Com­pe­ti­tion is the lat­est fac­tor to cloud Tesla’s murky out­look

The Globe and Mail (Ottawa/Quebec Edition) - - OPINION & ANALYSIS - ELIS­A­BETH BEHRMANN LEONARD KEHNSCHERPER

When the call came, Robert Wickel wasted lit­tle time. The sub­ject? Reser­va­tions for Porsche’s all-elec­tric Tay­can were com­ing, even though the ve­hi­cle wouldn’t en­ter pro­duc­tion un­til next year. Buy­ing Tesla Inc.’s Model S, avail­able for the past six years, had al­ways been an op­tion but lacked the al­lure of the first bat­tery-pow­ered car from the iconic Ger­man sports-car maker.

“Tesla’s Model S trig­gered cu­rios­ity to give it a try, but there were sev­eral un­knowns start­ing from un­clear de­liv­ery times to a patchy service net­work,” said the 46year-old Mu­nich res­i­dent, who has been driv­ing Range Rovers, Audis and Porsches and joined the list to place an order when they are avail­able. The Tay­can “is a se­ri­ous car with the qual­ity prom­ise of a lead­ing car man­u­fac­turer – I know whom I’m buy­ing from and what [I] can ex­pect in case I need sup­port.”

The Tay­can, de­vel­oped un­der the project code-name Mis­sion E, is but one of a bulging wave of Tesla fight­ers about to roll off the pro­duc­tion lines of pre­mium Euro­pean car mak­ers in­clud­ing Jaguar, Audi, Mercedes-Benz and BMW, start­ing, well, just about now. Count it as an­other headache for Tesla chief ex­ec­u­tive Elon Musk, whose tweets about tak­ing the com­pany pri­vate are re­port­edly un­der re­view by the U.S. Se­cu­ri­ties and Ex­change Com­mis­sion. Saudi Ara­bia’s sov­er­eign wealth fund is in talks to par­tic­i­pate, Bloomberg News re­ported on Sun­day, cit­ing a per­son with di­rect knowl­edge of the dis­cus­sions.

To date, Tesla has ruled the roads for elec­tric-car buy­ers, with lit­tle di­rect com­pe­ti­tion in the mar­ket from US$60,000 and up. Those days are over: Jaguar is al­ready de­liv­er­ing its I-Pace all-elec­tric sport-util­ity ve­hi­cle, with com­pa­ra­ble en­try-level prices to the Model S sedan and Model X SUV. The new Jag comes with a pedi­gree of lux­ury, rac­ing and en­gi­neer­ing prow­ess. In some mar­kets, the wait-list is now a year long.

Autocar U.K. took a di­rect com­par­i­son of the Tesla Model S sedan and the new Jaguar. The re­sult was about what many had ex­pected.

“The I-Pace pro­vides a more ap­peal­ing space in which to pass the time, and a far more en­gag­ing driv­ing ex­pe­ri­ence on the way,” the re­viewer wrote. The Tesla is “still im­pres­sively ca­pa­ble given its age, but qual­ity is vari­able and chas­sis not close to the stan­dard now set by Jaguar.”

The new ri­vals are likely be­hind some of the soft­ness that Tesla has ex­pe­ri­enced in Europe. Sales in all ma­jor mar­kets there that don’t of­fer sig­nif­i­cant re­bates slid dur­ing the first half of the year, data from fore­caster IHS Markit show. The drop was as much as 30 per cent in Ger­many and Bri­tain, IHS data show. Tesla doesn’t re­port pan-Euro­pean sales num­bers, although the IHS es­ti­mates are con­sis­tent with de­liv­ery data kept with na­tional gov­ern­ments. Tesla does re­port rev­enue for Nor­way, where sales peaked in the fourth quar­ter of 2017. Cus­tomers there are also in quiet re­volt af­ter wait­ing for months to get spare parts and re­pairs.

“Growth in sales for Tesla in mar­kets like Nor­way and the Nether­lands re­mains in­cen­tive led,” said Tim Urquhart, an an­a­lyst at fore­caster IHS Markit. “In the U.K. and Ger­many, well­heeled early adopters have adopted and are al­ready look­ing at the next shiny thing.”

Tesla dis­putes the IHS and gov­ern­ment data and says to­tal sales are ris­ing in Europe, while de­clin­ing to pro­vide any mar­ket-by-mar­ket de­tails. “The data from both IHS and re­gional trans­porta­tion de­part­ments is not re­flec­tive of ac­tual sales data,” Tesla said. New-car reg­is­tra­tions can’t be re­lied on to track ac­tual ve­hi­cle sales, Tesla said.

In­creas­ing com­pe­ti­tion com­pli­cates Mr. Musk’s quest to trans­form his un­prof­itable jug­ger­naut into a vi­able mar­ket leader. The com­pany’s Model 3 is still partly made in a makeshift tent, rais­ing ques­tions about the am­bi­tious out­put tar­gets and crit­i­cisms over poor qual­ity.

The “de­bate about newly in­tro­duced mod­els from com­peti­tors and Tesla’s re­cent prob­lems on pro­duc­tion and de­liv­ery is go­ing to be even louder in the fu­ture,” said Karsten Gross, a spokesman at PA Con­sult­ing.

Over all, sales for the Model S and Model X are slow­ing, although the com­pany says de­mand is high and bat­tery-cell sup­plies have con­strained de­liv­er­ies. The com­pany fore­casts 100,000 sales of the two mod­els this year, com­pared with about 101,000 in 2017, when sales jumped 33 per cent. Tesla’s re­sponse to in­creased com­pe­ti­tion and an ag­ing Model S is the Model Y, an elec­tric cross­over set to be in­tro­duced later this year or early in 2019.

Of course, Mr. Musk’s prob­lem with his lat­est car is sup­ply. The car maker has taken hun­dreds of thou­sands of de­posits for its Model 3 sedan – more than a year of pro­duc­tion at current rates – and an order book that ex­pands as more Model 3s reach drive­ways across the United States. The Model 3 isn’t avail­able out­side the United States yet.

“The sales and de­mand trends, it’s look­ing re­ally pos­i­tive,” Mr. Musk told an­a­lysts af­ter re­port­ing se­cond-quar­ter re­sults and pre­dict­ing its string of losses would soon end.

Tesla’s own fu­ture is now un­known af­ter Mr. Musk sur­rep­ti­tiously tweeted Aug. 7 that he was con­sid­er­ing tak­ing the com­pany pri­vate in a US$82-bil­lion deal, a dis­clo­sure that seemed to catch the com­pany off guard and cre­ated a new dis­trac­tion for the board. The SEC is in­ves­ti­gat­ing Mr. Musk’s claim that he had fund­ing se­cured, ac­cord­ing to the Wall Street Jour­nal. Should a deal hap­pen, it may ac­tu­ally ease cash con­cerns and help Tesla ex­pand.

A deep-pock­eted part­ner “should en­able the com­pany to ex­e­cute and move faster,” Ever­core ISI an­a­lyst Ge­orge Gal­liers said in a re­port.

“This only in­creases the need for tran­si­tion at tra­di­tional car mak­ers who must carry out ex­haus­tive pow­er­train re­struc­tur­ing if they choose to com­pete with a po­ten­tially faster and more nim­ble Tesla.”

RICHARD VOGEL/AP

Peo­ple check out Tesla cars on dis­play at a show­room in Santa Monica, Calif., last Wed­nes­day. With lit­tle di­rect com­pe­ti­tion in the US$60,000-and-up mar­ket, Tesla has long ruled the roads for elec­tric-car buy­ers – but those days are over as Euro­pean au­tomak­ers en­ter the sec­tor.

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