Everyone seems to miss the biggest reason why Tesla has won and the other companies won't be able to catch them. The dealer network.
The Nissan Leaf came out and was way ahead of everyone but nobody bought it because they couldn't find it. The dealers would hide the car in the back and avoid showing it to you. There was no incentive for them to get you in a Nissan Leaf because they would make profits, negligible ones, on the sale but the place they make their money is maintenance and that would deplete their profits.
The issue with this is the dealerships aren't owned by the organization so the incentives aren't aligned. If GM/Ford/Toyota create the best EV the dealer won't have any incentive to sell them until unless they make up significant profits, which means they would have to make up 5-7 years of maintenance profits on the initial sale. In essence they will just sell their land and move on and have to take a loss. The smart dealers sold their stake in the dealerships and now the suckers are holding onto the last bit hoping to get out.
The dealerships we have now Ford/GM/Chrysler/Toyota/Volkswagen/Nissan are all going to disappear, that's why their valuation is justified. The only competitors are going to be the new car companies because they will adopt the same model Tesla has where they own their own dealerships. It's why the current Auto companies and dealers are lobbying to not allow Tesla to own their own dealership.
The only competitors are going to be the new car companies because they will adopt the same model Tesla has where they own their own dealerships.
The general form of your argument is correct, however existing automobile companies aren't all wedded to their dealer networks. Volvo (which is now owned by Geely in China) took their Polestar performance brand and launched an entire automobile brand a few years ago.
They now have a Polestar 1 performance hybrid coupe, and are taking orders for their Polestar 2 small sedan that will compete with the Tesla Model 3.
And when I say, "taking orders," I mean over the web. You cannot buy or lease a Polestar automobile in a Volvo dealership.
I think Tesla has a lot of technical advantages that throw up barriers to competition from existing manufacturers, and there is no doubt that from a management perspective, these companies are their own worse enemy.
But the dealer network thing I think is a much weaker moat than it appears at first glance. I think it's a lot easier for an existing company to sell cars direct--possibly under a new marque--than it may seem.
There are problems of institutional inertia and lobbying and so on to overcome, but for some manufacturers, like Volvo, selling cars without a dealership just happened, without fanfare.
Are they a "new car company?" I don't think it matters that the cars they sell online are called "Polestar," and the ones in their dealership are called "Volvo."
> And when I say, "taking orders," I mean over the web. You cannot buy or lease a Polestar automobile in a Volvo dealership.
How does this not sound like "working around the dealership model that is engrained in traditional auto manufacturers"? It also brings up the point - how will their existing dealer network react when they get replaced by web sales (like some Office episode)?
My point is that we don't need to speculate about what will happen to Volvo when they start selling around their dealers. They already did it with the Polestar 1, and they did it again with the Polestar 2. AFAICT from taking my Volvo into my nearby Volvo dealership, they're still selling and maintaining Volvos.
They haven't staged a mass protest, I am unaware of any lawsuits. I do not believe that Volvo dealers here in Canada are lobbying for it to be illegal for the Polestar vehicle to be sold in Canada.
I can't saw what goes on south of the 49th parallel, but what I can say is that from what I have observed, if Volvo has dealership baggage, that baggage is lightweight and compliant.
Which is my point. There may be baggage, but it might not be the encumbrance that we have speculated about. That may be uneven: Perhaps the "Big Three" have an albatross and an anvil around their necks, while (relatively) smaller brands can be more nimble.
Recall that the comment I replied to said that other companies can't catch them. I doubt Volvo will catch Tesla, but Geely certainly could, and clearly not all companies are following Nissan and BMW's example: Volvo did not launch Polestar in their existing dealerships.
p.s. That being said, Volvo just announced the XC40 P8, which is a "pure electric" model, so they are having it both ways: You can buy an electric car from Polestar, over the internet, or buy an electric Volvo from a dealer.
Is that a superior strategy? I doubt it, but it is a way to harvest revenue from "legacy customers" that want to do business with a dealership they can touch and feel.
Will Volvo "beat Tesla?" I doubt it. They might not be able to, and for that matter, I doubt Geely even want to try. They have a portfolio of brands, and each one has its place in their strategy.
All I'm saying is that I don't think the dealer network is the thing that will ensure Tesla's victory. At the moment, I think it's their supercharger network, their technology around range, and their brand cachet.
> They haven't staged a mass protest, I am unaware of any lawsuits. I do not believe that Volvo dealers here in Canada are lobbying for it to be illegal for the Polestar vehicle to be sold in Canada.
This is because they don't believe it to be a credible threat to their business... yet. Assuming EVs do completely transform the industry (through a combo of economic & regulatory forces), how do companies like Volvo/Geely plan to transition the existing dealership network, or will it result in mass layoffs?
