There are over a million Teslas on the roads. How many fewer would there be if the owners could have bought a tiny 75-mile Chinese car? My guess is at least several hundred.
You sound like someone from IBM in 1984. "IBM is quality. People don't want 'compatibles'; they want the real thing." Nope. When a Tesla costs $36,000 and you can buy a "good enough" Chinese electric car for $18,000, many people will buy the latter. What happens next is as predictable as day follows night. The Chinese company improves the product and comes out with a $25,000 mid-line product. Keeps improving, and comes out with a $36,000 direct competitor with Tesla. Improves again and . . . Tesla is gone. The way IBM sold out to the Chinese company Lenovo and exited the PC business in 2005. You must never let the competition eat away at your market from the bottom.
See the book, "The Innovator's Dilemma" for details.
A million Teslas is impressive, but there are also 470,000 Nissan Leafs. How many people do you think bought a Leaf instead of a Tesla? Hundreds of thousands, including me. I think the Tesla is marvelous, but not $15,000 more marvelous than the Leaf, and not when I only use an electric vehicle in Atlanta city traffic. I have an older model ICE car.
We weren't discussing "good enough" $18,000 Chinese electric cars; we were discussing $5,000 mini-cars. No doubt many people would buy that hypothetical $18,000 vehicle (albeit probably not very many current Tesla owners, depending on what "good enough" means).
As I explained earlier, the $5,000 cars are sub-compacts which are very common in Asia. They are ideal for Asian roads and conditions. (You may have missed an addendum I wrote describing how I and two others once picked up one of those cars and put it back on the road -- that's how small they are.)
A few sub-compacts are available in the U.S., but they do not sell well. The Smart Car size is too small for the U.S. market. The smallest cars in the U.S. are the size of a Yaris, which is the same size as a Nissan Leaf. I guess they are "compacts." The sub-compacts are only a little cheaper than these compact cars in Japan. If the Chinese can make a profit with a $5,000 sub-compact in China, I am guessing they can make a slightly larger model compact and sell it at a profit in the U.S. for approximately $18,000. That is about the cost of the cheapest compact model ICEs.
The car might be a little more expensive at first. Maybe $25,000? But it would be cheaper than the Leaf, and far cheaper than the Tesla.
Good enough means it has GPS telling you where to recharge. That's the one feature that really enhances an electric car. The other advanced features of Tesla, such as automatic lane changing and radar, are wonderful. I wish I had them. But I would never pay extra for them for a car used in Atlanta traffic mainly on surface roads. They would not work. Good enough range is ~100 miles for urban driving. There is so much traffic and it is so slow, you can't drive more than 100 miles per day in Atlanta. There are not enough hours in the day. If they can do 75 miles in China now, they will be able to reach 100 miles pretty soon. The Leaf is now at 150 miles for $31,600.
Urban driving is a gigantic market for compact cars, both ICE and electric. That's the market the Chinese should start with, because Tesla has already grabbed the high end luxury electric car market. Normally, it is good idea to start high and go low by stages. That's how IBM sold personal computers and Tesla sold electric cars. The high end usually has a higher profit margin. But, when the high end is already taken by a strong competitor, you have to start at the low end. The way Japanese cars did in the 1960s, and Compaq and other IBM PC compatibles did in the 1980s.
This discussion about EVs reminds me so much when the first attempt to go mass market on them happened in California in the 1990s and even with a short 70 mile range many people that had the chance of leasing one loved them. I never got why they weren’t for sale. Anyone recall seeing a documentary named “Who killed The Electric Car?”?
Well, but that’s history now and mass market electric cars are a reality, while very cheap electric cars are already a headache for bigger players in China. One thing that many overlook is that sometimes people of lower income are indeed a big market on their own, and are willing to pay for dirt cheap products of Lower standards if those products provide a good enough utility.
As I keep saying, it is a very diverse market that addresses a broad range of needs and desires. There is no vehicle of any type/price/configuration that could ever take over the market.
You don't need to take over the market in the first round. Just take a large chunk of it that is vitally needed and price sensitive. Such as cars for short range urban driving. People who live in cities like Atlanta need cars. Rich people can buy any kind of car they want, but there are 6 million people in greater Atlanta and the vast majority of them must buy a cheap, reliable car. Such cars are far more common than Teslas or luxury cars. Leafs are FAR more common than Teslas in Atlanta, because they are cheaper. They are all over the place.
Once you establish a profitable presence in one large chunk of the market, you can expand to other parts with other models. Japanese cars began at the low end in the 1960s. Now they include luxury models such Infiniti and Lexus. Begin by addressing one set of needs and desires. Then another, then another . . .
