Comment by Octokiddie
3 years ago
Tesla is in the process of discovering that the electric car was in fact never a disruptive innovation in the Christensen sense. It's a sustaining innovation. Under the sustaining innovation model, the upstart is not likely to succeed because the innovation plays the the incumbents' strengths.
It's just taken time for the industry to respond.
I say this because I interpret Tesla'a nonstop obsession with self driving as an admission they're in a race they will lose. The feature is a gizmo that appeals to techies and can, for a time, prop up sagging unit margins. But it's a nice to have bobble at best compared to the real prize of dominating the car market.
Christensen book, The Innovator's Dilemma even specifically identifies the electric car as a potentially disruptive innovation, mapping the path an upstart could take to eventually dominate the car market. Tesla never took that path, and instead did the exact opposite. It sold social status to wealthy customers rather than basic transportation to an abandoned market.
> I say this because I interpret Tesla'a nonstop obsession with self driving as an admission they're in a race they will lose
You don't need to interpret there; it's one of the few things Musk has been relatively consistent and forthright in admitting to. EV technology alone is not a very wide competitive moat, it was clear that other OEMs would be able to catch up to it. The mechanical and electrical engineering required is not a big challenge for the supply chain and a lot of the components were already available off-the-shelf.
I believe he has said something similar to "without Autopilot Tesla is worthless" or some sort of dramatic statement like this - it's supposed to be their competitive moat going forward, so there's a lot, no pun intended, riding on it and making the market believe it's going well.
This is doubly true because Tesla is arguably not doing great at scaling out the stuff that makes the other OEMs be able to participate in the overall industry business model. Tesla has made very impressive strides in bootstrapping and building out a volume production network etc., but what other OEMs do in having stable and predictable schedules and refresh cycles for a number of underlying platforms and car lines is still a very different ball game. Just look at how long in the tooth the S/X and even the 3 are getting without a full makeover or how long the Cybertruck is taking. Also a full refresh cycle of the factory network when you switch from one carline gen to another etc. is a milestone Tesla still has to manage.
I seem to remember automated manufacturing was supposed to be his big thing. The other companies were bogged down with union labor and he saw an opportunity. Then the first gigafactory failed to fully automate the process and so he put all his chips on "cheap" autopilot that didn't require expensive vision hardware and could instead all run on video.
Now that isn't panning out either. I don't know if there are any other places to fundamentally disrupt in the automotive space, but if there are, that's where Tesla will focus next I suspect.
This never really made sense either -- labor is manufacturing's largest "avoidable" cost by far, so all manufacturers want to reduce the amount of labor to an absolute minimum. The machines Tesla were buying to automate their plants only existed because other auto manufacturers were already using them for the same purpose. Tesla thought they could extend their use to places where traditional manufacturers had decided against it -- for instance shaping/fitting body panels, but quickly learned why the GMs and Toyotas of the world had human input in those areas.
Trying to "out automate" companies who make literal millions of cars per year was never a recipe for enduring margins. There are plenty of videos from even economy car assembly plants 15 years ago where robots did the entirety of the welding and humans were only involved for little bits of final assembly.
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On of the next big things will be the next GPS, internet and other services that Starlink will make possible. Who knows how long it will take but I get the notion that Tesla can fix a lot of their problems in a production cycle or two and still have killer features to set it apart.
That's odd considering VW's impression of the Berlin factory was that it is the new standard to beat regarding automation and build time.
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It is panning out, it's just not all robots, gigapress is a thing.
> I believe he has said something similar to "without Autopilot Tesla is worthless" or some sort of dramatic statement like this
Musk said, "The overwhelming focus is on solving full self-driving. That’s essential. It’s really the difference between Tesla being worth a lot of money or worth basically zero":
https://electrek.co/2022/06/15/elon-musk-solving-self-drivin...
Fucking hilarious.
2022: "Our focus is on solving the problem."
Musk in 2015: "Self-piloting cars are a solved problem." "I view it as a solved problem. We know exactly what we need to do and we will be there in a few years."
