It is evident that a charging infrastructure will be essential to the development of electric cars. Tesla wants to be a major producer of electric cars. To do this, it needs to have the facilities to allow it to make enough vehicles. Tesla is a good example of an electric car producer. Tesla has taken some measures to overcome electric car’s main obstacles. Tesla Superchargers are a large network of fast charge stations designed for Teslas.
These charging stations can be used by other electric vehicles, too. Tesla may be prepared to share its network with other manufacturers. It also shows its forward-looking strategy and its intention to have its charging system become the industry standard. As the Betamax-VHS case shows, networks can have a significant impact on competition. Tesla understands how networks affect competition. It is open-source technology that has been released by Tesla.
Elon musk, CEO of the company, said that it was willing to offer its technology and superchargers to other manufacturers. But in fact, they don’t seem interested. Tesla’s wireless network is only available to manufacturers who use batteries with a lower charging voltage. Some of these require an adapter. Tesla’s open-source technologies may make it easier for car manufacturers who are behind the curve in developing electric vehicles to use Tesla’s advanced and high-quality technology. The technology of Tesla Superchargers can be made to the standard for its industry. Building a network involves both costs and revenue. Tesla spends lots of money building the Super Chargers and is expected to need USD 1.9 to 7.5 Billion for the US Gas Structure, which would be 30,000 Superchargers.
How can Tesla continue to expand its network to maintain its advantage? Tesla has decided to build direct its infrastructure in other regions as well and is willing affirm its technology. In order to do this, Tesla can license its superchargers and share the network costs. It will also increase revenues by increasing the number users. The network has already been spread across North America, Europe, Israel, United Arab Emirates (especially the western part), China, Taiwan and Japan. It also covers South Korea, Australia, New Zealand, Australia, and New Zealand. Tesla, compared to the other energy companies or manufacturers, is also very advanced. In particular, Tesla is consolidating the network of stations that already exist, and planning to add some more in Eastern Europe.
Tesla Superchargers still do not cover the rest. The stations are located in both cities and speedways to allow electric vehicles to travel long distances. They signed agreements to provide charging stations at restaurants, hotels, shopping malls, and touristic resorts for Tesla owners. Tesla’s network is very strong, as it includes both Superchargers and “Destination Charging” stations. Tesla’s ability to provide its customers with a higher level of value is an advantage. At the moment, a fast charging station network is not only rare but also valuable, difficult to replicate and costly. But it is vital to know whether or not it will continue to be viable in the near future. This would allow Tesla’s profits to increase even further than their competitors. You can do this by performing a sustainability assessment.
Three key measures should be considered: difference between a company’s product and its competitors’, imitation, and improvements. Tesla’s biggest competitive advantage is not being discussed by anyone, even though it is set to announce its earnings in the near future. Tesla’s Super Charger system is the most well-known in the industry. The vast majority of customers and potential purchasers are not aware of other networks. Tesla car owners will also be able charge their vehicle at public charging stations as well as charge it at home. Tesla’s customers have more options when it comes to charging their cars than competitors.
Second, Tesla’s open-source technology is easy to copy, but the spread of the network is difficult and expensive to duplicate. The network is impressive and ready for expansion and improvement. Tesla is always one step ahead of its competitors. In fact, it has plans to expand and improve the network. Tesla isn’t just an automaker, it’s a tech company as well. So, it’s obvious that their goal is to always improve their products. In fact, the company is constantly working to improve their charging technology, including with its new Super Chargers V3 model (Lambert 2018, as well as new models).
Tesla’s advantage is sustainable, and this is evident. The business model can also be used to assess Tesla’s advantage in terms of sustainability and analyse it once more. Comparing Tesla to its competitors can be helpful in some areas. Firstly, customers are usually environmentally-conscious people from upper middle class. Tesla’s core value proposition revolves around safety, charging speed, and being able to charge at home or in a Super Charger. The website Tesla.com is the basis for customer relationships. The customer can test drive the car by surfing the website. And after purchasing, the interaction between the company and customer takes place through the constantly updated interface of the vehicles. Tesla’s stores are the only ones that use its channels.
Tesla’s primary activities are improving and creating electric and self-driving cars, while also building new ones in automated factory environments. They are constantly innovating to make their cars less expensive to maintain and release regular software updates. The company relies on its engineers to develop its products and charge network. Tesla has no service partners, as it delivers itself. The final cost factor is the development of new hardware and software. Human resources, production and marketing are also cost sources.
Sales of Model S and Model 3 are the company’s major revenue sources. Sales of wall connectors, as well as maintenance services, generate revenue for Tesla. Tesla’s competitors are clearly different from them. BMW, on the other hand, has revenue streams very different from those of its competitors, including high rental and leasing fees. BMW also wants to give its customers the best driving experience. It is a traditional manufacturer with a dealer network. The main partners for BMW are IT and other car companies. The analysis shows that Tesla’s Business Model is different from the traditional model of a manufacturer.
