Tesla’s profit and outlook stunned the market this week and the stock priced soared on the news. This showcases why the traditional car companies are frightened of and trying to kill the company much like they killed Tucker decades ago. Tesla could make most of them obsolete with a transition wave that might rival what happened when cars first came to market and took out horses as the primary personal transportation device.
Tesla Is More Like Apple
What Makes Tesla very different is they are more like a Consumer Electronics company than a car company. They appear to be far closer to Apple’s model of selling and servicing customers than Ford’s. That has to be incredibly frightening to Ford, GM and the others because these firms don’t know how to adopt or operate under a CE model which requires far more aggressive advancements and, using Apple’s variant, a far deeper engagement with customers than they have ever wanted to use.
Tesla sells through stores like the Apple store placed in high traffic malls. They don’t stock product but build to order using massively automated factories and their products run on batteries like CE products do not on gas. The cars they sell are basically large tablets on wheels with much of the instrumentation, navigation, and audio/video capabilities defined by software, no hardware, much like you would have on an iPad and while they don’t have apps yet, those are coming.
Tesla is moving end to end with charging solutions in the home and free Super Chargers in the field. Traditional cars have to live off Gas Stations which the auto makers don’t control and their electrics have to use generic chargers in the field which they can’t assure.
Tesla’s cars are always connected, like a Smartphone (in effect there is a Smartphone in every Tesla) while the traditional car makers have had significant trouble rolling out similar capabilities with services like OnStar.
Tesla has a simple line, one car with some variants, which will be expanded to three shortly. This is very much like Apple’s model where they keep the line like the iPod, iPad and iPhone very simple and draw people to them. Car companies take the shot gun approach which has proven to be far less profitable by creating massive variety in the hope one of the designs is what a driver/user really wants.
In short Tesla is like Apple with wheels while the traditional car companies aren’t even close and they have no idea how to compete against an Apple model.
Tesla has two new car types coming to market that are even scarier to the car companies than the Tesla S was. The Tesla S is a big expensive sedan but the trendy cars tend to be smaller sedans and SUVs both of which Tesla has in the Pipeline.
The all-wheel drive Tesla X will solve a problem the S has which is getting power to the ground. With two wheel drive the S just can’t accelerate as fast as it is capable of doing but with 4 motors not only does the X potentially get more power it gets much more traction. You can with motors better moderate the power between the wheels to maximize traction which suggests the X will be wicked fast on the street and able to clime things a gas powered SUV could only dream of.
The Tesla E is their small sedan. Far more affordable as an entry car (think if it as Tesla’s iPad Mini) and able to pull buyers into the brand that wouldn’t otherwise be able to afford a Tesla. The lighter weight and smaller size will make it more ideal for cities which are best for electrics (great with stop and go driving bad for distance) and in a performance configuration it should come close to supercar acceleration as well.
If the car companies were scared before they should be frightened to death of what is coming and Tesla is still very young.
Tesla is a force to be reckoned with but while folks tend to focus on the cars it is actually their Apple-like business model which assures they won’t be the next Tucker no matter how badly the large car companies want to squash them. If they succeed in turning the car market into a CE like derivative the big firms won’t be able to compete and they’ll have a lot in common with the buggy manufacturers a century ago. I’m sure that isn’t something they are looking forward to. Their only real response is to embrace the change but I’ll bet most don’t do that in time.
President and Principal Analyst, Enderle Group
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