Apparently it got unsolved along the way.
Source: https://www.wsj.com/articles/teslas-elon-musk-says-autonomou...
At Battery investment day (a few years after Autonomy investor day) he said the opposite: that self driving wasn't worth much because competitors would follow in 2-4 years, and that their advantage was all about their new battery tech. The new Tesla-made batteries have come out now and are 20% worse energy density than Panasonic's.
I hate defending Tesla/Musk, but the reason the new batteries have worse energy density is because they switched chemistries to much cheaper, longer-lived, and safer lithium-iron-phosphate batteries.
The downside to LFP batteries is that they are less energy dense than the old NMC chemistry, though modern LFP batteries now have the same energy density as NMC batteries from about 10-15 years ago (due to the fact that individual cells can be placed more closely together than in NMC batteries due to the lack of thermal runaway risks).
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'Tesla founder Elon Musk said the key to his electric automaker's value is whether it can achieve self-driving technology, adding that the firm would be "worth basically zero" without it.' (https://www.businessinsider.com/elon-musk-tesla-worth-basica...)
I guess it's a trope he trots out in different contexts.
As for batteries, you hear much the same content at a variety of different OEM "battery days", which usually get much less coverage on places like HN however.
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Who cares about power density? They are designed to lower $/kwh not kg/kwh.
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I don’t get why tesla can’t just do the thing that originally made them successful: build really good electric cars, that people choose to buy over cheaper alternatives.
Why do they need a competitive mote when they can just outcompete by doing things as they already were?
AFAICT teslas are becoming worse instead of better, because of this obsession with gimmicks instead of excellence and customer satisfaction.
>build really good electric cars, that people choose to buy over cheaper alternatives.
From the perspective of an employee at another OEM, I’d say they already do that. They have several moats outside of autonomous gimmicks:
1) Charging network. Nobody comes close. 2) Infotainment software (combined with underlying architecture and in-house silicon). They have the best experience in the industry. Their architecture is streamlined unlike disjoint legacy OEM 15 ECU hell. The broad market doesn’t really understand how far ahead they are in terms of architecture. Any new OEM has a huge advantage of starting fresh. 3)Packaging and battery density. They have the best range. They have the best packaging (tons of trunk and frunk space), where as many other manufacturers end up with weird raised trunk floors and no frunks in their competitor products that also somehow get worse range.
So yeah, I think Musk definitely undersells their lead in these areas. With no redesigns of the main models yet, they really could have focused a lot of effort on improving quality, interior materials, etc, but they instead poured money into the quagmire of autonomy.
> "without Autopilot Tesla is worthless"
There's nothing too special about their autopilot compared to what other manufacturers offer. Musk's fast and loose claims about what Autopilot cand do "in the next six months" or "around the corner" were overhyped exaggerations designed to sell cars at best or Theranos style lies at worse, hoping that by the time people wise up about the false promises, Tesla's engineers will have something to show for close enough to what he promised which will buy hem more time to create more hype to sell more cars. Rinse and repeat.
The thing is Tesla can't maintain their wide moat as the other manufacturers are catching up.
Grown up friends of mine were rabidly buying Tesla stock, basically putting their life savings into it, and when I asked them why, they kept telling me "because Tesla's innovations would make the other car manufacturers obsolete". Now they're pissed at him.
> they kept telling me "because Tesla's innovations would make the other car manufacturers obsolete".
Always thought this was a pretty odd belief, because this, generally, is not how things work. It's very unusual for a company to sustain a monopoly on _innovation_; where it happens it's usually down to the market being too small to justify the investment to catch up by others.
What company has as good of an autopilot? The luxury car makers don’t seem to have one.
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>It sold social status to wealthy customers rather than basic transportation to an abandoned market.
That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery battery. You can get tons of power for almost not additional money, mass or volume. So building something like a 5 series BMW is very easy to do and make competitive. Building a Honda fit is very hard. The nissan leaf is the closest thing to that, and people don't want it because it can't really do road trips.
> That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery.
