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Porsche's Taycan V. Tesla And Others: Product, Technology And Market Factors

|About: Porsche Automobil Holding SE (POAHY), TSLA, Includes: AUDVF, BMWYY, TTM
Summary

In this article I will discuss Product, Technology and Market factors and comparisons in the EV market as they relate specifically to Taycan and Tesla.

Product: Taycan has a high price and seemingly below-par performance when compared to Tesla, but very favorably compares with the non-Tesla competition.

Technologically: Tesla is very much ahead of it competition in key fields such as batteries and motors as well as some less quantifiable areas such as software architecture and autopilot.

Market: Established ICE Automakers profits are in ICE cars and they need to sell less profitable BEV’s as compliance cars in limited supply and markets, resulting in noncompetitive BEV offerings.

Market: I estimate 30-40k Taycan units through 2020, including cheaper model. Considering various factors I see little impact to Tesla S/X sales.

On September 3, Porsche (PAH3.DE) unveiled its first EV. A pricey 150,900 and 186,000 vehicles claiming to be the greatest track ready electric vehicles. Car and Driverand a noted SA Tesla short seller feel this development would likely shrink Tesla’s Model S market share, according to the SA contributor by 5,000-10,000 units S/X and impact Tesla’s (NASDAQ:TSLA) brand. From the research I have done, automotive bloggers Here, Here & Here many suggest that while the Taycan is truly a remarkable vehicle it is incomparable to Tesla. I will explore in this article product, technology and market factors where I feel Tesla has compelling advantages and will analyze Taycan’s potential impact on Tesla.

Product Comparisons

Taycan v. Tesla Performance vehiclesspecifications table: (* - Estimated)

Sources: Tesla, Porsche, Elektrek, InsideEVs, EV-databaseAnd TMC(WLTP/EPA conversion are either taken from sources or roughly estimated at 1.121:1, WH/Mi estimated battery /EPA Range).Older pre-Raven update S/P 324 S/LR304 X/P 396 published efficiency. Estimation are sourced or my own.

Almost all of Tesla’s Performance offerings exceed or are competitive with Taycan and for at least 30% lower cost. Acceleration on S/X (2.4/2.90) exceed Taycan(2.6/3) as well as top speed(163 v. 162)and power(762launch bhp v. 670/750). On even more important technology specs like efficiency(S 290 v. est. 370) and range (SP345/SLR370/X305 v. TaycanEST. 233-249 EPA) Tesla outperforms Taycan by a wide margin.The only advantage for the Taycan is it’s narrow turn radius, which may allow it to best the model S Performance on the Nurburgring race track(according to Musk’s Twitter feed, Model S will attempt record run soon). Otherwise it’s heavier and slower in acceleration and top speed. Taycan’scharging capacity is higher than the model S, however model S is due for a refresh soon (although Musk won’t call it that) that is likely to give it Model 3 specs in many fields including potentially new battery chemistry (2170, currently 18650) and charging at 250kw. Although Taycan does have a slightly higher electrical capacity then the Model 3 (270kw v. 250kw) it’s rate of range increase (I.e. the amount of range from a given charging session) is likely comparable as the Taycan is less efficient than Tesla’ offerings. The Taycan is expected to receive a max charge capacity upgrade in a 2021 to 350kw which would be higher than current generation Tesla’s. Tesla is guiding for increased super charging on their Semi (Musk called them MegaChargers) due for release next year, and could potentially incorporate the technology into the next generation cars.

Porsche promises sustained speed and powerand other non-metric slogans to boast about the Taycan’s performance. We’ve seen interesting stunts from them like 30 0-200km/h launches consecutively, 0-90-0 on the top of an aircraft carrier, set a record on Nurburgring and a 24hr endurance test in order to brag about their next-gen Tesla killer. However, in such a large heavy car they have not been able to exceed 300 miles of WLTP range, or comparative trunk space for an enormous price tag.

Supercharging network consists of over 14k superchargers (Level 2 @ 72-150KWh, migrating to Level 3 @ 250KWh) and is a significant reasongiven by consumers in consideration of their BEV purchase. Tesla’s supercharging network is among the best in the USA, seems to be among the most comprehensive in the world and is conveniently located next to major highway routes to be usable for long distance driving. Many other networks chargers are located closer to cities due to local incentives and have less road trip utility.

