The wind has changed
Too big to fail: Can Tesla survive?
By Helmut Becker
26.05.2024, 11:57 a.m.
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For years, Tesla has been on a successful path, growing and becoming the industry leader in electromobility. But now sales and margins are falling and the competition is sharpening its knives.
Without a doubt, Tesla is in trouble: falling sales figures in all major markets; rapidly shrinking margins as a result of a ruinous price war of its own making; the dismissal of over 14,000 employees, which corresponds to about a tenth of Tesla’s total workforce. And that’s not all: the halt in construction of the “Gigafactory 6” in Mexico is having just as negative an impact as the postponement of construction of the planned “Gigafactory 7” in Canada and the protests against the expansion of the plant in Grünheide, Brandenburg.
But does all of this justify the question of Tesla’s survival? When the eccentric, IT-obsessed innovator Elon Musk has had a “fairytale” success story since taking over the company in 2008 and revolutionized the venerable automobile industry with his electric cars? Within just a few years, Tesla has become the world’s most highly valued car manufacturer and Musk himself has been the richest person for a time. For a time. The wind has now changed and Tesla is on a downward trend.
Is Tesla just an episode in automotive history?
So can Tesla continue to exist? The answer is clear: No, not in the long term! In the current structure of the future global automobile market, Tesla has little chance of surviving. Elon Musk’s fame as a game changer will remain, Tesla will only be an episode in automobile history. So what speaks against Tesla’s continued success in the future, what arguments are there against the Texan electric car manufacturer?
First of all, it should be said: This is not against electromobility as such. The era of only fossil combustion as energy in drive units is over and must be replaced for climate reasons. Fact! – This column is exclusively about the company Tesla, whose vehicles are in turn exclusively electric.
The main causes of shrinking opportunities Tesla’s problems are based – to put it simply – on the one hand on changed and continuing changing external market and competitive conditions to the detriment of the electric car pioneer. On the other hand, they are anchored in Tesla’s internal corporate structure itself.
Major external stress factors
At the beginning, Tesla took the entire established global car industry by surprise with innovative electric cars, new battery storage technology, the development of its own charging network and the goal of networked, autonomous driving. The established manufacturers had to face accusations from the media and the public of technological backwardness and social ignorance, and Tesla was elevated overnight to the status of the world market leader in terms of technology and environmental image.
But that has now fundamentally changed. Similar to the Tour de France, the (automobile) peloton has chased the breakaway, caught up with it, overtaken it and is now in the process of leaving it behind.
Failed model policy
The market for electric cars has turned around, the growth euphoria that was built on government purchase premiums has evaporated, the oversupply of electric cars is increasing in all markets, there is tough discounting and ruinous predatory competition. Political visions of predominantly electric car fleets on the roads by 2035 are proving to be a mirage.
In the classic high-price market segment, there is a growing oversupply thanks to the wide range of catch-up competition from other car manufacturers. At the same time, there are increasing signs of the market becoming saturated. Tesla does not have any alternative markets or other technology at its disposal.
Instead of pure battery-powered cars (BEV), there is increasing demand for hybrids (HEV), especially plug-in hybrids (PHEV), which Tesla does not have in its range for image reasons and can never include in its range for technological reasons due to incompatibility with autonomous driving. Hybrids and PHEVs are on the rise worldwide.
Now Tesla CEO Elon Musk is paying the price for failing to broaden and deepen his vehicle range into inexpensive, lower market segments during his monopoly phase. A range of four high-priced basic models (Model S and X, Model 3 and SUV Model Y, plus the steel special model Cybertruck and electric truck Semi) are not enough to withstand the increasing competitive pressure in all market segments with profitable scaling. Only the mass market for electric cars still has great growth potential.
China as a problem factor
Especially in its main sales market of China, Tesla is suffering from price competition from domestic competitors and their growing range of small, cheap electric cars. Now it is taking its toll that Musk’s range of models does not include small, inexpensive electric cars or cars with combustion technology such as hybrids of any kind.
“Many dogs are the death of the hare,” as the saying goes. All in all, Tesla, the “outlier,” is running out of steam, and Musk, as the spiritus rector, is getting bogged down in a series of other projects (rockets, tunnels, storage batteries, X aka Twitter). Battery-powered electromobility in particular is proving to be a technological and market-related narrow track for Tesla, or better: a one-way street.
And we must not forget the consequences of the trade war between the USA and China – with prohibitively high tariffs on electric cars and battery electronics from China. Tesla would only be able to sell in China itself, the rest of the world would be closed off. Combustion engine cars, on the other hand, could be built without supplies from China if necessary.
Another major internal stress factor is Elon Musk’s erratic and eccentric management of the company and, above all, personnel. Spectacular dismissals of managers with important core functions or, as recently, harsh job cuts and wishy-washy slogans of perseverance as well as the sudden closure of entire departments or the constant threat of clear-cutting are not good breeding grounds for successfully counteracting a company’s crisis-ridden development.
In summary, one can conclude that Tesla will be eliminated from the market in the long run. The company is hardly a candidate for takeover because all conceivable interested parties from the industry can do the same as Tesla itself and even more technologically. And because there is currently no market for gigafactories. And there never will be, who can do something with such huge areas? Perhaps the monument protection authorities!