> I don't see legacy auto being capable of refactoring their cars, manufacturing processes and business models fast enough to survive.
That doesn't make any sense. "Legacy auto" knows how to make cars. To their final assembly factories there's not a huge difference between a BEV, PHEV, or an ICE drive train. So long as they feed in components they get cars out. They definitely know how to get components made to feed into their factories.
That's a place where they have an advantage over Tesla. They can make BEVs that break even or lose money because they have a whole line of ICE cars making a profit. Tesla only has their up market BEVs to make their money.
Tesla doesn't have a moat around BEVs. Now that "legacy auto" is making them Tesla is just another BEV manufacturer. As their market share erodes they're going to have a harder time maintaining their price premiums. They also don't have the deep bench of fleet sales that "legacy auto" has. The places they're trying to diversify (Power Wall, solar, etc) aren't markets that support the premium prices they currently enjoy with their cars.
> That doesn't make any sense. "Legacy auto" knows how to make cars. To their final assembly factories there's not a huge difference between a BEV, PHEV, or an ICE drive train. So long as they feed in components they get cars out. They definitely know how to get components made to feed into their factories.
That's the problem. When they do it that way, they don't make a profit on BEV's. "Legacy auto" got good at building the supply chain network for parts. Then they pick and choose and assemble into a car. But everyone is taking a slice, and it's hard to optimize designs for efficiency between so many suppliers. Then they have their dealers to contend with.
What i'm saying is that "legacy auto" can certainly build and sell a BEV like they do with ICE. And it's not too hard for them to make that change, baring battery supply challenges. But they don't have the 30% gross margin that Tesla does. That margin will continue to grow and then turn into a weapon when Tesla needs to be competitive.
> That margin will continue to grow and then turn into a weapon when Tesla needs to be competitive.
This does not follow at all. Tesla sells their barely up market cars at luxury car prices and makes a significant amount of money off selling emission credits and raking in other government subsidies.
As "legacy auto" manufacturers ramp up their EV production they won't need to buy emission credits from Tesla. They'll also themselves be eligible for the bottom line boosting government subsidies.
I also don't see Tesla being able to compete on luxury as they have significant problems with fit and finish. Now that traditional luxury brands have solid EV offerings it seems unlikely Tesla will be able to keep their margins and increase their sales volume.
> This does not follow at all. Tesla sells their barely up market cars at luxury car prices and makes a significant amount of money off selling emission credits and raking in other government subsidies.
Emission credits were 3.6%[1] of revenue last quarter (Q1 2022). I don't know what "subsidies" you are referring too but you may be thinking of the EV tax credit, which was exhausted by Tesla in late 2019[2]. So in that regard other EV automakers have an advantage over Tesla.
> I also don't see Tesla being able to compete on luxury as they have significant problems with fit and finish. Now that traditional luxury brands have solid EV offerings it seems unlikely Tesla will be able to keep their margins and increase their sales volume.
Tesla has certainly had fit and finish issues but they are solving this. Their new Model Y produced in TX uses their "giga castings" which removes the opportunity to screw up alignment by removing ~150 welds for the body. Look it up if you want to know more.
I think error in your thinking is that Tesla will remain static while others catchup. That's not going to happen. Tesla is innovating (increasing margin) and scaling at a faster rate than "legacy auto".
> But they don't have the 30% gross margin that Tesla does.
Sure, but they'll make it up on volume. Tesla also will have much lower than 30% gross margins in 10 years -but can it catch up with "legacy auto" on volume?
That doesn't make any sense. "Legacy auto" knows how to make cars. To their final assembly factories there's not a huge difference between a BEV, PHEV, or an ICE drive train. So long as they feed in components they get cars out. They definitely know how to get components made to feed into their factories.
That's a place where they have an advantage over Tesla. They can make BEVs that break even or lose money because they have a whole line of ICE cars making a profit. Tesla only has their up market BEVs to make their money.
Tesla doesn't have a moat around BEVs. Now that "legacy auto" is making them Tesla is just another BEV manufacturer. As their market share erodes they're going to have a harder time maintaining their price premiums. They also don't have the deep bench of fleet sales that "legacy auto" has. The places they're trying to diversify (Power Wall, solar, etc) aren't markets that support the premium prices they currently enjoy with their cars.