Market Context
Tesla's Postcard from The Future (2030).
With the recent announcement of the i4, BMW Group ensured that the ground under Tesla's feet would start to shift. In my latest article, I discuss Tesla's positioning, the changing market landscape, what Dyson have in common with Mr. Musk & Co and what the next 10 years may hold for this premium EV brand.
When BMW launches the i4 in Spring 2022, it will be the company's first entirely electric 4 door sedan.
'So what?' I hear you murmur. After all, it is just a car. I beg to differ. As a product marketer, I see this as a seismic shockwave for the car industry. It will be the real start of the structural change that has been quietly building for the last 10 years.
Audi, Volvo, Jaguar and Land Rover have all officially announced that they will onlyproduce battery powered electric vehicles (BEV), ceasing over a century of production of the defacto internal combustion engine (ICE). BMW has stated that by this date, 50% of its line-up will be electric.
Make no mistake, this is a boon for the consumer, starved of real choice in the BEV category. Tesla, to its credit, have spent years gaining momentum with very little competition, albeit as a niche player in the general scheme of things in 2021.
But in just 9 years from now, or sooner, the electric vehicle category will change beyond all recognition. So, what does that mean for Tesla?
In this article, I discuss Tesla's position now and in the future. The impact of genuine competition and the potential market options open to Musk and Co.
'So what?' I hear you murmur. After all, it is just a car. I beg to differ. As a product marketer, I see this as a seismic shockwave for the car industry. It will be the real start of the structural change that has been quietly building for the last 10 years.
Audi, Volvo, Jaguar and Land Rover have all officially announced that they will onlyproduce battery powered electric vehicles (BEV), ceasing over a century of production of the defacto internal combustion engine (ICE). BMW has stated that by this date, 50% of its line-up will be electric.
Make no mistake, this is a boon for the consumer, starved of real choice in the BEV category. Tesla, to its credit, have spent years gaining momentum with very little competition, albeit as a niche player in the general scheme of things in 2021.
But in just 9 years from now, or sooner, the electric vehicle category will change beyond all recognition. So, what does that mean for Tesla?
In this article, I discuss Tesla's position now and in the future. The impact of genuine competition and the potential market options open to Musk and Co.
It is necessary to choose a visual aid that is appropriate for the material and audience.
From Here to There.
A survey from the Harvard Business Review clearly shows us where Tesla is positioned in the minds of U.S. consumers.
Across the two universal dimensions of Centrality (how representative brands are) and Distinctness
(the degree to which brands stand out from others), we read the perception map as a 2x2 grid by the following quadrants:
Regardless of an inflated valuation, Tesla is not a big player in the general category of passenger vehicles.
A survey from the Harvard Business Review clearly shows us where Tesla is positioned in the minds of U.S. consumers.
Across the two universal dimensions of Centrality (how representative brands are) and Distinctness
(the degree to which brands stand out from others), we read the perception map as a 2x2 grid by the following quadrants:
- Unconventional
- Mainstream
- Peripheral
- Aspirationa
Regardless of an inflated valuation, Tesla is not a big player in the general category of passenger vehicles.
It is necessary to choose a visual aid that is appropriate for the material and audience.
But with the market changes coming, Tesla's distinctive position of 'Unconventional' will be changed for them. It will be dragged into 'Aspirational' by the fact its product will be the same as every other premium BEV. And that's based on them maintaining its current brand equity.
The challenge for Tesla is that it's not completely in direct control of this. Once the only premium BEV in the market to speak of, the market is literally forcing Tesla out of its comfortable solitary competitive position.
The Adoption Barrier Triangle.
To date, the barriers to consumer adoption have been non-trivial and this, apart from the eye-watering cost of structural change for car manufactures, has hardly been friction-free for consumers.
Choice.
Frankly speaking, the choice in the BEV market is woeful. Try and find a mid-size, mid-price BEV and you'll find scarce options. In the past couple of years when renewing my car, I ended up with hybrid as the next-best option to a BEV. As a side note, cars that look like they are fresh out of The Jetsons do not tick any practical boxes.
If you have been looking for your favourite car as a BEV, you WILL be disappointed.
Cost.
Unless you have over $60,000 as table stakes then, being a BEV owner is highly unlikely. Your options are generally a mini-type car at $30,000 with a poor range. Or, a $60,000 premium car that will give you 4 decent seats and a range that means you can leave town, and get back again.
Yes, the Tesla Model 3 is the sole game-changer in this regard, but you still have the other two factors to consider.
