Hamartia Antidote
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https://seekingalpha.com/article/4208634-tesla-killing-competition-charging-network
In a recent article, John Engle wrote about how "Tesla's Supercharger Moat Is Under Siege" by Electrify America, a Volkswagen (OTCPK:VWAGY) subsidiary building a nationwide charging network. He explains that a company's moat is a competitive advantage that keeps competition lagging behind. He argues that the charging network built by Electrify America will propel the Audi E-Tron to victory over Tesla's (TSLA) luxury models.
I'm here to explain why his thesis is wrong. First off, estimates from LMC Automotive call for fewer than 11,000 E-Trons in 2019, and only 21,500 E-Trons in 2021. This is easily dwarfed by any of Tesla's models: Model S, Model X, or Model 3, which combined will sell approximately 240,000 units in 2018. These low projected sales can be explained by Audi's choice to not stock inventory of Audi E-Trons at dealerships. Such a move indicates Audi plans for low volumes of sales and little consumer interest in the car. Second, Tesla's supercharger "moat" is too wide, or too deep (depending on how you like your metaphor) to overcome.
To see this, just look at the data I wrote about a year ago. Tesla's historical expansion of the supercharger network is online, and so is Electrify America's charging network plan for California and nationwide. Let's assume that over the next year, Tesla will finish building all supercharger locations currently permitted or under construction, and that represents the current state of Tesla's Supercharger network. Meanwhile, Electrify America's (Volkswagen's) charging network will be built out according to plan over four phases through 2026. So, when do Volkswagen's highway charging network locations exceed Tesla's Supercharging network in the latter's current state?
The end of 2025. That's right, Volkswagen's highway fast charge network will match Tesla's charging network in its current state seven years from now. That moat that John Engle is describing as shallow will take seven years to cross, assuming Tesla doesn't keep increasing the size of the moat. It is worth noting, however, that Tesla's Supercharging network currently charges at rates up to 135 kW, with plans to expanding beyond 200-250 kW in the future, while some of Volkswagen's highway chargers are capable of 150 kW and others are capable of 320 kW.
It is also worth mentioning that Volkswagen plans to build out a network of community chargers across the United States that are placed at places where consumers might want to stick around for a while (apartments, workplaces, commercial/retail, community spots, and municipal lots/garages). This network is equivalent to Tesla's destination charging network. This community charging network from Electrify America will be built in four phases through 2026, just like the highway network. So when does Volkswagen's community charging network exceed Tesla's Destination Charging network in its current state?
Never. The VW Community Charging network never catches up to Tesla's Destination Charging network. This time, the moat that John Engle claimed was shallow is actually uncrossable even if Tesla doesn't expand the size of this moat. It is worth noting, however, that some of Volkswagen's community chargers will charge faster than Tesla's destination chargers while other will charge slower (some will be <20kW, others 50 kW, and others 150 kW).
So, a company with $10.8 billion in profits in 2017 and resources that "dwarf" Tesla's, will spend $2 billion on two charging networks that will barely match what Tesla has now by the end of their expansion in 2026. Sounds to me like Tesla still has a significant advantage.
Other Charging Network Woes For Volkswagen
The other issue for Volkswagen is that their charging network is mandated to be open to any electric vehicles, including Teslas. This means that for accuracy, we should be adding Volkswagen's network to Tesla's network to see the total number of charging locations where Teslas can charge. Meanwhile, no other cars can charge at Tesla's networks, with exception of some of Tesla's destination chargers, which include multiple types of chargers. Since Volkswagen's network is open to all electric vehicles, many other manufacturers are pointing to this network as a justification for not building their own. This means that, as automakers flood the market with electric models, as they promise to do, Volkswagen's charging network will become overcrowded. In order to fix this crowding, either Volkswagen must expand their network plans or other charging networks must pick up the slack. Volkswagen will likely choose not to foot the bill for other automakers any more than they have already agreed to do under the settlement that created Electrify America, which means automakers other than Tesla will rely on many fragmented charging networks to avoid overcrowded chargers. The systems integration problem for that is a complete mess. Each charging network will have to be incorporated into the navigation systems of each car, and until non-Tesla automakers start to offer over the air updates for their electronics and navigation computers, many of these navigation systems will have out-of-date information on chargers. Even then, automakers and charging network owners will have to navigate the complex web of stakeholders to communicate how full each charging location is so that drivers can avoid crowded networks. Put simply, fragmented, shared charging networks will be a mess and a pain in the butt for consumers who are still largely skeptical of electric vehicles. Meanwhile, Tesla will know exactly what pace at which it needs to expand its own network in order to avoid overcrowding since only cars manufactured by Tesla can charge at these networks. Tesla's navigation system already displays up-to-date charging locations and their occupancy status. Tesla's charging network is a glorious example of brand integration that echoes Apple's (NASDAQ:AAPL) iTunes.
Conclusion
Charging networks are still a problem for non-Tesla automakers, and Tesla is years ahead of even the most ambitious charging networks. Therefore, Tesla's competitive advantage, or moat, is still alive and healthier than ever - until, of course, automakers choose to get their act together. Don't hold your breath. Automakers have ignored or put through half-baked charging networks and electric vehicles for over two decades, and every charging network or electric-vehicle announcement should be viewed with healthy skepticism. Currently, non-Tesla automakers aren't doing enough on the electric vehicle front, and it will show as Tesla will capture the majority of the electric vehicle market in the next few years.
