I think Mercedes may have a chance of being the #1 selling EV for legacy.
Mercedes you might think, am I insane?
Not many people can afford a new Mercedes.
And you’re right.
And that’s why everyone will buy a tesla.
But some people are too good for a common tesla and must have something more special.
Everyone has a tesla, I want something different, I'm special.
You might think then I’ll get a Hyundai or something like that.
And here lies the problem that all legacy autos face.
They aren't making a profit on their EVs.
BATTERY You see there is a fundamental difference
between battery propelled vehicles and ICE.
An ICE car can pretty much have any engine size, and the performance will come down to
the power to weight ratio.
And the range, well that just comes down to the size of the gas tank, if you want more
range, make a bigger tank.
The smaller or more basic the engine, then the lower the cost.
The larger more complex, then the higher the cost, for example, there is a big difference
between the cost of a straight 4 engine in VW Golf compared to a V12 engine in a Ferrari.
However, the economics for a battery are very different.
You can't just serve up a smaller battery for a lower cost car, or the equivalent would
only give you about 50 miles of range, instead of 300 miles.
That's not enough range.
Not to mention the performance would likely be at a dangerous level.
This is not suitable for the major auto markets.
They would much rather choose an ICE vehicle.
The other EV companies have to offer better value than their ICE offerings, well somewhat
if you ignore subsidies.
And they do eventually have to also do that with a profit, a reasonable profit too, if
they want to maintain similar market capitalizations they have today.
Therefore there is this fixed cost of the battery for every electric car.
They also need to be offering around mid 200 miles of range, or else consumers wont buy
them.
So there is an entry level cost of an EV, with this battery, of course the motors and
drivetrains too.
It's somewhat of a hurdle, that must be cleared or else there is no profit.
In fact there are massive losses, which is manageable if you are selling in low quantity,
and have a massively profitable ICE business to support it.
It's when ICE sales start to diminish, and you try and ramp up electric is when the fit
hits the shan.
BRAND However, the auto industry is about marketing
as much as anything else, creating brands that people can identify with, and feel value
for the price point they are seeking.
If a brand has more class, prestige, heritage, etc, then people are willing to pay more for
that.
As for many a car is considered an extension of themselves.
The mistake that Henry Ford made, thinking they just wanted cheaper Model Ts, and thus
lost a lot of his massive market share to GM, and eventually Chrysler.
Which brings us back to Mercedes.
Now if the cost of manufacturing a Mercedes is similar to a Hyundai, sure there is the
additional cost of the Mercedes refinement and extra features, that also accompany the
brand, but they aren't major relatively, and Mercedes will also up-sell a lot of extras
anyway.
Well what are you left with?
A Hyundai that costs perhaps $40,000 to build, and a Mercedes that costs $45,000 to build.
However, the market may only be willing to pay $35,000 for a Hyundai, but $50,000 for
the Mercedes.
Prices are for indicative purposes.
What does that leave us with, one profitable car, and one losing car.
The other EV companies are going to struggle to get their costs down low enough to meet
their brand.
The prestigious brands can do that, as consumers are willing to pay more for a Mercedes.
And what do brands like Hyundai represent?
More so value for money.
But who is owning the value for money EV market?
Well Tesla of course.
They are the best value vehicles on the planet.
Tesla will take the mainstream EV market, for sure, there is no doubt about that.
The Chinese EV market will be small too, at least outside of China.
NON-TESLA So Tesla will be the mainstream brand, they
may end up with a global market share of 50% or perhaps much higher like 80%, depending
on what market share we are talking about, whether it's auto sales or transit including
Robotaxis.
But either way, there may be some gaps in the market.
A lot of people want their car to be different from other people, particularly if you have
a large ego, and want people to know just how much more successful you are than everyone
else.
If everyone has a Tesla, then you can't stand out.
Sure you can customize it and wrap in in pink, with a bodykit and after market wheels, but
that doesn't tell people you are a big success either.
So it's possible there will be a market segment available for a more prestige brand instead
of Tesla.
I don't think there will be much a market for a lower cost brand, again because of that
initial entry cost of the battery, but no one can make cars for less than Tesla, so
eventually Tesla can just undercut everyone.
And the on top of that there is no lower cost form of transit on road than a Robotaxi.
NICHE I have talked before about niches that may
be left in the market, but it's tough when you don't have economies of scale.
Ok sure there could be an opportunity for some really cool EVs, like the electric DeLorean,
but it's not going to be a big seller, will cost a lot, the range will be bad, and the
performance wont come close to a Tesla.
Teslas are always going to have the best range and performance relative to battery size and
cost, it's as simple as that.
So Mercedes have a massive history, they literally invented the ICE car.
No one goes back further than that.
DEALERSHIP Anyway, I went into my local Mercedes dealership
yesterday, and spoke to one of the dealers and she showed me their EVs.
She loved them, said it was much better than an s class and clearly is the future.
Half her inquiries are for electric these days she said.
But half of them still struggle with range.
And only buy them as a secondary vehicle rather than primary.
But she was very excited about electric.
And she was a former v8 fan.
She showed me all the current vehicles they had and the electric line up, I even got to
experience the EQS.
Oh yea, the EQS, Mercedes answer to unadulterated luxury in an EV.
This was the fully optioned AMG model too.
