reluctance amongst the general public to use these services. A mixture of expensive ticket prices, together with reliability issues, have hovered over the industry like a black cloud for many years now. Unfortunately, with the exception of a handful of countries around the world, the image of public transport services is probably getting worse rather than better.
The idea of reliable, clean, and affordable public transport services in the future would obviously appeal to the general public and politicians. However, would you trust an autonomous vehicle to get you from A to B?
Autonomous vehicles are already here
While not often discussed, there are various metro systems around the world which are in already autonomous; with some having no drivers, while others have drivers with minimal input. These systems have been in place for some time now and on the whole they have been very well received by the general public with very little in the way of major problems. As with electric vehicles on the whole, one of the major problems that Elon Musk and Tesla will face is educating the general public and injecting trust in these new automated systems.
We only need to look at the likes of Tesla, Google, Apple and other groundbreaking technology companies to see that autonomous vehicles are the future. Those systems which we often see in sci-fi movies will eventually come to fruition and the pace of change at the moment indicates this will happen sooner rather than later. Indeed, the UK government has already given permission for autonomous vehicles to hit the roads of the UK which will pose an interesting challenge.
Will autonomous electric buses pay for themselves?
When you bear in mind the massive investment in public transport systems across the world it would not take an awful lot of change in passenger attitudes for these autonomous electric buses to pay for themselves. How many of us would rather use public transport when visiting or working in town centres? If there were reliable public transport services then it is likely that passenger numbers would increase significantly which would also allow ticket pricing to remain competitive.
If we then move onto the issue of CO2 emissions from traditional vehicle transport there are not only an array of potential cost savings but also environmental issues to consider.
While Elon Musk knows how to play the game, he was reluctant to give too much away about what could be a surprise development from Tesla in the short-to-medium term. The introduction of autonomous electric buses could be a novel way to solve worldwide public sector transport issues. Will Tesla be able to deliver?
Even Elon Musk had no idea that pre-order levels for the Tesla Model 3 would reach anywhere near the current number of 325,000. This has given the company over $300 million in pre-order down payments, with orders now valued in excess of $10 billion. This is a phenomenal effort by any stretch of the imagination with initial forecasts for around 55,000 pre-orders. So, what does this mean for Tesla in the short to medium term?
Research shows that less than 5% of the pre-orders relate to individuals pre-ordering two or more vehicles, so there are literally hundreds of thousands of customers. It is difficult to estimate at this moment in time how many will follow through with their orders as the deposits are refundable. However, if just 50% of those pre-orders followed through this would equate to in excess of 150,000 Tesla Model 3’s on the roads.
There is no doubt this is going to be a major challenge for Tesla and perhaps one the company had not expected.
It is well-known that Tesla has been increasing both battery and plant capacity over the last few years as a means of ramping up volume to reduce production costs. We will see in the next year or two, whether the company has sufficient capacity to fulfil ever-growing order numbers or whether it will struggle. If this was anybody but Elon Musk it would be tempting to say it would be impossible to fulfil all pre-orders in an acceptable time scale, but this is a man who does everything his own way and very rarely fails.
Just after the launch of the Tesla Model 3 Elon Musk commented that the company would need to reappraise pre-order levels and delivery timescales. Since this statement, here has been no further word from the company about how they plan to fulfil all the orders. However, it would be foolish to write off Elon Musk!
Make or break for the industry?
Sceptics believe that the company will struggle to fulfil pre-orders and cash flow issues could come to a head. However, on the cash flow front Tesla already has in excess of $300 million in additional funding from the $1000 deposit per vehicle. Each vehicle is priced at around $35,000, therefore the more vehicles the company is able to produce the less pressure on long-term cash flow.
There are wider implications for the electric car industry because Tesla has been the leader for many years and broken many taboos with regards to traditional fuel powered vehicles. If the company is successful and able to deliver pre-ordered Tesla Model 3’s in an acceptable time scale then this will be a massive boost for the industry going forward. On the flipside, if there are production problems, faults with the vehicle or it receives negative feedback, then this will reflect very badly on the electric car industry as a whole.
Make no mistake, the next couple of years are a pivotal point for the electric vehicle market and Tesla is leading the way. Will Elon Musk prove his doubters wrong as he has done time and time again?
News that Porsche’s Mission E is finally underway, with around €1 billion set aside to fund the project, has certainly set the electric car industry alight. This is a project which has been rumoured for some time now and could be the first real challenge to Tesla. As you might expect, this news has given Tesla bears much ammunition to attack the company but will Elon Musk sit back and let some other company take over his mantle?
Does the '1st to Market' phenomenon stand?
Historically, those first to market with new technology/services tend to fall by the wayside as others follow behind them once they have done the hard work. A mixture of improved marketing, improved technology, and perhaps a more structured approach to the future, often pay greater dividends for those following behind. There will be some experts focusing on the '1st to market' phenomenon as Porsche launches its Mission E project, but is this a fair representation of the challenges ahead?
Never underestimate tesla
Time and time again the '1st to market' phenomenon has evolved like a script but there are a number of reasons why Tesla will not roll over for anybody. This is a company with a focused and determined chief executive officer in the shape of Elon Musk. Tesla is a company which has invested billions of dollars in new technology and perhaps more importantly, has a reputation that money just cannot buy.
Let’s not forget that Tesla was pushing electric vehicles when nobody else would touch them. The alone ploughed on with research and development while others fell by the wayside and Tesla has taken on governments and regulators around the world while others have backed off. Unlike many predecessors in the '1st to market' group, Tesla is not afraid of challenges and competition. Indeed many would argue that Tesla performs better under pressure.
Is this a big gamble for Porsche?
Those with a liking for Tesla have already begun to point the finger towards Porsche, suggesting this is a market which could make or break the company’s future reputation. While a move into electric vehicles with a name like Porsche is risky, it will require significant investment and success will not appear overnight. But what are the choices going forward?
The fact remains that fossil fuels will eventually be phased out, no matter what the politicians and the automobile industry tells us. As a consequence, more companies will need to move towards more environmentally friendly fuel sources in the not too distant future.
Will consumers be the ultimate winners?
When we see companies like Tesla and Porsche going head-to-head, both will want to be the winner and build on their already awesome reputations. Therefore it is likely that consumers will see an array of offers and deals available and could come out of this battle as the major victors. It will be interesting to see whether the companies actually challenge each other head-to-head in specific markets and with specific types of vehicles or whether they give each other some room.
Whatever happens in the short-to-medium term, there will be no lack of news flow from these companies as they look to outdo each other on the public relations front!