Strategic Collaboration Expands Charging Station Accessibility, Software Integration, and Industry Standardization in the Electric Vehicle Market.
Introduction
On 25th May on Twitter’s audio live stream function, CEO of Ford Jim Farley and CEO of Tesla Elon Musk publicly announced an unexpected yet strategic partnership between the 2 biggest players in the US electric vehicle (EV) market. This partnership would reveal 2 major changes. The first was that by spring 2024, existing and future Ford EV customers would have access to 12,000 of Tesla’s Supercharger stations via an adaptor in the US and Canada. Secondly, Ford’s 2nd generation of EVs would be built in with the same connectors as Tesla to use their Superchargers eliminating the need for an adaptor.
The announcement came as a surprise to many, considering that Tesla and Ford EVs are direct competitors. Moreover, it essentially undermines one of Tesla's economic moats, which is its extensive fast-charging station network. Tesla's supercharger network not only holds the label of being the largest fast-charging network in North America but also globally which has played a significant role in influencing potential Tesla vehicle buyers. In fact, the CEO of Ford himself publicly shared an anecdote about how his kids would always spot Tesla's Superchargers during their road trips.
With this new partnership, Ford customers will now have the opportunity to benefit from this strategic network, thereby addressing one of the main obstacles that hinder the transition to electric vehicles: the limited availability of charging stations, which often leads to "range anxiety" among drivers. By joining forces with Tesla, Ford expands the accessibility of charging stations and aims to alleviate this concern for its customers.
Impact
Although the third-party usage of Superchargers may not make a significant change to Tesla’s revenue or profit, it paves the way for Tesla to begin their standardisation of not only the charging station network but also for the software and technology that will be used for all future EVs. Firstly, by letting a direct rival access their network, they are ultimately adhering to their company objective of “Accelerating the World’s Transition to Sustainable Energy”. Whilst this decision may deter potential customers from buying a Tesla to a Ford in the short term, the overall impact it will have on accelerating the transition to EVs will be substantial for Tesla in the future. Additionally, this is not the first time Tesla has made a surprising decision such as in 2014 when Tesla chose to open-source all its patents meaning that any car manufacturer can use Tesla’s technology.
Secondly, during the live stream, Elon Musk did say one important line: “We are happy to be helpful in other respects on the software front. There may be something we could be helpful there … We could potentially open source more code and we would love to be helpful in any way we can.”
Currently, Tesla’s full safe driving (FSD) software is proprietary meaning that it is not free to use by other car manufacturers. As a result, we could infer that in the near future, Ford could be licensing Tesla’s FSD software into their own EV. If this happens, this could potentially be a catalyst for other legacy automakers, such as General Motors, to license Tesla’s technologies in order to keep up in a fast-innovating industry. If this trend materialises in the future, then it could create an environment where partnering with Tesla will be a make-or-break decision for all EV manufacturers.
However, there are certain limitations to Ford gaining access to Tesla's network. One potential issue is the potential hindrance it may cause to existing Tesla drivers, who will now have to share the charging stations with a new customer base. It's important to consider the impact this sharing arrangement could have on Tesla's loyal customers. On the other hand, it's worth noting that Tesla is only sharing 50% of its charging stations with Ford. As the data holder, Tesla has valuable insights regarding which are the busiest stations, and which are located in a prime location. Therefore, Tesla must create a balance between fostering a healthy partnership with Ford whilst minimizing any inconvenience or hindrance to their existing customers. Maintaining customer satisfaction and ensuring a smooth charging experience for all users is a crucial aspect for Tesla to navigate in this partnership.
Standardising the Supercharger network
Prior to the partnership, Tesla Superchargers were exclusively available for Tesla vehicles as they were equipped with the North American Charging Standard (NACS) connector. In contrast, the Combined Charging System (CCS) is considered the industry standard for connectors, utilized by non-Tesla vehicles, including those manufactured by General Motors. However, Ford's recent announcement of incorporating NACS into their upcoming car models suggests a potential shift away from CCS towards NACS as the new industry standard. Should other automakers follow Ford's lead, it would further accelerate this transition. Ideally from a consumer perspective, they would rather prefer one standardised charging plug rather than multiple adaptors and plugs. According to Forbes, Tesla charging plugs are considered to be superior given their small nature compared to the bulky CCS. Therefore, a transition to a NACS standard would most likely be favoured by the majority of EV consumers.
Source: Yahoo Finance
Biden Administration and EV subsidies
People or investors who have been closely monitoring Tesla's developments are well aware that the opening of their Supercharger network to third-party access was an inevitable step. In line with the Biden administration's efforts to promote widespread EV adoption, they aim to establish 500,000 chargers across the United States by 2030. Additionally, the administration plans to provide substantial tax credits to consumers of electric cars through the Inflation Reduction Act. A crucial part of this strategy involves urging Tesla to make their charging network available to other EV manufacturers, which would not only benefit Tesla but also allow them access to $7.5 billion in subsidies. Consequently, this move further solidifies Tesla's potential to establish a standardized charging station network throughout the United States.
Conclusion
At the time of writing, since the announcement date, Tesla and Ford’s shares have been up almost 16% and 9% respectively which shows a bullish sentiment as a result of this partnership.
Overall, the Ford-Tesla partnership not only addresses charging station availability but also sets the stage for industry standardisation, potential software licensing, and accelerated EV adoption. While there may be challenges and considerations to navigate, the collaboration has generated optimism in the market and demonstrates the evolving landscape of the EV industry.
Written by: Matt Delani, Market Analyst at Sora Capital A.C.
Very insightful report. 🌠