Tesla Wins Because it has an Ecosystem

The future of the auto industry starts and ends with EVs. Nearly every automotive manufacturer has dedicated billions of dollars to develop new EVs, which, by some estimates may outsell their gas counterparts as early as 2035. 

However, while many manufacturers are positioning themselves to take advantage of the ever-growing EV market, they are also missing out on something far bigger. To win with EVs a lot more is needed than just a good vehicle, without an ecosystem to support it much of this effort will fall short. 

Tesla Leads the Way

Elon and Co. realized a long time ago that selling electric vehicles was going to take a lot more than a fast car and decent range. Getting a vehicle to mass adoption was going to require everything from auto repair shops to public charging stations. 

When building the Model S, they did something remarkably ambitious, they began construction of a coast-to-coast supercharging network. From then on Tesla owned the EV industry. 

Once Tesla began construction of a coast-to-coast supercharging network they owned the EV industry.

What the company realized was that a vast ecosystem was needed in order to not only support their existing customers but also convince the general consumer that EVs were not only green but practical as well. They slowly built out a world-wide charging network to overcome fears of range anxiety, but they didn’t stop there. Over the last decade Tesla has added, high-speed in-home charging, home battery storage, over-the-air software and performance improvements, mobile repair services, and are slowly rolling out home solar as well. 

Its easy to see why some of the largest automotive OEMs on the planet are having a hard time catching up. Tesla has the most comprehensive EV ecosystem, when you buy a Tesla you're not just buying a car, you're also buying into that entire ecosystem.

Other Automakers Are Taking Notice

An ecosystem doesn't just create a better user experience, it creates far more brand loyalty too. Over 90% of Tesla owners plan to buy another in the future, showing just how strong the Tesla brand really is, and some competitors have started to notice their keys to success. 

Look at many of the new electric vehicles being released by the other OEMs and you see a striking similarity to many of the design quirks popularized by Tesla. Large touch screens at the center console, frunk for additional storage, advanced cruise control and most importantly buying into a fast-charging network of some kind. Much like the iPhone competitors a decade prior, the industry is simply copying and pasting what has worked for Tesla. While this isn’t a bad strategy, especially for those just getting involved in the EV industry it’s not going to move the needle. 

Furthermore, many of the top competitors don’t seem to understand what is actually driving Tesla stock. Yes, they are first to market and have a sizable lead and there is a little too much hype but they do have incredible potential to grow in a multitude of directions many of which are not in the automotive industry at all. 

Where the Money Is

EVs aren’t a bad business to be in, but the simple fact has always been that the profit margins on most vehicles are relatively low. Currently, Tesla makes around $3k per vehicle which is the most in the EV industry. Even though Tesla has managed to make a profitable vehicle, something the other OEMs really haven’t cracked, they still don’t make loads of cash per vehicle sold. 

Where much of their added value comes from is the many add-ons that the company provides that customers are more than willing to pay for. Home charging stations, access to superchargers, auto-pilot, and much more all can be added on. This may be where the bottom-line profits are but it isn’t where the big-time value is coming from. 

It’s the entire ecosystem combined and where it’s headed. Tesla now has millions of vehicles on the road, thousands of charging stations, batteries installed in homes, with solar roofs and battery arrays on the way. In essence, Tesla has become both General Motors and Exxon Mobil in one swift play. They sell the car, own the gas station, and in some cases produce the energy as well. It doesn’t stop there either, as Elon Musk has already stated outright he plans on allowing Tesla owners to put their vehicles in self-driving mode and become a pseudo-taxi service to rival that of Lyft and Uber. While this may end up a 20-year dream, it is certainly possible

Not only can this drive massive profits, but it also pulls more people into the ecosystem. Something that most closely resembles what Apple has done with the iPhone rather than of the big automakers. 

The Ecosystem Sells Vehicles

Something that’s rarely brought up about Tesla is that they don’t really engage in marketing and advertising. Tesla has built such a strong brand they don’t need billboards, banner ads, or commercials. A lot of this comes from never-ending press coverage, however, it’s more than just free publicity.

Tesla has a legion of fans that will swear by the brand and it’s strikingly similar to that of Apple. Once people buy into the ecosystem they typically love it and have no intention of leaving. Even with a laundry list of design flaws and manufacturing errors people still love their Tesla. This is mostly down to how the ownership experience plays out. Talk to any Tesla owner and they usually say the same things. Tesla makes them feel special, not just the status symbol of owning the car but all those little touches of the ecosystem. 

Tesla’s will tell you where the nearest available Supercharger is and how long you’ll need to charge to complete your journey. If something is wrong with your vehicle, you don’t need to take time out of your day, they just send the repair team to you. Many restaurants, hotels, and even some Airbnb’s offer Tesla charging so you don’t ever have to worry. Tesla has spent years building an extensive ecosystem and they’re not done yet. 

If the Big Three want to catch up they are going to need to do more than just copy and paste what Tesla has done. They need to start making bold moves to catch up. Simply buying into an existing EV charging network is going to work.