What is Tesla's competitive advantage?

Tesla's "competitive" advantage is that they essentially do not have any serious competition. They show all the signs of a company fully ready to take over the market, and not just any market, but the global market for personal transportation. Tesla is the one company that recognizes fully and completely the ramifications of the imminent storm which is heralded by the end of the "oil age." To extend the analogy, Tesla is the only company that is investing all of its energy and brainpower on producing umbrellas for that storm as fast as it possibly can. The facts are very simple, and ought to be obvious for anyone who looks at things with a semblance of care: 1. Oil is running out. It's been worried about before--possibly sooner than was necessary--but now the problem of it is much closer to hitting home. Oil has already passed $100/barrel before, and even if it goes back to $60/barrel, as some analysts think it might, the "writing is already on the wall" for the oil industry. Resisting the change of things will simply be more costly than embracing it. Gas will never again cost consistently less than $3 in the US, to say nothing of the average price worldwide. Considering that the US average fuel economy for vehicles is still less than a paltry 27 mpg, this STILL leads to a fuel cost of 11.1 cents per mile! Compare that to the fuel cost of electricity to move a vehicle--even using Hawaii's staggering 32 cents per kWhr--and you very quickly learn that an electric car--which easily gets 3 miles per kWhr and generally averages 4 or more is much more economical to operate. Worst case 10.7 cents per mile, average 8 cents per mile where electricity costs the most. http://www.neo.ne.gov/statshtml/204.htm In Iowa (6.44 cents per kWhr) this leads to a paltry 2.15 cents per mile at worst and 1.61 cents per mile more typically--either of which is many times better than even the most fuel efficient of gas cars. 2. Even if oil weren't running out, it appears to be causing problems UNRELATED to it running out, and people are "noticing." We might well be frying our planet. Sensible people view it as a risk; self-interested nonsensible people are waiting for the data to be "universally conclusive"--which is to say they're waiting for it to be too late before they decide its worth changing the path. This is essentially no different than seeing a gun pointed at your head and waiting until the trigger gets pulled before you decide to move. 1 & 2 are stimuli for change. They provide a unique, never-seen-before opportunity. It's been said many times and in many ways, but to quote Warren Buffett (who just lost $1 billion on IBM "before lunch"--sorry, "Oracle"...): Where others see opportunity, see risk, where others see risk, see opportunity. Elon Musk, as "maverick" as he may seem, simply sees the confluence of several factors that others still appear "dull" to. His is a "chutzpah" that is related largely to the fact that he's just plain added things up correctly and used the results of the equation with ruthless indifference to the status quo. Everyone knows these things: We need to travel different places It requires energy to do this We can't afford to continue utilizing oil for this Even if we could, we simply will not be able to pretty soon (the "well" is running dry Electricity is a viable means of powering vehicles. It is proven. Electricity can be created in countless different ways. The basic infrastructure for electricity is already in place. Internal combustion (ICE) vehicles have undergone over a hundred years of optimization, while batteries, solar power generation, etc. are essentially in the infancy of their development. Tesla as a company simply adds them all together and bets wholeheartedly on a roulette wheel that it knows for a fact is going to land on green. "It" (Tesla) has completely specialized in the field. It doesn't worry about hydrogen fuel cells or "water as a fuel" or any other kind of path--because it knows that if it fashions a big enough steamroller to pave the path for electric vehicles, the rest of those paths will wither up and become dead ends. It has obvious results to show for its specialization. It produces critical components (most notably its batteries) at the lowest cost of any "competitor" and it does this by taking advantage of efficiencies of scale, in particular. The planned Gigafactory is a textbook definition of that strategy. Its vehicles are designed to be as good as or better than any other vehicle made. It doesn't set its bar low; it is a competitor that realizes its only real competition is itself. It doesn't bother to worry about the "competition" because in doing the best it can it renders that competition irrelevant. The cost curve for oil is going up--very rapidly if you consider the carbon cost as relevant (a factor people are beginning to count.) The cost curve for batteries is going down--very rapidly for a company that focuses on that factor like a laser beam. This ultimately means that Tesla is within 10 years of producing vehicles that are not simply superior in performance capacity but superior in sticker price AND superior in operational cost. When this happens, whether it's in 3 years, 5 years, or 10, prejudice toward "my tried and true gas car" will give way to economics: no one in their right mind is going to drive a car which: a) costs more to buy b) costs more to operate c) costs more to repair d) is operationally inferior e) damages the atmosphere to a greater degree AND f) takes longer to fuel. http://www.teslamotors.com/batteryswap