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Just this morning I watched another Tesla bear trot out the "competition is coming" argument. His argument, "During seventeen years Tesla had no competition but now real car makers have come out with real cars that will eat Tesla's lunch." That's one way of looking at it but why did these real car makers not make EVs before? Why are they doing so now?

From my point of view this competition is good news. It's proof that EV technology has crossed the chasm and there is no turning back. This competition validates Tesla! Even if you buy this argument it still does not address the bear argument entirely.

Tesla is said to be capacity constrained and battery cells are a critical component. Tesla pioneered the use of lithium cells in EVs and early on recognized the supply bottleneck which led to the construction of Giga Nevada. By 2021 Tesla will be making their new 4680 cells in various locations. Tesla has become the largest battery maker. Other car makers will be competing in the market for batteries. If we take into account market forces, this is what I see. Tesla is bringing down the cost of batteries by around 50% which allows them to make more affordable cars. To the contrary, the competition will be bidding up the price of batteries they must purchase. The larger car makers can start making batteries in house but the smaller players will be priced out of the market.

I'm not saying it's a slam dunk. I'm saying the bear argument is weak because it's based on shallow thinking.

Denny Schlesinger
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