Last week, Tesla laid off 500 employees responsible for the expansion of the Supercharger network.
The layoffs surprised many, considering Tesla's Supercharger network is dominant in the United States, often the only chargers in many areas. In addition, the company had they recently signed agreements to allow other car manufacturers to use the network.
But Northeastern University business professor Fernando Suarez says the decision — while “complex” — makes sense.
“At the end of the day, I can see how — from Tesla's perspective — you would make a decision like that,” says Suarez, the Jean C. Tempel Professor of Entrepreneurship and Innovation at Northeastern. Suarez also lectures about Tesla in an Innovation Driven Strategy course at the university.
“Yes, they could make some money from charging other cars on their network,” Suarez continues. “But at the same time, they give oxygen to the competition and allow them to become stronger and stronger.”
And while the decision leaves many drivers worrying about how and where are going to charge their electric vehicles, Suarez believes consumers will ultimately benefit from Tesla's move.
“In the long run, it means there will be more competition,” says Suarez. “It will incentivize other networks to grow faster and other companies to start investing in their Supercharger network and competing Supercharger networks that are going to be built.”
Tesla's Supercharger network is the dominant fast charging network in the United States, with approximately 6,000 station locations and approximately 28,000 charging ports. Elon Musk said the layoffs included the team that had worked on building new Supercharger stations. Tesla, he said, will finish the stations under construction. ChargePoint has the largest charging network in the United States with more than 27,000 stations with nearly 50,000 individual charging ports, but the majority of these are slow charging stations.
The Supercharger network was for years proprietary, meaning only Tesla cars could use it.
However, Suarez says some recent developments have made the idea of continuing to build and develop a nationwide charging network less appealing to Tesla.
First, the electric vehicle market has “matured” – Tesla is no longer the only player in the game.
“Tesla enjoyed a situation that was very unusual – they were basically left alone for 10 years,” says Suarez. “When the competition came, like last year Tesla had to reduce pricesdiscounts was down, 10% of its workforce was laid off, and its stock fellyou're moving into a different state in the industry — one where efficiency is extremely important.”
In other words, Tesla needs to cut costs.
But in addition to efficiency, a more mature market also includes standardization.
Perhaps anticipating this, Tesla has struck deals with other automakers to allow non-Tesla cars to use the Supercharger network with adapters. But it would cost money for Tesla to adapt, maintain and expand its charging network — costs that may exceed the money Tesla could make from charging customers. It would also give its competitors a leg up if they didn't have to spend money building their own charging networks.
Plus, this was only going to work for so long – the EV charging market is also maturing.
In fact, in last year's bipartisan Infrastructure Act, the administration set EV charging standards and required companies to meet them in order to access $2.5 billion federal grants to build the EV charging network;.
Ultimately, facing a cash crunch, a standard mature market for EVs and a mature market for EV chargers, Tesla had to make a decision, Suarez says — essentially, did it want to be a car company or a charger company?
Tesla seems to have chose the former, betting on autonomous vehicles for the next market upheaval.
Of course, for the EV driver, Tesla's decision is troubling. probably also for the environmentalist.
“From a social point of view, maybe this is not really good because it will delay the development of the EV industry and the progress of the industry in the US,” says Suarez. “But that would be temporary.”
Will others fill the void?
“No question,” says Suarez.