Tesla’s Falling Behind on Production, but Maintains Lead in Future of Transportation

Tesla’s production challenges outlined on yesterday’s earnings call beg the question – is Tesla falling behind in the race to be a key player in the future of transportation?

Tesla is struggling to produce the Model 3, and at the same time firmly holds its pole position in EV and autonomy. In 10 years we expect 3-5 companies will own the market for EV and autonomy, compared to 8 major auto companies today. Of the 3-5 winners of the future we expect 2-3 to be tech companies. That means of the 8 major auto OEMs today, only 2-3 will be relevant in the future.

EV. Taking a step back, Tesla is struggling to make the Model 3. Musk gave the reasons on the call but the bottom line is it’s hard to make a car that advanced for that price at scale. The reason why Tesla’s manufacturing struggles don’t suggest their falling behind is none of the other auto OEMs have started EV project as ambitious as Model 3. These OEMs have EV offerings, but consumers largely don’t want to buy them so the OEM don’t have to travel through “manufacturing hell” like Tesla is today.

Autonomy. This one is a wild card. Most of the major car companies have made statements about why they’ll be important in autonomy and some have made acquisitions to advance that cause. GM has done a notable job of catching up. Tesla’s real competition in autonomy is Waymo. Waymo has been making progress and is now testing in several states. But Tesla has all of the hardware (they think) being added to their vehicles today for autonomy. No other car manufacturer makes a claim close to that.

Bottom line: Even if you soften Musk’s hype (i.e. Model 3 production ramp will be liken to a jet fighter in a vertical climb) with a dose of reality, Tesla is still in the driver’s seat (pun intended) to be one of only a few winners in the future of transportation.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.