Autumn 2019 – I walked into a kid’s party at a small village hall. Outside the single on road parking space was taken by a Tesla driver who was delighted that everyone was to walk past his “Midnight Silver” Model 3. Inside the not quite middle age dad swung his keys around his finger, praying that someone would notice the Tesla key and start a conversation. Naturally as a car enthusiast I fell for it. He went on to tell me that he had dreamt of owning that car since he was a boy. When I challenged him on the fact that Tesla didn’t exist when he was a boy, he likened his Model 3 to a Ferrari. 0-62 in about 3.1 seconds. Pretty wild stats for a car that is about a quarter of the price. As far as he was concerned, he had his Ferrari.
The Disruptor
Elon Musk and Tesla have embarked on a 20-year journey to bring electric cars to the mass market in a way that the rest of the competition couldn’t see possible. By introducing cars with incredible performance and range but a price point that has allowed access to the masses of company car drivers, directors and technophiles.
Quantity and Quality
When you think of Tesla cars and what you see on UK roads, you probably assume that only a very small percentage are Tesla cars. And in the short term you’d be right, in 2022 Tesla sold 35,551 vehicles in the UK, Audi on the other hand sold 110,193. Fast forward to 2023 and Tesla has outsold Audi for the first time in Q1. Q2 has only just ended but predictions are that that trend has continued. Tesla slashed the price of their marque Model 3 and Model Y by as much as £5,000, leading to a surge in sales across the world. The thing is this trend has no end in sight. Elon predicts that Tesla will continue by grow by 40-50% each year. Even if that is overly ambitious, if they continue on their current path, they will be outselling Mercedes-Benz and BMW by the end of 2024.
Twitter Madness
If you are a Twitter user you have no doubt seen some changes over the last few months, since Elon sensationally bought the social media giant, laid off 90% of the entire workforce, starting charging people for blue ticks, restricted the amount of posts a person can see in one day…etc. etc. In the background of all this madness, he promoted head of Tesla China Tom Zhu to take control over the manufacturing plants in the US, as well as sales operations for North America and Europe.
Quality over Quantity
Tesla achieve this inspirational sales numbers with just four main models. The Model 3, Model Y, Model S and Model X. However, for UK drivers, the choice is more restricted. Whilst you could walk into a Tesla showroom today and drive away with a Model 3 or Model Y in less than an hour, Model S and Model X drivers have been less fortunate. 2 years ago, Tesla started taking pre-orders for the premium models in their range, only for Tesla to contact customers this year and advise they can either have their Model S or Model X as a Left-hand drive vehicle (not ideal!) or have their deposit back.
Growing the portfolio
Compared to the German giants of BMW, Audi and Mercedes this portfolio of 4 (or 2!) vehicles is not enough to sustain the ambition of the business. Next up are the Cybertruck Pickup, which from the images we’ve seen online looks like a car drawn by a 5-year-old with a pencil and ruler. Tesla are also working on a smaller, cheaper car that some people have donned the “Model 2” although Elon has said that’s a little further off, they are not working on a car in the £20,000 bracket but they will eventually grow the range to cover more angles.
“Over time we should cover all areas. It would probably make sense to develop a compact car as well as a van or minivan”
Smashing conventions
The reasons for the huge success of the company are well known and actually quite obvious, if you have hundreds of millions at your disposal for innovation and marketing. Tesla came into the market with 100% electric cars, enormous centre console screens, its own portfolio of supercharging stations, direct sales from “dealer” to consumer, autonomous driving features and everything was from scratch.
Musk himself is part of the attraction for many. He is outspoken, unconventional, innovative and fearless. A self-made billionaire with a longing for technology and an eye for unsettling the big table. Naturally along with this success comes envy and some enemies.
“We could sell our cars now for no profit and make incredible profits later via autonomy updates”
Can’t Stop, Won’t stop. Will not be stopped.
The future of Tesla is tech, tech and more tech. Vehicles and smartphones become one. Do everything from your car or do nothing and still arrive at your destination. Elon Musk invest around seven billion US Dollars into Tesla every year, most of which is spent acquiring new production space and technology improvements. That may sound a lot, but CFO Zach Kirkhorn admitted in March this year that the investment would need to increase dramatically if there were to continue on the upward trajectory. There is already a new plant in production, just outside the Mexican city of Monterrey. The German Gigafactory near Berlin has recently had plans for expansion submitted.
“The Demand for our cars could be infinite” Musk said at an investor’s day at Tesla HQ in Austin, Texas. He believes they will be able to sell as many as 20 million cars worldwide by 2023 (18 x that of 2022) For context Toyota and the VW group sell that many combined.
Profits can wait until another day.
Tesla right now are focused solely on market share. Swallowing up all the drivers who are new to electromobility and making them customers for life. “We could sell our cars now for no profit and make incredible profits later via autonomy updates, Musk said at a presentation of the company’s quarterly earnings in April. This is how Musk justified the massive price reductions, which was great for customers, but not so great for investors, and people who already owned their Tesla outright.
The Tesla World is not enough
Musk doesn’t just stop with the Tesla rollercoaster. He also has the worlds 14th biggest social media platform Twitter and casually has himself a rocket company, Space-X. Both receive lots of attention, good and bad. But all this does is further fuel the interest in Tesla and the desire for many to be a part of it.
Competition
Tesla only have one option if they want to continue to grow and that is to continue to invest, continue to wow the audience and continue the bend, break or smash through conventional automotive practices. Electric cars have already become a normal sight on UK roads so that ship has sailed. Popular brands already have their own range of electric cars and more and more are integrating substantial technology into their vehicles to compete, or at least be seen as competing. Polestar sold 51,000 cars in 2022, which pales in comparison to Tesla’s 1.3 million. But that’s a 51k is an 80% increase over 2021. New brands to enter the UK market such as BYD have a wealth of advanced technology and investment to suit. Do we really think global brands such as Ford, BMW and Toyota are going to sit by and watch Elon take all the glory? We think not.