Comparisons to other non-Tesla automakersPorsche v. AudiE-Tron, JaguarI-Pace, BMW i3 & 8 table:

(* - Estimated)

Sources:Audi, Porsche, Jaguar, BMW, Autoblog, Car and Driver, Rivian, Elektrek, InsideEVs, CleanTechnica, EV-Database andGuide Auto Web. Estimations are from sources or my own.

The Taycan will probably impact sales of the competition, its price is comparative some offerings and its performance metrics exceed current specs of its competitors. Granted it is unfair to compare SUV’s to sedans, however in the small BEV market this is necessary. The expensive Taycan turbo models are comparable to the price of BMW’s (BMW.F) i8 plug-in hybrid electric vehicle (PHEV) a great design but very expensive low performance super car with less than 400 bhp and 15-20 mile battery range. Taycan’s design, it’s fully electric powertrain, reasonable battery range, high horsepower and torque output likely caused the end of i8 which is being killed in April 2020.

Taycan when compared to other EV’s from luxury European automakers, Jaguar’s I-Pace (TATAMOTORS) and Audi’s E-Tron (NSU.DE), is certainly worthy of the ‘Supercar’ appellation and the associated premium pricing. It has comparable range (230’s), but blistering speeds (162 compared to 124), power (750/670 compared to <400), and acceleration (2.6/3 compared to 4.5 & 5.50). It also exceeds the competition in efficiency (estimated 372Wh/mi compared to 440+) and has a sporty narrow turning circle. Certainly when the rumored low-cost mid-80k version of Taycan is produced this car will solidly compete against the other designer automakers offerings. Rumors are an 80KWH battery and 430-480 HP, which if true, would price the car more expensive than I-pace/E-Tron with lower range and likely higher performance.

The only product comparable to Tesla is Rivian, however we don’t have a full picture.

I’ve always wondered who would buy the BMW i3 S (a 47,500 variant that underperforms an equivalently priced mode 3 in almost every category) or i8 in place of any Tesla.Apparently there are some ‘never-Tesla’ people that would prefer designer European models to practical American cars, those people will likely buy the Taycanand its competition.

Technological Trends

Tesla’s increased efficiency and range stem from major technological advances in motor technology and battery density. Real world testsindicate Tesla is the most efficient car in its class and a Volvo (VOLVB.SS) executive from Polestar recently commented that Tesla is far ahead of the competition in terms of efficiency, noting that they may not even be able to compete in that field.

Efficiency with the car itself stems from three major components battery density, motor and inverter.

Tesla has figured out how to “make magic” and maximize performance of the permanent magnet switched reluctance (PMSR) motor. PMSR motors are technologically challenging to manufacture affordably, but according to Munro M3 motor is the best in its class.

Their battery and charging technology of five years ago, are still far ahead of most automakers and a UBS analyst confirmed that Tesla has big advantages in cutting battery cost – considered the most critical factor for EV adoption. Musk hinted this yearthat they aim to be at $100/KWh by the end of 2018. The power density of model 3 cells areunmatched (according to Munro and associates calculations) by competitors resulting in lower weight and greater efficiency of energy and space.

Tesla incorporates advanced technologies in designing and producing their inverters resulting in the most efficient device that requires less batteries and increased efficiency (less battery = less weight = higher efficiency).

Autopilot and Full self driving are difficult to qualify using standards, although manyagree that Tesla is in the driver seat (pun unintended) on FSD (next to GM, Ford/Argo and Waymo). Autopilot and FSD make driving much less intellectually demanding, even though they currently require the driver to have his eyes on the road.

Tesla’s integrated software architecture any subsystem can be updated OTA to improve performance or safety. Tesla cars have future technologies not yet ready for use,built-in but software locked and updated for use when sufficiently validated.Tesla has the hardware in its car in place for FSD and when that is ready it will be pushed OTA into their cars. Legacy automakers are copying Tesla, shifting their automotive architecture designs from multiple non updatable systems to a central software system integrated with all subsystems.

I’m surprised why many comments on SA see no benefit to OTA (over the air) updateswhich keeps the technology and screen graphics up to date. Imagine your windows DOS computer could be continuously updated to the look and functionality of Windows 10. Due to the misunderstanding amongst many on SA I will list some examples of helpful OTA updates. Tesla decreased braking distance OTA in response to Consumer Reports complaints. Model 3/S/X built with 150KW V2 charging are now being updated to higher charge rates. A video console and games are pushed into their cars OTA. OTA makes cars more future proofed than before and is something new automakers are copying, it is unquestionably a valuable feature.

