Start-Up "Romeo Power" Attempts to Break into Market for Electric Vehicle Batteries

As discussed in a previous post, several electric car companies (Tesla/ Solar City being the most notable example) have been pushing to create the perfect combination of technology for their energy-conscious consumer. The first company to come out with the technology (some combination of electric vehicles, personal solar panels/ wind turbines, and a high-efficiency battery to store the collected energy) to match that growing need is bound to hugely benefit their productivity in the future.  Although Tesla Motors has made itself a household name in the electric vehicle market, Russ Mitchell, in his L.A. Times article, describes a start-up called Romeo Power that may be able to stand in the way of Tesla's dominance of the high-efficiency battery market.

Not only is Romeo Power a new competitor in a market with high barriers to entry, but the people behind the company seem very confident that their product is better than any sold by the competition. The battery packs are innocuous looking, long and thin to fit underneath a car. Inside the battery pack is what stores all the electricity: thousands of battery cell cylinders slightly larger than a AA battery. Those cylinders have the ability to accelerate a car from zero to 60 in just a few seconds and can allow the vehicle to drive for hundreds of miles without stopping, so packing them all together like that can be a tricky endeavor.

Not only do customers want a battery that stores as much energy as possible and charges quickly, they also want to know that they are safe, that their car won't explode when it hits the slightest bump. Those are all the aspects that design teams have to take into account. They need to ensure their customers' safety while still improving the product's performance. While that may seem unrealistic, Romeo has claimed that its battery packs can achieve a 25% higher energy density than any of its competitors, an unbelievable improvement to most analysts. However, if Romeo succeeds in breaking into the industry with such high-efficiency batteries, they could easily find themselves on the path toward leading market share.

While it seems impossible to many that the start-up will ever take significant market share away from the leaders in the industry like Tesla, some analysts are unsurprised by the company's quick growth. The executives of the company all come from backgrounds involving battery production, and most of them worked for a while at SpaceX, Faraday Future, and Tesla, where they learned a lot about their competition. Sure, mid-level electric vehicles won't need their battery packs, because their manufacturers make their own in house. However, if their battery packs truly have an increased efficiency of 25%, then even the high-end companies will want to use their battery packs. It's simple business: if you don't use the best parts in your product, most customers will choose to go with a company that does.

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Not All Tesla Customers Will Get Expected Tax Rebates on Model 3

Tesla's new electric vehicle, the Model 3, is making waves throughout the market. Thousands of buyers are looking to get their hands on the luxurious, energy-efficient, affordably-priced car. At $35,000 before any governmental rebates, the Model 3's price can't be beaten by other electric vehicle producers. Thousands of dollars in state and federal rebates are offered to buyers, thus making the car an even better deal, but the rebates are not as easy to get as a buyer might think. According to Rob Nikolewski's article in the L.A. Times, buyers shouldn't count on the rebates when determining whether they can afford to purchase Tesla's Model 3.

Just this week, Tesla allowed potential customers from around the world to put down a $1,000 deposit in order to reserve their Model 3, which won't actually hit the market until December 2017. In the first 3 days, over 270,000 customers reserved their future vehicle, drawn in by its price, appearance, and the Tesla brand name. Many also took into account potential rebates that they expect to receive from the government, which Nikolewski considers an unfortunate oversight. According to him, most of the government rebates could run out by the time people get behind the wheel of their Model 3.

Southern Californians can receive $7,500 from federal subsidies and $2,500 from state subsidies when purchasing one of Tesla's electric vehicles. Unfortunately, the subsidies are only allowed for a certain number of customers. After 200,000 Tesla vehicles have been sold, the government will start to phase out the subsidies until, eventually, there will be none left. Additionally,  the state recently announced that wealthy buyers (a head of household income of greater than $340,000 or a single filer income greater than $250,000) will not qualify for the state rebates at all. So, some buyers are trying to play the odds to have the greatest chance of getting the $10,000 in tax rebates.

One customer in Santa Monica, Paul Scott, decided to go for the $50,000 version of the Model 3, which comes "fully loaded." Scott's logic in ordering the most expensive model is that he assumes that Tesla will produce their more expensive models earliest, which means that he will have a greater chance of getting the rebates before they run out. Either way, Scott asserts, he is fully willing to buy the car, whether he gets the tax credit or not. Other buyers, however, don't even seem to realize that the tax rebates are not a definite source of income. They are assuming that the price will automatically be $10,000 less, and are making their purchasing decisions with incorrect numbers, a mistake that they will regret.

Tesla needs to make the terms much more clear for customers. While $35,000 is still an incredibly low price, especially for a high-end, energy-efficient vehicle that grants owners the use of Tesla's supercharger stations, customers will not be happy if they find out that they won't be able to get the $10,000 in tax credits that they had expected. For all we know, California may decide to raise the number of individuals to which they will grant rebates, in order to encourage more potential buyers into greener vehicles. So, it is possible that a lot more than 200,000 customers will get tax credits. Either way, Tesla needs to make the situation as transparent as possible so as to avoid upsetting customers and losing potential customers forever.

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Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

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