October 18, 2021

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Tesla can still be overtaken in the electric car race

First, price. Tesla is still making a premium product. The cheapest on the market, the Model S, costs close to £40,000. It is edging into the mass market, but it started as a luxury product, and that will be hard to change now. Lots of people just want something cheap and reliable to run them around town, not a status symbol to impress the neighbours on the driveway. There will be plenty of demand for the first electric vehicle manufacturer who serves that market. 

Next, range. The one thing anyone buying an EV cares most about is how far they can get without having to plug in and charge up. Cracking range was Tesla’s real secret, but there is still a huge scope for dramatically increasing the distance between charges. Car battery technology is still in its infancy, and rivals can easily overtake it – the first 1,000-mile battery will be a sensation. 

Finally, and perhaps most significantly, design. All the electric cars on the market right now look just like petrol vehicles, except with a battery where the engine was. Even the charging point is often where the petrol cap used to be. While that may have helped initially, creating a familiar look for consumers, there is still space for someone to radically rethink what a car looks like. Indeed, that is what will make Sir Jony’s work for Ferrari so interesting. He dramatically changed the way phones looked and worked. Perhaps he can do the same with cars? And even if he doesn’t, someone else still can.

On top of all that, there may be one more factor as well. Musk is, and let’s put this as politely as we can, idiosyncratic in his style of management. While that has worked brilliantly so far, he may well end up making a massive strategic misjudgement. It is even harder to see him handing over calmly to a successor. 

Electric vehicles will be one of the biggest industries of the next decade. In 15 years, there will be virtually no petrol-driven cars left on the road. Right now, Tesla is way out in front. And yet, the companies vying for a slice of the market aren’t crazy, and neither are the investors backing them. It would be rash to assume another challenger won’t emerge, and may even topple it. The industry is still wide open, for both companies and investors.

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