Last week was a bad one for Tesla (TSLA) and Chief Executive Elon Musk, as internal issues threatened to thwart Musk’s power and choke the company’s business. But now the electric-car maker faces a raft of more conventional troubles — this time from the outside.
A number of large automakers are coming to market with all-electric vehicles, ratcheting up the pressure on Musk and Tesla. Analysts see performance specs and pricing matching up well with Tesla’s three vehicles, the Model S, Model X and Model 3. These automakers hope to challenge Tesla’s current dominance in the electric vehicle market for the first time.
The first one to hit the market is the Jaguar I-Pace, a product of Tata Motors (TTM), to be followed by the Audi e-tron from Volkswagen (VWAGY). Others coming to market are the Mercedes-Benz EQC from Daimler (DDAIF), the BMW (BMWYY) iX3 and the Porsche Taycan, also from Volkswagen.
Jaguar currently sells the car in Europe and plans to make its U.S. debut later this year. The others plan to enter production and arrive on the market over the next two years.
“It’s going to get interesting to see how this unfolds because these new vehicles are hitting the market at the same time Tesla’s federal tax credits are expiring,” said Jeremy Acevedo, an analyst at Edmunds.com.
Musk A Victim Of His Own Success?
The boom in electric-vehicle design and manufacturing is a result of Musk’s own phenomenal success. The success of Tesla in the all-electric vehicle category spurred the auto industry to jump aboard. They are now intensely focused on making electric cars like never before. Virtually every auto company with brand-name recognition is in the game. These are companies with decades of experience in automobile manufacturing.
“They’re compelling vehicles and they certainly could take market share away from Tesla,” said Acevedo.
But how much of a threat it is to Tesla has yet to be seen. Tesla’s current advantage is top-notch brand recognition and a loyal band of fans.
“What Elon Musk was able to do is capture lightning in a bottle,” said Acevedo. “Hundreds of thousands of people put in their reservations for its Model 3.”
Trouble is, Tesla can’t make them fast enough. The company struggled mightily to reach its goal of producing 5,000 Model 3 sedans per week, with plans to double that. But it’s still not yet clear if Tesla can turn a profit on the Model 3.
Slammed By Bulls
Many analysts also wonder about Tesla’s financial situation. The company had a huge working capital deficit at the end of the second quarter. Billions in debt are coming due in the next couple of years.
Even Tesla’s most strident supporters of the past are getting nervous. One of Tesla’s biggest bulls recently slammed Musk, slashed his price target and bemoaned the CEO’s erratic behavior.
That behavior includes a bizarre incident involving Musk smoking marijuana and drinking whiskey during a news interview, which rang alarm bells about his overall stability. Musk revealed how his myriad executive responsibilities have taken a steep personal toll in a recent New York Times article. He’d been working up to 120 hours a week, splitting time between Tesla and his rocket ship company SpaceX.
Tesla initially pitched the Model 3 at a base price of $35,000, its first car designed for the mass market. No current Model 3s go for that price. The Model 3s currently shipping are premium versions of the car that sell for much more than that.
Keeping Quantity And Quality
Can Tesla ramp up the Model 3 and retain quality?
“Possibly, but not currently,” UBS analyst Colin Langan wrote in a note to clients recently. “While Tesla should eventually be able to produce Model 3’s at a relatively high volume, the production delays challenge the notion it has invented a superior manufacturing process. Moreover, our teardown (of the Model 3) highlighted significant quality issues.”
Tesla’s first car was the Model S, a midsize luxury vehicle with a base price of $74,500. It followed that with the Model X, a midsize, all-electric, luxury, crossover utility vehicle. The Model X sells for $79,500, but both vehicles typically go for much more than that with options.
The Jaguar I-Pace compares favorably with the Model X. It has similar range and acceleration, though the Model X is bigger and has more seats and storage space. But its base price, at $70,495, is about $9,000 below the Model X.
Following the I-Pace is the Audi e-tron. It’s the first fully electric SUV from Audi, which will begin taking reservations this week. Production of the e-tron is already underway, but a U.S. on-sale date is still unavailable. Audi forecasts hitting the U.S. market in the first quarter of 2019.
BMW plans its iX3 SUV debut for 2020. BMW is currently taking orders though a price hasn’t been announced. Mercedes-Benz plans the EQC, another all-electric SUV, for a 2020 debut. The market sees prices for both in the same range as the Tesla Model X.
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