- The Gigafactory deal with Panasonic will prove vital for reducing price points for the Model 3 and the rest of the Tesla fleet.
- The Model S and Model X bring superior range, luxury, and performance, while competitors are able to bring affordability. The Model 3 will provide all of the above.
- Toyota Motors withdrew its place in the EV market last week, and the company is turning to fuel cell technology.
With Toyota Motors soon to bow out of the EV market, Tesla (NASDAQ:TSLA) would have one competitor less. However, there are other, bigger threats that can, potentially, hack the market for Tesla's vehicles away.
Electric Vehicle Sales in North America
Source: Vox.com Cumulative PEV Sales
The bar graph above shows the cumulative sales of electric vehicles over the past three years. According to the figure, the leading pure EV seller in the U.S. is Nissan, with its Leaf. The company has sold as many as 54,858 Leafs in the U.S. alone, in the past four-and-a-half years. Standings from Canada replicate the standings in the U.S., too, where Nissan has sold a chart-topping total of 1,342 Leafs in the past three-and-a-half years. In either country, Tesla's Model S comes in second.
Nissan's $21,510 compact hatchback runs on a 24 kWh battery that helps it travel for up to 84 miles on a single charge. Tesla's $62,400 luxury sedan, on the other hand, runs on either a 60 or 85 kWh battery pack giving a driving range between 208 and 265 miles.
Popular EVs in Europe
According to a recent report by The Guardian, the three most popular electric vehicles in Europe based on 2013 sales, were Renault Zoe, Mitsubishi Outlander and the Volvo V60. Out of these, only the Renault Zoe is 100% electric; the other two being PHEVs, which are not considered in this article at all. According to a separate Forbes report, however, the Nissan Leaf was the topper with the Renault Zoe coming in second, considering sales in Western Europe, only.
The Guardian report suggests that the Zoe sold approximately 8,000 vehicles in the whole of last year. The year is important, since Tesla's Model S had hit the European market in August 2013. According to the Forbes report, Tesla came in third behind the Leaf and the Zoe, with 3,900 vehicles sold in Western Europe and 1,983 in Norway. This, importantly, was achieved in just five months.
The Renault Zoe, which starts at £13,995 ($23,651), comes with a 22 kWh battery that, according to the company, gives the vehicle a range between 100 km (in cold weather) and 150 km (in warm weather), when driven on a suburban route. The battery can be charged to 80% capacity within 30 minutes albeit from a 43 kW charger. Using the standard "wall box" charger provided by the company, the car is charged completely in 3 to 4 hours.
What's Keeping Tesla Behind?
Considering the fact that Tesla produces electric vehicles, exclusively, the company shouldn't take the lower sales compared to Nissan and Renault's products too well. The main feature keeping the EV maker behind the two compact cars seems to be the price tag. The Leaf and the Zoe both come in the whereabouts of $20K - much more affordable than the $62.4K minimum Model S. Furthermore, both cars have a reasonable driving range, too, in the whereabouts of 70-80 miles, which is sufficient for an average family or individual's daily use. The trouble - and the honor - for Tesla is that the Model S and Tesla's upcoming Model X are both luxury cars. For the most part, Tesla's vehicles aren't bought by people looking to save on gasoline, but by luxury car enthusiasts who can afford the huge price tag. If they save up on gasoline in the mean time, good enough. This is why the Model S is considered as a threat by Lexus and not, for example, by Nissan. Granted, Tesla's EV is much better than Nissan's and Renault's, and that Tesla's limited sales are limited by supply and not demand at the moment. Nevertheless, the price tag would eventually be an issue for the carmaker's quest to become a mass market name. For Tesla to become a mass market carmaker - and, hence, a bigger name in the stock market - it would have to execute the Model 3's production perfectly, as the company proposes, today - and with the price tag that it suggests.
Why the Gigafactory is Vital to Tesla's Success
As already mentioned, one of the major reasons behind Tesla vehicles' lack of success in Europe and the U.S. is the price tag. Another reason behind the relatively slim sales is the fact that the company is not able to produce enough vehicles to meet the demand for them. For either problem, the Gigafactory is the answer. The massive factory would enable the company to, simultaneously, produce a higher volume of batteries and a 30% cost reduction in the lithium ion battery packs. So, should the Gigafactory succeed - as seems increasingly likely after the recent agreement between Tesla and Panasonic Corp. - Tesla Motors would be a huge step closer to the mass production of its vehicles, as well as a huge step closer to producing a cheaper EV, the Model 3 - and another huge step closer to becoming the bestselling EV maker in the world.