Infrastructure.
80%+ of current BEV owners charge their car at home. That's OK on two conditional fronts:
The challenge for Tesla is that it's not completely in direct control of this. Once the only premium BEV in the market to speak of, the market is literally forcing Tesla out of its comfortable solitary competitive position.
The Adoption Barrier Triangle.
To date, the barriers to consumer adoption have been non-trivial and this, apart from the eye-watering cost of structural change for car manufactures, has hardly been friction-free for consumers.
Choice.
Frankly speaking, the choice in the BEV market is woeful. Try and find a mid-size, mid-price BEV and you'll find scarce options. In the past couple of years when renewing my car, I ended up with hybrid as the next-best option to a BEV. As a side note, cars that look like they are fresh out of The Jetsons do not tick any practical boxes.
If you have been looking for your favourite car as a BEV, you WILL be disappointed.
Cost.
Unless you have over $60,000 as table stakes then, being a BEV owner is highly unlikely. Your options are generally a mini-type car at $30,000 with a poor range. Or, a $60,000 premium car that will give you 4 decent seats and a range that means you can leave town, and get back again.
Yes, the Tesla Model 3 is the sole game-changer in this regard, but you still have the other two factors to consider.
Infrastructure.
80%+ of current BEV owners charge their car at home. That's OK on two conditional fronts:
- You can be bothered with the hassle and cost of installing a rapid charger on your driveway or garage.
- You don't need to charge much whilst you are actually out and about
- Availability. I've had a charging subscription before but most of the charging points are taken when I need them. Bah-humbug.
- Time. You can kiss your petrol fill-up-in-5-and-go goodbye. It's an hour at least for one of the latest public rapid chargers. You need a very current model of BEV to be able to absorb the equivalent of the power of a lightning bolt into your electric vehicle, whilst you decide if you want a latte or flat white.
The Ten Ton Gorillas Are Coming.
When a music artist seemingly comes out of nowhere and has a smash hit, music biz people say 'there's no such thing as an overnight success'. You are only hearing about them now.
Looking at the BEV market, there's been a decade-long dress rehearsal for the ten-ton gorillas that make up Tesla's growing and future competition. BMW are on its 5th generation of electric drive trains already, the i3 was first released in January 2010.
But maybe more concerning is the fact that Tesla does not have to wait until 2030 for the starter pistol to sound. It has sounded already. The announcement of the i4 (4-series equivalent) and iX (direct Model X competitor) are direct shots across Elon's desk.
When a music artist seemingly comes out of nowhere and has a smash hit, music biz people say 'there's no such thing as an overnight success'. You are only hearing about them now.
Looking at the BEV market, there's been a decade-long dress rehearsal for the ten-ton gorillas that make up Tesla's growing and future competition. BMW are on its 5th generation of electric drive trains already, the i3 was first released in January 2010.
But maybe more concerning is the fact that Tesla does not have to wait until 2030 for the starter pistol to sound. It has sounded already. The announcement of the i4 (4-series equivalent) and iX (direct Model X competitor) are direct shots across Elon's desk.
Volvo's XC40 recharge is enticing as a practical compact SUV, and it's only a matter of time before choice at the right price stares Tesla in the face.
The axis of price vs. volume is something that has largely eluded the BEV market. High set up costs and low sales volume have been a major business inhibitor for companies. But with countries like the UK legislating law to ban new fossil fuel car sales by 2030, this has proven a catalyst for our gorillas to swallow the bitterest of pills and subsequently sweeten the consumer market.
The timing is very good. The car renewal cycle in the UK is about 8 years, meaning consumers who purchase a car now will be considering a new vehicle by the time the legislation comes into force. Is it a coincidence that it takes us close to 2030?
Our silverbacks have started educating and preparing the market for structural and behavioural change. Change to how we 'refill' and reposition what time means vs. what miles really means.
Miles Per Gallon (MPH) will no longer exist and we all have to get used to thinking in kWh (per Kilowatt Hour) or at least, charge time and range.
But one of the biggest challenges for Tesla is that it will get 'out-gunned' in marketing. Because Tesla does not advertise.
Until this moment, that's been sustainable. Elon Musk is the best advertising vehicle the company could have imagined. An enigmatic, brilliant and slightly eccentric founder is a brilliant marketing asset when you are setting out.
One tweet and the Internet breaks.
But once the ten-ton gorillas start throwing big money around, then how will Tesla fare?
Tesla is now an Internet-based company. It has no showrooms. It competes online. A car is the second most expensive purchase you will make and a very informed decision.
