Tesla can still survive even if it doesn’t sell enough vehicles to become profitable. If it can sell a significant number of the Model S and Model X, this will further establish Tesla as a valuable brand, and could eventually make it an attractive target for acquisition. “Tesla could be an excellent electric vehicle brand for a major automaker,” Bragman says.
Some experts think Tesla could also have a future as a supplier to other automakers. Unlike Fisker Automotive, another small automaker that’s attempting to break into the electric vehicle market, Tesla developed its own motor, controls, and battery pack technology for its electric vehicles. That gives it valuable intellectual property and expertise and, as a result, it has developed similar technologies for electric vehicles made by Daimler and Toyota. In his shareholder letter this week, CEO Elon Musk said that the company has produced more batteries for these automakers than it has for its own Roadsters.
That arrangement might not last forever, though. If electric cars fail to sell in large numbers, and automakers abandon them, Tesla would have few options left. If, on the other hand, electric vehicles do become popular, major automakers may want to develop the core technology themselves. Just as GM, for example, likes to design its own engines, deeming those a core technology, it’s also decided to develop and build the battery packs for the Chevrolet Volt.
Paradoxically, a modest success for electric cars could also be good for Tesla. Recent changes in manufacturing make it easier for automakers to produce electric cars at volumes that are too low to justify developing their own technology in-house.
“The industry is getting very good at making profits on lower volumes of vehicles for niche applications,” says Jay Baron, CEO of the Center for Automotive Research. In part, this is because factories are using more robots, and robots that can perform more functions, so they can be quickly reprogrammed to make different vehicles. Some automakers have announced that they will offer three versions of a car—one gasoline-powered, one hybrid, and another electric. With flexible manufacturing, they can switch between these according to demand. Baron says Tesla may have a future in selling technology for these niche vehicles.
In this scenario, it would be cheaper for a company like Toyota to buy the batteries and motors from Tesla rather than developing them itself. And Tesla could make significant revenue by making relatively small volumes of its battery packs for several automakers, since it can adopt its technology for many different kinds of cars.
How Tesla fares this year with its Model S and its projects with Toyota and Daimler will give a clearer idea of the company’s future. But even if Tesla can’t stay afloat, it will have played a central role in the technological shift that’s now reshaping the auto industry.
“It’s arguable how much influence they had over the development of electric vehicles,” Baron says. “But there’s no doubt they created a lot of excitement around them.”
Updated 2/16/2012, 12:25 pm
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