A Shift in the European Electric Vehicle Market and What It Means for Tesla’s Future
The brains behind Tesla, Elon Musk has been known as the martyr of electric vehicle (EV) innovation. The only way was up for Tesla, the king of electric cars and the top global leader in the market it had created. But as European buyers start to bail on the brand, Musk might be facing a come-to-Jesus moment. Tightening market dynamics and increasingly demanding buyers are challenging the seemingly unassailable supremacy of Tesla in Europe. In this analysis, we take a look at what is causing this decline, the future of Tesla in Europe, and whether Musk can change the data.
The Early Success of Tesla in Europe
The launch of Tesla was applauded when it entered one of the largest markets (Europe) in market. The Model S, then the Model X, and later the more affordable Model 3 helped to change a somewhat scared marketplace that has always been eco-friendly though very slow in taking up ‘new’ green technologies. It joined the trio: innovation, luxury, and sustainability — elements that struck a chord with European buyers.
On a more positive note, Tesla is in such a powerful position to have become one of Europe’s most successful EV companies early on because they could offer electric vehicles with great range even back then (and soon for affordable prices as well) as the only ones and were the forefront of both technology and marketing that it’s charismatic CEO Elon Musk from even before. Tesla emerged as a leading player in the premium electric vehicle segment, and it was also able to rule markets like Norway, Germany, Netherlands — mainly due to the handsome incentives being offered for electric vehicle adoption.
But the market that helped Tesla thrive has started to turn on it, and this new climate could have serious ramifications for its international presence.
The Rise of Local and International Competitors
That Tesla is now struggling in Europe partly as a result of big-name local and international automakers entering the EV market, is if nothing else an indicator that electric-vehicle adoption has gone mainstream. Now, European automakers like Volkswagen, BMW, and Mercedes-Benz have upped their game with electric vehicles that imitate Tesla’s technology, performance, and styling. These well-established brands know the European market inside and out and use this understanding to create EVs that are made for Europeans only.
Volkswagen’s ID. BMW’s iX3 as well as the Mercedes EQS meanwhile have both shown they can be competitive in part with different range requirements over a particular section of the European EV market. The good news is those cars are not only close to the state of the art for technology and range parity with Tesla models, but they also benefit from established service networks — something Tesla has so far struggled to establish on a broad scale throughout Europe.
Furthermore, Chinese EV companies such as Nio and BYD are starting to make inroads in the European market by providing competing but cheaper alternatives to Tesla. These brands are perfectly poised to cater to the rising demand for more affordable electric cars, and in segments where Tesla’s comparatively high prices have priced them out of contention.
Quality and Service Concerns
Tesla has also experienced growing pains when it comes to the quality of its vehicles and after-sales service in Europe. Customers have complained about inconsistent fit and finish with gap gauges, paint blemishes, and non-functioning software systems. While Tesla’s technology is in many ways regarded as state of the art, the European market is undoubtedly finding quality control issues equally frustrating after years of exceptionally well factory-built cars from brands known for their markedly higher standards and attention to detail like German and Scandinavian counterparts.
But that makes maintenance a priority since one of the other problems for Tesla in Europe is its relatively limited service infrastructure. Tesla service centers and Superchargers network has grown, but it’s still not as convenient — or perhaps as reliable — as rival networks. Buyers in countries like France and Italy last month lamented long delays for repairs, difficulty finding charging points, and concerns about whether to trust the brand.
With competition only increasing and these quality bit service issues remaining difficult for Tesla to resolve, the company is starting to slide in Europe where stricter markets like Germany expect top-tier quality and service from their vehicle manufacturers.
The Impact of Regulatory Changes
Tesla is also facing a rapidly changing regulatory environment in Europe. European governments have been hot on emissions targets as well as the adoption of electric vehicles. This would also seemingly be good news, but some of the new policies are putting Tesla at a disadvantage.
This has resulted in a spike in demand for electric vehicles (EVs) as European nations such as the UK and France plan to ban internal combustion engine (ICE) cars by 2030 or earlier. At the same time, new rules coming down make localized production and green manufacturing key. Tesla’s need to import vehicles, especially from its U.S. and China factories, has been an issue for European governments keen on boosting their own EV manufacturing.
Tesla last week tried to address this problem with its large new Gigafactory in Berlin, which is anticipated to let out hundreds of thousands of vehicles every year. Construction delays, red tape, and environmental troubles have crippled the factory’s development though, leaving Tesla unable to fully achieve their European rise.
Changing Consumer Preferences
In addition to regulatory changes and intensified competition, the tastes of European buyers are changing. More opportunely, consumers are wising and are no longer willing to pay a premium for Tesla-branded material. Tesla’s stripped-back cabin design and bleeding-edge tech were a draw for some, but buyers are now starting to look for cars with more traditional luxury touches, better materials, and perhaps improved aesthetics.
Moreover, the excitement around Tesla’s Autopilot, which was a key differentiator for the company, is starting to fade as rivals rush out their own ADAS technologies. Brands such as Mercedes-Benz and BMW have advanced self-driving technologies that are better than anything Tesla offers. Those alternatives add even more competition for the autonomous driving features that Tesla helped popularize in Europe and increasingly make it hard to argue Tesla is unique from the others.
Can Elon Musk Turn the Tide?
Nevertheless, Tesla has not yet said the broken batteries mean that they’ve given up on Europe. If circumstances change, Elon Musk can and has changed with them. Here, too, the Berlin Gigafactory could be a boon for Tesla when fully operational by allowing local production and tuning of vehicles to European needs. Furthermore, Tesla’s dedication to rolling out software updates on an ongoing basis could allow it to immediately remedy some of the complaints about its software, which should help enhance the customer experience.
While still expanding, Tesla’s European Supercharger network is one of the largest and most established fast-charging networks there, and the decision to open it up to non-Tesla EVs could provide a big boost in that market.
If Musk wants to win back the confidence of European buyers in 2019, though, he will also need to confront complaints about service and quality. Image source: Tesla, Deadly CymbalsStrengthening customer support infrastructure, better manufacturing standards, and making the delivery process smoother are going to be important for helping Tesla in its long-term success in Europe.
Conclusion: A Pivotal Moment for Tesla
The moment of truth arriving for Elon Musk in Europe Domestic and international rivals, shifting regulations, and more discerning customers are all putting pressure on the once-mighty Tesla. Though Tesla remains in a position to rebound, its path to recovery won’t be easy. Musk may be able to make a difference in Europe if he can solve both quality problems, lift customer service, and pivot fast enough for what is changing over there so quickly. The next few years will give us an answer to whether Tesla stays ahead in the global EV market or falls behind some of its competitors.
