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20 Reasons Why Tesla Will Lose The EV Race

Tesla, one of the latest and most talked-about EV (electric vehicle) companies, seems to be taking the lead in design and manufacturing.

Tesla, one of the latest and most talked-about EV (electric vehicle) companies, seems to be taking the lead in design and manufacturing. Tesla has plenty of technical experience and is producing battery-powered cars that have sufficient power and driving range. The electric-car manufacturer has gone ahead to build the largest lithium-ion battery plant that should support its projected vehicle demand.

The company wanted to hasten the transition to sustainable energy, and in doing so, it came up with plug-in electric cars that feature an advanced autonomous driving technology. The tech, better known as "Autopilot," is considered one of the most advanced EV technologies and is one of the key selling points of the Tesla.

This electric-car maker has made electric vehicles a reality, though the electric-car market has barely interfered with the sale of gasoline-powered cars. Germany, Britain, France, Norway, and India are already planning to go fully electric in a few years. Several other countries also want to get on board. And this can only mean one thing: that an electric-car war is looming.

Unfortunately, Tesla isn't going to win this war. First of all, Tesla has a track record of failing to meet demand and has been continuously accused of making unreliable cars. The company has been surviving on lofty promises because Musk is a genius at organizing epic new-product reveals that pleasure loyalists and keep the stock price up.

In addition to the looming cash burn, Tesla is also facing stiff competition from Volkswagen, Audi, Toyota, and other luxury brands, like Porsche and BMW.

Let’s delve further into why Tesla won’t win this war:

20 Volkswagen Is Already Scheming To ‘Leapfrog’ Tesla In EVs

Volkswagen has declared that it's confident it'll become the EV leader by 2025. While the company was entangled in an emission scandal back in 2015, it's now diverted its attention to battery-powered cars, and the target is one million electric cars by 2025. This is a clear sign that VW is going to clash with Tesla, which is also promising to produce one million cars by 2020. The heads of the VW brand have openly stated that their company has the capability to surpass whatever Tesla has done.

VW is a major brand with years of experience and millions of loyal customers, and this alone should make Tesla panic.

Worse, VW wants to make these cars for the volume market–not for the premium market like Tesla does. While this is still something debatable, the reality is that VW is a reputable carmaker–with scale–that wants to transform its operations, while Tesla is a startup that's trying to scale up. VW has numerous cost advantages, among other perks, and the odds will be in its favor.

19 GM May Ramp Up Production Using Available EV Platforms And Outshine Tesla In The U.S.

General Motors has been a major force in the United States for more than half a century now. It was at its peak around the mid-1950s with only two competitors: Ford and Chrysler. This giant carmaker had the resources and the capability of controlling over half of the US market before several other competing brands came into the picture and gave consumers more options. In just about a year and a half, GM was able to go from the concept to the production of its mass-market electric car, the Chevy Bolt. Surprisingly, the Chevy Bolt was selling around 1,500 units every month.

This EV and the gas-electric Chevy Volt hybrid have made GM the top seller of electrified cars that are non-Teslas in the United States.

GM could go ahead and use the same technology to produce pickups, sports cars, and bigger all-electric cars. The company has, in the past, used this type of method with its gas-powered vehicles and has a reputation for scaling up production exceptionally well. While Tesla continues to struggle with the production of the Model 3, GM could decide to increase its EV production exponentially and surpass Tesla. In fact, if demand surges, GM has the capability of switching from gas to electric in the shortest time.

18 More Luxury Automakers Are Also Looking To Join The EV Industry

By the end of this decade, Porsche, Audi, Mercedes, and BMW will have released all-electric cars that have the specs and capabilities of a Tesla. But unlike Tesla, these are traditional luxury manufacturers who treat luxury like their lives depend on it. They know the finest materials for the interiors, plus they have experience about the finer details that make a car luxurious. In the past, they've given consumers a good reason to spend six figures on a car because they're reliable and they make great cars. In fact, Mercedes already has its version of Tesla’s Autopilot; it’s called "Drive Pilot." However, car enthusiasts claim it comes nowhere close to Tesla’s Autopilot. But do you think Mercedes is behind technologically? Definitely not. Mercedes is an auto-industry pioneer, and its quality control is top-notch; so it's probably just taking its sweet time. Just like most other luxury automakers, Mercedes has massive resources and supplier networks that are already in place, and it has the capability of acquiring a big chunk of Tesla’s clients.