Kind of, you can also change the other factors in the equation like that startup building 'Lightyear' with the light weight platform, aerodynamics and with PV panels [0]
[0] https://lightyear.one/lightyear-2
Or the extreme aerodynamics of Aptera which in 3 days [1] claims to "showcase our production-intent design and announce our Launch Edition’s unique specifications and revolutionary capabilities in a livestream webinar."
[1] https://aptera.us/meet-delta/
I think the range problem is already solved by the 800V/250kW+ charging. A 20-minute break every 3 hours of driving is within reason, and it makes the range effectively infinite.
I know there are people with steel bladders who also need to tow a boat every day, through a desert, in the snow, uphill both ways, but for commuting and occasional road trips it's already pretty good. Just don't try this with Leaf and its previous-gen peers that are 5 times slower than the state of the art.
But the only 800v cars are the extreme upper end of the price scale even for EVs. I think currently it is only the Lucid Air and the Porsche Taycan, both extreme luxury even in the expensive EV segment. And the infrastructure for non-Teslas just isn't there. The state of charging infrastructure sans Tesla's Supercharger network is really, really bad in the US right now, to the point that major EV influencers are just straight up recommending not yet switching to an EV just because of this.
I'm talking 1/2 of the stations broken/bricked on average, another 1/4 not delivering at all or not delivering the promised (250kW+) output, so you're stuck with 50kW in the middle of nowhere and your 20 minute stop now takes you 2.5h with no amenities around.
Check the Out of Spec channel on Youtube for frequent updates on this type of stuff.
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Just imagine what you could do if you could just open the boot and swap out a few 10kg batteries at the fuel station. You'd still have 30KWh hidden around the chassis, but most people don't need >100mile range every day.
Taking a long road trip with multiple people in a subcompact "penalty box" car the size of a Honda Fit is kind of a miserable experience regardless of what kind of motor it uses. People mostly only do that when they have no other options.
Never owned a Fit, I take it?
My wife and I owned a Fit for over ten years. We took many long roadtrips (i.e. 8+ hours in the car). For a couple with no kids, it's perfect, with a decent amount of cargo space, and great mileage.
Frankly, outside of North America, small cars are by far the norm rather than the exception. The American SUV or pickup are quite literally jokes in other parts of the world for how absurdly large they are.
Yes cars like the Honda Fit are only for people who cannot afford a nicer, bigger car. Very few people actually prefer them. Their advantages are low cost and high fuel economy, which are the biggest factors forthe bottom end of the market.
Using Christensen's theory against Tesla is an interesting one and one I've thought about. I largely think batteries and EV's are a red herring as far as Tesla goes and this type of analysis. I think it is much closer to a new market disruption. Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. The iPhone targeted different values than the dominant "smartphones" of the day. The attacks against Tesla to me feel very analogous to the attacks agains the iPhone. But I guess only time will tell.
As an aside, I actually think the advantages of Tesla are its willingness to constantly improve the product - from software OTAs that make the cars better years after purchase to fundamentally reworking manufacturing (eg mega casting). They've taken Toyota's Kaizen and cranked it up to 11.
As far as the rest of the auto industry, I think there is probably a cheaper worse play (low end disruption). EVs are much simpler to make and that's going to wreak havoc on the auto supply chain (needing it to be much smaller/leaner). And it would also seem the dealer's days are numbered - both as a dated sales model as well as their revenue drying up (fewer repairs to make). Do any of the encumbants disrupt themselves (knowing it is inevitable)? Or is there another player that comes in? (And I don't think Tesla really fits this role).
> Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry.
Can you expand on this?
When the iPhone came out there was literally nothing like it on the market. It genuinely redefined what could be done with a phone, and it doing so, completely changed the category.
Nothing that Tesla is doing rises to that level of disruption/innovation, at least as far as I can tell.
What, exactly, are they doing that brings you to this conclusion?
> But I guess only time will tell.
I find this so strange.
Tesla has been around for... let's see... 20 years. The S is over 10 years old now (production started in late 2010).