I can't see a world where Tesla gets much positive attribution from BMW or Volvo's BEV marketing spend. I can only see a world in mass consumer-land where Tesla maintains its current 'no advertising' position. As a result, its share of voice or search in the category will get eaten. It's a proven fact that share of voice directly correlates to market share.
Therefore, if Tesla wants to convince the mass market to pay a premium, it will need to advertise.
Tesla Won't Be Making Many Cars in 10 Years from Now.
None of this must be a surprise to Tesla. With such competition, you have a limited window to make whoopee in the market and gain an unassailable lead.
To get that, you need great product quality, the right portfolio and subsequently, diversity across a wide price range, amongst other things. Tesla has none of this.
Simply, there are better options coming and i4 is the best example yet of a Model 3 killer.
But it's not all doom and gloom. Tesla is an innovation powerhouse and has plenty of options by focusing on what it does best.
Tesla's cars are best described as software on wheels and its expertise and infrastructure abound battery technology is central to its position and growth for the future.
The axis of price vs. volume is something that has largely eluded the BEV market. High set up costs and low sales volume have been a major business inhibitor for companies. But with countries like the UK legislating law to ban new fossil fuel car sales by 2030, this has proven a catalyst for our gorillas to swallow the bitterest of pills and subsequently sweeten the consumer market.
The timing is very good. The car renewal cycle in the UK is about 8 years, meaning consumers who purchase a car now will be considering a new vehicle by the time the legislation comes into force. Is it a coincidence that it takes us close to 2030?
Our silverbacks have started educating and preparing the market for structural and behavioural change. Change to how we 'refill' and reposition what time means vs. what miles really means.
Miles Per Gallon (MPH) will no longer exist and we all have to get used to thinking in kWh (per Kilowatt Hour) or at least, charge time and range.
But one of the biggest challenges for Tesla is that it will get 'out-gunned' in marketing. Because Tesla does not advertise.
Until this moment, that's been sustainable. Elon Musk is the best advertising vehicle the company could have imagined. An enigmatic, brilliant and slightly eccentric founder is a brilliant marketing asset when you are setting out.
One tweet and the Internet breaks.
But once the ten-ton gorillas start throwing big money around, then how will Tesla fare?
Tesla is now an Internet-based company. It has no showrooms. It competes online. A car is the second most expensive purchase you will make and a very informed decision.
I can't see a world where Tesla gets much positive attribution from BMW or Volvo's BEV marketing spend. I can only see a world in mass consumer-land where Tesla maintains its current 'no advertising' position. As a result, its share of voice or search in the category will get eaten. It's a proven fact that share of voice directly correlates to market share.
Therefore, if Tesla wants to convince the mass market to pay a premium, it will need to advertise.
Tesla Won't Be Making Many Cars in 10 Years from Now.
None of this must be a surprise to Tesla. With such competition, you have a limited window to make whoopee in the market and gain an unassailable lead.
To get that, you need great product quality, the right portfolio and subsequently, diversity across a wide price range, amongst other things. Tesla has none of this.
Simply, there are better options coming and i4 is the best example yet of a Model 3 killer.
But it's not all doom and gloom. Tesla is an innovation powerhouse and has plenty of options by focusing on what it does best.
Tesla's cars are best described as software on wheels and its expertise and infrastructure abound battery technology is central to its position and growth for the future.
What do Vacuum Cleaners Have in Common With Tesla?
James Dyson is a British inventor who introduced his bagless 'cyclone' vacuum cleaner in 1993 as a result of his frustration with upright cleaners that would notoriously lose suction over time.
It was not the first time, nor the last, when the competition caught on, he has posed a not-dissimilar challenge to that of Tesla. I've seen it in my own career too quite recently…when you are in a unique market position, it is inevitable that the gorillas will come (assuming you are not one of them).
Dyson knew this and played his best card. Dysons main 'product' was not the vacuum cleaner but the digital motor inside it that was compact, powerful and frugal on energy consumption.
Over the years, Dyson refined its digital motor and applied it to diversify into new categories. The Dyson portfolio used this asset to launch the famous air blade hand dryer, hairdryer, straighteners, airwrap, humidifiers, cooling and heating products. The company even had plans for a BEV but that got shelved at a cost of over $700m.
Tesla needs to diversify its portfolio but what are its best options?
James Dyson is a British inventor who introduced his bagless 'cyclone' vacuum cleaner in 1993 as a result of his frustration with upright cleaners that would notoriously lose suction over time.