With this massive screen on the dash, there weren't even that many buttons.
And I have to say, I was absolutely...
underwhelmed.
I sat in the seats, and tried to experience it as much as possible.
I interacted with the screen and user experience, admittedly it was more responsive than most
ICE cars entertainment units in the past, but there was very little going on.
Just massive screens.
Well I say massive, but in reality the total viewing area of the main screen was smaller
than a Model S. In other words if you are watching Netflix on it, then it's a smaller
screen.
Of course that's a big if, because there is no Netflix, or Youtube, or Disney, or anything
exciting in the Mercedes.
No nothing like that, although you can however change the interior lighting to just about
any color you so please.
Cool.
The sales lady admittedly said Mercedes has no FSD close to Tesla, and tried to tell me
that was what Tesla tries to compete on.
Which she was partly correct, however, the range and performance might also be another
unique selling item that Tesla also offers, oh and at an affordable price, well much more
so than a Mercedes.
It felt very basic.
They had even tried to hide the air vents somewhat, by not placing them in such high
profile areas and halving the height, but they still exist.
SUVs She showed me all the other electric vehicles
they had, the EQA, EQB, EQC, and soon the EQE.
They all looked very similar, just SUVs with a slight difference, at different price points.
Something that the Model Y would be suitable as an alternative for all of them, and of
course would cost less and get more range.
Oh and offer a tone more features, with a much larger screen.
And of course does come with Autopilot as standard, and FSD as an option, that does
actually work.
Although she did tell me that Merecedes does have all the latest safety features when it
comes to driving.
Sure, I don't think it comes close to Tesla's safety features.
But 4 different varieties of very similar SUVs, is kind of strange.
I mean obviously they aren't hitting volume production, so why bother starting another
production line of the same vehicle, may as well make something slightly different at
least to target another market I suppose.
They sell the SUVs or cross overs because that is a highly popular market segment, and
can justify a higher price tag.
There is more room there for profit, or as the legacy autos call it, recovering more
of the cost of the battery.
On top of that, the larger a vehicle, the larger the battery can be, which means more
cells can go into the battery and thus increase range further.
This tends to be all non-Tesla's EVs strategy of increasing range, by stuffing more cells
into the battery, of course they still don't get close to Tesla's range, the cars cost
a lot more as a result, and handle and perform a lot worse.
In fact there are very few sedans that aren't Chinese.
The Chinese EVs have to use sedans, because they are at least lighter, and can thus work
with LFP cells, the range on a Chinese LFP SUV would be horrendous.
Same for trucks, another reason Chinese vehicles can't compete in the US, as SUVs and trucks
are quite popular over there.
PORSCHE Now you might also think that Porsche is another
brand with a similar advantage, and I would agree with you, and they managed to sell their
Taycan for as much as nearly $200,000 and people pay, despite it being so inferior to
the much lower cost Model S Plaid.
Some people have too much money, they don't care.
And they want to boast about how much better Porsche is than a Tesla, despite being slower,
with less range, not as safe, and not even close to as many features.
But this is for a sedan, a large sedan, hence why they went for the large sedan to make
sure it was large enough to fit their battery in.
They will also have an electric SUV too.
But after that Porsche hit quite a big dilemma.
The brand is synonymous with the iconic 911.
A car with not too dissimilar a 0 to 60 time than the Plaid, at around 2.2 seconds.
Very impressive.
It handles superbly too being mid-engined, with a short wheel base.
It also costs very little to make relative to its price tag and thus carries a huge gross
margin.
Porsche is a sports car company, at least that's what it's heritage is based.
But how can Porsche fit a massive battery into a 911, with such a short wheel base?
If Porsche went all electric they would have to give the 911 a totally new design, it would
lose it's iconic shape that is held on to since it's inception.
An all electric sports car is not impossible, Rimac have achieved it, hey even the original
NIO too.
They can look absolutely amazing, and have stunning acceleration.
But to give up the 911 shape may be too hard for them to let go.
FORD Then you might think ford are doing well with
the f150 Lightning, but it’s just a niche vehicle for a select target market, and it
hasn’t had to compete with the Cybertruck yet.
A vehicle who’s full specs we are not even aware of yet and have no idea what they have
added over the last 3 years since it’s reveal.
CHARGING Of course none of legacies offerings will
have range close to Telsas but they also suffer with a charging network.
They are being obtuse as to not join the tesla charging network.
And this problem is for every non-tesla ev.
It is worse for non-Teslas as their range is obviously worse, and then they have less
of a charging infrastructure to support their lack of range.
Oh dear, they really are in a pickle.
FSD And anyway, like the salesperson told me,
they don't have FSD, and they wont have FSD, and Tesla will.
And like I say, if you think Tesla's are popular as EVs, wait until you see their popularity
as an AV.
SUMMARY Look there is potential for Mercedes to be
a player, but they’re only selling feature is Mercedes refinement, and teslas are in
my opinion are for more luxurious anyway, and offer features with true value rather
than just glamor.
So it’s really just people who want to show they can afford more than a tesla.
And I don’t think this is even an appeal for the younger generations, possibly just
baby boomers.
But not buying a Tesla because you don't like the company or CEO, would have been like not
buying incandescent light bulbs because you didn't like Edison or General Electric.
But there probably are some people out there.