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Tesla Stands Alone in Luxury EV Niche

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Tesla Stands Alone in Luxury EV Niche Chris Jenks, [email protected] INITIAL REPORT Tesla Stands Alone in Luxury EV Niche Companies: BIT:F/FIATY, ETR:BMW, ETR:NSU, ETR:PAH3/POAHY, F, GM, TSLA, TYO:7201/NSANY, TYO:7203/TM, TYO:7211/MMTOF October 31, 2013 Research Question: Will high-end electric or hybrid vehicles from BMW, Audi and Porsche pop Tesla’s bubble? Summary of Findings Silo Summaries Tesla Motors Inc.’s (TSLA) Model S still has no direct competition; it 1) TESLA DEALERSHIPS stands alone in its class of luxury electric vehicles (EVs). These seven sources reported no impediments in meeting or exceeding current sales goals and no direct The 15 sources who discussed Tesla’s sales said the company has EV competition for Tesla’s Model S. All have taken part met or exceeded its goals, and not one of our 28 sources criticized in the Model S buyback program, often describing it as Tesla’s current performance in sales and order fulfillment. a lease program sweetened with the tax incentives of ownership but not a significant sales driver. The video The infamous video of a Model S catching fire has had no lasting of a Model S catching on fire has not been a hindrance; repercussions on Tesla. Sources said, if anything, the incident has if anything, the incident has driven home Tesla’s high reinforced Tesla’s claims of its strong safety features. safety standards. Although not a sales driver, Tesla’s three-year buyback program 2) TESLA SUPPLY CHAIN does boost consumer confidence and helps to close deals. A few These four sources were positive on Tesla, and three sources compared the program to a lease but sweetened with tax reported solid volume growth year to year in their Tesla incentives that come with ownership. supply sales. Three also expressed enthusiasm for their involvement in Tesla’s Model X SUV, due out in 2014. Nissan Motor Co. Ltd.’s (TYO:7201/NSANY) Leaf, which is smaller Tesla lacks a direct competitor. The video of the fire has and lower-priced than Tesla’s Model S, was the only other EV noted created no fallout for the company, but two sources as truly succeeding in the market. Many hybrid and lower-end said slight changes to batteries and storage may occur. No source supports Tesla’s battery swapping program. electric vehicles are in development, but few are expected to Rather, three said Tesla should focus its efforts on compete head-to-head with Tesla’s Model S or upcoming Model X creating more charging stations, particularly in the SUV. Two sources said General Motors Co.’s (GM) luxury Cadillac Northeast. ELR may offer some competitive pressure. 3) NON-TESLA DEALERSHIPS AND MANUFACTURERS These seven sources agreed that Tesla is alone in its Tesla in the class as a luxury EV. Sources representing competing Tesla’s Tesla vs. Wake of the dealers that sell gas cars and hybrids but not yet EVs Performance Competition Model S Fire were predictably less positive on all-electric driving, dubbing EVs as “commuter cars.” No source expects Tesla Dealerships Tesla’s battery swapping program to work, nor did any say that the company had been hurt by the Model S fires. Tesla Supply Chain 4) EV INDUSTRY SPECIALISTS Non-Tesla Dealerships Nine of 10 sources addressed Tesla’s performance, and Manufacturers and all nine agreed its sales will remain strong in the near term. However, four voiced longer-term concerns; EV Industry Specialists two worried about Tesla’s ability to scale production, one was skeptical about the Model E’s launch at a more modest price, and one was concerned with bureaucracy involved in selling cars from dealerships. The Model S lacks direct competition but could feel pressure from the Cadillac ELR in the future. Two said Tesla’s competition also may build as it moves down market, especially with its Model E. All sources who commented on battery swapping expressed reservations, but no source reported any ill effect from the Model S fires. 