Mar 17: The Auto Industry! What did Tesla do with it?

*Note: Content from other sources is summarized in normal format, my original content is in italic

Source: Mostly from Quartz and Finimize, the best newsletters on business updates and analysis/strategy right now to me

Biggest manufacturers in the world

• By countries: China (over twice as many as the second player) -> America, Japan -> Germany and India. China’ve just accelerated since mids 2000s with cheap labor and excellent capabilities.
• By companies: Toyota, Volkswagen -> Huyndai -> General Motors and Ford. The funny thing is, if we talk about valuation, Tesla is the world’s second biggest, without any reported annual profit.

How The Market’s changing

• Shifting geography of car sales: Emerging markets (like China) are getting more cars, and also more “after sales” products. 
• Electric cars: fossil fuel scarcity and climate change is moving the world towards EVs.
• Autonomous vehicles: It is expected that 40% of European personal mileage could be autonomous by 2030 (PwC). This also brings a seismic impact on the way we move around: “shared autonomous driving”

The Challenges Ahead

• Advanced technology doesn’t come cheap.
• The US-China trade war is driving up price on steel and car parts 
• A recession is coming that makes consumers stick with their existing vehicle. The probability is high when Covid-19 epidemic is expected to cost global economy $2.7 Trillion (Bloomberg)

What about Tesla?

• It is now the world’s second most valuable car manufacturer (BI)
• It reached 1 million vehicles last March 09 (Electrek) and became the largest EV carmakers in the world. The follower: BYD can deliver nearly the same capacity, but with plug-in hybrid models.
• 2019 is a turning point for the company as it is entering its mass-production phase. Tesla is in a Goldilocks situation: when its luxury rivals are still too expensive, while the entry-level competitors aren’t attractive enough (Quartz)

I think the reason why Tesla can reach such a high valuation is its distinctive value proposition. The traditional auto industry is saturated. In every price range, different brands could bring the same specifications and people just look at the “logo” to make a decision. Tesla is different, the company also works towards efficiency and environmental-friendly goals.