17 Teslas Are Too Expensive For The Mass Market

Teslas are high-end EVs that target a niche market of mostly wealthy consumers. Tesla Motors has made significant progress in the automotive world and has attracted a cult-like following of EV lovers who are willing to spend upwards of $100,000 on a single automobile. If you want to buy a Model S today, you have to chuck at least $70,000, which is too expensive for most car consumers around the world. This is why Tesla embarked on a mission to produce the Model 3 mid-size sedan, which is supposed to be for the mass market. But with a $40,000 price tag, will the Model 3 be considered affordable? The answer is a resounding no. The Model 3 may bring in sizeable cash from sales and may help Tesla stabilize, but Tesla still needs a car that goes for less than $30,000 if it wants to capture a substantial portion of the market. Already, other car manufacturers are well positioned to transition to electric cars, and if Tesla hesitates, it'll be fighting a war on many fronts. Keep in mind that this war will be against brands that are well established and have excellent customer loyalty across the globe.

16 The Minimalist Interior Of The Teslas May Continue To Turn Off More Buyers

Outside of the cult of Tesla lovers, no high-end car buyer, when given other options, would spend thousands of dollars on a car that has a minimalistic interior. Some buyers have also complained that the interior feels hollow. If you're self-driven, you don't need to concentrate on the road; therefore, you'll spend more time staring at the interior of the car. But Tesla seems unbothered by its interiors, as it's also planning to give the Model 3 a minimalistic interior.

The Model 3 will have no interior hardware and will only feature a 15-inch center-mounted touchscreen. There will be no heads-up display, speedometer, or any gadget to play around with.

The traditional driver is used to a cluster of controls, and adjusting to a Tesla may pose a challenge. In fact, this kind of simple interior may turn off plenty of potential customers. Tesla had already acknowledged that it needs to improve its interiors, and this became evident when it poached Volvo’s head of interior engineering, Anders Bell. However, consumers are yet to see anything fancy on the interior of a Tesla.

15 Competitors Will Catch Up To The Brand’s Technological Lead

Competitors will catch up with Tesla’s technology, or they'll copy Tesla’s playbook. When that time comes, factors like style, comfort, and quality will come into play, and Tesla Motors is bound to lose because it's been stagnant in those areas. In fact, Tesla should be more worried because more auto manufacturers are eager to join the EV bandwagon. If carmakers like Mercedes or Audi get this technology, then Tesla is going down because it hasn't even been able to meet consumer demand in the first place.

The worst thing is that Tesla has already shown its hand, and the only thing that the competitors have to do is copy Tesla’s playbook.

Think about it—if a company that has a production volume that exceeds 10 million vehicles per year goes ahead and replicates Tesla’s strategy, then Tesla will be in deep trouble. We're talking 10+ million vs. Tesla’s 500,000 vehicles per year (which is still a forecast by the way). If this said company installs self-driving hardware on all its cars, Tesla would be unable to keep up with the data collected, and its autopilot feature would lag behind.

14 Tesla Has Been Incurring Losses, And That's Not Ending Soon

Instead of selling stock, Tesla has been taking out debts, and this is primarily because the company has been incurring losses for the longest time. Even though Tesla has made numerous sales in the past years, the money collected isn't increasing fast enough to fill the gap. Therefore, Tesla has been simply turning to the nearest investor to find more funds. Just recently, Tesla announced that it would be incurring more debt by issuing another round of bonds. The issue is that the more Tesla borrows, the more it will have to pay to borrow, and that's if there will still be anyone willing to give it cash. Most of the borrowed money is used to boost production, develop new models, and improve technology, but Tesla may soon run out of places to source capital that can enable it to compete effectively when EVs fully go mainstream. The only way out of this conundrum is if Tesla meets its production volume for the Model 3 and sells the car to the masses. Otherwise, Musk may have to withdraw his $11 billion from Spacex equity.

