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Tesla and the New Frontier in Electric Car Competition

Stocks in this article: TSLA GM F NSANY TM

You can increase the range from 250 miles to 300, or from 300 to 350 -- but that alone means very little for the road trip if the recharge time is long. You basically run into a metaphorical wall despite very high costs -- if the charging times are long.

My argument is this: Once we have hit a certain sweet-spot for range in terms of an electric car -- I argue that it is somewhere between 200 and 300 miles -- the competitive frontier for the automobile manufacturers will move from the range of the batteries in the car, to the charging network.

Imagine a world in which your electric car could get 150 miles of range in five minutes. Or even 10 minutes. If these charging stations were so readily available so as to not cause you to worry about finding them you would not need a bigger battery and it would be "game over" for traditional gasoline/diesel automobiles.

If you are a car company, investing more in a 200- to 300-mile electric car's battery -- even just to cost-reduce it -- will ultimately get you nowhere in terms of the competitive matrix. The competitive frontier will have moved from the car to the charging network.

Even in this 200- to 300-mile range electric car scenario -- today's Tesla -- the vast majority of people don't need any radically fast charging on most days. You charge at home overnight, at work during the day and perhaps at some public parking garage once a week. Seeing as you tend to drive fewer than 200 miles per day, that's all you need.

But we all know that the unexpected happens: emergencies, detours, change of plans or perhaps you simply forgot to charge on a few occasions. It's like insurance: You don't need it on most days -- perhaps even weeks or months. But you still need insurance for the outlier events.

In other words, even if it costs more to charge quickly, having the fast-charge option will be a strong competitive weapon. On most days you will charge for a very low price using slow-charging (240 or 110 volts, AC), but on the few moments you really need it on a road trip or in an emergency you'd be willing to pay a higher price for the electricity being fed at 440 volts DC.

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