Industry 4.0 — The Spark Behind Big Tech & Tesla’s Q1 2020 Strength

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In a fiscal climate that’s unparalleled in the history of anyone reading this today, a company’s success is most frequently grounded in Industry 4.0.

Even in the event of adversity — you already know about the widespread lockdowns in Europe and most of the US  — companies like Google, Apple, Facebook, Amazon, and Microsoft posted positive revenue growth to end Q1.

So did Tesla. Tesla showed a profit for the quarter when other carmakers were moaning about seasonality and virus-related slowdowns. What’s Tesla got that other automobile manufacturers don’t have?

Industry 4.0. That’s Tesla’s advantage.

Industry 4.0 and How a Company Knows What It Knows

Industry 4.0 — that coordinated use of digitally enabled technologies like robots, sensors, and artificial intelligence — depends on a particular kind of management paradigm. Management paradigms influence views about the nature of knowledge in the company. In no other automaker is the reciprocity between knowledge, data, and the context in which they are generated so evident as it is at Tesla.

Let’s now refer to a 2019 paper titled Who Profits from Industry 4.0? In it, a team from economics and business worlds highlights “value migration,” which they define as the process that occurs when there is a change in who captures value. This is key, as change that occurs within firms likely affects the nature of value migration across firms.

Because digitalization affects competition, markets, industry structures, industry boundaries, and the role that corporate strategy can play in broader ecosystems, certain choices in organizational architecture can promote or stall a company’s foray into Industry 4.0.

Tesla as Example of Industry 4.0 Excellence

The automotive industry plays an enormous economic role in the US and abroad. After decades of success, however, it now confronts major existential challenges due to ongoing powertrain innovations and the transformation of the industry’s business model. Technical drivers pushing the auto metamorphoses include electrification of the drivetrain and the digitization of transport processes.

Indeed, the automotive development process is highly complex and is getting more diverse with increasing possibilities in modeling, computing. and analyzing. The 2019 Fourteenth International Conference on Ecological Vehicles and Renewable Energies described in part how, especially in the electric vehicle sector, an increasing number of simulation methods exist, dealing with areas like propulsion systems, power supply, and thermal management.

About half of US robot shipments are to the automotive sector, while only about 20% are delegated to the consumer electronics sector. Tesla is a car company that has wrestled long and often with robot demons and come out on the other side stronger for the struggle. Before Tesla started making its Model 3 sedan in 2017, CEO Elon Musk declared that the Fremont assembly plant would resemble more of the factory of the future than any auto manufacturing facility in the industry. By gradually replacing human labor with machines, Tesla would lower costs and improve efficiency.

That’s been a bit of a bumpy road, but through mistakes come experience and eventual advantage. It seems the effective compromise between human workers and robots has allowed Tesla to excel.

Autopilot Continues to Shine

There’s a lot of Tesla pride going around right now. The company has accentuated driver focus and safety through its Autopilot feature. With 8 external cameras, a radar, 12 ultrasonic sensors, and a powerful onboard computer, Autopilot’s suite of driver assistance features is partly the result of a neural network that has accumulated billions of miles of driver experience. Tesla’s accumulated autonomy data set is truly unique, and the technological nuance that Tesla exhibits creates excitement in customers and chatter of reluctant envy in many automotive boardrooms. It has some automakers worried that they’re so far behind Tesla in R&D that catching up is going to be a long, strenuous, and possibly futile race.

Tesla has been able to zoom ahead of fossil-fueled automakers due to its dedication to creating a sustainable transportation network. With the backdrop of COVID-19 alongside the climate crisis, a new melange of courage, caution, and chance is warranted, and Tesla is seeing renewed confidence from investors.

Is the S&P 500 Index Next?

Tesla’s advantage over other automakers has another perk: the all-electric carmaker should qualify for inclusion in the S&P 500 Index if it managed to earn a profit in Q2, says Wall Street Journal‘s Tim Higgins. He allows that Musk’s recent success restarting production at the Tesla factory in Fremont defeats the drama and introduces another big question: “Can the car maker park itself in the S&P 500?”

Joining the index would bring the prestige of belonging to the benchmark gauge of U.S. equities and drive index funds to race to include the company’s shares in their holdings. Time will tell if inventory backlogs resulting in current deliveries, furloughing employees, and rent deferrals, as Higgins outlines, could also factor into the equation.

We’ll know soon.