It was not the first time, nor the last, when the competition caught on, he has posed a not-dissimilar challenge to that of Tesla. I've seen it in my own career too quite recently…when you are in a unique market position, it is inevitable that the gorillas will come (assuming you are not one of them).
Dyson knew this and played his best card. Dysons main 'product' was not the vacuum cleaner but the digital motor inside it that was compact, powerful and frugal on energy consumption.
Over the years, Dyson refined its digital motor and applied it to diversify into new categories. The Dyson portfolio used this asset to launch the famous air blade hand dryer, hairdryer, straighteners, airwrap, humidifiers, cooling and heating products. The company even had plans for a BEV but that got shelved at a cost of over $700m.
Tesla needs to diversify its portfolio but what are its best options?
Diversify the portfolio:
Dyson has diversified its portfolio originating with vacuum cleaners all the way through to hair straighteners.
It is necessary to choose a visual aid that is appropriate for the material and audience.
Position to Your Strengths, Market Opportunity and Capability.
Just like Dyson leveraged the digital motor for category entry, Tesla should do the same with its battery and charging technology before the gorillas eat their lunch.
Tesla does not make the best cars. Even Musk says the quality suffers when production ramps up and not to buy a model from a production ramp-up!
Simply, BMW, Volvo, Audi, even Ford, make better quality-built vehicles. So, what are the options?
Own the grid.
Charging infrastructure is a nightmare. Most governments have done little to roll anything meaningful out, leaving it to private companies to make the investment.
Tesla has great form here. Its Supercharger stations are an excellent experience, best in class technology and stationed where they need to be on the motorways, freeways/interstates and shopping centres. It has over 2,000 stations (locations) with over 20,000 chargers.
In a world where most of the BEV's are not Tesla's, Musk and Co. could do worse than offering a non-Tesla subscription and thus monetise the gorilla's market share without having to compete in like-for-like car sales.
The flip side is there's a competitive advantage for Tesla car sales and US BEV manufacturer Rivian just joined the party too. In context though, if you are not the top-selling electric car, then you are shouting into a paper cup.
When it comes to charging, the future must be standardisation and interoperability.
Build cars for smaller gorillas.
It's an economic fact, not all car companies can afford the cost of this structural change. Tesla can use its manufacturing plants to build for other brands. If well-known FMCG companies can make baked beans and toothpaste for supermarket brands, why can't Tesla make cars for someone else?
Either as a pure play OEM or as a co-branded 'powered by Tesla'.
Home is where the charge is.
More than 80% of BEV's requiring charging at home. Tesla can bring smart technology and its brand to the home charging market by partnering with existing energy providers or improve their distribution for their current solo efforts.
The home market is naturally going to explode and there are some key players already, but no prestige brands. A Tesla charger at home is an enticing brand proposition, even if you drive a Ford BEV.
Leverage the renewable energy market.
Another market to explode in the next ten years is the renewable energy market. Governments around the world and with the US back on side, the Paris climate accord must be acted upon.
Grants are widely available for solar in the home and the democratisation of the energy utility market (in the UK anyway) has meant that companies like Bulb who only do single tariff 100% renewable energy are proving very popular.
Tesla has made a step here already. Its Powerwall stores solar energy for you to use on-demand and surplus energy can be sold back to the grid. Even my local council is offering grants and collective-buying on solar and battery storage. In this case, the battery ain't no Powerwall. I'm not even sure it's a Duracell!
Just like Dyson leveraged the digital motor for category entry, Tesla should do the same with its battery and charging technology before the gorillas eat their lunch.
Tesla does not make the best cars. Even Musk says the quality suffers when production ramps up and not to buy a model from a production ramp-up!
Simply, BMW, Volvo, Audi, even Ford, make better quality-built vehicles. So, what are the options?
Own the grid.
Charging infrastructure is a nightmare. Most governments have done little to roll anything meaningful out, leaving it to private companies to make the investment.
Tesla has great form here. Its Supercharger stations are an excellent experience, best in class technology and stationed where they need to be on the motorways, freeways/interstates and shopping centres. It has over 2,000 stations (locations) with over 20,000 chargers.
In a world where most of the BEV's are not Tesla's, Musk and Co. could do worse than offering a non-Tesla subscription and thus monetise the gorilla's market share without having to compete in like-for-like car sales.
The flip side is there's a competitive advantage for Tesla car sales and US BEV manufacturer Rivian just joined the party too. In context though, if you are not the top-selling electric car, then you are shouting into a paper cup.
