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Tesla Motors Inc (TSLA): Should Elon Musk Fear Faraday Future? Cadillac Says Yes!

Tesla Motors Inc (NASDAQ:TSLA) Faraday Future

Tesla Motors Inc , led by CEO Elon Musk, has shown the world that electric vehicles are viable.  Now a strong debate has taken the automobile industry by storm; How soon will the EV’s take over the auto industry? All major traditional auto firms seem to have one EV project or the other as Tesla’s disruption of the EV space continues with full steam. More so, tech firms are starting to show serious interest in the EV race as the car becomes more of a mix of hardware and software than a mechanical contraption.

Tesla Motors Inc (NASDAQ:TSLA) Faraday Future
Faraday Future exhibit at CES 2016. Photo: David Goldstein for Learnbonds.com

Tesla Motors is yet to turn a profit as it continues to pump serious money into R&D, scaling its operations, and launching into new markets. The firm has two cars (Model S and Model X) in production, and it will unveil a mass-market Model 3 in the next couple of months. The firm hopes to start booking profits by 2020 when it starts making 500,000 cars annually. Nonetheless, General Motors’ Cadillac chief thinks that Tesla is a making a fundamental mistake in its business.

Cadillac thinks Tesla Motors is wrong about China

It is a well-known fact that Tesla Motors   is struggling in China because its cars are expensive due to import duties, the Chinese culturally love “bigger” cars, and because the government is not playing nice with the firm. In fact, Tesla has reduced its headcount in China and the firm is still lobbying the government for improved business relations. Yet, China is currently the world’s biggest market for EVs as the Chinese bought three times more plug-in vehicles than U.S. buyers in 2015.


Yahoo Finance reports that Cadillac chief Johan de Nysschen thinks that Tesla is making a wrong business decision by focusing all its attention on building electric cars. He says Chinese drivers still have range anxiety stemming from distance between charging locations, long recharging times, and distance that can be covered with pure electric power without a gas-engine backup.

The Cadillac chief opines that plug-in hybrids make more business sense in China. He reveals that Cadillac is set to offer a CT6 plug-in hybrid (similar to Chevy Volt). The CT6 plug-in hybrid will have a range of about 30 miles on electric power alone backed up by a gas-powered 4-cylinder engine. I think de Nysschen is making a big error because the CT6 plug-in hybrid is obviously a gas-powered car that happens to have electric backup for 30 miles.

de Nysschen then goes on to berate Tesla as he shows a fundamental difference between Tesla and traditional carmakers. In his words, “Tesla is a very interesting brand… but I don’t believe there has been any car company that has made a profit on EVs. I need to be profitable so I can prioritize EVs in the future. For now, we will focus on hybrid technology.”

Is Faraday Future a thorn in Tesla’s flesh

While it is easy for Tesla’s fans to laugh off the statements by Cadillac’s de Nysschen on why hybrids are better than pure EVs, it would be harder to laugh off the threats that Faraday Future poses to Tesla. To start with, Faraday Future has master the art of creating hype and buzz such that it shares the limelight with Tesla Motors at every chance it gets.

Tech Insider reports on a more annoying trait that Faraday Future has developed – Faraday Future has built a penchant for poaching key talent from Tesla. For instance, four out of Faraday Future’s leaders are former Tesla employees. The report goes on to show that 410 people have Faraday Future as their current employer on LinkedIn – of those 410 people, 73 of them are former workers at Tesla.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.