Tesla was largely modeled after Apple, which fueled the speculation that Apple was going to go into cars. However, it looks like Apple has backed away from its automotive efforts. That doesn’t mean that its model isn’t working like a champ in the automotive space, though. Last week, Tesla passed Ford in terms of market valuation, and this week it passed GM (for a time) to become the most valuable car company in the U.S. It has a shot at becoming the most valuable company in the world, given that goal was achieved at one time by Apple using the same model.
Last week I spoke about what Ford will need to do to truly get ahead of this curve; it has a good start with BlackBerry and Argo AI, but needs to go farther with a Skunk Works like project. This week let’s talk a bit more about what makes Tesla different and recall just how Apple got the jump on initially far more powerful companies like Nokia, Samsung, and took out Palm. What folks often forget is these more powerful players didn’t really take the threat that Apple represented seriously until too late, and I’m still in doubt about whether Ford, GM, or the rest of the auto industry really understands the revolution that Tesla represents yet.
So, let’s chat about what it means to be a Tesla buyer and why the experience is not only different but generally better than with any other car company.
With Tesla Your Relationship Is With Tesla
I bought a new Mercedes a few months back and it really highlighted the difference for me. I actually did the European Delivery experience, thinking it might be something like what you get from Tesla. I was wrong. The problems I had showcased were founded in the fact that Mercedes really didn’t care about me; I wasn’t their problem, they didn’t communicate with the dealership very well and much of the experience was defined by Mercedes but set up by the dealership. The end result was arguably both the most expensive and worst vacation I’ve ever had, and Mercedes didn’t even get the car configuration right. I’m now faced with just sucking it up or hiring an attorney because, apparently, the company’s mistake is my problem. Clearly this is my last Mercedes.
With Tesla, your relationship is with Tesla; if you have a problem, Tesla is who you contact to fix it. While there may be communications issues between employees, there is no issue with deciding whose problem it is. No finger pointing between the dealership and the car maker. Granted, if you screw up it’ll still be a discussion, but instead of three parties there are two and that makes getting a resolution far easier.
For Service They Come To You
If you pay the better part of a hundred grand for anything, the firm should want to make the experience painless. Yet getting a typical car serviced means having to take time off work to drive the car to a dealership, get a rental car (often these days from a rental car company), and then having to go back again and pick the thing up. Tesla not only comes to you, often it can remotely diagnose and fix the problem. More important, since it remotely diagnoses the problem, it is ready with the parts to fix it when it takes your car. When Tesla takes your car, it gives you a newer model of it, and if you like that car, it’ll work out a deal where you can exchange your car for the loaner. Dealers often don’t get that the loaner could be a test drive for a new car, and I’ve never had one offer to let me exchange my car and cash for the loaner.
Car As A Service
Since leasing a Tesla is more the norm than the exception, and Tesla manages you while you have the car, the experience is more like the future where the car is a service rather than a purchase. The cars are even designed differently so they can be upgraded to newer models rather than replaced. This not only is good for the environment, but it also means that your typical “get rid of the old car and buy a new one” experience, once in the program, is actually relatively cheap. Often a full upgrade costs about one-fourth of what a new car would cost. In effect, you don’t invest in the car, you are investing in the experience of having a Tesla for the rest of your life. Plus, Tesla gets to know you over time, and that knowledge helps it pick accessories, upgrades, and other things it will offer in the future.
In short, what I don’t think Ford or GM get is that when you “buy” a Tesla, you aren’t really buying a car, you are buying into a relationship. Regardless of Tesla’s growing pains (its Model X kind of sucks), the experience is so much better that, given a choice, you will likely never go back to the old way that Ford and GM currently live on.
Much like Apple effectively wiped far larger companies off the map when it came up with a very different way to look at Smartphones largely by focusing on the user and the relationship, Tesla is beginning to do the same with cars. The only thing keeping it from wiping the other car companies off the map is that it is limited by line depth. It only has two types of cars, lacks car charging infrastructure (this is getting better), and has to fight local officials who own car dealerships and are acting to prevent competition. But this should all change over time, and if the car companies don’t get that Tesla is massively changing the entire car market and making the old models obsolete, they’ll have a lot in common with the old Nokia executives when the executives join their Nokia peers in early retirement.
In the end, Tesla is doing so well because it really isn’t a car company; it is a services company and the car is just the core part of the service. You know, if it ever figures that out and realizes the same model could work for a lot of other products, a lot of other companies will be screwed.
President and Principal Analyst, Enderle Group
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