Tesla’s edge in the competitive market comes from factory automation as well as self-driving technology. Tesla is the only manufacturer investing in order to solve these problems. Most of the others are dependent on public chargers. Tesla is an excellent example. Tesla’s main rivals, like BMW produce both internal combustion and electric engines. Tesla must guarantee its customers that their cars can be charged. Otherwise, they will not achieve its goal to become a mass manufacturer. This strategy is sure to help Tesla achieve its goal of expanding internationally.
In fact, the company’s activities were not limited to the United States of America. It also included many other countries, both developed as well as developing. Tesla may not be able to produce 5,000 models per week, but this number is still quite low. Tesla must also find a sustainable way to maintain its competitive edge. Tesla was able to foresee the need to build its own charging infrastructure, but its competitors’ views on the topic are also worth considering. Tesla’s rivals are not currently investing millions in building their own infrastructure.
In Europe, there are something like Tesla’s Supercharger Network. It’s called “Ionity”, a joint-venture between BMW AG and Daimler AG. It plans to build up 400 fast charging stations throughout Europe before 2020. The first twenty will be placed near speedways and motorways in Germany, Norway. Ionity intends to build a charging network that is reliable for electric vehicle owners all over Europe. But, at this time it isn’t relevant compared to Tesla. Ionity currently has six charging station open across Europe. It’s important to let customers know that this network is being launched, but it appears to be unknown in Europe.
Instead, a company named Electrify America in the United States of America was created by Volkswagen AG. The company is investing USD 2 billion for the next ten to build charging stations throughout the USA. The “Combined Charging System”, a technology that was proposed as a global standard to rival Tesla’s Super Chargers, is used. Only a handful of the planned stations are actually operational, so it is impossible to drive an electric vehicle from the west to east coasts or vice versa. In reality, there are 12 stations that work in all of the USA. It’s clear that Electrify America has a different network than Tesla.
Another competitor is also building an electric vehicle charging infrastructure in Japan. It’s called “CHAdeMO”, or “Charge the move”. Tokyo Electric Power Company Ltd. Nissan Motor Company Ltd. Mitsubishi Group Subaru Corporation Toyota Motor Corporation have formed a Japanese Joint Venture (CHAdeMO). It is a Japanese joint venture between Tokyo Electric Power Company, Nissan Motor Company Ltd, Mitsubishi Group, Subaru Corporation and Toyota Motor Corporation (CHAdeMO, 2018). CHAdeMO’s network is present in North, Central and South America, with a good spread in the USA, even if it is less developed than Tesla’s.
In the end, only CHAdeMO appears to compete with Tesla’s network of charging stations. But there are important differences between the two. There is a big difference between the two solutions. Superchargers were designed to only charge Tesla vehicles and they’re very fast. This exclusivity will add value for Tesla, as all of its competitors lack something similar. The analysis shows that the charging network has a competitive impact, but it’s also expensive to create. So it’s important to understand why some companies choose to build networks together and others, like Tesla, do so independently.
Tesla is motivated to build a network because it will be harder to compete with traditional manufacturers if it does not. Tesla has never been more willing to compete in a big way than it is now. Electric vehicle sales were historically very low compared to those of cars powered by internal combustion engines. Tesla will only be able to grow if it can guarantee that its customers are able to travel far distances and charge their car. Charging infrastructure plays a huge role in electric car production. Anyone would rather charge their car in 20 minutes than seven hours, using the standard power sources.
In addition, there are several competing standards, and one must be able to assert itself over the rest. Nevertheless, if you look at them in a technological perspective, there are some issues. CHAdeMO was introduced earlier than Super Chargers. However, these are growing at a much faster rate. CHAdeMO has a unique connector, and two different chargers are needed, one to charge fast, and one to charge slowly. This increases the cost of a vehicle with fast-charging technology. Tesla and other manufacturers are trying to assert their own standards because the industry’s standards don’t coalesce. Because there is no standard for electric cars, their market is limited (Besen & Farrell, 1994). Moreover manufacturers have complete control over the network because they own it. FDI is the best option to create an infrastructure that can be used worldwide. Another thing must be highlighted.
Tesla also has SolarCity under its control, which is a company that supplies solar energy directly to charging stations. This allows Tesla to benefit from a more convenient charging network as well as a potential increase in profitability. In addition, many automotive incumbents do not have plans to build a charging network. They are instead projecting the use of electric cars. As already stated, customers will not wait hours for public stations, which are rare and hard to locate in many countries. Tesla is the owner of a large network and will be willing to let them use it, while only sharing the costs of maintenance. In reality, Tesla’s balance sheet is the reason they should be looking for partners. It is unlikely that Tesla will be able to expand its network. Tesla is among the markets with the least leveraged financial statements, about 32,5 %. Tesla also has an extremely high current liability coverage, with a ratio of 1.125.
Tesla hasn’t been able to generate a consistent and meaningful net profit over the years. The company invests aggressively, which is why this is the case. The real problem, however, is that the company burns so much cash that it can prevent them from making it through the year. Exhibit 1 illustrates that the FCF of the company is negative and has been for six quarters. Exhibit 1 shows that the company would have to raise additional funds to build more charging stations.