Chapter 1: Tesla's Unique Position in the EV Market

For several years, Tesla has been the leading choice for consumers seeking a technologically advanced, reasonably priced, and high-quality electric vehicle (EV). However, brands like Ford, Hyundai, and Kia have recently begun to replicate the sophisticated feel that was once the hallmark of Tesla vehicles. Compounding this challenge are significant price increases, with Tesla's most budget-friendly model now costing an astonishing $47,000.

With these developments, Tesla's primary advantages seem to be its extensive Supercharging Network and advanced features like autopilot. Nevertheless, the recent announcement from the White House regarding the opening of Tesla's charging stations to all electric vehicles could level the playing field for all manufacturers. Consequently, Tesla faces a critical choice: to either return to offering competitively priced EVs or to intensify its commitment to technology, specifically in making autopilot widely accessible.

Elon Musk, Tesla's CEO, has made it abundantly clear that he prefers to pursue the ambitious target of achieving full autonomy rather than focusing on the equally ambitious $25,000 "Model 2." While this strategy may appear beneficial, it could potentially backfire for the company.

Section 1.1: The Challenges of Pursuing Autonomy

Despite Musk's initial predictions of a fully autonomous vehicle by 2018, we are still far from that goal as we approach 2023. Tesla has made strides with its Full Self-Driving Beta, but the technology still commands a hefty $12,000 premium and demands driver attention.

Adding to the confusion, the terminology surrounding Tesla's technology has been criticized for being misleading. In July, California's DMV took issue with terms like "Autopilot" and "Full Self-Driving Capability," which they argue do not accurately reflect the system’s limitations. If Tesla does not address these concerns promptly, it risks losing its license to operate in California. Given Tesla's long-standing use of these terms, it will be interesting to see how the company adapts its marketing strategy.

On a brighter note, Tesla recently announced that its Full Self-Driving Beta has amassed over 35 million miles of user data, a figure expected to grow in the near future. However, Musk's optimism may be misplaced, as he anticipates that nearly 1 million people will be using the FSD Beta by the end of 2022, despite current usage being just over 100,000.

General Motors is also making strides in this area with its Supercruise system, which has logged 34 million miles and is touted as a "hands-free system" for select roads. GM plans to expand this offering to encompass 400,000 miles of hands-free compatible roads by early 2023.

While Tesla may eventually lead the way with a fully autonomous vehicle, likely in the form of a robotaxi, Musk acknowledges that regulatory challenges may limit its operational scope. He envisions a robotaxi that could debut as soon as 2024, operating without pedals or a steering wheel, allowing it to function autonomously.

Despite the allure of such a product, it seems optimistic to expect it to be ready and legally permitted by 2024. Musk envisions these vehicles operating similarly to a blend of Airbnb and Uber, where users can earn money by allowing their robotaxi to join Tesla's fleet when not in use. However, the additional income may be necessary to offset the high cost of these vehicles.

Section 1.2: The Importance of Competitive Pricing

Due to Musk's focus on autonomy, Tesla has deprioritized the development of the $25,000 Model 2, initially expected to launch in 2023. During the Q4 earnings call last year, Musk confirmed that the company was not actively working on this vehicle, suggesting that it may not be available until at least a year after the robotaxi’s introduction, pushing the timeline for the Model 2 to 2025 at the earliest.

Unfortunately for Tesla, other automakers are aggressively working to introduce compelling affordable EVs. Chevrolet has reduced the starting price of its Bolt to $26,500, while Nissan's Leaf is now priced at $28,000. Although these models may not rival Tesla's offerings in terms of features, they signal a shift in the market.

Chevrolet is also preparing to launch a ~$30,000 Equinox EV, built on General Motors’ new Ultium platform, which supports higher-end vehicles. Volkswagen has announced a lower-cost variant of its ID.4, starting at $29,995 after tax credits. Most notably, Volkswagen plans to begin production of a small crossover based on the ID. Life concept, potentially priced as low as $24,000 by 2025. This vehicle could offer impressive specs, including 231 horsepower and a 57-kWh battery, translating to about 250 miles of range based on European testing standards.

Although the ID. Life concept may not enter production, it illustrates Volkswagen's vision for what is achievable in EV technology by 2025. If Volkswagen meets its production goals, it could soon offer vehicles that closely mirror its concept’s specifications, especially given the company's continuous improvements in EV technology and pricing.

As Tesla navigates its autonomous vehicle ambitions, it must adopt a more pragmatic approach regarding timelines. While Musk's visionary mindset has propelled the company forward, it often leads to overly optimistic projections.

If Tesla can manage to launch the robotaxi in 2024, it will solidify its status as an innovator in the EV sector. However, if this project faces delays of three to five years, as seen with other initiatives, and the Model 2 is postponed until closer to 2030, Tesla could find itself playing catch-up. Nevertheless, the enduring demand for Tesla vehicles indicates that the company is unlikely to fade into obscurity anytime soon.

Sounds like a win-win, doesn't it?