In the late 2000s, Tesla released the Roadster, a limited-production sports car that paved the way for the electric vehicle (“EV”) industry. More than a decade later, the pioneering EV maker has undoubtedly shifted the automotive industry towards electric vehicles. Several EV start-ups are constantly offering innovative products and large automakers such as General Motors and Volkswagen have started producing electric vehicles. So how has Tesla (NASDAQ: TSLA), a firm that produces super-expensive EVs managed to become the most valuable car company in the world?
Despite several governments pushing for the phase out of internal-combustion-engine vehicles in favor of electric vehicles, EVs are still a long way from widespread adoption. This can be attributed to two factors: high upfront costs and range anxiety. Producing EVs remains expensive and, consequently, EVs remain expensive. Range anxiety, on the other hand, refers to the fear of running out of juice with no charging station in sight, and Tesla dealt with this problem in two ways.
For starters, the firm invested in battery-swapping technology. Unlike internal combustion engine vehicles that can be refueled in seconds, EVs take time to get from zero to 100% power. If you don’t have a charger installed at home or have access to a reliable public charging network, you won’t get far in your EV. With battery swapping, however, you can have your empty or nearly-empty battery pack swapped out for a fully charged battery within minutes. Thus you don’t have to worry about finding a charging station and waiting at least an hour for your EV to get enough juice to hit the road again.
Unfortunately, Tesla’s battery-swapping plan didn’t go quite as planned. Although the firm invited Model S owners to try it out, not many drivers were interested. An independent survey of 145 Tesla owners found that battery swapping wasn’t a popular option. However, other EV makers have instigated successful battery-swapping programs. Chinese EV maker NIO Inc. (NYSE: NIO), for instance, has swapped more than 800,000 batteries for its Chinese customers, so EV makers will have to find out if their target market would be interested in battery swapping.
An exclusive supercharger network proved to be more popular with Tesla drivers. The firm has built a network of more than 20,000 superchargers globally that can recharge a Tesla to 80% in as little as 10 minutes. Not only does this reduce range anxiety, but it also enhances customer experience. A reliable supercharger network would closely mimic the experience most drivers have while refueling fossil fuel powered cars, which is quick and efficient.
Tesla has managed to create a self-sustaining ecosystem using its supercharge network, much as Apple did with its products and services. Only Tesla drivers are allowed access to the supercharger network, hence most drivers who prefer the speed and convenience it offers tend to go for Tesla vehicles. By investing in a reliable supercharger network, EV makers can significantly reduce range anxiety and attract more customers to their brand.
Ultimately, each electric vehicle maker will have to do their own research and identify the pain points of their target market, and then design solutions to those challenges. Tesla has just shown that it is doable.
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