If you're searching for a reason why Morgan Stanley's "hugely bullish" report is wrong, you're searching in the wrong direction. The only way they might be wrong is if they haven't been hugely bullish enough. [Note: I currently drive a 2013 Nissan Leaf, and although it is a truly excellent vehicle--the best I've ever owned--the main reason I have it is because I couldn't afford a Tesla. At the time of purchase (Dec. 20, 2013) they told me that the 24kWhr battery of my car made up $17,000 of the total cost to produce. Current figures indicate that Tesla could produce such a battery for approximately $5000-$6000. This would have dropped the purchase price--with incentives--down to about $12,000, making it by far the cheapest production car of its quality in the world--with the added benefit of at least (a) through (e) above, and (f) being essentially its only disadvantage. If the Gigafactory results in the conservatively estimated improvement in efficiency Tesla will then be able to produce a battery equivalent to my Leaf's for an astounding $2400--meaning the price of my vehicle would have been about $9000 after incentives, or about $17000 without them. Let's face it, when Tesla can market its cars for a population other than the top 5%ers, it's all over for any vehicle manufacturer that hasn't latched onto its coattails. None of the other manufacturers are keeping pace with it because their investments are "diversified" on the dead end street of gas as a fuel.] *It doesn't count to diversify when you're putting money toward an investment that doesn't have a future.*  Samarth Dua has noted Toyota and Daimler as two major manufacturers with at least the foresight to 'buy in' early. Panasonic is also allied with Tesla. These are good investments.  The following are my predictions for the US market: In 5 years, 10% of new vehicle sales will be electric. The first year half or more of new vehicle sales will be electric will be between 2024 and 2026. By 2030, 90% of all new vehicle sales will be electric. By 2035, virtually ALL new vehicle sales will be electric. As an investor, what this means to you is that: ....approximately 1.5 million new electric vehicles will be sold from Q3 2019 to Q3 2020--roughly three times as many as are currently on the road. Half of these will be Teslas: http://insideevs.com/tesla-production-projected-to-be-100000-units-in-2016/ ...approximately 7.5 million new electric vehicles will be sold in 2025, and (as a best guess) half of those will also be Teslas, with the runner ups being Toyota/Daimler vehicles based on Tesla's technology. Overall, it is not very difficult to imagine all new vehicles having some of Tesla's technology in them--including the half sold that are ICE. If this occurred, it would clearly be very good for a Tesla stock owner. Further... The efficiency of electric vehicles will likely be so high (and the production cost comparatively low) that incentives will very likely be offered to retire used vehicles, increasing overall new car sales versus used car sales as the infrastructure for electric charging and battery swapping becomes ubiquitous. Given: http://www.nbcnews.com/id/12040753/ns/business-consumer_news/t/whats-life-expectancy-my-car/#.VEVzYPl4rYg and this: http://en.wikipedia.org/wiki/Passenger_vehicles_in_the_United_States One would think it would be relatively easy to predict how fast gas cars will become a scarcity on the roads. However, it is actually very difficult. The new car purchase numbers (roughly 16 million this year) cannot be directly used with the average longevity number (8ish years) to result in the total figure of 254.4 million cars. What happens in reality is that cars last quite a bit longer than just 8 years, on average, with 90% or so of them (as a ballpark estimate) "sticking around" for a total a bit over twice that long. However, if we view the efflux to be roughly equal to the efflux, with the available data we can conclude that it will look something similar to this (if my sales projections were on the mark): Note here the increase in the total vehicles on the road happening as time moves on. This will be due in part to the fact that EVs have fewer moving parts (some estimates have it at 35% simpler) and as such have more limited methods of breaking down. It will also be due to the fact that as battery technology improves, the cost of a new vehicle is likely to go down--increasing the rate at which older ICE vehicles are retired and making personal transportation more available to people. So the fast answer is "Tesla has no competition." It's almost the same as asking "Who is going to fight me for a seat?" when you're entering the auditorium two hours before the play is scheduled to begin. No one will. The only serious limitations Tesla has are unrelated to competition: Musk is nailing the supply chain in a way reminiscent of John D. Rockefeller, and absent a major calamity is the odds on favorite to become the world's first trillionaire. If he can manage to avoid pissing the public off--which shouldn't be hard considering that many are already looking at him as a gift from God--Tesla's ceiling is going to be determined by Tesla. In summary, Good investments: 1. Tesla (doh) 2. Panasonic 3. Toyota 4. Daimler 5. Solar City 6. Anything related to charging infrastructure I haven't been following GE but I know their WattStations are among the better ones out there. It will be interesting to see whether the US can avoid the charging compatibility issues with EV's that it faced with cell phones. One can only hope.

