Analysts at International Strategy and Investment (ISI) have told investors that they believe Tesla will have a “tangible lead” in both product and technology, and that battery electric vehicles (BEVs) are likely to be the “optimum solution as OEMs pursue tailpipe emission-free cars”. 

Tesla has a major advantage over the competition because it will not face significant increase in costs as global CO2 emissions regulations are becoming increasingly difficult to meet. ISI said: “(Tesla) has a market-leading product for which there is no obvious competition (and) has already created substantial brand equity through product and innovation. Global legislation, namely emissions regulations, is a tailwind (for Tesla) yet a headwind for the [premium] competition.” 

Tesla has also estimated that the cost of batteries should fall by about 30 percent, while ISI has estimated that the cost for making a Model S should drop by 13 pertent by the year 2020. On the other hand, the manufacturers which decide to switch to hybrid systems will face a rise in costs when they do so to meet more stringent emission norms. 

ISI has also asserted that Tesla will be more successful in China, not only because the premium car market is booming, but also because Chinese authorities are rooting for a much greater uptake of BEVs. The country wants as many as five million BEVs on the road, and approximately 4.5 million charging points. Across the open market, Tesla is already drawing customers away from Mercedes, Lexus and BMW. Daimler also sold its four percent stake in the BEV manufacturer recently, which is indicative that Tesla is now more competition and less technical partner.

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