13 Tesla Could Run Out Of Cash

The information is already out there in the wild that Tesla is having a cash burn with the Model 3. In fact, analysts have already predicted that based on its monetary incineration, the company will tap out by August 2018. Apparently, Tesla has been spending too much money to run its operations. For example, it spends $1 billion per quarter for its normal operations and to facilitate the production of Model 3. This kind of expenditure is worrying considering Tesla isn't building several cars. GM manufactures millions of vehicles and is the biggest car manufacturer in the US, yet it spends the same amount every quarter. This trend means disaster for Tesla.

The worst case scenario is Tesla running out of cash to fund any of its activities.

Despite this type of expenditure, Tesla registered the biggest quarterly loss toward the end of 2017. With their endless appetite for new capital, Tesla may truly be on its last billion by August, as predicted.

12 Audi Is Pushing To Enter The Chinese EV Market To Gain An Advantage Over Tesla

China is a lucrative market because it has a massive population of car users, but Audi is already planning a major entry into the Chinese EV market in a bid to outdo Tesla. In fact, Audi has already announced its plan to produce five new EVs that it'll introduce into the Chinese market in the next five years. This is worrying because China has the largest market for EVs in the world. This is largely because there are government subsidies that encourage the sale of electric vehicles. The thing is, when you sell electric cars in a high-population country like China, it helps in spreading research, and in the long run, it significantly reduces manufacturing costs. China requires EV companies to work with local partners and even share their technology, and this is probably why Tesla has been hesitant about entering the Chinese market. Already, there are talks that Tesla is planning to set up a plant in Shanghai, but who knows where Audi will be by that time? The German automaker will have probably gained an insurmountable lead over Tesla.

11 Musk Misses Targets

There have been major concerns over the wide demand-supply gap because Tesla has consistently failed to deliver as promised. This is because Musk is notorious for missing every production target. This may be attributed to the various supply-chain problems that Tesla has experienced in the past. The sad fact is that Tesla may, over the next few years, still not be able to add assembly lines fast enough to keep up with the competition. This only means that Tesla won’t have the capacity to dominate in the grand scheme of things.

First of all, Tesla is using an old plant in California that allegedly has a capacity of half a million units a year. Sadly, Tesla is yet to record anything close to that number.

What if EV demand takes off? The only guess is that Tesla won't be able to compete favorably. To make things worse, Musk doesn’t seem excited about ramping up production; he just wants to see more EVs on the roads even if they're not Teslas. If Tesla continues to miss targets, consumers may turn to competitors, and Tesla’s stock may tumble.

10 Tesla Has Been Losing Some Of Its Key Employees

As Tesla races to make the Model 3 a reality, it's been losing some of its key personnel. The latest casualties are Ernest Villanueva, senior manager of Battery Module Design; Jason Mendez, senior director for manufacturing engineering; Celina Mikolajczak, senior battery engineer; and Will McColl, senior manager for equipment engineering. Its Chief Financial Officer, Jason Wheeler, left in 2017 just 15 months after coming from Google. Surprisingly, Tesla has been keeping some of these exits under the radar. For example, when the company announced that it had hired Chris Lattner from Apple, it didn't mention that Sterling Anderson, who was responsible for the entire Autopilot program, had left in December 2016. Tesla then went ahead to sue Anderson with claims that he had broken the confidentiality agreement. Last year, former executives who hid their identities spoke out about the harsh working conditions at Tesla. They complained about mission creep, long hours (a result of attempting to meet high-volume production), and a tense culture. This came after another employee had published a Medium post that highlighted the plight of Tesla employees and triggered a unionization effort. Safety-related issues, mandatory overtime, and long weekly hours were some of the main grievances.

