Tesla’s unsuccessful demonstration of the Cybertruck during its unveiling in 2019.
Tesla currently stands as the most valuable automotive company globally, boasting a market capitalization of over USD 720 billion, and ranks as the second-most valuable automotive brand, following Mercedes-Benz. Although the company’s profit margins have fallen to a five-year low last quarter, investors maintain a positive outlook on Tesla’s future, particularly regarding autonomous vehicles (AVs) and robotaxis, which the company is expected to unveil next month.
“No other firm compares to Tesla, tackling exceptionally complex issues that were once perceived as impossible, and in many cases still are,” claims investment group Deepwater Asset Management. “Achieving fully autonomous vehicles will take years… However, resolving these challenges will completely alter Tesla’s business configuration. This forms the investment rationale for Tesla.”
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The Tesla Cybertruck featured in a 2023 episode of BBC’s Top Gear.
The 845 bhp Tesla Cybertruck was showcased in a 2023 episode of BBC’s Top Gear, which described the vehicle as “astoundingly fast… instantly makes you famous,” while also mentioning its “lack of interior buttons or controls and endless scrutiny” and its “higher price than promised.” Critics argue that Tesla has repeatedly overhyped the capabilities of its self-driving software and is inherently lagging behind competitors like Waymo (Google), Cruise (General Motors), and Baidu from China in this area. For context, Waymo has been delivering autonomous ride-hailing services since 2018, while Baidu asserts it manages the world’s largest robotaxi initiative.
Opponents of Tesla further contend that its long-term viability will hinge on its ability to manage quality and manufacturing challenges rather than just software issues or autonomy.
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This is highlighted by the fact that in J.D. Power’s 2024 Vehicle Dependability Study (VDS), Tesla ranked among the lowest brands, reporting 252 problems per 100 vehicles (with only VW, Audi, Land Rover, and Chrysler performing worse). In J.D. Power’s Initial Quality Study (IQS), Tesla was the third-worst brand, with 266 problems per 100 vehicles, tied with Rivian and ahead of Dodge and Polestar.
Witness this Cybertruck disintegration 🤣: Tesla whistleblowers informed me that many vehicles are delivered missing bolts and with cracked components, which unsuspecting fans soon discover, sometimes with dire consequences. $TSLA shifts blame onto owners when vehicles malfunction.pic.twitter.com/hioaICpSfA
— Facts Chaser 🌎 🤦🏻♂️ (@Factschaser) August 3, 2024Concerns about the brand’s quality have particularly intensified since the Cybertruck’s launch last year. Priced starting at over USD 62,000 and sporting a unique design, the pickup was anticipated to reignite consumer enthusiasm for Tesla; however, it has instead prompted complaints about defective wipers, rust and corrosion on its stainless steel body, along with safety hazards due to sharp edges and blind spots. “Owners and industry reviewers have been vocal about the vehicle’s deficiencies. And I’m not even addressing its unconventional aesthetic, which undoubtedly offers critics plenty of fodder. Rather, I’m referring to its ongoing recalls and design quirks that make it a distinctive encounter on the road,” stated CNN Business in an article from August 2024.
The situation has escalated to the point where the Cybertruck failed to qualify for Car and Driver’s 2024 EV of the Year award, as it malfunctioned during evaluation. “Before any Tesla fans contest that we aren’t giving the Cybertruck proper credit, be aware that the rented unit malfunctioned on the second day, effectively immobilizing itself with just a few hundred miles logged. A DNF results in a score of zero for mission fulfillment,” the magazine remarked.
An NPR report from 2021 indicated that Tesla had recalled 475,318 vehicles — including 356,309 Model 3 and 119,009 Model S — based on filings with the National Highway Traffic Safety Administration.
Undoubtedly, Tesla has issued numerous recalls to address complaints, but the adverse publicity will still impact its brand equity significantly. A survey by the marketing agency GfK revealed that 79 percent of car purchasers regard “reliability” as a “very important feature,” surpassing safety (75 percent), fuel efficiency (69 percent), and a smooth, quiet ride (52 percent). Similarly, Autovia Group found that a “reputation for quality” was the foremost aspect influencing automakers in drawing new customers.
While Tesla has historically been identified with a Californian elite image, it seems the manufacturer has struggled to adapt to the Asian market. Tesla initially thrived in China, but it now faces stiff competition from homegrown brands like BYD, NIO, and XPeng, which provide more affordable, tech-driven EVs tailored to local consumer preferences. Furthermore, Tesla has had difficulty combating the looming challenge from Chinese competitors without enhancing its quality issues. The company’s handling of factory safety complaints and recalls has further Hindered its reputation in China. Additionally, Asian consumers prioritize reliability and affordability—areas where Tesla has struggled against local brands.
The emergence of Chinese automakers, like BYD and NIO, poses a direct risk to Tesla’s market position in Asia. These companies deliver comparable technology at more competitive prices and frequently surpass Tesla in terms of range and features. In the early 2000s, China recognized electric vehicles as a strategic industry, implementing various policy initiatives, including over USD 230 billion in subsidies and significant investments abroad, to boost its competitive edge in low-cost EV manufacturing and to target markets that have been traditionally monopolized by Western and Japanese manufacturers. China’s backing of local EV manufacturers, through subsidies and infrastructural support, places Tesla at a disadvantage. In the long run, Tesla may find competitive pressures intensifying from these local titans.
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The introduction of BYD’s Han EV series.
“Chinese EV manufacturers have undeniably emerged as key global players in the industry and are certainly a long-term threat to traditional auto manufacturers from OECD countries,” noted a report from the think-tank Information Technology and Innovation Foundation (ITIF). “[They] benefit from a progressively capable support ecosystem, encompassing everything from research and development quality within Chinese universities and research institutions to a robust local supplier network.”
Ultimately, Silicon Valley often overestimates the significance of software and digitization because of their quick financial returns. Currently, Tesla must tread carefully to avoid falling into this trap because, despite the rise of software-defined vehicles (SDVs), the automotive industry remains fundamentally different from the technology sector. There is a reason for Apple’s decision to discontinue its automotive initiative, despite being one of the most lucrative companies.
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An automobile typically stands as one of the most significant purchases for most people, making it essential for manufacturers to ensure the highest quality and reliability, which often takes years, if not decades, to achieve. Although electric vehicles are indeed easier to manufacture than internal combustion engine vehicles (ICEVs), Tesla still faces considerable challenges in its learning curve, and much of its future success may depend on how it addresses these challenges.
While Tesla once enjoyed a distinctive reputation as a beacon of technological progress and environmental responsibility, attracting a wealthy and progressive clientele, it has diminished some of its appeal, especially as the premium electric car market has expanded, causing Tesla’s unique selling proposition of leading EV technology to become less distinct. Tesla’s Autopilot and Full-Self Driving (FSD) software have encountered multiple high-profile failures, including instances resulting in fatalities. The National Highway Traffic Safety Administration (NHTSA) and various other agencies have probed these occurrences, raising serious concerns regarding Tesla’s safety protocols. Lawsuits arising from these incidents only exacerbate public skepticism and doubts. Furthermore, one might argue that Elon Musk’s controversial public persona, overshadowing the company, has left some of its initial supporters feeling disenchanted. Musk’s unpredictable social media interactions and polarizing leadership style have negatively impacted Tesla’s aspirational image.
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