Sustainable travel is essential for a low-carbon society, but the long view for many had been that EVs posed too large a threat to the profitability of the conventional fossil-powered auto industry. Without a refueling infrastructure and a distribution and service network, and with externalities and high barriers to entry like high-tech startup costs and building production capacity, EVs seemed doomed as another clever idea but little more. Early on, Tesla’s competitors weren’t really worried.
“The higher the capital requirements, the higher the barriers to entry,” Tesla CEO Elon Musk acknowledged. “When there are high barriers to entry, then you don’t see new entrants, and you don’t see innovation. It’s really that new entrants are what drives innovation.”
Musk and team anticipated the vertical alignment that would be necessary to be a viable all-electric car company. It shifted the auto industry toward EVs and continues to achieve consistently growing revenues.
What elements pushed Tesla to its pivotal place in the automotive world today?
The Steps that Side-Blinded Tesla’s Competitors
Early adopters believed that Tesla would beat incumbents and gain market share, and now Tesla’s competitors — like Ford, GM, VW, and Mercedes — cannot change fast enough. Tesla has played the role of industry torchbearer, differentiating itself in terms of brand image, function design, sales model, in-car intelligence, and service platforms. Each year we see more development and innovation in its product line. The company’s supporting infrastructure, ancillary technologies, and industrial chain are becoming more mature, too.
The Tesla patent pledge has aimed to facilitate “the advancement of electric vehicle technology.” The company has committed to “not initiate patent lawsuits against anyone who, in good faith, wants to use its technology.” The term “in good faith” is further defined, excluding, among others, uses by parties that “challenged, helped others challenge, or had a financial stake in any challenge to any Tesla patent.”
Tesla’s innovations have convinced its competitors that technology is the future of automotive success. The question, “Is Tesla a car company that incorporates technology, or a technology company applied to cars?” has been answered — it is both, and each is unalterably dependent on the other. As an internet of cars company, Tesla has more software than the average vehicle, and it is integrated around a single central software architecture. Most internal combustion engine (ICE) cars have less software, making it more challenging to imitate Tesla’s ability to update software and optimize vehicle performance.
The transition to cloud-based infrastructure in the automotive industry required breaking down resistance to technological innovation. Tesla turned this specific objection into a non-issue with its Supercharger network. At the time of the company’s unveiling, limited EV range and a lack of charging options were considerable major obstacles. Tesla eliminated these complaints by making charging fast and nearly ubiquitous.
Tesla’s hardware architecture contradicted early legacy automakers’ attempts at vehicle electrification due to the all-electric car company’s flat pack of batteries at the base, two electric motors (front and rear), and no transmission. Tesla’s competitors writhed as they saw a lower center of gravity, greater energy density, and more efficient battery management instead of their feeble approach of adapting existing ICE vehicle architecture by putting batteries in the trunk.
In advance of volume production of the Model 3, Tesla cut battery costs by manufacturing its own — enter the Gigafactory. Such an innovation relies on economies of scale to make them feasible. Rather than a one-time manufacturing decision, Tesla continuously upgrades its production processes to improve quality and squeeze out costs.
Demonstrating how far Tesla has come, Toyota announced recently that it will adopt a technology Tesla introduced called Gigacasting as part of a strategy to improve the performance and reduce the cost of its upcoming EVs. The Giga Press is an aluminum die-casting machine adopted by Tesla at its factories in the US, China, and Germany. Enormous machines produce aluminum parts far bigger than anything used before in auto manufacturing. Tesla sources its presses from Italy-based IDRA, which has been a unit of China’s LK Industries since 2008. In operation, the press takes in a shot of molten aluminum of 80 kg (176 lb) or more into a mold where it is formed into a part, released, and then quickly cooled.
What’s to be Expected Ahead from Tesla
As we in the press create headline-grabbing stories about Tesla like launching the Cybertruck, the failure to roll out true full self driving tech, and Musk’s own many foibles, it’s easy to overlook the grounded successes of its core vehicles, the Models S, X, 3, and Y. The Harvard Business Review argues that Tesla’s controversial reveals aren’t really about making money — such media messages are consciously designed to get attention and remind audiences that Tesla is one of the world’s most innovative companies. Such messaging arises from Tesla’s need to build support from stakeholders in what’s termed “innovation capital.”
For example, inside sources say that Chinese customers find the in-car navigation systems in EVs made by NIO and XPeng to be far more friendly than the one provided by Tesla. It seems logical that Tesla will respond to such gaps by creating impression amplifiers to get stakeholders onboard. If the Cybertruck reveal is any indication, Musk won’t just talk about navigation system innovations — he’ll materialize them, creating a pilot physical form to demonstrate abstract concepts. It’s an approach that wins over skeptics, gets third parties talking about the company, and generates buzz.
Drawing on metaphors like the envisioned coming Roadster with rocket thrusters inspires audiences to draw upon their prior knowledge of SpaceX, one of Musk’s other companies. Connecting one possible innovation with an already successful one creates an impression of Tesla’s technical superiority across multiple domains. It’s a branding technique that creates mind maps in the audience and builds Tesla’s innovation capital so that the company can continue to win support from investors, customers, and employees.
Tesla’s recent whirlwind market performance has silenced skeptics, albeit perhaps momentarily. Not to be overlooked, however, Tesla is a large corporation that invests in an expensive big data and analytics capacity to enhance its innovation and competitive advantages. Being able to capture, manage, process, and analyze big data to generate valuable insights for business value creation infuses Tesla with strategic flexibility, strategic innovation, and innovation performance. It assuages environmental uncertainty and introduces opportunities for disruption to fill in gaps.
Tesla’s competitive advantages, which include a battery supply chain, Supercharger network, software updates, and intelligent automation, have subverted people’s expectation of what is normal and have upended an industry. It surely is fun to keep on the lookout what’s next for the company. 🙂
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