The conventional Wall Street thinking on Tesla Motors is that it's a vanity stock or a fraud. Tesla says its engineering costs will be half that of its competitors. That may sound fantastic to Wall Street but let's look at one "secret" competitive advantage that analysts are not seeing: Tesla builds electric cars - they are not building electric versions of fuel-burning cars.
Eventually, Tesla will make an automobile in half the time that it would take Ford because Ford cars will still be using traditional design not an electric car design.
Tesla has already tried electrification of a traditional car. Their first attempt was the Tesla Roadster which used the fuel-burning Lotus design. In designing the Roadster, Tesla had no idea the manufacturing costs would be 1/3 higher than originally planned. Tesla began testing this year a car that used an electric design from the beginning. That puts Tesla ahead of the curve.
Ford, along with the rest of the industry, is planning electric cars that are variations on fuel-burning car designs. Ford will run into the same problems as Tesla did with the Roadster; a car that will be hard to design and expensive to manufacture.
Why is an electric design easier to manufacture than a fuel-burning design? First, there is no engine in an electric car. (I know this saves a bundle because I just spent $3000 having the engine in my fuel-burning car reconditioned.) With no engine, there is no need for the engine block and the heavy frame which serves to protect the passengers from the engine in case of a crash. This means the weight of the car is reduced to almost half. Components such as axles, tires, even bolts, don't have to be as substantial as before. The number of parts is reduced to about half and the labor to assemble the car is also reduced. That's how much difference there is between making an electric version of a conventional car and making an all electric car.
What makes an electric car expensive is the battery. However, we know that the price of batteries will fall. After battery prices have fallen, electric cars will cost less to manufacture than their fuel-burning ancestors. The question Wall Street and the auto industry should be asking is this: Which auto makers will be ready when that day comes?
