From Jesus Diaz, Fast Company:
After a decade of being the only game in town, Tesla is entering a new era of the EV wars, which started in earnest in 2022 but will only intensify in 2023. Tesla still dominates the EV market in the U.S. today, but its lead has consistently dropped—and is expected to quickly dwindle—as legacy automakers roll out their own electric models.
Tesla’s rise to fame has been nothing short of impressive, but in a competitive market like the automotive industry their regression to the mean was inevitable. As a Tesla Model 3 LR owner, I can say that while I am happy with my car, I wouldn’t buy a Tesla for my next vehicle.
The early decision to start from the top and working your way down the price ladder was something that set them apart and helped drive the “cool” factor despite the car not being premium in ways folks paying $60–100k for a car would normally expect. They used the early dominance to build a charging network that is still unrivaled, and the battery life for their long range models is still better than most of the competition. The ongoing software update model aligned with consumer expectations in the iPhone era and was fairly unique in the indsutry. Combine that with Musk’s larger that life personality (and expectations about self driving that he’s been promising since 2014), the company earned a lot of fans (myself included!) for accelerating the move away from ICE vehicles by making something cool, approachable and futuristic. But the cracks that have always existed are much more apparent now that the rest of the indsutry is getting into the game.
Teslas are notorious for questionable build quality, which is not at the level of other $50–70k cars that I’ve driven. Personally, I haven’t had many issues on my end but I’ve experienced a few unsatisfying noises from time to time, the feel of closing doors and windows isn’t satisfying, and I wish the road noise was a bit quieter. Additionally, the company’s insistence on cramming everything into one touchscreen is a weak point, and their insistence on building every single app for their touchscreen in-house means they’re always playing catch up when it comes to other infotainment systems. Tesla’s refusal to integrate with Carplay and Android Auto, likely due to their view of those platforms as competitors, is super frustrating. And then, there’s the elephant in the room – Elon Musk. While his outspoken nature and leadership of Tesla and SpaceX was once seen as a competitive advantage, it has now become a distraction.
While Tesla’s Full Self Driving (FSD) technology has been highly anticipated for a decade now, I don’t believe anyone will be able to deliver on it within the next 15–20 years. FSD is at level 2 or 3 out of 5 right now, and haven’t made a ton of progress. The standard “Autopilot” feature, which is basically variable cruise control and lane assistance, is quite good for level 1. Highway driving on long road trips is way better with this tech. But the rest of it? Way too many edge cases for me to be interested in trying out. Like most software, that last 20% is hard to iron out, but in this case we’re dealing with 500k beta testers playing with human life. No thanks.
To keep a market share close to what they have now, Tesla needs to scale up, fix the quality issues they have and convince nearly every current Tesla owner to buy a second vehicle when they’re ready to buy. They also can’t rely on consumers paying premium prices for EVs forever. Delivering on a true mass-market EV in the $30k range will help them maintain a lead. Oh, and crack Level 4–5 autonomy to differentiate themselves from the rest of the market. Hard to see that happening with all of the great options coming out from established automakers.
It’s far easier for traditional automakers to figure out how to transition their fleet from ICE to EV than it is for Tesla to become a big automaker and solve for all of the small but significant headwinds they’re facing. That doesn’t mean Tesla is going out of business or doomed to fail. What it does mean is that capitalizing on the first mover advantage in an industry without strong network effects is hard to do for long. I don’t think many automakers could have maintained Tesla’s lead for long, but it seems like Musk and Tesla are squandering it even more quickly.