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Possible Tesla flop could hit global EV adoption rate

14th October 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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VANCOUVER (miningweekly.com) – Tesla Motors will probably not be able to meet its aggressive production targets and will perhaps experience ramp-up delays in manufacturing the Model 3 electric vehicle (EV), auto analyst Edward Niedermeyer argues, questioning whether the company will still be around in two years.

“I’m very bullish on EVs, but sceptical about Tesla,” he told Mining Weekly Online on the sidelines of the Benchmark Minerals World Tour 2016, in Vancouver.

He flagged the risk that, in Tesla’s haste to ramp-up output, the company is at risk of falling short in terms of assembly line quality and cancelled orders, as production delays push deliveries out. Coupled with presale customers' option to cancel orders and demand refunds for the highly anticipated Model 3 EV, the outlook seems troubled.

Tesla also has to deal with a $2-billion backlog on capital expenditures earmarked for 2016 and the Model 3 assembly lines.

“If Tesla collapses, it could prove to be a significant knock to EV growth on the whole, since it is leading the field in planned production capacity,” he said.

The analyst notes that the market remains comparatively small at this stage, with one thing for sure – knowing that demand will increase belies how hard it is to tell just how fast, or even why.

One thing Tesla had succeeded in already was to somewhat reduce the range anxiety associated with earlier first-generation short-ranged EVs, which will spur more demand. Tesla’s $35 000 Model 3 EV, with a range of nearly 350 km, could be the key for the company to hit its stated goal of 500 000 EV sales by 2018. But Niedermeyer believes it might be too ambitious, adding that 2019 is a likelier timeframe.

POLITICAL WILL
Niedermeyer highlights numerous announcements made regarding political policy interventions worldwide to boost mainstream EV uptake, stressing its importance as a key driver for enabling macro demand growth. However, it remains to be seen how much of it is only hot air and exactly what gets implemented.

He notes that the political agenda and reality are at odds, since the inflection point for EV adoption is around 2025, when most analysts agree the adoption curve will start changing in favour of EVs.

“If one strips out political commitments, not a lot of demand remains, since political agendas will probably provide some reliable demand on a macro basis,” he said.

Volkswagen’s ‘diesel gate’ scandal did contribute to the overall move away from emissions-producing vehicles.

Niedermeyer says research has shown that an EV range of around 320 km encourages the uptake of EVs, as it eases people's psychological fear of running out of power somewhere remote from a charging point. Today's second- and third-generation EVs incorporate significant improvements on the capabilities of the initial-phase commercial EVs.

He adds that it it is decidedly difficult to extrapolate data from the announcements made by several automakers of pending EV models, since they keep information about how big batteries will be very closely guarded secrets.

“We don’t have a precedent for this transition to EVs, but what we do know is that the auto industry is notoriously slow to adjust to the uptake. Partnerships with existing market players are probably the best route to go to implement new technologies in the auto industry,” Niedermeyer stated.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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