The iPhone came out in 2007. A blink of the eye later and the smartphone was ubiquitous.
You say "time will tell", but... how much more time, exactly?
The iPhone was seen as a niche device when it was introduced. It was both "too expensive" to be a mass market consumer device and lacked features that the enterprise demanded at the time. At the time, consumer phones were much cheaper, and smartphones were PDAs that made calls -- they were electronic Rolodexes. "Kids don't want to play with a rolodex, they want MP3 players!"
What nobody expected is the power of: people just loving the device. Enterprise IT departments were approached by C-suite folks demanding to use the device. Consumers decided they did want to fork out big bucks for one, and carriers found a way to finance them.
There's a few things to unpack here. One is the perception of the iPhone. Eg here's a quote from PC Magazine I saved when it came out: "Poor business e2mail and PIM connectivity. Bad audio quality on phone calls. Tons of GSM buzz on nearby speakers. Virtual keyboard hard to type on. No phone functionality with iPod speaker docks. It’s the best portable media player ever. It’s possibly the most fun we’ve ever had with a handheld device. It browses the Web like a champ. But poor phone call performance and missing messaging options make us unwilling to recommend it as a phone." There are similar other criticisms. It was not part of the category of smartphones at the time as seen by the people using them.
The early criticisms about Tesla's build quality and a lot of the arguments about a battery not being good enough seem to follow a similar argument. Is the original Model S as good as a top of the line gas car at the time? By most metrics used at the time, no. The criticisms in the peer comment by lbsnake7 are similar - those are legacy metrics of a car. However it did find a customer base that valued what it offered, bad seats and poor panel gaps and all (just like the GSM buzz and non-replaceable battery).
As far as the timeline, the slowness has surprised me a bit but I think comes down to a couple of things. One is the turn over time of getting a new phone vs a new car. Cars are much slower. And another (which might be related) is the price point of cars being orders of magnitude larger than phones. And finally, it's taken a good while for Tesla to ramp - it's been supply constrained forever (although there might be signs of that shifting).
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I'm far from a Tesla fan myself, but one thing I found really cool are claims by friends who worked with Tesla is that they have a huge lead on mainstream car makers thanks to the fact they design and make a huge part of the cars and "stack" in-house. Rather than 80% of the car (and code) being built by 1st tier makers, packaged by 2nd tier and integrated by your 3rd tier provider, leading to very very slow iteration cycles. One friend even claimed they do continuous delivery on many parts of the hardware on a daily basis (meaning revisions are a frequent thing across the entire stack). I am not sure how much of this is true though.
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This is wrong. Tesla does have the advantage of being the more tech of all the car companies. They have the disadvantage of being bad at the car part. They spent massive amounts of time and energy being vertically integrated as much as possible. Historically car companies outsource everything in the car but their core differentiator (mostly engines). Tesla thought they could do everything themselves because it is cheaper but you are not going to make seats better than someone whose only job is to make seats. This is why they have all the quality problems.
> In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. The iPhone targeted different values than the dominant "smartphones" of the day.
As much as the iPhone killed off those companies, it grew the market for smartphones more.
There is no significantly growing market for cars like there was for "handheld internet-connected personal computers". Every EV sale is effectively 1 less ICE sale - a 1:1 replacement in the market. Whatever market growth potential exists is in the very price sensitive developing world (South Asia, Latin America, Africa, etc), where EVs will show up en-masse last.
Now that practically every company is selling EVs, Tesla only has its brand to differentiate it, which was at one time significant but perhaps less so lately.
As I see it, their only meteoric growth opportunity (by eating into competitors' market share) would be if they released a $20K, 250+ mile range, 5 seater EV in the very near future - like what the VW Beetle did in its generation.
But that's hard to achieve in an EV (especially from a luxury brand used to high margins), since the majority of the cost of an EV is still in the battery, and that cost doesn't scale down much with a lower price tag.
I think that was part of why FSD was such a core pitch from the beginning. IF Tesla had managed to crack that to the actual fullest it could have been the game changing thing to put them ahead. The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock. Too bad they hard committed to camera only sensing which is looking like a major mistake given how little headway they have against traditional car safety features.