Model S/X are scheduled for an update soon and many features/technologies already available on M3 can be easily moved over with increased performance (as well as new performance upgrades). M3 battery design (2170 cells) are more than 10% denser that 18650 cells of current S/X and will decrease weight and increase efficiency, top speed and acceleration. M3 drive units currently used in Front axle drive units on S/X could be adapted to RWD units of S/X potentially (although Musk acknowledged the value in using two different types of powertrains) increasing performance as well. And M3 interior can be used to improve comfort.

Besides design, sport car features, turning radius and ‘foot lockers’, Taycanillustrates no new impressive technology. Taycanmakes a strong case that other automakers have a long way to go before they can match Tesla’s technology and Tesla has an easy path forward for even further performance increases.

Market Trends and factors

BEV Global market

Projections for growth through 2030:

Source: IEA

Source: Deloitte

Source: BNEF

According to IEA the estimate the global stock of BEV’s increasing from 3m 2018 to 10m BEV’s 2020 and 50m in 2025 (I do think this is overly optimistic and will only work if their plans are implemented by authorities worldwide). Deloitte estimates new car sales will be up 4m in 2020 from 2m in 2018 and 12m in 2025 and Bloomberg NEF approx. 5-6m in 2025. IEA graph shows the growth of EV stocks globally from under 500k in 2013 to over 3m in 2018. All estimates point to a rapidly developing market still young that will continue to grow rapidly over the next few years.Accordingly, Tesla has increased their sales as well (and in 1H2019 is selling more cars than Porsche). Presuming that growth factors remain constant or increase there will be a need for millions of new vehicles on the road next few years of which many (could not find exact stats) will be in the premium sector. This would favor all market entrants, particularly those with current offerings.

BMW’s i8 departure - a comparable Taycan offering (despite being a PHEV) will potentially increase the number of potential Taycan buyers (although the i8 was never a great seller).

According to Deloitte, there is a large gap between lower demand and high production capacity, this can certainly be an important factor when valuations EV manufacturers. They predict that around 2030 many EV makers will be out of business, as high production capacity will squeeze weaker manufacturers. It is thus crucial to evaluate the competitiveness of EV’s in determining long term sustainability.

ICE Manufacturer’s Profits and BEV’s

Another market challenge for ICE manufacturers is the simultaneous resource demands for research in both ICE and BEV’s. As their manufacturing lines and supply chains are optimized for ICE cars, they require large CapEx updating and retooling facilities to be BEV capable.

Many of these automakers are building compliance cars that are sold at losses or small profits to meet emission guidelines in the EU and other locales like California. This strategy is particularly successful by creating BEV’s that least impact the most profitable offerings. Accordingly, these firms limit the features and performance of their BEV offerings and sell them only in marketplaces where compliance requires(such as vehicles only for sale in California or Europe) like VW ID.3, Honda Clarity, Fiat 500e, Kia Soul EV and Hyundai IONIQ Electric.Alternatively, they don’t stock the cars at dealerships and make them challenging to purchase (like VW e-Golf, Ford Focus Electric andSmart forTwo).As shown above,Rivian is the only manufacturer to reveal Tesla like specs – and is not a Traditional ICE startup. Many vehicles are only sold in limited markets. These trends will continue to support the fast-growing electric car startup movement (Fiskar, Rimac, Rivian, Aspark, Dyson and others) and the established BEV maker – Tesla.

Taycan – even with its cheaper variants will not heavily impact Tesla sales through 2020

Taycan’s expensive price point and its comparatively low performance means that it is hardly comparable to the Model S and not much ahead of the Model 3 performance which is a third the price. Even the reportedly ‘cheaper’ version due for release mid-2020 won’t dent Tesla’s sales. If their uber-expensive Taycan turbo barely outperforms a model 3 Performance certainly not a S/X, their cheaper GTS variant certainly won’t. It’s likely smaller battery and lower performance won’t even be comparable to the Model S and the 3 Performance/S long range will still be cheaper (although Taycan will have a larger tax break in the USA).