One thing that many overlook is that sometimes people of lower income are indeed a big market on their own, and are willing to pay for dirt cheap products of Lower standards if those products provide a good enough utility.
That is how personal computers blew away minicomputers and mainframes in the 1980s. Measured in terms of performance, ease of use, and even cost per megabyte of hard disks, they started out inferior to the minicomputers. The software was dreadful. Windows did not achieve the reliability or features of Data General RDOS until the mid-1990s, as I recall. Yet by 1990, Data General was gone. How did the PCs do this? Price! Price, price, price. The IBM PC was introduced at $1,600 in 1981 ($4,600 today inflation adjusted). A Data General low end computer with 4 terminals cost about $16,000 to $21,000 as I recall. $16,000 translates to $4,000 per terminal, and what if you only need one terminal? The moment the PC came on the market, the minicomputers and mainframes were dead ducks. The PCs were dirt cheap, and they quickly became far cheaper. They were a pain in the butt to program, but it was worth the trouble because we could sell a hundred times more copies of the program. The cost per copy was far lower than the minicomputer programs, but the customers had lower expectations. Customers were less demanding. The programs couldn't do as much in any case. They had to be stripped down, low feature, low maintenance, and they had to fit into 16 KB of RAM. Mainly, they had to be crash-proof. The computers would fail often but the programs could not lose data or lose track of what they were doing when the computer came back on.
As a general rule in business, is easier and more profitable to sell 100 items for a $1 each than it is to sell 1 item for $100. A $1 item is an impulse buy. A "why not try it?" purchase. Cheap software is an impulse buy. There was no such thing as impulse buying of software before the era of the cheap PC. That would be like impulse buying of a Toyota T100 3.4L AT timing belt. You don't buy a timing belt unless you need it, and you know exactly what kind you need.
These ultra small, dangerous electric cars in China do not even need a driver's license, according to the WSJ video. They go no faster than 25 to 43 mph. And they are perfect for the Chinese market. I have been to China and I can see that. What they have now are bicycles, electric bicycles and buses. These cars are electric bicycles with cabins so you stay dry in the rain and warm in winter. They are much safer, faster and more practical than electric bicycles. An accident at 25 to 42 mph is less likely to kill you than 50 to 60 mph. You can see why the mother with the baby interviewed in the video is enthusiastic about them. They are dangerous, but less dangerous than a bicycle or walking. You could never sell one in Atlanta or Osaka, but they are ideal for China or India.
The early customers for PC applications were not demanding because they were paying half or one-tenth of what it would cost them for a minicomputer, and they knew that. People who buy mini-mini-electric cars in China are less demanding than Americans who buy Leafs, and a zillion times less demanding than a Tesla customer. They just want something that goes 35 mph to get to work or pick up the kids from school.
And unless the people of Atlanta are vastly more sensible than people elsewhere, the majority of them will not buy a cheap, reliable car. They probably should, but they won’t.
They definitely will, the moment electric cars become cheaper to buy, fuel and maintain. Which they are on the verge of doing. People are not stupid. They do not throw away their money for no reason. Okay, some do. Some "oppose" the use of LED lights because they are idiots. But most can do grade-school arithmetic, and they can see that LED lights save a lot of money over the life of the bulb, so most people buy them. Years ago it was predicted there would be resistance to buying CFT and LED lights because the unit cost was higher than for incandescent light bulbs. That prediction was based on the assumption that people cannot do arithmetic. Go to Lowe's and look at the selection of light bulbs and you will that is not true.
The relationship between people and their cars is an interesting one. For some people, their car is the ultimate expression of their identity. For others, a car is like a blender: just another appliance to accomplish a certain task. Get one of each type together to talk cars and watch the fun!
About how I feel about it too
The relationship between people and their cars is an interesting one. For some people, their car is the ultimate expression of their identity. For others, a car is like a blender: just another appliance to accomplish a certain task. Get one of each type together to talk cars and watch the fun!
That’s more of a side effect of weak minds that are easily susceptible to marketing, but I agree that barring a concerted effort to weed out that kind of idiotic behavior in young generations, whimsical and ego driven consumption habits are a market factor as things stand today.
For others, a car is like a blender: just another appliance to accomplish a certain task.
Exactly. And people in that category will start to buy electric cars as soon as the numbers show they are cheaper. The parking lots in Atlanta grocery stores and office parks show that a large fraction of the population treats cars as utilitarian objects. Appliances. The Toyota dealer who services my Prius says that almost all of their sales are Camrys and Corollas to middle class people, and the customers' main concerns are price, reliability, the cost of maintenance, fuel costs and other utilitarian factors which will soon swing in favor of electric cars.
Of course there will still be people who buy sports cars as an expression of their sexual insecurity, and people who buy SUVs because . . . who knows why.
