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Author Topic: Electric Vehicles  (Read 10918 times)

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AGelbert

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Re: Electric Vehicles
« Reply #375 on: April 29, 2018, 03:16:11 pm »
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Tesla’s Moats — Tesla Can Do What Other Car Companies Only Dream About, And Why

April 27th, 2018 by Guest Contributor

Originally posted on Cars With Cords.

By Patrick C

A moat surrounds a medieval castle to protect from attackers

In modern business parlance, a moat is something that protects a business from competition or gives it an advantage. A moat could be a trade secret, patented product or process, or an asset that represents a significant capital investment. A moat could be a partnership, an exclusive license, a government granted limited-monopoly, or any barrier to a resource or market. The term was popularized by Warren Buffet. He covers moats in his book Buffett Beyond Value and says that he doesn’t invest in businesses unless they have one or more moats; otherwise, it’s a quick race to the bottom.

Quote
“In business, I look for economic castles protected by unbreachable moats.” ~Warren Buffett

This story is about Tesla’s moats, but I don’t mean to imply that Buffett would invest in Tesla. Tesla is far from the value investments of the Berkshire Hathaway portfolio. Rather, Buffett’s comments are to demonstrate the importance of moats. Morningstar even has a guide called Why Moats Matter. Understanding the moats a business employs is clearly important to understanding the business and its future.

In no particular order, here’s a list of Tesla’s moats: mall stores, direct sales, Supercharger network, brand loyalty, EV mindshare, mission-driven, Tesla Energy, Panasonic partnership, rockstar status CEO, electric motor technology & manufacturing, battery technology & manufacturing, software development, connected cars, AI, talent magnet, fleet learning, SpaceX, vertical integration, over-the-air updates, mobile ranger service, Gigafactory, investor expectations, first mover advantage.

These moats enable Tesla to do things that other automakers cannot even consider. Some of these moats are wider than others. Let’s group them and look at them in more detail. If you know of any Tesla moats missing from the list, let me know below.

Stores & Direct Sales

When you buy a Tesla product, you buy it from, well, Tesla. This might seem like a silly statement, but that is not how most car companies operate. Traditional automakers have dealerships. Dealerships are not owned by the manufacturer, they locally owned businesses. In most states, the automakers are legally forbidden from owning a dealership. Dealerships are middlemen. This means that when you pay for a car, you must pay a price that allows both the manufacturer and the dealership to make a profit on the sale.

Tesla has stores in shopping malls. This allows you see their cars in a familiar and comfortable place. The Tesla employees in the store are not commissioned, salespeople. They are there to answer questions, not to “get you into a deal today”. There is no haggling, the cars have a Hobson’s Choice price; Take it, or leave it. You pay the same price that Elon Musk’s mom would pay, the same price that any Tesla board member would pay. This matches well with the online shopping model that Gen Y and younger are accustom to.

* Moats: Mall stores, direct sales.

Connected Cars & Over-the-Air Updates

All of Tesla’s cars have wireless service. The original cars had 3G, today they have 4G LTE, and when 5G is the standard they’ll come equipped with that (or maybe something better). This connectivity allows the navigation system to have up-to-date maps and real-time traffic. Every smartphone has had this feature for over a decade, but in cars, this is still a rarity. In other cars, maps could be years out date and/or cost hundreds of dollars to update.

The maps and traffic data is nice, but the real advantage of a connected car is software updates. Tesla is constantly improving their software (more on software later) and when they have a new version, you click a couple buttons on the screen, and your car is updated to the latest and greatest. This keeps the ownership experience exciting. You can recapture a bit of the new car smell when a new feature or easter egg is added.

* Moats: Connected cars, OTA updates, refreshed software keeps cars relevant.

No Dealerships

A dealership’s agenda, might not be the same as the manufacturer’s and it is not likely the same as yours.

We just discussed over-the-air updates. These are an example where the dealership might have a different interest than you or the manufacturer. Over-the-air updates are convenient for owners, you just wake up to a vehicle with updated software. Well, dealerships in many states can prevent a manufacturer from implementing this feature in their cars. Why? Because that is considered “servicing the vehicle” and the dealership agreement guarantees that all manufacturer service is contracted to the dealership. The dealerships want you to bring your car in often so they have a chance to upsell you on service or to a newer car. If a manufacturer pushes updates over-the-air, they might find themselves in a lawsuit or two with the dealership associations as Tesla has been, albeit for different reasons.

Dealerships make most of their money from service. Anything that prevents a car from coming into the shop is a missed opportunity for them to profit from the customer. Electric vehicles already require far less maintenance than gas cars, allow wireless software updates too and there is even less of a reason for the car to visit the dealership on a regular basis.

With Tesla owning their own stores and service centers, Tesla is able to set their own direction without a complex web of multi-state dealership agreements. This gives them flexibility and allows them to define the ownership experience for their vehicles.

* Moat: Ownership of customer experience, no margin sharing.

Panasonic Partnership

Tesla and Panasonic are partners in battery and solar technology and manufacturing.

Full, very thorough, excellent article:

https://cleantechnica.com/2018/04/27/teslas-moats-tesla-can-do-what-other-car-companies-only-dream-about-and-why/
« Last Edit: April 29, 2018, 04:21:51 pm by AGelbert »
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