Tesla Motors Inc has serious competition coming on the horizon as German automakers start to enter the pure-play electric car market. News broke earlier this week that Audi and Porsche have displayed the concept cars of their EVs at the Frankfurt auto show. Mercedes Benz has also showed interest in the pure EV space and BMW already has some cars on the road. General Motors is also building a Chevy Volt to cut of Tesla at the knees before its mass-market Model 3 sees the light of day.
Now, Tesla has to fight the rivalry battle on many fronts. Apple is reportedly working on building a car – Apple has been poaching talent from Tesla and there are even hints that the exodus of workers from Tesla to Apple might delay the launch of the Model 3. However, for all the rivalry that Tesla faces, the firm might be its own enemy because it has clearly underestimated how the competition can quickly alter the dynamics of the market.
Build-to-Order Model
Tesla started out its business of selling cars on a build-to-order model in which buyers are allowed to custom-order their car. They’ll pay a deposit and Tesla Motors goes to work to build the car. The wait time for the car varies, based on the kind of custom features that are required. However, with or without “crazy” features the average wait time for Tesla’s Model S is two to eight months. There are hints that the priciest P85D has shorter wait time of about 20 days.
The fact remains that anybody shelling out as much as $100,000 on a car would prefer to drive the car off the lot than wait for one month after paying – talk about instant gratification. Tesla Motors is still able to force the wait-time down the throat of buyers because there are no other EVs that match its cars out there. However, Tesla won’t be able to get away with its lack of inventory much longer when the likes of Audi, Porsche and Benz starts building EVs that you can buy and drive off the lot in a matter of minutes.
Tesla Motors needs to grow up
Tesla Motors has been stuck at the spot of being a startup that makes cars for too long and it needs to start acting like a real carmaker if it wants to survive in the market it created. Tesla builds premium luxury cars; hence, buyers won’t mind waiting for a couple of months.
However, its luxury brand image pales in comparison to the likes of Audi, Porsche, and Benz – and if these firms can build EVs faster than Tesla, buyers will have a choice in where their money goes. Tesla needs to start building its cars faster, and goal to have 500,000 cars annually by 2020 must succeed or Tesla might become the BlackBerry of cars.
