With all the recent announcements from major automakers about plans to enter the electric vehicle market with their own high-end vehicles, it has sparked a debate about whether or not Tesla Motors (NASDAQ:TSLA) will face greater challenges in growing its business than investors have expected.
Here's a look at how the electric-car maker thinks about competition, as well as some new quotes from Tesla CEO Elon Musk from an interview with Danish newspaper Borsen this week, in which he talks about the increasing number of competitors in the space.
Model S. Image source: Tesla Motors.
Where is the competition?Up until recently, the main narrative expressed by Tesla management regarding competition was about how disappointing the competitive response to the success of Model S has been. As carmakers continue to flood the market with new gasoline cars, Tesla has tried to woo them toward electrification in a number of ways, including an onstage plea in Detroit from Musk for more electric cars, and a move to open-source its patents.
In a blog post last year, Musk articulated the company's frustration with the automotive industry's lack of interest in electric vehicles, regarding its decision to share its patents "in the spirit of the open source movement, for the advancement of electric vehicle technology":
At Tesla, however, we felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales, and marketing power to overwhelm Tesla. We couldn't have been more wrong. The unfortunate reality is the opposite: Electric car programs (or programs for any vehicle that doesn't burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales.
At best, the large automakers are producing electric cars with limited range in limited volume. Some produce no zero-emission cars at all.
Musk acknowledges competitionBut the narrative is shifting. Competition is finally showing interest in building compelling electric vehicles. And in this recent interview with Borsen, Musk provides an update on how Tesla is thinking about its competitive landscape today.
When asked about an increasing number of plans from its larger peers to compete with its electric vehicles by building their own electric models, Musk said he was "glad."
"I hope they move even faster than they announce," Musk said.
He noted that Tesla's ultimate mission is to accelerate a transition to sustainable transport, so automakers' decisions to launch their own electric are in line with what the company is trying to accomplish.
"To that end, we actually open sourced all of our patents," he reminded. "So, we said any car company can use our technology -- it's no problem. They don't even have to pay a fee to us."
When asked whether he believes Tesla investors expect the company to "fight off this competition rather than embracing it," Musk first responded saying that he has been clear from the beginning that Tesla is driven by strong ideology to transition the world to sustainable transport, so Tesla's efforts to support competitors in developing electric vehicles shouldn't come as a surprise.
Tesla Model S Supercharging. Image source: Tesla Motors.
"So, for us, we're very philosophically motivated. We care about the advancement of electric vehicles," Musk said.
But then he addressed the elephant in the room, which is whether Musk believes it will be able to effectively compete with these new entrants. "As long as we make compelling products, I think Tesla will do OK. I mean we shouldn't do OK just because the competition failed; I mean we should do OK because we make good cars -- that's the only reason."
Perhaps an even bigger question about whether Tesla will be able to remain competitive when there is more electric competition on the road is whether new entrants in the space will drive enough incremental demand for electric vehicles in total that the competition actually ends up helping Tesla. Only time will tell.
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Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Source: Tesla CEO Elon Musk on New Electric Competition: I'm Glad
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