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Missing Link: Tesla in Grünheide – are we experiencing disruptive electrification?

The Missing Link on October 17th was about Tesla’s technological leadership in many relevant areas (batteries, software, body construction) and the difficulties incumbent manufacturers have in catching up on this lead – they are still at least ten more years in parallel with combustion engine production busy – a classic legacy problem.

What is missing: In the fast-paced world of technology, there is often the time to rearrange the many news and backgrounds. At the weekend we want to take it, follow the sidewalks away from the current, try different perspectives and make nuances audible.

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This missing link is about Tesla’s actual competitive advantages: above all his undisputed software competence and the design of the product as a software-driven one. The company, long ridiculed as an electrical start-up, actually works like one – the adaptation of agile methods up to the shop floor allow Tesla to make changes to hardware and software within months and to pass these on to its customers. Unique in the industry: The product that has already been delivered is getting better and better, and customers don’t have to wait for the next model change.

Since it was founded in 2003, Tesla has pursued a plan whose long-term goal is to build cheap e-cars for the mass market in large numbers. At each level the money is earned and the experience that is necessary for the next level is gained. Initially, Tesla demonstrated no more and no less than the basic usability and performance of the electric drive with the Roadster, a $ 170,000 sports car manufactured by Lotus, that was in 2006. Next, Tesla went into small series production in 2012 with the Model S. a luxury sedan. The Model 3 then broke into the middle class, production of which started in 2017. Next up are an inexpensive entry-level model and the Cybertruck, which is aimed at the pick-up market, which is so important in the USA.

This plan has been consistently pursued so far and has so far worked: Tesla is currently the only manufacturer that makes money with electric cars, states the management consultancy McKinsey: “Apart from a few premium models, OEMs lose money with almost every electric car sold, which is clearly unsustainable”. Tesla has now been in the black for seven consecutive quarters and is behind inclusion in the Standard & Poor’s 500 stock index Also a must-have for institutional investors.

The financial position of Tesla is rosy compared to the carmakers – almost no debt, high cash reserves and a market capitalization that is second to none. The traditional manufacturers, on the other hand, are plagued by high levels of debt and liquidity problems – sometimes the funds for necessary investments are lacking. They are valued comparatively low on the stock exchange, which not only makes investors nervous, but also increases the risk of takeovers. “At the end of March, beginning of April of the previous year, when our share price was between 23 and 30 euros, we were in a risk zone”, admitted Daimler CFO Wilhelm recently.

Manufacturer Market value of the company [Mrd. US $] Stand 20.10.2021 debts [Mrd. US $] Stand June 2021

Tesla

876,2

11,1

Toyota

143,9

24.460

Volkswagen AG

115,4

218,4

Daimler AG

88,1

145,8

General Motors

83,7

111,9

Ford

62,9

147

In terms of sales, the established manufacturers are still at the top, Volkswagen recorded 223 billion euros in sales in 2020, 12 percent less than in the previous year. Tesla achieved sales of just 27.3 billion euros in the same period. The Association of the Automotive Industry (VDA) is still concerned that the industry is “as a whole far from sustainable recovery“(VDA annual report 2020).

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