If one takes a moment to think about the value of a private car participating in a public taxi fleet, the idea collapses completely. Public transit is difficult, so is a taxi fleet. A part is labour - drivers specifically - but equally large portions are maintenance, insurance and related things.
Even if Tesla developed robo taxis tomorrow, there are numerous legal, regulatory, liability and willingness hurdles to overcome.
There is also the issue of which markets robo taxis would address. Old-world cities tend to have good to excellent public transit. The value is largely in limited regions - north america being one.
True but that's still a huge market and if it were demonstrably safer than people driving you could work through the insurance and liability issues in fairly short order.
Also even European cities with great transport are often choked by cars and parking issues. London in particular seems to have issues with the volume of vehicles that could be at least partially helped by car share robo-taxis.
There were tons of potential issues but it still formed the ideological core propping up any semblance of rationality to Tesla's pre-crash stock price. IMO it's still way over valued but it's at least no longer larger than every other major car manufacturer combined.
>The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock.
Sounds miserable, I wouldn't want to get back to my car after work and find some passenger had ruined it in some way. Bodily fluids, smoking weed in it, leaving trash, the possibilities are endless!
> The whole pitch of "your car makes money for you while you don't need it" robo-taxis
If you can print cash with your Robotaxi, why would Tesla ever sell you one? Just build your army of Robotaxis and make your billions that way.
I agree with your interpretation, but I don't think Tesla is discovering this. I think they've known that the electric car was a mere sustaining innovation, while a true self-driving car is disruptive. That's why they've tried to sell their electric cars as self-driving cars.
Unfortunately for Tesla, you can't just hang an "automobile" sign on a faster horse and declare yourself the owner of a disruptive product.
I think they initially had hopes that they would be able to make some disruptive innovations in auto manufacturing - but all the evidence suggests they went way over their skis as Teslas are notorious for having extremely poor fit and finish. The failure to deliver on self driving is in line with a history of failing to deliver. You can include the weird hype around the Tesla humanoid robot on this list too imo.
> It sold social status to wealthy customers rather than basic transportation to an abandoned market.
I thought their plan explicitly was to start with low-volume, high-margin exotic cars (the Roaster), followed by the slightly higher-volume luxury car (Model S), then progressively going towards higher-volume, lower-priced cars, with each step funding the development of the next.
Are you looking for the Toyota Corolla of the EV market?
I don’t own an EV but wouldn’t the closest one to that be the Nissan Leaf?
I see them all around me and the marked for used ones, all the way back to 2012 models seems to be strong.
Leaf is a "city car" which is an euphemism for very short range and slow charging using a dying standard.
MG4 is the cheapest EV (£30K) sold outside of China that could reasonably compete with a Corolla. There isn't much else in the cheap bracket. e-Niro and ID.3 start at £35K.
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It never sold that well and is being phased out of Nissan's range:
https://www.caranddriver.com/news/a40613694/nissan-leaf-bein...
While they were a dime a dozen in the bay area and a handful of wealthy urban markets, its been hugely outsold by the more expensive Model 3 and Y despite being on sale since 2011 and didn't sell anything close to Nissan's hopes for the model.
It does feel like they're pretty comfortable selling expensive cars for now while others are expanding info the cheaper segments.
You're a bit too late with that observation I think as Tesla is no longer the upstart.
> The feature is a gizmo that appeals to techies and can, for a time, prop up sagging unit margins. But it's a nice to have bobble at best compared to the real prize of dominating the car market.
The feature and all the rest of the hype somehow got it this far.. it might break 2m ($100B revenue) cars sold in 2023. That's about as much as Mercedes. BMB is 2.5m. So it has wiggled its way by sheer tyranny of will, luck, and incumbents dragging their feet to being in the top 10.
Otherwise I'd agree with you but the bluff, improbably, worked out. They are here to stay.
What are you talking about lol. The whole point of Tesla has always been able to achieve scale so they can sell mass market cars.