In a recent article, John Engle wrote about how "Tesla's Supercharger Moat Is Under Siege" by Electrify America, a Volkswagen (OTCPK:VWAGY) subsidiary building a nationwide charging network. He explains that a company's moat is a competitive advantage that keeps competition lagging behind. He argues that the charging network built by Electrify America will propel the Audi E-Tron to victory over Tesla's (TSLA) luxury models.
I'm here to explain why his thesis is wrong. First off, estimates from LMC Automotive call for fewer than 11,000 E-Trons in 2019, and only 21,500 E-Trons in 2021. This is easily dwarfed by any of Tesla's models: Model S, Model X, or Model 3, which combined will sell approximately 240,000 units in 2018. These low projected sales can be explained by Audi's choice to not stock inventory of Audi E-Trons at dealerships. Such a move indicates Audi plans for low volumes of sales and little consumer interest in the car. Second, Tesla's supercharger "moat" is too wide, or too deep (depending on how you like your metaphor) to overcome.
To see this, just look at the data I wrote about a year ago. Tesla's historical expansion of the supercharger network is online, and so is Electrify America's charging network plan for California and nationwide. Let's assume that over the next year, Tesla will finish building all supercharger locations currently permitted or under construction, and that represents the current state of Tesla's Supercharger network. Meanwhile, Electrify America's (Volkswagen's) charging network will be built out according to plan over four phases through 2026. So, when do Volkswagen's highway charging network locations exceed Tesla's Supercharging network in the latter's current state?
The end of 2025. That's right, Volkswagen's highway fast charge network will match Tesla's charging network in its current state seven years from now. That moat that John Engle is describing as shallow will take seven years to cross, assuming Tesla doesn't keep increasing the size of the moat. It is worth noting, however, that Tesla's Supercharging network currently charges at rates up to 135 kW, with plans to expanding beyond 200-250 kW in the future, while some of Volkswagen's highway chargers are capable of 150 kW and others are capable of 320 kW.
It is also worth mentioning that Volkswagen plans to build out a network of community chargers across the United States that are placed at places where consumers might want to stick around for a while (apartments, workplaces, commercial/retail, community spots, and municipal lots/garages). This network is equivalent to Tesla's destination charging network. This community charging network from Electrify America will be built in four phases through 2026, just like the highway network. So when does Volkswagen's community charging network exceed Tesla's Destination Charging network in its current state?
Never. The VW Community Charging network never catches up to Tesla's Destination Charging network. This time, the moat that John Engle claimed was shallow is actually uncrossable even if Tesla doesn't expand the size of this moat. It is worth noting, however, that some of Volkswagen's community chargers will charge faster than Tesla's destination chargers while other will charge slower (some will be <20kW, others 50 kW, and others 150 kW).
So, a company with $10.8 billion in profits in 2017 and resources that "dwarf" Tesla's, will spend $2 billion on two charging networks that will barely match what Tesla has now by the end of their expansion in 2026. Sounds to me like Tesla still has a significant advantage.
Other Charging Network Woes For Volkswagen
The other issue for Volkswagen is that their charging network is mandated to be open to any electric vehicles, including Teslas. This means that for accuracy, we should be adding Volkswagen's network to Tesla's network to see the total number of charging locations where Teslas can charge. Meanwhile, no other cars can charge at Tesla's networks, with exception of some of Tesla's destination chargers, which include multiple types of chargers. Since Volkswagen's network is open to all electric vehicles, many other manufacturers are pointing to this network as a justification for not building their own. This means that, as automakers flood the market with electric models, as they promise to do, Volkswagen's charging network will become overcrowded. In order to fix this crowding, either Volkswagen must expand their network plans or other charging networks must pick up the slack. Volkswagen will likely choose not to foot the bill for other automakers any more than they have already agreed to do under the settlement that created Electrify America, which means automakers other than Tesla will rely on many fragmented charging networks to avoid overcrowded chargers. The systems integration problem for that is a complete mess. Each charging network will have to be incorporated into the navigation systems of each car, and until non-Tesla automakers start to offer over the air updates for their electronics and navigation computers, many of these navigation systems will have out-of-date information on chargers. Even then, automakers and charging network owners will have to navigate the complex web of stakeholders to communicate how full each charging location is so that drivers can avoid crowded networks. Put simply, fragmented, shared charging networks will be a mess and a pain in the butt for consumers who are still largely skeptical of electric vehicles. Meanwhile, Tesla will know exactly what pace at which it needs to expand its own network in order to avoid overcrowding since only cars manufactured by Tesla can charge at these networks. Tesla's navigation system already displays up-to-date charging locations and their occupancy status. Tesla's charging network is a glorious example of brand integration that echoes Apple's (NASDAQ:AAPL) iTunes.
Conclusion
Charging networks are still a problem for non-Tesla automakers, and Tesla is years ahead of even the most ambitious charging networks. Therefore, Tesla's competitive advantage, or moat, is still alive and healthier than ever - until, of course, automakers choose to get their act together. Don't hold your breath. Automakers have ignored or put through half-baked charging networks and electric vehicles for over two decades, and every charging network or electric-vehicle announcement should be viewed with healthy skepticism. Currently, non-Tesla automakers aren't doing enough on the electric vehicle front, and it will show as Tesla will capture the majority of the electric vehicle market in the next few years.
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