Fast-forward 7 Years. Which Brand Should Imply Value, Dacia or Tesla?

There’s a raging battle going on in the financial community.  It’s over Tesla.  Overpriced.  Too few sales.  No long-term outlook. Yadda.  Yadda.

I finished a post at Seeking Alpha titled, “Tesla vs Renault: Low Cost, Not High Cost, is the Future.”  It’s written by a fine young man named Zoltan Ban.  Zoltan starts with:

“The real story of exponential growth is in the low-cost vehicle category, as evidenced by Renault’s Dacia brand performance, which offers cars for less than Tesla’s current battery costs…”

 

He goes on,

“…Tesla on the other hand is limited in terms of room to grow. Its current product line is literally tailored to the 1%, given that its model S sells for about $100,000 on average once all options are factored in on top of the base price. In the U.S., where Tesla currently sells most of its cars, this means than only about three million households make up its potential consumer base. Going worldwide would expand that base to over ten million households. The model E, which is supposed to hit the markets in 2016, is going to sell for far less, perhaps as low as $35,000 (base price)…”

 

And on,

“…The EV story is just like the hybrid car story we already saw play out. If we think back to the first years in the late 1990’s the assumption was that it will not be long before hybrids will be the rule rather than the exception, therefore we were looking at human innovation saving the planet from ecological disaster and resource depletion….”

 

First…duh.  You need to get a product into the hands of the most people in order to enjoy the best shot at being actively sold in 50 years.  The more Leaf-style Teslas out there the better for their long term survival.

However, in order to start a new car marque from scratch you need to start by selling them to rich people.  Why?  Not only because they can afford them, but because the profit margins they’re willing to pay in order to be early and mid-early adopters provide you the money to survive and expand.

Zoltan also misses something prescient in the second snippet.  Tesla is moving downmarket.  He talks about the Model E, but being a financial guy–or the recipient of a check from Renault Dacia–he assumes that Tesla will stop with the E.  Why wouldn’t Tesla keep moving down the scale until they offer the equivalent of a Mitsubishi MiEV?

Let’s say it takes 7 years.  By that time they’ll have a solid brand and a nationwide network of charging stations.  They’ll have time to properly develop and deploy new battery technology and the economies of scale to produce them cheaper.  That they come in later with a better marque doesn’t necessarily elevate them to the equivalent of Mercedes-Benz branding.  But the brand will be strong; one that I believe would get buyers who have previously owned EVs as well as those moving to an EV.  You can buy a Toyota minicar; or you can buy a Mini.  Sure, they’re both high mileage 4-bangers; but which one has the brand cache?

Yes, I’m assuming as well.  But at least my assumption is built on the tendency for organizations to find ways to grow.

Now, let’s look at that Dacia as well.  Click on the video above.  Take a look at what Zoltan wants you to get excited about in place of Tesla.  Which would you buy?

 

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Sebastian James

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Accept no substitutes

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