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A Tesla crash

3 May 2018

No, I'm not talking about another unfortunate incident involving one of Tesla's electric vehicles.

I'm talking about the crash of the company and the Tesla EV brand.


Well not according to stories doing the rounds in the mainstream media. If these reports are to believed, the EV company will be bankrupt by Christmas thanks to a burn rate of over $10,000 each and every minute of each and every day.

That's a lot of cash going down the gurgler but most companies operate at a loss when setting up new ventures and the potential returns to be had from the EV market place are astronomical. Never the less, I suspect that there are a few investors who are starting to have second thoughts about sinking their money into Tesla, and for good reason.

It's a sad fact of life that those who blaze new trails are seldom the winners in the long-game.

And blazing trails is exactly what Tesla has done with its electric vehicles.

Until the Tesla Roadster arrived, the public's impression of EVs was that they were slow, limited in range and far from "sexy". The Roadster changed all that and showed the world that EVs can be fast, stylish and offer truly practical range.

Then the S and X models arrived and showed the rest of us (those who had outgrown sports cars) that EVs were also practical as an every-day ride, whether commuting to work and back or ripping down the shops for the Sunday bread and milk.

So why was Tesla able to succeed where others had failed?

In a word... timing.

The cornerstone of Tesla's range and performance is the switch to lithium ion batteries.

Older battery technologies such as lead-acid, nickel-cadmium and nickel-metal hydride were far heavier, slower to charge and had a far lower energy density when measured by mass or volume. The switch to newer lithium ion batteries meant a massive improvement in just about every aspect of an EV's performance and Tesla took advantage of this to deliver the first truly practical "no compromise" EV to the public.

All was looking good for Tesla and demand was so great that the company was able to raise huge amounts of capital by simply taking deposits from customers on yet-to-be-built cars.

So what could possibly go wrong?

Observers could be forgiven for thinking that Tesla had done its homework and even thought far enough ahead to anticipate the huge demand for lithium batteries that the EV industry would create. Its own Gigafactory was commissioned to make enough of this essential component that we wouldn't end up with a battery shortage effectively crippling the company.

However, where Tesla has seemingly slipped up is in underestimating the complexity involved in simply building the car itself.

Forget about the batteries, forget about the lightweight electric motors, forget about the fancy big-screen centre-console computer... if you can't put the metal pressings together, bolt the suspension elements on and roll something off the production line that looks like a car... all is lost. And that's where the wheels seem to have fallen off the vehicle on which the company is now banking: the Model 3.

Ongoing issues with the Model 3 production line has meant that output has fallen far-short of the promised volumes and those cars which have rolled out the door are rumoured to have some quality control and consistency issues.

Right now, Tesla is hugely vulnerable and those predictions of its bankruptcy by Christmas look as if they could hold water.

Just about every major car maker in the world has been watching the way that Tesla as effectively created a whole new market -- for practical EVs. The Fords, Nissans, Toyotas and others of the world have not just been watching however. They've been planning their own practical EVs and some, such as Nissan, have actually started shipping to an eager market of consumers.

These existing car makers have some huge advantages over Tesla. They have decades of experience in the basics of building cars. They have established distribution and support networks. They have established names and brand loyalty within the marketplace.

These are all the things that Tesla lacks.

Tesla simply showed the world that, thanks to lithium battery technology and lightweight brushless electric motors, we have the ability to make practical EVs. The rest of the car industry is now taking advantage of that and preparing to roll out their own EVs in quantities and with marketing muscle that Tesla can only dream about.

Of course Tesla could still succeed and become the dominant force in EVs... but if those people who paid deposits for Model 3s a long time ago get tired of waiting and decide instead to buy a Nissan, Ford or even "a Jaaaag", then the company's fortunes could turn quite quickly.

And Tesla ought not rely on its Gigafactory and dominance in the battery market to protect or save it. China could build half a dozen gigafactories in a few short months and leave Tesla to be "just another supplier in a competitive market" to the rest of the auto-makers.

I love Tesla for its innovation, the risks it's taken and the way it has blazed new trails -- however I also see the signs of a company that isn't truly focused on its core product. The announcement of things such as solar tiles, power banks and "big rig" EV trucks, at a time when its Model 3 production facility is in crisis, speaks volumes to this lack of focus.

Only time will tell where Tesla will be in 2-3 years time. Care to place a bet?

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