When it comes to charging, the future must be standardisation and interoperability.
Build cars for smaller gorillas.
It's an economic fact, not all car companies can afford the cost of this structural change. Tesla can use its manufacturing plants to build for other brands. If well-known FMCG companies can make baked beans and toothpaste for supermarket brands, why can't Tesla make cars for someone else?
Either as a pure play OEM or as a co-branded 'powered by Tesla'.
Home is where the charge is.
More than 80% of BEV's requiring charging at home. Tesla can bring smart technology and its brand to the home charging market by partnering with existing energy providers or improve their distribution for their current solo efforts.
The home market is naturally going to explode and there are some key players already, but no prestige brands. A Tesla charger at home is an enticing brand proposition, even if you drive a Ford BEV.
Leverage the renewable energy market.
Another market to explode in the next ten years is the renewable energy market. Governments around the world and with the US back on side, the Paris climate accord must be acted upon.
Grants are widely available for solar in the home and the democratisation of the energy utility market (in the UK anyway) has meant that companies like Bulb who only do single tariff 100% renewable energy are proving very popular.
Tesla has made a step here already. Its Powerwall stores solar energy for you to use on-demand and surplus energy can be sold back to the grid. Even my local council is offering grants and collective-buying on solar and battery storage. In this case, the battery ain't no Powerwall. I'm not even sure it's a Duracell!
Brand.
If done right, there's no reason why the equity in Tesla's brand can't be a really big asset. True, the car company was recently valued at a staggering $208B but this is not a true reflection of its sales and reach. Only its promise and likely at some point, this bubble will burst (or explode).
Its sales are a miserly percentage of the competition. Toyota, the world's largest car company sold nearly 10m cars last year - 20X that of Tesla's ambition. And despite beingnumber 40 in the best global brands, its brand value is measured at $12B, in the same analysis, Toyota is worth more than 4X times of Tesla.
Tesla might be able to close some of the gap on brand value but it has no chance to close on hard sales in the car market.
If done right, there's no reason why the equity in Tesla's brand can't be a really big asset. True, the car company was recently valued at a staggering $208B but this is not a true reflection of its sales and reach. Only its promise and likely at some point, this bubble will burst (or explode).
Its sales are a miserly percentage of the competition. Toyota, the world's largest car company sold nearly 10m cars last year - 20X that of Tesla's ambition. And despite beingnumber 40 in the best global brands, its brand value is measured at $12B, in the same analysis, Toyota is worth more than 4X times of Tesla.
Tesla might be able to close some of the gap on brand value but it has no chance to close on hard sales in the car market.
Conclusion.
Tesla has a great future ahead of them but it's not making cars at scale under its own brand.
Market forces are going to start pulling them into the aspirational mainstream and the grounding for its differentiation will give way. This is not even up for debate - it's happening already.
With the gorillas coming out of the mist, it's time to saddle up and look to 'do a Dyson' and enter new markets. Maybe not immediately, but the groundwork needs to happen now. Its stock is overvalued for what it is currently and investors know it. Either the bubble will burst, or the promise is fulfilled.
I am betting on the latter. I can see a world with a Powerwall at home and a Tesla t-shirt in my wardrobe. I'll just be driving something else.
Stay Safe. Look after one another.
Harvey.
https://www.harvey-lee.co.uk
Sources:
1. Perception Maps - Harvard Business Review.
2. BMW data. BMW Chairman Oliver Zipse, quoted Drivetribe, March 2021.
3. All other data linked to original source.
Tesla has a great future ahead of them but it's not making cars at scale under its own brand.
Market forces are going to start pulling them into the aspirational mainstream and the grounding for its differentiation will give way. This is not even up for debate - it's happening already.
With the gorillas coming out of the mist, it's time to saddle up and look to 'do a Dyson' and enter new markets. Maybe not immediately, but the groundwork needs to happen now. Its stock is overvalued for what it is currently and investors know it. Either the bubble will burst, or the promise is fulfilled.
I am betting on the latter. I can see a world with a Powerwall at home and a Tesla t-shirt in my wardrobe. I'll just be driving something else.
Stay Safe. Look after one another.
Harvey.
https://www.harvey-lee.co.uk
Sources:
1. Perception Maps - Harvard Business Review.
2. BMW data. BMW Chairman Oliver Zipse, quoted Drivetribe, March 2021.
3. All other data linked to original source.
© Harvey Lee 2021. All Rights Reserved.
