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Charging Networks Are A Competitive Moat For Tesla

Whitney Tilson’s email to investors discussing a conversation between his reader and a Tesla owner, highlighting special perks Tesla enjoy against their competitors as autopilot, charging networks and more.

Tesla charging networks
Blomst / Pixabay

One of my readers wrote:

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Thanks as always for another great email. I shared the bit from your email with my co-worker, Elliot, re-Tesla. It feels like your friends comments re-the product not being special are not rooted in data. Has he done any surveys or analysis to back the claims that the vehicle is nothing special? Would love to see it if so?

Here is a sample size of one (but at least it's real data). Let me know what you think of Elliot's comments.

Me: Hey, as a Tesla owner, what do you think of this comment. “Also, if you drive any of the competitors, you realize that Tesla doesn't really have anything special – other than its legendary lack of reliability and quality. Those were the factors that sunk the longest list of automakers over the last 40 or so years.

Elliot (Tesla Owner): Completely disagree. That makes no sense and is total nonsense. The cars are different from any competitor. That sounds like something a short seller would write to get ppl to sell shares versus a true depiction of reality:

  • First of all, no competitor has their own charging network. If you're a tesla owner, you use superchargers which are ubiquitous now at plenty of rest stops. You can also do road trips super easily.
  • If you own a new Audi, Jaguar, etc EV, you are just screwed and cannot do road trips. The number of fast chargers that work with audi/jaguar/etc are probably < 1 % of the number of superchargers.
    • Those automakers haven't pursued their own charging networks, so literally this one factor alone is a competitive moat for Tesla
  • Here are some other reasons why these other vehicles models do not compare to Tesla
    • Dollar for dollar, the ranges of these other models to not compare to Tesla
    • These models are universally slower
    • They don't do over the air software updates which is a revolutionary thing for a car (Teslas get better over time w/ software updates like your iphone, all other cars never improve beyond the day you drive off the dealer lot)
  • Tesla has autopilot, which is by far the most advanced consumer-available semi-autonomous driving system
  • The buying experience is amazing. You buy the cars with apple pay on your phone and they bring it to your house, and prices are set (no haggling w/ awful car dealer experience that everyone hates)
  • The car has games to play when you're stuck in traffic, design is great, I just love it generally

I could not possibly be more happy with my Tesla. The only thing I guess that is a legit drawback is that their interiors are less luxurious (quality of materials) than mercedes/audi/jaguar. But to be honest, that’s the only thing I can think of.

My friend replied:

It sounds like this person is unaware of Electrify America in the U.S. and other networks such as Ionity in Europe: https://www.electrifyamerica.com/locate-charger

 While it is true that Electrify America isn’t yet at the near-500 stations (each with at least half-a-dozen units) that they will be in July of this year, how is it possible to be invested in Tesla and be ignorant of this highly visible competition?  I heard someone say recently “Yeah, but not all 474 of those are live yet, so it’s not really here.” Well, if you cannot invest and discount for what you KNOW will be COMPLETE in only FOUR MONTHS from now, then you should certainly not call yourself a long-term investor.

Yes, Tesla has the best network today. Yes, they will still be ahead by the end of 2019. But yes -- the competition will have significantly closed the long-distance driving/charging gap only four months from now. That’s what a $2 billion investment does (only $500 million will have been spent yet, by July 2019; the other $1.5 billion happens after July).  How much has Tesla spent on its network? And yes, the $2 billion number is EA’s U.S. spend -- not global or even “North America.”

See above.  Someone is clearly unaware of all the other charging networks that are being built.  If you say that people should be invested in Tesla for the “long run” -- with financial measurements based on what’s coming in 1, 2 or 3 years from now -- you also have to accept the other side:

What will those other charging networks be like 1, 2 or 3 years from now?  In the case of Electrify America, we are talking four months from now, and when it comes to Ionity in Europe, we are talking about an even bigger build-out later in 2019 and 2020 that is already way underway today. Speaking of 1, 2 and 3 years from now -- outside China alone, there will be over 200 competitive models by the end of 2022.  What will be the sales and margin impact of too much supply?

Dollar for dollar, range?

Chevrolet Bolt EV 238 miles, Kia Niro EV 239 miles, Kia Soul EV 243 miles, Hyundai Kona EV 260 miles.  They are all $37,495 before full $7,500 Federal tax credit. So, lower price than the cheapest Model 3 -- but all have longer range.  So, lower price and higher range than Model 3. Now what?

Universally slower?  In terms of acceleration, yes.  That is true. They all have 0-60 times that are slightly slower than the base Model 3.  You got me there. But in my opinion, I have no interest in paying more for a car that’s any faster than 0-60 MPH in 7 seconds.  I get car sick at higher G-forces.

Over the air updates:  We’ve been through this before -- Are you sure which other competitors don’t take OTAs?  That said, as a customer I don’t care about OTAs. In fact, I don’t want anyone messing with my car after I buy it.  I want the automaker to complete its testing of the car BEFORE

they put it on sale. I don’t want to have it fixed multiple times after.  Get it right from Day One, and then leave me and my car alone. Don’t hack into it from some remote location. One of these days, that remote hacking will be a Dictator’s favorite tool.

Autopilot:  Are you kidding me?  It doesn’t do anything for me.  It does not allow the driver to take his hands off the wheel or eyes off the road.  Driving with Autopilot is like driving in the passenger seat next to your 15 year old son after he’s knocked back a bottle of whiskey.

It’s making me very nervous, having to supervise a de-facto pet crocodile, who can send you to six feet below at a fraction of a second’s non-notice.  If you want the ONLY car in the U.S. market today, where you are allowed to take your hands off the wheel, you have to buy the Cadillac CT6. It is the most advanced system on the road today.  That’s an objective fact, not opinion. And yes, I have driven it back-to-back with a Model X.

Buying experience?  Not sure everyone cares, but I really don’t want some stranger and potential stalker to seek me out at my house.  Maybe the Tesla delivery person can meet me in a back-alley parking lot instead, just like a drug dealer, to complete the sale.  Just don’t seek me out at home, like an assassin.

The car has games?  Seriously?

Games are for CHILDREN, not adults -- and preferably played on the phone or other tablet/laptop already in the child’s possession.  Actually, I don’t think children ought to play games either. Notice what’s happened to the fertility rate in Japan in recent decades?