This is why I’m ultimately bearish on TSLA long-term: the automotive sector is historically extremely competitive, and Tesla will not be the only major player in the field for much longer.
Volkswagen in particular is already hot on Tesla’s heels.
VW last year became the No. 1 electric-vehicle maker in Europe, where sales of battery-powered cars surged thanks to stricter carbon dioxide limits. After the introduction of the ID.3 hatchback in 2020, the ID.4 crossover—the first global model based on VW’s electric platform—is starting to reach showrooms from Shanghai to Chicago. This year, VW plans to deliver 1 million plug-in hybrid and fully electric vehicles, and [CEO Herbert] Diess aims to surpass Tesla in EV sales no later than 2025. Some analysts predict it will happen much sooner.
Musk has long said that he welcomes EV competition and that Tesla’s mission was to accelerate the advent of sustainable energy. He got what he wanted.
Tesla’s main challenge is ramping up production to meet demand. But Volkswagen is already capable of mass-producing EVs:
Diess has won over investors by making the case that VW can exploit something Tesla doesn’t have much of yet: scale. With a dozen brands that fill every nook and cranny of the auto market—and sales last year of 9.3 million vehicles, compared with a half-million for Tesla—VW is uniquely positioned to pool resources and bear the cost of developing new technologies. By next year, VW will have 27 models based on its standardized platform. “Our transformation will be fast,” Diess said at his event, “bigger than anything the industry has seen in the past century.”
Even as the first models from the current platform start to roll out, VW is furiously developing a separate set of standard components for electric vehicles from Audi, Porsche, and its other upscale brands. That premium platform promises speedier charging times, greater range, and faster acceleration than the first-generation models. By the middle of the decade, VW says it will have a single scalable system to underpin all its battery-powered cars—no matter the brand or segment—as it aims to sell 26 million of them in the next 10 years. “They’ve got confidence that they can catch up with Tesla,” says Michael Dean, an analyst at Bloomberg Intelligence, who expects VW to take the global EV crown by 2023. “Their foray into electrification is serious.”
Volkswagen is just the beginning. Eventually, all the world’s major automakers will flood into the EV space as it becomes clear that electric is the future.
Tesla may have a head-start in the EV sector, but all the major automakers are the ones that have, in some cases, hundred-plus year head-starts over Tesla when it comes to producing automobiles in general.
Tesla has already been surpassed in Western Europe:
I just don’t see Tesla being able to maintain this level of dominance over the EV sector indefinitely. Even if they end up taking a smaller part of a much larger pie (instead of their current large part of a small pie), I just don’t think it justifies a $600bn+ valuation.