![\"\"](\"https:\/\/i1.wp.com\/towncryyers.com\/wp-content\/uploads\/2020\/03\/546b326ed674b_-_466093487-lg.jpg?fit=1024%2C576&ssl=1\")
<\/figure>\n\n\n\nHow could the disruption have happened so quickly? The\nanswer begins by looking at how the world\u2019s traditional auto leaders got where\nthey are today. What started as a fragmented market of some 200 car makers in\nthe early 1920s gradually consolidated into a few behemoths who erected\nenormous, capital-intensive barriers to entry that they assumed to be\nunassailable.<\/p>\n\n\n\n
Tesla\u2019s speed in innovation in the market for high-end vehicles\nis more like a Google or an Amazon than an automaker. And its soaring market\nvaluation is a clear sign to all automakers that they\u2019ll need to develop more\ninnovative, Tesla-like business models in order to survive.<\/p>\n\n\n\n
As I see it, Tesla currently does at least four things\nbetter than all the auto makers:<\/p>\n\n\n\n
1. It develops cars as it would a software product.<\/strong><\/p>\n\n\n\n Tesla builds cars by developing software on unique hardware,\nmuch in the way Apple develops the iPhone or Microsoft leverages Intel chips\nand Dell PCs. This enables the company\nto improve its cars\u2019 software functionality every few weeks. This is in sharp\ncontrast to the traditional auto industry model where the product is the same\nfor as long as you drive it.<\/p>\n\n\n\n With fewer parts, the total cost of Tesla ownership is\nsignificantly lower than an internal combustion vehicle. There\u2019s no need for\nexpensive oil changes, tune ups, replacing mufflers, and the like. The\nautomakers, who derive significant profitability from their service businesses,\nknow this.<\/p>\n\n\n\n 2. It simplifies the buying process, putting the consumer\nin control.<\/strong><\/p>\n\n\n\n Tesla doesn\u2019t advertise in the Sunday newspaper or put ads\non the radio. Instead is uses the classic software \u201cinbound\u201d sales model: They\nknow consumers are smart and will find them. They understand the buyers\u2019\njourney very well.<\/p>\n\n\n\n Buying a Tesla is relatively simple: You go online, pick a\nmodel, add your features, place your deposit, and schedule pickup. Done. The\nlast time I bought a car from a well-known Japanese automaker, the buying process\nwas miserable from start to finish. I had to talk to a sales rep who would not\ngive me a straight price and kept scurrying back to a manager, who wrote down\nsuccessive new numbers before we came to a deal. When I picked up the car, the\nsalesperson begged me to give him a 10 on the Net Promoter Score survey so he\ncould get his bonus. I much prefer controlling the experience myself.<\/p>\n\n\n\n 3. It leverages its prowess in battery technology to\nminimize the total cost of ownership over the vehicle\u2019s lifetime.<\/strong><\/p>\n\n\n\n Tesla\u2019s battery-powered vehicles are significantly simpler\nthan their internal combustion competitors. By some estimates they have\nsignificantly fewer parts per vehicle \u2014 around 20 \u2014 versus the 2,000 in\ninternal combustion engines. This simplicity dramatically reduces the consumers\ntotal cost of ownership. Tesla has recently acquired battery manufacturing\ncompanies and will incorporate new kinds of battery-related technologies into\nits vehicles, which could further reduce cost of ownership. While other automakers\nare also rushing to acquire the right electric battery expertise, they will\nstill be playing catch up as this market grows.<\/p>\n\n\n\n 4. It attaches itself to the predominant market trend of\nthe day \u2014 going green to reduce global warming.<\/strong><\/p>\n\n\n\n From a marketing point of view, Tesla already has a big\nadvantage in some categories. Who wouldn\u2019t want to own a car that creates no\npollution, eliminates visits to gas stations, and is truly green? Other automakers are going to be playing\ncatch up on this issue for a long time.<\/p>\n\n\n\n Given this situation, what is the auto industry to do?\nTraditional car makers will be offering a growing range of electric vehicles in\n2020 \u2014 but they aren\u2019t necessarily software cars. They are often the cars\nyou\u2019re used to, fitted with electric motors.<\/p>\n\n\n\n To be sure, there are security risks with software cars, as\nwith any kind of connectivity. But Tesla could expand its leadership role by\nmodeling how to manage those risks effectively.<\/p>\n\n\n\n Traditional automakers must now imagine how to become\nsoftware companies, which, given how far behind they are, means they will have\nto do what legacy software companies do when startups disrupt their core\nmarkets \u2014 they buy competitors to consolidate the market. We should watch for\nthis activity, because it is likely about to start in earnest.<\/p>\n","protected":false},"excerpt":{"rendered":" by Lou Shipley Tesla\u2019s recent breakout market performance is proving some of its skeptics wrong. By mid-January, Tesla\u2019s market capitalization had reached $107 billion, and it surged past the giant German automaker Volkswagen to become…<\/p>\n","protected":false},"author":1,"featured_media":837,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9,7],"tags":[199,35,32],"class_list":["post-835","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-tech","tag-business-model","tag-elon-musk","tag-tesla"],"jetpack_publicize_connections":[],"yoast_head":"\n![\"\"](\"https:\/\/i0.wp.com\/towncryyers.com\/wp-content\/uploads\/2020\/03\/maxresdefault.jpg?fit=1024%2C576&ssl=1\")
<\/figure>\n\n\n\n![\"\"](\"https:\/\/i0.wp.com\/towncryyers.com\/wp-content\/uploads\/2020\/03\/Tesla-Supercharger-V3.jpg?resize=1020%2C516&ssl=1\")
<\/figure>\n\n\n\n