The top 3 reasons (of which one is the greatest concern in 10 markets surveyed) for not purchasing a BEV according to Deloitte are 1. Range, 2. Cost, 3. Charging infrastructure. As noted, Tesla has the upper hand in all these areas.

Source: Deloitte

There have been mixed reports regarding Taycan preorders. Most recently the numbers thrown around (Jul. 29) were 30k. It is important to note that Porsche was guiding for pricing ‘like an entry level Panamera”, so it remains to be seen how many of those preorders translate into sales. More than 50% of Taycan’s preorders are from Porsche brand loyalists according to reports by CNBC, indicating that this is about the brand more so than about the model’s performance. It seems that Taycan will sell by its curb appeal, branding and status symbol more than any other factor, migrating many existing ICE loving, avid Porsche loyalists to the enjoyment of EV driving.

Porsche’s CEOis guiding 10k units for 2019, 20k +units for following years although there have been reports of 40k production capacity a year. As it is a very expensive offering that underperforms its competition it is unlikely that it will exceed 20k units yearly and perhaps 10k this year is an overly optimistic production estimate considering production began on Sept. 9.With the cheaper model they can increase sales, but that would be at a price more expensive than I-Pace, E-Tron and M3 Performance without super car performance and hence, would be facing challenges in a crowded field.I would say that 30-40k units through 2020 is a more realistic (40k is very optimistic, production maximum is 50k – 10k this year 40k next year) estimate,presuming the entry-level variant comes to production early 2020 and that Taycan is superbly successful. If Taycan isn’t well received 20-25k units through the end of 2020 would be realistic.

Porsche will be working through its preorders until mid 2020 (presuming a 75% conversion of preorders to sales, production of 22.5-27.5k) perhaps producing 7.5-17k cars to non-preorders. Given the contrast between offerings and the high demand of Porsche enthusiast interest, I wide suggest that 5-10% (500-1700 units) or less of non-preorder sales will impact Tesla. Thus, it’s unlikely that the prophecy of doom given by another SA writer of Tesla loosing 5k-10k to the Taycan is likely to happen. Any Porsche preorder is likely already a potential lost sale by Tesla (if we presume the offerings are comparable) and early production is fueled by Porsche loving enthusiasts. If Tesla can continue to grow Model S/X sales they can mitigate that loss.

However, as noted earlier, compared with non-Tesla vehicles Taycan Turbo is worthy of Super car status and will likely create its own genre of ”EV’s with a soul” selling to Porsche enthusiasts a true sports car that happens to be electric”. Audi and Jaguar will likely take a hit from the Taycan when the more affordable variations become available and BMW (i8) was likely a big loser with this unveiling.

Considering the model S/X refresh, Mercedes EQ brand, Audi GT, BMW i4 and the EV expansion of other automakers, it is questionable if Porsche will ever maintain 20k+/yr units past 2021/2 without increasing performance and lowering the price.

[Important note:This article does not discuss some of Tesla’s cost competitive advantages. They have superior design as it relates to manufacturing and advancedprocesses lowering manufacturing costs. Their direct sales model eliminatesdealership commissions and they don’t have reps that need to down-sell lower profit EV’s in favor of higher dealer profits on ICE vehicles (commissions and service). These factors contribute to lower costs and higher margins].

Conclusions:

Tesla’s product far exceeds the specifications of any competitors. Porsche’s offering has inferior specs and is unjustifiably expensive when compared Tesla, but compares very favorably to non-Tesla BEV offerings in specs, price-justifiability and technology. It is the first non-Tesla BEV to really stand out as a high-performance vehicle.

Technologically the case can still be made in Tesla’s favor. Tesla continues to outperform other in key technologies like efficiency, range, motors, software and FSD and we see little evidence of that trend abating. That gives Tesla a significant advantage going forward as their products will likely to continue to exceed their competitors. Rivian may challenge that advantage but it is too early to tell.

Market factors favor all entrants as BEV sales continue to increase, but production capacity will continue to eclipse demand long term. EV manufacturers will need competitive products and sustainable business models to succeed long term. Established ICE manufacturers face tensions transitioning to (at least initially) less profitable BEV’s while selling and investing in more profitable ICE cars. Taycanwill likely create its own genre as it enters the growing BEV market,be well-received and sell 20k+units a year. At the same time the material number of Taycan sales taken from Tesla will through the end of 2020 be minimal as they aren’t directly comparable.

Disclosure: I am/we are long TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.