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The Greatest Long Term Challenge To Tesla Motors Will Come From This Company

Written by on December 23, 2014

As Tesla Motors Inc (NASDAQ:TSLA) goes through a bit of a slump after flying high for much of the year, it’s worth taking a look at who its long-term competitors will be.

Tesla Motors Is Not The Sole Innovator

While Tesla Motors gets a lot of press and has a high-profile CEO in Mr. Elon Musk, it’s far from the only innovator in the automobile business. The Japanese and the Germans are busy innovating as well. BMW has its i3 up and running.

While Tesla aims to sell half a million cars a year sometime around 2020, BMW sells that many 3 Series sedans a year right now.

Porsche is another German performance car maker that is innovating with its plug-in hybrid versions of its iconic Porsche vehicles.

But the manufacturer that has the variety and scale to swamp Tesla — or make it irrelevant — is Toyota Motors of Japan.

Consider their Tesla-killing models on offer.

Toyota Prius As A Tesla Killer

Toyota Prius has been a runaway success in the hybrid electric vehicle space. The Toyota Prius family has sold 4.8 million units cumulatively as of September 2014. Toyota offers quite a choice in the Prius family and three more non-Prius hybrid models too.

And none of them even touches the $40,000 price range. Those Prius models hover at around $20,000 while Tesla’s Model 3 is expected to cost $30,000 as per Tesla’s projections. Not everyone is sure that Tesla will be able to hit those price targets for the Model 3.

2014 Toyota Prius C Hybrid Subcompact

2014 Toyota Prius C Hybrid Subcompact

Toyota Camry is the other popular hybrid offering from Toyota that easily beats current Model S sales in the U.S. Of course, the Model S is closer in price to the BMW i8 hybrid and other similar luxury vehicles.

In terms of sales numbers, the Model 3 will need to compete not only with the different Prius variants but also Lexus Hybrids, Nissan Leaf, Ford Fusion Hybrid, and the Chevy Volt.

Toyota FCVs As A Future Threat To Tesla

After the enormous success of its hybrid electric vehicles, Toyota’s next onslaught is to leap frog the pure electric vehicle (EV) technology that Tesla is championing and go straight for futuristic hydrogen fuel cell vehicles (FCVs).

The FCV technology is complex and enormously expensive — as of now. But Toyota has the size and deep pockets to support long-term research and development into FCVs and FCV technology.

Toyota Mirai FCV

Toyota Mirai FCV

Already, the Toyota Mirai is a visible result from that effort which is on the road in Japan in a small and symbolic way. With the Japanese government also being a willing partner in the development of fuel cell vehicles (FCVs), Toyota may repeat its Prius success again with the Mirai FCV.

Lessons For Tesla Motors

To mount a serious challenge to global automobile majors like Toyota, Tesla needs to get together with a large company and become a leader in innovation. Google with its experimental driverless cars is a possible partner and fit for Tesla Motors.

With a Google-Tesla partnership, we could see EVs from Tesla that are also at the forefront of the technology that enables driverless cars. Google is going to soon launch its Android for autos. Again, a Tesla partnership could bring that technology to Tesla vehicles. Integration of Android technology with Tesla may lead to many benefits for Tesla drivers since Google’s other products include Google Maps which is of some relevance to drivers.

Bottom line is that Tesla will have a significant challenge on its hands as it seeks to ramp up production to multi-million levels and become one of the big guys in the global automobile industry.