6 Ways Tesla Ruins Everything For Incumbent Automakers
This article was inspired by a tweet by a popular YouTuber who commented that his driveway is going to look like a Tesla dealership. I replied that although I have only one Tesla now, everyone in my family wants a Tesla, even though none of them had any interest in the car during the 2 years I was talking about it but they hadn’t yet seen it. Once they got to spend some time in the car, they all came to love it. All like the instant power, some like the prestige, some like the low maintenance, and most appreciate the low running costs (especially if we purchase them on my account and they can use some of the 162,000 free miles I’ve received as referral awards).
Family Effect
Whether it is a family reunion or holiday like Thanksgiving, when you show up with a Tesla or other EV, it becomes the topic of conversation, since it is so different than any other car. I’m certainly more active than most in my Tesla evangelism, so it should be no surprise that all 5 members of my immediate family — my wife and I as well as my 3 adult children — all want to drive a Tesla.
Right now, we just have one Model 3 that my wife and I share. The 3 children have used cars that do have a lower cost of ownership than a new Model 3, but over the next few years, two things are likely to happen. First of all, they should have increased income as they finish their education over the next year. Additionally, prices of used Model 3’s might come down as they get more miles on them. Of course, if Tesla figures out full self driving (FSD), the price of that option will go up, and if it looks like Tesla is going to get approval for it to be used without supervision in even a single market, I expect there to be a rush on all Teslas made after October 2016 that are upgradable to the FSD computer, which will make used Model 3’s more expensive.
Coworker Effect
Whether they notice you in the parking lot, you take them out to lunch in the car, or you actively ask people if they want a test ride or drive in your car, when someone at your job gets a Tesla, the word gets out. At my workplace of about 300 IT workers, we have gone from just my car a year ago to 6 Teslas in the parking lot. Several of the cars don’t show up every day, because the drivers have to split use of the car with their spouses.
We have about 50 Audi, Mercedes, Jaguar, and BMW cars in the parking lot, so you can see we have a lot of cars to replace. Unfortunately, some of the people who have pricier (greater than $70,000) cars own them more to signal their status than anything else and don’t really care about the cars. With the Model 3 being so affordable, it may not meet their need to signal their status as a rich guy (or gal).
Friend Effect
People who get Tesla’s tend to talk about how satisfied they are with their cars, to both their online connections and their friends in real life. This is yet another way Tesla (and other EV makers to a lesser extent) promote their cars without spending money on advertising.
Longevity Effect
With the Model 3 motor expected to last a million miles and the batteries expected to last 300,000 to 500,000 miles before module replacement, the car is expected to last close to 5 times as long as conventional gas cars and maybe 3 or 4 times as long as diesel cars (which tend to last a little longer than gas cars). This means that when someone buys a Tesla, the other manufacturers may lose the sale of 5 cars they would normally build for a million miles.
Some have mentioned that the seats or other non-drivetrain materials won’t last a million miles, and they have a point. I do think the safety features will reduce the small dents that affect many older cars, but there may need to be a refurbishing industry created to improve the interior of Teslas and other EVs that have many miles and need some interior work.
Every gas car that I have given up on has had a combination of drivetrain and cosmetic issues, but I’m sure I would have kept them longer if their drivetrains were reliable and they had over-the-air updates constantly rolling out exciting new features to keep me happy and entertained (which every Tesla has).
Segment Effect
As I described in this article, Tesla is a fast learner. It has a history of dominating segments it enters, and unlike gas or diesel cars that dominate a segment for a year or two because they have updated styling or one or two nice features, Tesla vehicles come in with 30 or 40 features nobody else even has in development, so once they enter a segment, nobody else is able to come up with a competitive product.
I’m hopeful that Hyundai (which does have some good products, including the 2019 CleanTechnica Car of the Year award) will start to compete, but having a good product doesn’t help if you have no volume available for sale. Hyundai has been selling less than a hundredth the cars in the US as Tesla and it isn’t because Tesla is a hundred times better — it’s because Hyundai is allocating its volume where the incentives are the highest (which is rational behavior) and it only has so much production capacity.
I’m also hopeful that dieselgate has scared Volkswagen into making EVs in sufficient volume to meet the demand for them. The company’s recent ads suggest it is in this game for the long haul and working to associate its brand with EVs instead of diesels. That’s a good sign.
Satisfaction Effect
As we wrote about here, Tesla owners are (in general) very satisfied with their purchases. If an Accord owner buys a Toyota Camry, Honda has a great chance to get them to switch back in a few years if its next Accord is 2% better than the current Camry. When someone converts to a Tesla, that person is likely gone as a gas car customer forever, because once you try an EV, unless you are one of the very few who have a bad experience, you will likely only buy EVs for the rest of your life.
Conclusion
In this article, I explained 6 ways that, when traditional automakers lose a sale to Tesla, it is much worse for them than if they lose the sale to another traditional manufacturer. I would suggest these factors all are multiplicative. So, one person buys a Tesla, then within 2 or 3 years, a few of their family members do, a few coworkers do, and a few of their friends do as a result of that first sale (maybe we are up to 10 sales now); then the person decides to upgrade to a new model (maybe the Model Y or Pickup) and the cycle starts again in the new segment (and maybe another 10 people are sold in the new segment). Furthermore, the car he trades in goes to a new owner and he sells about 10 cars over 3 years.
You can see in my example how a single sale can easily result in about 30 sales over the next 6 years. If this continues to work, Tesla won’t need run advertising. Opinions differ whether this will work for Tesla or, once it gets to a certain size, it will need to advertise to reach certain markets. That’s the subject for another article.
Use my Tesla referral link to get 1,000 miles of free Supercharging on a Tesla Model S, Model X, or Model 3, here’s the link: https://ts.la/paul92237 (but if someone else helped you, please use their link).
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