Tesla has conquered the fear of hikes in gasoline prices as the number of wars in oil producing countries keeps increasing . Electricity is almost available because the resources to generate it are in various forms.

I think the answers below miss a critical point. Who is the competition? All the answers seem to assume that it is other EVs but, if Telsa want to be a mass manufacturer of automobiles that happen to be electric, then their competition is other motor manufacturers, electric or conventional. I agree that they have some very talented people and are capable of making tremendous technical advances, but my petrol driven car will already go almost 500 miles on one "charge" of petrol and will "recharge" in a matter of minutes. This is the real challenge that faces all EVs at the moment. If Simon Kinahan's assessment of their strategy is correct then that is their real competitive advantage. Without a clear strategy and a plan to deliver it, you run the risk of going down the wrong road and your talented people will only take there quicker.

You can find the summary of Tesla Motos Strengths, Weaknesses, Opportunities and Threats (entire SWOT analysis) for the Tesla company here: http://goo.gl/tc71nH

A textbook definition of a competitive advantage is: having resources that provide better value for customer then competitors can. So, whether your comparing Tesla to its electric vehicle counterparts or to the mass auto manufacturers in general, the competitive advantage it has is the same. And that is their innovations, technical savvy, and leadership. Tesla is without a doubt disrupting the automobile market and this marks the beginning of a new technology cycle. For now, because the technology for EV is fairly new, there is only going to be incremental improvements because they have not fully figured out how to get the best performance out of the new technology. However as mentioned by a few others in this thread, as the R&D and new entries to the EV market increase, the cost of production will fall and voila! mass manufacturing of EV will emerge. This is where leadership plays a key role. I honestly believe the guys running the ship are why JP Morgan is so bullish and its because the head-honchos are setting the trend for change in the automotive market. If you think about their open source technology policy, its hard not to believe that in a very short time from now gas powered vehicles will be outmoded. Sharing information is only going to oil the rigid gears of change in the automotive industry by allowing competitors to feel like they can compete. Although I'm sure those companies suffering from competitive inertia as well as big oil companies will throw a lot of money and clout in the way of Tesla's progress.

Either way, they are disrupting the industry (a good thing) and we will all benefit down the road as the competition strives to compete in areas they are weak in now. Hurray for Tesla!

The real advantage is Tesla Motor's speed in recognizing and capitalizing on business opportunities. Some examples are: Efficient use of subsidies, and dominating the top-end EV market. Soon to come are the Battery Megafactory and Self-driving cars. Anyone can build a basic electric car. The reason why Tesla Motors is different is because it is driven by an agile strategy which recognizes that electric vehicles have more in common with cell phones than with gasoline cars. Another less obvious Tesla advantage is the ability to attract top engineers. There are thousands of engineers trying to get jobs at Tesla Motors which gives them the opportunity to pick and choose.

Lets not leave out the fact that they designed a really beautiful car, and an all electric sportscar with real sportscar handling has huge geek appeal.  I think this has helped them create a brand.  The question is, can they leverage it into areas other then very expensive geeky toys for very wealthy geeks?  Thats not a terribly big market, even in Silicon Valley...

Many of these answers do not actually answer your question about Tesla's competitive advantage. Competitive advantage is all about highlighting what makes you and your product better for the customer. You're right, soon every major car manufacturer will have a compelling electric vehicle on the road. It's inevitable and Tesla knows this. That is why Tesla has developed its competitive advantages early. These include direct to customer sales and they're growing supercharger network. Other internal technologies do exist that can be considered a competitive advantage, however to the customer - the people actually interested in buying these vehicles - the fact that they can buy directly from the manufacturer and get support directly from the manufacturer is a huge advantage. Also, knowing that a large international charging network exists specifically for Tesla's customer base is a huge competitive advantage. Other companies must rely on third parties whereas Tesla has a network of superior hardware at no cost to the customer.