_how do companies like Volvo/Geely plan to transition the existing dealership network, or will it result in mass layoffs?_
Good question, let's stock up on popcorn.
There are multiple forces acting on this, and they will interact in ways we may not anticipate. What we do know is that simply selling the cars does not pay the dealership's rent.
Maintenance is a big source of their revenue, and we anticipate that EVs are going to drive that revenue way down whether dealers are selling EVs or not.
How will Volvo's dealerships react to the XC40 P8 and any other EVs Volvo is going to sell? That's as much a threat to their existence as the Polestar vehicles they aren't allowed to sell.
I don't know, but I have a ringside seat and the first couple of rounds have been exciting.
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My personal thoughts in this area is that the really big thing we have to think about isn't the dealerships, or even the slow-to-react Big Three US carmakers.
The big thing we should keep an eye on may be the role of fossil fuel oiligarchies in politics all over the world. They are already heavily invested in so-called "conservative" politics, fighting any and every attempt to discuss or even research climate change.
These are people who will stop at nothing to maintain their wealth and power. They will topple democratically elected governments, undermine democracy wherever it is found, lie, cheat, steal, and bribe their way to supporting their supremacy as the rent-collectors for using stored energy.
I'm much more worried about oiligarchs interfering in the rise of EVs than I am about dealerships.
I might be mistaken but I think the Polestar line is a Hybrid car so that will result in Maintenance for the dealer. I.e. I am unsure if you buy the Polestar 1/2 where do you get it fixed? If you have to get it fixed at Volvo the dealership won't be upset, but then it's not really an electrical car so it's not upending their business model.
The Polestar 1 was a hybrid, the Polestar 2 is pure electric. They have some of their own stores, but I believe these are purely retail. They might be serviced in Volvo dealerships at the moment, I don’t know.
Fair enough! I tend to gloss over it because it still has an ICE engine in it, even though Polestar are supposed to be the “electrification” brand.
I got the impression that it was a kind of halo car, intended to be made in small quantities just so that Polestar could brag it was making a 600hp sedan. I believe they’re only making 500 a year, for three years.
It isn’t their focus, and given their strategy, it was obsolete the day they announced it. It feels like they took the Volvo Concept Coupe, put a Polestar badge on it instead of a Volvo badge, and announced the Polestar was shipping a car.
But you’re right, they’re supposed to ship it this year, and if demand continues, they’ll ship it though 2022.
> It's why the current Auto companies and dealers are lobbying to not allow Tesla to own their own dealership.
More like they simply want to remain the parasitic middleman. In practice, no one needs dealerships to begin with these days. They fight through corruption, because they are already obsolete.
Is ... that really true? That (traditional) car dealers discourage purchase of low-maintenance cars? As you note, that seems like a dangerous case of misaligned incentives between the manufacturer/driver vs dealer.
Most ICE dealers have a high-dollar repair shop as part of the facility. Yes, the incentives do not work out in the buyer's favor: complex high-maintenance parts ensure the cars don't last all that long without pricy repairs, and parts obsolescence assures cars aren't maintained much past 200K miles[0].
In contrast, Tesla's low-maintenance high-mileage design means Tesla need not worry much about parts & repair at all, and focus on simply selling new cars. People will get rid of cars not so much because of repair issues, but because they're bored of it after 1-2 decades.
[0] - I'm now suffering from inability to find a replacement computer for my SUV. Car is mostly fine, but extreme limited availability of even used components means it has been in the shop for over a month, and may have to be sold for parts for want of one.
The Nissan Leaf came out and was way ahead of everyone but nobody bought it because they couldn't find it. The dealers would hide the car in the back and avoid showing it to you. There was no incentive for them to get you in a Nissan Leaf because they would make profits, negligible ones, on the sale but the place they make their money is maintenance and that would deplete their profits.
The issue with this is the dealerships aren't owned by the organization so the incentives aren't aligned. If GM/Ford/Toyota create the best EV the dealer won't have any incentive to sell them until unless they make up significant profits, which means they would have to make up 5-7 years of maintenance profits on the initial sale. In essence they will just sell their land and move on and have to take a loss. The smart dealers sold their stake in the dealerships and now the suckers are holding onto the last bit hoping to get out.
The dealerships we have now Ford/GM/Chrysler/Toyota/Volkswagen/Nissan are all going to disappear, that's why their valuation is justified. The only competitors are going to be the new car companies because they will adopt the same model Tesla has where they own their own dealerships. It's why the current Auto companies and dealers are lobbying to not allow Tesla to own their own dealership.