9 Toyota May Manufacture A Game-Changing Electric Car In 2022

Two major issues that Teslas have been dealing with are long charging times and short ranges. But a solution may be on the way, and unfortunately, it won't come from Tesla. Instead, it's Toyota’s idea. The Japanese automaker is planning to launch electric vehicles that'll charge in just a few minutes, but consumers have to wait until 2022. This game-changing electric car will use a non-flammable solid electrolyte as opposed to the liquid that's used in lithium-ion batteries. Speculation is rife that this kind of cell will give electric cars better performance. This is something that should worry Tesla, especially because Toyota has the capacity to manufacture this kind of car for the mass market. While Tesla is still dealing with production issues, Toyota may implement this plan to catapult itself to the head of the pack.

8 Tesla Is Yet To Figure Out How To Make Great Cars

The Tesla Roadster had major issues because the company had manufactured it from an assortment of parts from various suppliers. Musk admitted that the company had made a huge mistake by trying to use proprietary technology from another company. But the Model X wasn't better, and Musk openly admitted that Tesla had tried to put too much technology into the car.

The Model X falcon-wing doors gave Tesla so many problems because they were difficult to manufacture, and they didn't always work as expected.

In fact, they substantially slowed the delivery of the Model X. Just last year, a new owner of a Model S 90D was surprised to find that his A-pillar had a crack. But he's not the only customer who's complained about a Tesla. Several buyers have lamented bogus seats, cheap plastic components, panels with gaps, and medium-grade leather. Tesla is now working on the Model 3, and there are already allegations that the company is skipping the manufacturing prototype stage and jumping straight into production. If this is true, then Musk is tempting fate. Tesla shouldn't expect to spend two years learning what's taken a company like Mercedes 100 years. This "build fast, fix later" strategy will be the end of Tesla.

7 Purchasing A Tesla Is A Cumbersome Process

Tesla has bypassed the traditional franchise-dealer system that's been running in the US for a century. Instead, Tesla wants to sell directly to customers. Though Tesla has undergone great opposition from dealerships, it's somehow managed to woo legislators to allow it to avoid dealerships. To achieve this, Tesla has established a network of “stores” where customers can come and identify cars, perform test drives, order, and even get the necessary maintenance service. What Tesla is doing is similar to what Apple has been doing with its stores. But a veteran in the auto industry disagrees with this business model. According to Bob Lutz, setting up a company store has never brought in the expected returns.

But even with the existence of these stores, you can’t walk into one and leave with your car; you have to place an order and wait for 2-8 months before you receive your prized possession. This isn't how people want to purchase cars. One of the driving forces behind a car purchase is instant gratification. Buyers want to see, feel, and touch their car right away, but Tesla can't provide this.

6 Stock Price May Not Survive The Need For More Capital

Tesla has been on a continuous mission to raise more cash regardless of the fact that this trend could deflate its stock price. Already, Tesla’s expenditures are through the roof, and this causes a gap that needs to be filled every time through investor borrowing.

According to experts, Tesla Motors is going to need $11 billion to run smoothly over the next five years.

But don't forget that the Model 3 is supposed to sell at a lower price. Therefore, Tesla will need to make extraordinary sales if it wants to remain competitive. If Tesla continues to issue stock, it's going to mess up its stock price in the long run. Tesla is one of those companies that's gained trust and credibility based on the stock price. But the company is in a business that's somehow experimental. Tesla argues that it intends to make viable cars that will bring in huge profits, but in reality, this is just a speculative vision that cannot be tested or measured. So far, Tesla’s stock price has been rising based on lofty promises because the man at the helm is a genius. The best thing for Tesla is to avoid anything that threatens the stock price.

5 Tesla May Be Too Late For The Asian Market

For Tesla to be profitably viable, it needs to succeed in the Asian market because that's where the numbers are. However, Asian governments are getting serious about electric vehicles, and they're introducing measures that could make Tesla’s success there more challenging. The truth is that Tesla has been hesitant in entering the Asian market, and now, it may be too late. But that's not the only threat.

Tesla’s plan to integrate electric cars, solar energy, and battery storage isn't new. It's already happening in places like China. This means that Tesla Motors already has some competition in Asia, where it should've established itself earlier. The delay, coupled with the money issues that Tesla is experiencing, is proof that the company may not be able to catch the wind in Asia.

