Tesla builds Supercharging "moat" to keep out competition: analysis


Tesla Supercharger site in Rocklin, California, before expansion    [photo: George Parrott]

Tesla Supercharger site in Rocklin, California, before expansion [photo: George Parrott]

Competitors are coming for Tesla. Just as the young company begins to ramp up production of its bread-and-butter Model 3 to what CEO Elon Musk has called sustainable levels, Tesla's European rivals are beginning to roll out their own electric cars.

That has some investors worried about whether the upstart automaker can survive the onslaught from more experienced manufacturers. Early versions of Tesla's cars have had problems with panel fits, motors, and electrical glitches that most established automakers get ironed out before production.

So what's a scrappy upstart company to do?

When more experienced manufacturers launch electric competitors, one thing their cars won't offer is a coast-to-coast network of DC fast chargers that will enable their cars to make most of the same long trips that any gas car can do.

As some investors have criticized Tesla for its huge capital investments at a time the when the company is struggling to become profitable, its rapid build-out of Superchargers can be seen as a defensive moat around its business, suggests a report by Automotive News (subscription required.)

The company currently has more than 10,500 fast DC Superchargers in more than 1,300 locations worldwide that can let owners drive coast-to-coast or border-to-border on almost any major interstate. It is rapidly building a similar network across Europe.

Tesla Supercharger network, North American coverage map, Feb 2017 [graphic: Isaac Bowser]

Tesla Supercharger network, North American coverage map, Feb 2017 [graphic: Isaac Bowser]

Other automakers are relying on third parties such as EVgo and Chargepoint to build out charging infrastructure for their cars. In Europe, Volkswagen, Daimler, BMW and Ford have banded together to support and promote a fast-charge network called Ionity, which has begun installing ultra-fast 350-kw chargers in Europe. The network has a long way to go before it is finished, however.

In the U.S., Volkswagen is spending $2 billion over 10 years to build a network of fast chargers that will charge any type of electric car in its Electrify America network. The effort is in response to a court order following the company's admission that it sold almost half a million diesel cars in the U.S. that did not comply with emissions laws.

Electrify America's first stations opened earlier this year, and the company plans to complete the network by 2027.

These stations, however, are still sporadically located, and none will enable electric-car drivers to make a cross-country trip on more than a route or two for several more years.

Non-Tesla DC fast chargers, July 2018, via Plugshare

Non-Tesla DC fast chargers, July 2018, via Plugshare

Eventually, they may catch up with the Tesla Supercharger network, but it's likely to take years.

Meanwhile, Teslas can charge nationwide today, most of them for free.

During the company's last earnings call on June 6, Tesla CEO Elon Musk rejected the idea that the Supercharging network is a business "moat" against competitors. "Moats are lame," he quipped. "They are nice and quaint, but if your only defense against an invading army is a moat you won't last long."

Tesla has expanded free access to Supercharging for Model 3 Performance buyers, as well as Model S and Model X buyers through Sept. 16 if they are referred by an existing Tesla customer, as most are.

Other new Model 3 buyers can also use Superchargers but they have to pay for the privilege. 

READ THIS: Tesla expands Supercharger network as Model 3 rolls out

Tesla recently increased prices for drivers who don't get Supercharging for free, though a Tesla spokeswoman has said that the company does not plan on turning the Supercharger network into a profit center.

When it comes to choosing an electric car, fast charging is likely to be a key factor for most buyers. Cars carry the promise of freedom to drive anywhere at any time, even if few drivers use that ability. It will be years before other electric cars offer that.

Buying a car from a startup automaker bleeding money carries risks. But many may be persuaded that this additional functionality is more valuable than competitors' additional manufacturing experience.

 
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