1 1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com Tesla Motors Inc. Background Tesla has predicted a 25% increase in third-quarter revenue based on immense demand for its cars, and has discussed supply constraints in meeting this demand. To guarantee sustained value of the Model S and to gain more revenue from its low supply, Tesla initiated a buyback program through which it will purchase preowned Model S units for 50% of the purchase price. This program is estimated to gross $368 million by 2016. Electric vehicle (EV) adoption is becoming more widespread, as evidenced by a 50% sales increase year to year. The adoption rate will continue to rise as cheaper lithium-ion batteries result in lower EV prices, competition from a wide range of manufacturers floods the market, and more states like Vermont install electric charging stations. Tesla also is establishing charging stations throughout the country. Tesla has been unopposed in the high-end luxury EV market—until now. Entering the market are BMW AG (ETR:BMW) with its i3 and i8, Audi AG (ETR:NSU) with its A3 hatchback, and Porsche Automobil Holding SE’s (ETR:PAH3/POAHY) $845,000 hybrid 918 Spyder. These car giants have advantages over Tesla through their established consumer base and their manufacturing capabilities. CURRENT RESEARCH In this initial report, Blueshift Research assessed how high-end competition affects Tesla, now and going forward. We employed our pattern mining approach to establish five independent silos, comprising 28 primary sources and seven relevant secondary sources focused on Tesla and other electric or hybrid vehicles: 1) Tesla dealerships (7) 2) Tesla supply chain (4) 3) Non-Tesla dealerships and manufacturers (7) 4) EV industry specialists (10) 5) Secondary sources (7) Next Steps Blueshift Research will monitor Tesla’s sales and trends for 2014, including the manufacturing and rollout of its Model X SUV. We also will track developments in competitors’ hybrid and electric vehicles. Silos 1) TESLA DEALERSHIPS These seven sources reported no impediments in meeting or exceeding current sales goals and no direct EV competition for Tesla’s Model S. All have taken part in the Model S buyback program, often describing it as a lease program sweetened with the tax incentives of ownership but not a significant sales driver. The video of a Model S catching on fire has not been a hindrance; if anything, the incident has driven home Tesla’s high safety standards. KEY SILO FINDINGS Sales Trends - 3 sources who commented said they will meet or exceed sales goals. No source reported a shortfall. Competition - All 7 sources assert that Tesla’s Model S is alone in its class as a luxury EV. 2 1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com Tesla Motors Inc. - 3 sources pointed to conventional models as competition for Tesla’s Model S, specifically Mercedes-Benz (Daimler AG/ETR:DAI/DDAIF) E and S class, BMW 5 and 7 series and the Audi A6, A7 and A8. Buyback Program - All 7 sources said some buyers use this method of financing, though no source said the program was driving sales. - A few compared the program to a lease but with the tax incentives of ownership. Video of Model S on Fire - None of the 7 sources reported any negative fallout from the fire. - Several noted that a conventional gas-powered car likely would have fared much worse in a similar incident. 1. Tesla store manager and Tesla product specialist in the mid-Atlantic These two sources said Tesla corporate would like to see the EV market grow and is working with other car manufacturers to develop more electric and hybrid cars. Still, Tesla is the industry leader and will be for some time. Audi, Porsche, BMW, Mercedes-Benz and Toyota Motors Corp. (TYOP:7203/TM) all offer hybrid or electric cars but appeal to a different market than the Model S. Tesla will make its goal of meeting orders for 21,000 cars this year. The buyback program is not a sales driver, but may be enough to give buyers the confidence to commit to a purchase. The fire video had minimal, short-lived effect, and Tesla is proud of the way the car performed under the circumstances. The driver in the video already is in a new Tesla. Sales Trends . “I cannot give out sales information, but our earnings report will be out in November. … I can tell you we are exceeding our expectations at this I do not believe we have any location.” direct competitors out there. “Supply has been difficult for some areas, but we have been able to meet We are an all-electric, high- every sale in our market.” performance sedan. There are . “Our goal companywide was 21,000 orders this year, and we are going to others in the class that are meet it.” Competition hybrids and others that are all- . “I do not believe we have any direct competitors out there. We are an all- electric, but not in this class. electric, high-performance sedan. There are others in the class that are Manager & Product Specialist hybrids and others that are all-electric, but not in this class.” Tesla Store, Mid-Atlantic . “The [Audi] A7 and RS7 and the [Porsche] Panamera or the BMW Gran Coupe might appeal to the same customers.” . “Toyota has several electrics. And Mercedes is working with us on electric technology for their models, like the SLS, but it is a different class.” . “We hope to see more electrics on the roads, but I expect Tesla will lead the pack for some time to come.” .
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