4 Tesla's Domination In The EV Lithium-Ion Battery Will Be Short-Lived

Tesla has been busy with its monumental Gigafactory, which is supposedly one of the largest facilities of its kind in the world. Though there have been doubters, the Gigafactory has served as tangible proof that Tesla (in partnership with Panasonic) is going to be the leader in EV batteries. Some experts believe that the Tesla Gigafactory is one of the reasons other automakers will never catch up with Tesla. But as we move closer to 2020, which is believed to be the year when the EV momentum will be felt in full, Tesla may start facing some serious competition in battery production.

Some reports claim that by 2021, battery companies in China will be manufacturing almost thrice what Tesla’s Gigafactory will be producing.

In addition, there's a consortium of companies in Germany that are planning to set up lithium-ion battery facilities. Another company named “North Volt” is also looking to set up a similar factory in Europe. Therefore, the only way Tesla is going to succeed is if it constructs additional Gigafactories–in the next three or four years–around the world.

3 Teslas Have No Guaranteed Resale

In 2013, Tesla set up a buyback program where it promised its customers that it would buy back their Teslas after three years and for at least half of the purchasing price (which was higher than sedans from other manufacturers like Mercedes and BMW). But that program is no longer in existence. This resale guarantee program was ended primarily because it was too expensive to run, and according to Tesla, the EVs were already holding their value well. However, Tesla may intentionally be ignoring the fact that the program gave buyers peace of mind because Teslas didn't have a track record and customers were scared they were going to lose money.

But are Teslas holding their value well as the company argues? Absolutely not. The truth is that buying an upscale electric vehicle like a Tesla is still a risky affair, especially because Tesla has been manufacturing problematic cars. You can't compare your Model S with a tried and true German machine. Even though things have changed and Tesla is doing whatever it can to prove the worth of its cars, the risk of owning a Tesla is still high unless you earn top dollar and are willing to spend your money on cars that have barely lasted a decade.

2 Tesla Isn't Fixing Fremont

Tesla has a car factory in Fremont that allegedly has a manufacturing capacity of 500,000 cars every year. However, Tesla has never delivered anything close to 500k even though it's hopeful it'll reach full capacity in 2018. But can Tesla make 500,000 cars in 2018? From the look of things, no. Maybe 350k. It failed to meet the demand in 2017, and the excuse was that there had been some inconveniences at the Gigafactory in Nevada.

Despite the looming cash burn, Tesla’s second problem is fixing Fremont. There have been allegations that the Fremont plant is bursting at the seams even though it's 5.3 million square feet of office and manufacturing space. Worse, what's coming out of this place is just a fifth of the manufacturing capacity. The Fremont plant, formerly known as "New United Motor Manufacturing plant" (NUMMI) used to accommodate General Motors and Toyota back in the '80s, and both companies used to run their operations there with ease. So why is Tesla having trouble with this facility? Apparently, Tesla has hired more workers (than NUMMI employed) to manufacture fewer cars. In 2016, Tesla had between 6,000 and 10,000 employees and produced 83,922 vehicles, while back in 1997, 4,844 workers delivered 357,809 vehicles. There are just too many employees at Fremont, and there are even allegations that workers scramble for parking space.

1 Musk’s Workload Is Hurting Teslas

Elon Musk calls the shots at Tesla. But the company is experiencing a management challenge because their indefatigable CEO is running three companies: Tesla, SolarCity, and SpaceX. Tesla has great talent and can be run without Musk as its CEO, but the board of directors has been hesitant to make this type of change. Musk should know better—that he can't run Tesla as a one-man show and assume several critical roles that can be subordinated. Musk has this obsession of wanting to control everything at Tesla, and this is reducing his effectiveness as a manager. However, he scores highly as a compelling and dedicated founder who regularly sleeps on the factory floor. Other times, he decides to camp at the Gigafactory because he's the heart and soul of Tesla. However, while things may seem calm, Tesla may be bleeding as a result of Musk’s workload.

The bottom line is that Tesla will survive, but it won't rule the EV future. When the demand for electric cars gains momentum, Tesla won't be the biggest maker of those cars; instead, it'll be somewhere in the middle of the pack.

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