Tesla’s Technology-Driven Architecture Is A Barrier For Legacy OEMs

Red Tesla Model 3 LA Auto Show

JUN 20 2018 BY EVANNEX 17


On Tesla’s last quarterly earnings conference call, CEO Elon Musk largely avoided questions from Wall Street analysts in favor of a retail investor (and YouTube personality) Galileo Russell. In turn, analysts largely dismissed Tesla’s rosy outlook for the road ahead. However, one Wall Street analyst is gaining a newfound appreciation for Tesla’s inherent advantages over legacy carmakers.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Matt Pressman. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Tesla’s Model S (Image: InsideEVs)

An investment bank analyst from Berenberg said (via Proactive Investors), “Imminent competition from traditional Original Equipment Manufacturers (OEMs) is often cited as a key threat to Tesla, but this underestimates the full extent of Tesla’s technology advantage, which manifests in the entire electronic architecture design… [Tesla’s] clean-sheet development builds the infrastructure around the technology, enabling minimized-time-to-market product improvements.”

Berenberg added, “This is a decisive barrier for legacy carmakers. Tesla’s centralised, integrated, technology-driven architecture enables flexibility and OTA (over-the-air) software-upgradeability across the entire domain. In contrast, traditional architectures implement technology additively to the legacy infrastructure, resulting in decentralised electronic control units (ECUs) systems that creates excess complexity and incompatibility.”

Above: A look at Tesla stock’s long-term price action stretching back to 2012; each bar on the chart represents a full week of trading (Source: The Street)

Can’t legacy automakers catch up to Tesla? Berenberg argues, “Although OTA technology has existed for some time, it has only been deployed by Tesla to its fullest extent… In the traditional industry, OTA capabilities reach little more than telematics and infotainment system updates, even in the most advanced premium cars. The OEMs’ problem is a design concept that shoehorns technology piecemeal into an inflexible infrastructure, resulting in little-to-no interECU communicability or compatibility and a lack of security.”

Tesla’s battery tech has also leapfrogged efforts from legacy carmakers. Berenberg notes, “We expect Tesla to remain the battery technology leader, as traditional OEMs have shown little effort to commit meaningful capital to battery technology… Tesla’s temperature management is the most sophisticated in the industry, allowing better resilience to capacity degradation, and consequently better residual values.”

Above: Tesla Model S (Image: InsideEVs)

Regarding the Model 3, Berenberg also remains upbeat expecting “Model 3 gross margin to positively surprise… Substantial gains from lower labor content, as well as capital and material use efficiencies, should allow Tesla to comfortably achieve a margin above 25% throughout the product cycle.” In light of these industry advantages, Berenberg maintains a $500 price target on the stock.


Source: Proactive Investors

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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17 Comments on "Tesla’s Technology-Driven Architecture Is A Barrier For Legacy OEMs"

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Will be interesting to see which manufacturers can get to a similar OTA update level first.
Probably VW, since their new MEB Platform was built with this in mind (inspired by Tesla) and they started from scratch.
But it’s hard to tell how far they will go. And it’s still almost 2 years away.

But this also opens up the cars to new kinds of threats. No system is completely secure. Let’s hope this won’t get out of hand.

BMW 8-series will get OTA updates from September this year, I really doubt VW can beat that! Other beamer models will follow later for sure.

These are just small OTA updates. BMW is not ready for Tesla style updates. Most likely just the infotainment system. Which is easy to do.

Jaguar I-pace has OTA updating.

This is Tesla’s competitive advantage (autopilot, FSD, OTA updates/improvements). I believe it was BMW that stated over half of Tesla’s engineers are software engineers. Neither Germans or Japanese excel at software engineering. There is no equivalent version of Google, Apple, Microsoft, and on and on. It’s not just a matter of HW infrastructure or architecture. They are in real trouble.

First BMW (8 series) with OTA update will arrive already in 3 months, so the established cart makers are quickly catching up. There are so many issues with the Tesla OTA service so it will be interesting to see how BMW does it.

Another Euro point of view

OTA seems very useful to compensate for sloppy pre production testing and tuning in association with chaotic car makers (or for chaotic companies in other sectors, see MS for example). For the others it could be useful to update the maps of the satnav or change the display of the screen(s) for the juvenile drivers (or those with a juvenile mindset despite the years going by which seems to be a growing chunk in modern society).

With the money and amount of Japanese companys investing into solid state battery technologies, it’s kind of hard to imagine Tesla having a leadership role in battery technology.

I’m not against Tesla but geesh, call a spade a spade. There is HUGE industry push into newer battery technologies NOT including Tesla.

A bird in the hand…

Solid state is a battery CELL technology, not a battery (assembly of cells into a larger unit) technology.

Nor EV drivetrain technology.

Bunny’s comments are usually well-informed; this one is not up to his usual standards.

“With the money and amount of Japanese companys investing into solid state battery technologies, it’s kind of hard to imagine Tesla having a leadership role in battery technology.”

Then why hasn’t any Japanese auto maker produced a car to rival any of Tesla’s cars?

So far, the Jaguar I-Pace is the only BEV which is actually a rival. The Chevrolet Bolt EV is a rather distant second, and IMHO doesn’t qualify as a true rival.

No Japanese auto maker is yet in the running, and they’ve had 6 years now since the Model S debuted.

Bunny – Tesla have been doing battery research for many years under the auspices of Stabel and Kelty, and latterly under the leadership of Dr Dahn under contract to Tesla who funded his leading edge chemistry assessment lab at Dalhousie and supplies doctoral graduates like Smith who work out of the skunkworks on Level 2 Gigafactory.
Tesla holds battery chemistry patents and keep a keen watching eye on all developments of other companies.
https:// electrek.co/2017/02/13/tesla-patent-metal-air-battery/
http:// http://www.ipwatchdog.com/2017/05/11/tesla-battery-patents-elon-musks-duplicitous/id=81839/
https:// electrek.co/2017/05/04/tesla-battery-researcher-chemistry-lifcycle/
https:// http://www.youtube.com/watch?v=WJzzSOUlQ8o (9 -15mins).

I sure wish Nissan had OTA upgrades. If so, they could send out the latest fix for the 30K batteries. Instead, I’m going to have to setup an appointment to sit in a dealership. 🙁

Thanks for the information and also the valid criticism of my post. I do sometimes wonder if Tesla has made too much of a commitment to where their current battery technology is, realitive to maybe not having the flexibility to change over when and if the next substantial breakthrough in battery tech comes through, wherever that (Tesla included) comes from.

Hopefully the leadership position they have today just keeps growing, but that being said I don’t blame other makers being somewhat leary making huge financial commitments to today’s battery technology.

I just have a gut feeling 5 years from now , nobody will be using anything close to what they are using today.

While OTA is an advantage, I think Tesla’s biggest advantage is motivation. Tesla either succeeds fairly quickly in BEVs or dies. From that level of motivation comes advantages like the Gigafactory, SC network and OTA.