The Chevy Bolt is getting a great deal of attention right now as the company has promised more range than the Tesla Model 3. But it’s from a company which doesn’t have clear plans to deal with three major strategic blockers to large scale electric vehicle sales — dealerships, batteries, and between city charging — never mind the other innovations Tesla has in play. But Faraday continues to move forward with its inscrutable plans. Will Faraday be a greater threat to Tesla than Chevy?
Given what Faraday has said so far, is isn’t a threat at all except in siphoning talent from Tesla which it might need to hit Model 3, autonomy, and truck targets. But there’s a lot of talent in the world and Tesla is pre-eminent in terms of being an attractive and successful employer. If Faraday actually makes it to market, it will be much more of a threat to traditional car manufacturers.
What do we actually know about Faraday?
- It’s bankrolled by a media mogul. That’s media, not manufacturing, and there aren’t a lot of multi-talented, incredibly focused, team building Elon Musks actually floating around, sometime not even one per generation.
- There are a lot of questions about how the financing is structured.
- It doesn’t have a product. There is a rumor that it has a prototype crossover SUV.
- It doesn’t have a public timeline.
- It doesn’t have a robust autonomous solution today, although it is testing something.
- It has big plans for factories in Nevada, the SF Bay area and China (which includes a theme park, oddly), but haven’t apparently broken ground on any of them that can be seen.
- It doesn’t have a coherent, publicly available strategy, which is potentially okay.
- It showed off a concept for a single-person car which is really unlikely to ever see power getting to wheels.
- It is hiring people from Tesla, Tesla, GM, Apple, Toyota and others at a great rate, but has no proven ability to integrate them into a high-performing team yet.
- China just changed the rules for EV startups, and there’s no guarantee that Faraday is in the favored group.
In other words, the company has deep pockets, is buying talent, but is pretty scattered and at best in the forming and storming stage. And there are two major threats related to financing and China’s new rules for the EV startup market which could derail it in the short term.
It might be bringing a crossover SUV into the market. That would compete with the Tesla Model X when it gets to market. However, if the Model X follows the Model S trajectory, it will be killing that segment in many markets, taking market share from other manufacturers at a great rate over the next couple of years as it ramps up production. It is at 25% market share in the flat premium luxury sedan market in the USA fully at the expense of other manufacturers, and very strong in other markets as well.
Faraday has no factories. Let’s assume a very aggressive schedule gets it to mass production of a crossover SUV in three years in multiple markets. The same three to four years saw the dominance of the Model S in its market. By definition, a Faraday offer in this space would be being compared with the Model X and compete with it, but it will also be competing with the other competitors.
And that’s the key point. Faraday will theoretically be competing in a shifting marketplace, one in which the drivetrain, dealer model, ‘fueling’ infrastructure, expectations of active safety features, internal volume, connectivity and many other features are rapidly becoming the cost of doing business. It’s not Tesla which is behind on these things, it’s everyone else. This is the list of Tesla innovations which other companies have to figure out how to deal with that I maintain.
Faraday has to figure out how to match most of those and differentiate on key points. It’s starting from a blank slate however, and can design itself based on seeing what Tesla has succeeded at so well. Other manufacturers are stuck with legacy organizations, business models, and technologies which make many of those points extremely difficult to match.
The franchise dealership model alone is a huge inhibitor to success for traditional manufacturers. Dealerships make the majority of their money on lifetime servicing, not sale of the car, and electrics drop that revenue enormously. Electrics take a lot more time to sell right now, and salespeople are incented by sales volume more than anything else based on the dealership fiscal models.
If Faraday actually gets a car on the market in multiple jurisdictions in three to four years, then Tesla will likely be one of the dominant players, but most market share will be taken away from existing manufacturers who can’t transition rapidly enough to match the terms of the new market.
Disruption is occurring. Faraday might succeed in being part of that disruptive wave or might not, but the biggest threat is to existing manufacturers, not Tesla.