Legacy automakers need to sell EVs at a loss, or go out of business: Loup Ventures

Last year was a big one for Tesla, coming within inches of their annual guidance to deliver 500,000 vehicles. The fourth quarter numbers were the most impressive, manufacturing and delivering 180,000 vehicles, beating the previous Q3 2020 record by over 40,000 vehicles.

Those kinds of numbers are just part of a continuing trend of growing demand. Industry experts are predicting anywhere between 700,000-800,000 deliveries for Tesla in 2021, a growth rate 4 to 5 times faster than most other automakers.

That demand will hopefully be met with increased capacity. Giga Shanghai has the Model Y production coming online, and the opening of Giga Texas and Giga Berlin later this year will also help.

According to Loup Ventures Tesla is on a roll, and legacy automakers may have fallen too far behind to catch up. Loup Managing Partner Gene Munster believes they have two options, both of which aren’t very appealing:

  • Option 1: Release a car with features and range at parity with a Tesla, and sell it at cost. This car will be priced 10-25% higher than a comparable Tesla, thereby softening demand and leading to further market share loss.
  • Option 2: Subsidize vehicles in order to gain market share from Tesla. With a limited margin cushion, this will increase losses. The more they sell, the more money they lose.

Munster believes that in 10 years either of these options will lead to legacy automakers being forced to restructure, or go out of business.

Do you think Tesla has an insurmountable lead when it comes to the EV segment? Let us know in the comments below.

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