March 23rd, 2020 by Alex Voigt
Many have asked me why I believe Tesla will come out of this crisis stronger than other companies, and if so, why. In a series of 7 articles highlighting each one of the reasons, I will explain.
Cathie Wood, the founder of Ark Invest, has mentioned many times that in a recession or economic downturn, disruptive companies usually gain pace and expand their competitive advantage versus incumbents. That concept is very old and proven and we have no reason to believe it to be different today.
This is a series of 7 articles and 7 videos that explain the reasons why Tesla is perfectly positioned and will emerge stronger and faster out of the crisis in relation to other incumbent auto manufacturers.
What many people overlook is that it is not that much about whether a company does well or not but how it does in relation to its competition and peers. If you do just a little bit better than the companies you compete against, you gain a strategic advantage — for instance, with cash flow that allows you to make urgently needed investments others are unable to make. That helps to expand your capacity, market share, or profits, and with that you enter a positive spiral distancing yourself to other companies who fall further behind.
If two men walk into a forest realizing a bear is behind them and has started chasing them, the man who is faster will survive even though it does not matter that he can’t be faster than the bear. That anecdote illustrates the situation of Tesla versus incumbents very well.
Tesla has better jogging shoes (technology), is better trained (pace of innovation, organization, workforce), and has more and sharper senses (cameras, AP, FSD), which leads to the key result in the end.
To be fully clear, Tesla will of course suffer from a longer economic downturn too, but that does not matter in the long term if other companies are doing worse, as Tesla wins in relative terms. Every incremental part of being ahead is worth exponentially more in a crisis than it is in a stable, growing economy. That incremental benefit may define if you live or die.
The situation we are in is an excellent example for Tesla to show its strength and win an additional customer segment that has been immune to the benefits of a Tesla vehicle so far. It is a crisis and it is an opportunity.
This is the first article of 7 that describes valid reasons why Tesla will actually be stronger when the crisis is over than before. It’s not at all a question of whether Tesla will survive, but rather who from the incumbents will give up first.
In this article, I will discuss an important factor about a Tesla vehicle that, in a time when people fear getting infected by a new unknown virus, is exceptionally important for every person. That factor is called safety.
#1 — Safety
In a time when an invisible virus is around that may infect you, a virus that doesn’t have an existing and available vaccine, a virus that could threaten one’s life, people have a lot of fear — and some even panic. What everybody is looking for now is to somehow make sure they are safe. Tesla has a huge advantage in several aspects of safety, which you can find hidden in the company’s technology and processes.
I am not talking about accidents and crash tests here. Tesla has proven long ago to offer some of the safest, if not the safest, vehicles, but that obviously won’t help you against a virus infection.
Within a Tesla Model S or Model X, a superior, hospital-grade air conditioning system is delivered that offers the option of a Bioweapon Defense Mode that keeps a virus or bacteria — or other polluting air particles — out of your Model S or Model X and creates an atmosphere around you that is inspired by hospital AC systems. It is 100 times cleaner than what other automakers offer, and gives you the ability to relax and feel safe. Even the Model 3 and Model Y have AC systems that are much better than any other on the market except the Model S and Model X.
Any rational or irrational fear is mitigated if you have a vehicle with that technology, and right now there is not a single automaker besides Tesla that is offering anything close.
Another aspect of true safety is that with a Tesla you can reduce the number of days requiring physical contact quite significantly simply because you don’t have to drive to a gas station and can avoid the risk of coming across someone who has the virus without even knowing. Your personal risk is reduced.
Avoiding too close contact to people is in this days a strong positive and a Tesla vehicle allows you to do exactly that.
Even at public chargers, the simple fact that charging takes longer than fueling gas means fewer people pass through, with fewer hands touching the charger, which results in lower risks for you to get infected. What always was considered a negative for having a BEV, the longer charging time, is now a positive. Furthermore, you can easily take your time putting on a glove to use the charging cable.
With a vehicle that does not need maintenance and in which most issues can be fixed with over-the-air updates, a third important safety factor exists — you don’t have to worry much about wear and tear or broken parts. To add to this, even if a more severe issue appears that needs a service technician, the Tesla Mobile Service team may come to you and repair your car without your physical presence. Another risk as far as catching the virus.
The same is true for placing an order. You do not have to enter a store but can do it online, and can even pick the car later up without physical contact, as we see Tesla initiating touchless deliveries. New customers can pick up their vehicles without any physical contact, talking to service personnel only over the phone and through windows to get instructions, which is unique for Tesla vehicles since no one else can enable and disable the vehicle over the air. I enjoyed that feature when my car was diagnosed last year and the service staff was able to unlock my vehicle over the air for me to pick it up outside of their working hours.
Last but not least, we are in March — the last month of the quarter — when most Tesla deliveries are happening. The experience Tesla gained at the Shanghai Gigafactory delivering vehicles that are completely disinfected is now valuable experience to help consumers trust Tesla much better versus any other company not having that knowledge and experience.
While Tesla production in the USA is stopping, like for all other automakers, Gigafactory 3 (Giga Shanghai) in China has already achieved production rates higher than before the crisis started, versus other automakers that expect a production rate of 40–50% of full capacity in March.
The direct delivery model to customers, with no dealerships in between, enables Tesla to continue its delivery process while all other automakers cannot maintain those operations, as dealers are independent and have mostly locked down their operations too to rightfully avoid any customer contact.
That’s another safety feature and risk reduction to be infected which means a lot for consumers as everything in life is less important than health.
With these risk factors eliminated, if you own a Tesla and enjoy the “feel-good moment” of driving one home, you can see how priceless that is and how much huge of a benefit the health-protecting features above offer for the owner — and with them, for Tesla as a company.
Safety is underrated until the moment arrives when we need it and realize it is indeed priceless.
Stay tuned for article #2, Diversification.
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About the Author
Alex Voigt Alex Voigt has been a supporter of the mission to transform the world to sustainable carbon free energy for 40 years. As an engineer, he is fascinated with the ability of humankind to develop a better future via the use of technology. With 30 years of experience in the stock market, he is invested in Tesla [TSLA], as well as some other tech companies, for the long term.
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