EV Competitive Landscape

So due to the growth in NMC capacity, the industry is going to catch up with the battery technology advantages Tesla has enjoyed?

That’s right. Tesla has always had the halo effect and that continues to some extent, and they do deserve a lot of credit in terms of what they did on system engineering, the flat-format pack, the custom design of the vehicle around the battery pack, which are all industry firsts, and the over-the-air updates. They have a lot of credit, but it is going to shift because by next year, there may be a little over 200 new vehicle models that become available as EVs and PHEVs, and by 2022, that number may grow to almost 300. Given that and the R&D that’s going in, Tesla will end up being a somewhat marginal player in that timeframe. My expectation is that they will have less than 10% market share in terms of EVs and batteries and so forth, so that will start to change.

I think the real challenge is arguably yet to come with Tesla, in the sense that the competition is ramping up — 200 models in the next couple of years — and the competition on batteries is becoming much more intense. Therefore, it’s a big test of Tesla. What’s your view, can they keep up speed with the scale of Volkswagen, BMW, Daimler?

To me, that almost doesn’t matter. It’s kind of cruel to say that, but they have served their purpose. We are effectively at a point of no return, particularly in China and Europe, in terms of this transition and transformation to electric transportation. So, the industry is going to move forward in the direction that they set, and my sense is that they are very logical and smart people, so they are going to see the writing on the wall in terms of what happens for cost and performance, and they may continue to carry some forward with the cylindrical, but they will start to transition as they see the benefits of doing so.

So, you think the Tesla brand is strong enough, they have got the expertise now, they’re continually learning in terms of manufacturing?

Yeah, and still, there is not that fundamental competition. If you look at the Model 3 versus the Chevy Bolt; from appearance, styling, the Tesla looks like high-end jewellery, whereas this looks like, from a styling and appeal point of view, not that desirable a product. That will change with time, but Tesla has always managed to keep a few steps ahead of the competition. They’ve just announced they’re going to be setting up a factory in Germany, so they will look like as European a brand as any other. They’re doing that in China and working with CATL to get the partnership with a domestic battery manufacturer, so they are taking many steps that are strategically in the right direction. I’m not writing them off, but my point was that we no longer need that pioneering that Tesla did for the electrification to move forward.

So, now it comes down to brand, design, and how desirable the product is, and arguably, the scale of Audi, BMW, Daimler, Volkswagen, for example — they can also design cars and they’ve got much bigger scale. If you have the Model 3 at $30k and you have a well-designed Volkswagen or an Audi a bit more expensive, it’s going to be a big challenge for them.

Correct, and VW is going to be a very strong competitor, just because of their scale. They’re projecting themselves to need 125-150 gigawatt/hours by 2025. That’s twice the global demand for batteries last year. And I also understand that’s why they got the MEV platform for the mass market, but they will have two others. I think one is called PPE and one is called something else; the Porsche type of brand and then one for the Audi type of luxury, premium segment.