The argument I always hear, from sceptics within Saxo Bank and clients alike, is that when the other carmakers begin to move into EV they will crush Tesla. This sounds like a something we have heard before – remember Nokia versus Apple? The point is that Tesla’s pace of innovation is much faster than the competition right now and the Germans have underestimated Tesla.
Let’s look at the numbers:
As of 2018, Tesla will have spent $6.2 billion on research and development and $12bn in CAPEX. On top of this, Tesla is already climbing the production learning curve of battery and EV mass production. Most importantly, the mass production of batteries is probably where the competition will come up short against Tesla as the CAPEX needed is massive. VW has said it will invest $25bn in EVs
and start mass-producing in 2022. What a joke! By 2022, if Tesla continues at its current rate and avoids bankruptcy, the cumulative R&D in EV technology will have hit $16-20bn and cumulative CAPEX (gigafactories and production plants) will have hit $32-36bn.
According to analysts, Tesla could have $53bn in revenue in FY'22 (around 24% of VW’s current revenue).
Just for the record, Tesla spends 11.7% of revenue on R&D compared to 5.7% at VW. If you believe R&D matters in the long run, it’s clear that the German carmakers should begin recognising the threat.