Tesla to Overcome Difficulties?

Taken from:

http://green.autoblog.com/2014/02/28/is-bmw-the-only-real-competition-to-tesla-motors/

And from:

http://www.nytimes.com/2014/03/18/business/tesla-fights-for-a-place-to-park.html?hpw&rref=business&_r=0

Tesla Motors was the first company that produced an electric car using lithium-ion technology. In 2009, Robert Lutz, General Motors’ then-Vice Chairman said, “All the geniuses here at General Motors kept saying lithium-ion technology is 10 years away, and Toyota agreed with us – and boom, along comes Tesla. That was the crowbar that helped break up the log jam.” As “the log jam” was broken, many companies started joining the competition in the electric car business. The companies included General Motors, Honda, Audi, BMW, and more. The excessive number of companies in an industry naturally causes intense rivalry. For example, the price competition became harsh; Honda recently joined this electric car pricing war by lowering the price of a model (Fit EV) to only $259 per month lease. Also, we should notice that a number of electric car companies are originally gasoline car companies; it is not difficult for gasoline car companies to expand their business into electric car industry. In short, a threat of new entrants onto the industry is high, thus intensifying the rivalry in the industry.

Moreover, one of Tesla’s most competitive advantages, the direct-sales approach is facing hardships:

New Jersey last week became the latest state, joining Texas and Arizona, to effectively shut down Tesla, when regulators said that it had until April 1 to comply with the state’s restrictive dealership laws. In Ohio, lawmakers are considering passing similar legislation. And Tesla now expects New York dealers to once more seek regulatory changes before the State Legislature. The company has faced court challenges in New York before and in Massachusetts, as well as attempts to restrict its direct-sales approach in Virginia, North Carolina and Minnesota.

This shows that many states are shutting down Tesla by restricting its direct sales.

  However, I think Tesla will remain competitive. First of all, a threat of substitutes is low. It is true that people can use bus or other public transportation, but most people desire to have their own vehicle. Furthermore, I believe gasoline cars should not be counted as a substitute. Instead, electric cars should be considered as a substitute to gasoline cars. The US government has been pushing to promote the use of electric cars by investing millions of dollars into the industry; in addition, people would purchase eco-friendly electric cars as they become cheaper. In other words, there is no strong substitute that can intensify the rivalry in the electric car industry. Another factor that will help Tesla is the bargaining power of suppliers and buyers. Buyers of cars want high-quality cars, and Tesla has them. The supplier, Tesla, even requires the high switching cost caused from super charge stations and swapping batteries. Overall, I think these advantages will be able to let Tesla overcome the difficulties.