By Rubin Thomas
Tesla announced this month that it has secured land for its Gigafactory 3 near Shanghai, China. The factory, which is expected to cost around $2.2 billion, will be the third iteration of Tesla’s Nevada Gigafactory, which is expected to be the largest building in the world upon completion. Gigafactory 3 represents an effort by Tesla to increase its footprint in the profitable China market, where increasing tariffs have made Tesla’s vehicles unattainable for many.
Interestingly, this month Volkswagen also broke ground on a new Shanghai factory specifically designed for producing its new MEB electric vehicle platform. The factory will be able to produce around 300,000 vehicles a year annually once it is completed in 2020. Volkswagen plans to produce a wide range of new electric vehicles from this new factory, including 2 all-electric SUVS currently in development.
Volkswagen is one in many mainstream, established auto industry players to make massive investments to rival Tesla and its model range, currently comprised of the compact luxury Model 3 and larger, more expensive Model S and Model X. GM, for example, which currently produces the Model 3-fighting Chevrolet Bolt, plans to release 20 new electric vehicles by 2023. Luxury player Porsche is also currently developing a Tesla-rivaling model, called the Taycan, which is expected to rival or outperform the Model S in key metrics like driving range, 0-60 time, and charging time. The Taycan is just one facet of Porsche’s $7 billion investment into the electrification of its model range. Mercedes-Benz and BMW both also have dedicated electric vehicle divisions and a combined investment of over $20 billion.
Many are concerned that massive Tesla’s growth in recent years could stall once these established, more experienced players enter the market with full force. Tesla’s Model 3 is currently the best selling electric car in the US, the best selling luxury car in the US, and the fifth best selling vehicle overall in the US. These impressive metrics are largely due to a lack of directly-competing vehicles on the market.
More so in the luxury segment, Tesla’s Model S and Model X could fare poorly to offerings from the likes of Porsche and Mercedes Benz because of several factors, including build quality and interior finishings. Auto journalists often complain of panel gaps and loose-fitting interior panels in Tesla vehicles, although these issues often improve further into the production cycle. For interiors, Tesla vehicles are extremely minimalist and do not contain many of the features that luxury buyers are used to having—for example: highly customizable interiors, comfort features like massaging seats, or more plush, luxurious design.
However, if Tesla is able to further appeal to customers on areas it is currently advanced in—technology features, self driving features, and performance—it could maintain its ground in what could be a very crowded market. Especially in the areas of autonomous driving and electric vehicle performance, Tesla is currently potentially years ahead of the competition.