Fleets of autonomous robo-taxis make more sense from many perspectives.
I have no doubt that as soon as such fleets become technically possible, they will replace a large fraction of privately owned cars. They will be much cheaper. Many people in their 30s nowadays rely on Uber, which is a human-powered version of robo-taxis. They do not buy cars. Car ownership is falling.
However, lots of people genuinely enjoy being behind the wheel of their cars and tooling around in them. Those people aren’t enthusiastic about giving up driving.
Those people will probably not give up driving. They will continue to enjoy driving. But their grandchildren will never drive a car. They will not know how to, any more than I know how to ride a horse. They will probably never ride in human driven car, any more than I might ride in an open biplane.
In the 1920s there were still many people who rode horses, because they had to, and many others who rode horses because they enjoyed it. There are still some people who ride horses, but it is a rich person's hobby, not a practical means of transportation. A century from now there may still be some people who drive cars on privately owned roads, but human driven car will not be allowed on a public road or highway, any more than horses are today.
In any event, car culture is not going to vanish quickly regardless of how sensible the alternatives might be.
I predict that 25 years after self-driving cars are introduced, manually driven cars will be banned from most roads. Their accident rate and insurance costs will make them untenable. 38,000 people are killed by cars in the U.S. Soon after self-driving cars are introduced, it will become apparent to everyone that eliminating human drivers will reduce the number of deaths to a few hundred per year. Once that becomes obvious, people will not put up with the carnage just to allow auto driving enthusiasts to have fun driving. We are not going to sacrifice 38,000 lives a year so they can engage in their hobby. That would be like allowing drag races on urban surface roads. The driving enthusiasts are going to have to move to private property and racetracks.
A generation after that, driving cars will be as rare as riding horses or sailing -- something only rich people do.
JedRothwell , what you comment about Uber and not having a car Can be influenced by other things also. I have had a Chinese executive visit me twice in my city because I was a good purchaser of one of their products for my business, and he told me that he doesn’t own a car not for the direct cost of the car but because of the huge cost of parking space in his city (it costed about 6 times more than the car, and you need one at home and other at work, if not the car is useless). He used only one of the Chinese alternatives of Uber.
Display MoreNot true at all. I should explain that I had a used Leaf but I gave it to my daughter, because of the pandemic.
The Leaf I had was a few years old with an an effective range of 90 miles. It is a small car. The cost was around $30,000 new, after a tax break, and they were selling like hotcakes in Atlanta. They were everywhere! Tens of thousands of them, I believe. The tax break was rescinded and sales fell somewhat. But if you could buy something like that for $18,000 without a tax break, which is the cost of Yaris or other small car the size of a Leaf, they would sell millions of them in urban areas. Hundreds of thousands in greater Atlanta. The 90 mile range was never an issue. Other people I know who have one have never had a range problem. If you go far, there are charging stations everywhere, and there is a GPS in the car that shows you where they are.
If you need to drive hundreds of miles, you rent an ICE car.
The ones in China are smaller than most U.S. cars. They are the same size as Japanese subcompact cars, which are everywhere in Japan. I was riding in one years ago. When the driver parked, one wheel fell off the road into a steep gutter. Three of us got out, picked up the car, and put it back on the road.
These cars are well suited for the Asian market, and Asian roads. However, they are not really any cheaper to make or to buy than the slightly larger ones such as the Yaris, or the Geo Metro. The Nissan Leaf is the same size as a Yaris. The Chinese could probably make one the size of a Yaris and sell at a profit for $18,000 (the same cost as a cheapest U.S. ICE cars).
Agreed,
Electric drive vehicles will soon be commonplace
The IBM comparison is halting. It's like if IBM was INTEL as well and used 3-5 years versions ahead of the CPU than the competitors. How much is it worth to be able to commute
without actually driving the car when the commute is a 1 and a half hours drive? Yep that's the future and that realization is much nearer than you may think. Also Tesla is leading
when it comes to battery production and is innovating like hell. Sure cheating by cutting the range and long-lived of the battery you can make it cheaper with standard battery solution but according
to the plan Tesla will cut the price of batteries by almost a half on three years time when the standard tech have plateau-ed. But then again China is known to steal tech so who knows where it ends.
But I do not think that cheap labor can compete with highly automated production with a small skilled workforce. Also note that TESLA is innovating on basically every vertical layer in the production
of an EV, This fact typically means that they have an edge and if they decided to focus on a car in the cheap price range they would take over that market as well.
to the plan Tesla will cut the price of batteries by almost a half on three years time
It looks like this is done by the Chinese not by Tesla. People said that Tesla only construct large fake factories that are hardly used at all.
