Tesla Is Redefining The Automotive Industry

Tesla Model X

FEB 22 2018 BY EVANNEX 51

Tesla

Tesla Model S (Instagram: jamesalan86)

NEW PARADIGM: HERE’S HOW TESLA REDEFINES THE AUTO BUSINESS

Tesla’s original mission was to electrify the world’s transportation system. Along the way, that expanded into a reboot of the entire automotive industry. By the time it’s all over, Tesla will have redefined not just the way cars are fueled, but the way they are designed, manufactured, marketed and sold.

From the company’s emphasis on self-driving capabilities to its treatment of the vehicle as a computer system, with a unified operating system and over-the-air software updates, Tesla has made important advances, and the lessons have not been entirely lost on the legacy automakers. There are already signs that the Tesla way of doing things is starting to influence the global giants in several areas.

Like other tech pioneers such as Apple, Tesla sees the automobile as part of an “ecosystem” of products and services, and forward-looking execs at other automakers are beginning to see things this way too. The electric vehicle will not be simply a plug-in replacement for the legacy gas-burner, but rather a part of a new paradigm that includes charging infrastructure, vehicle autonomy, new ownership models and renewable energy. Automakers around the world are investing in charging networks, makers of self-driving tech and transportation service providers like Uber and Lyft. Some have explored partnering with solar installers to offer package deals to customers.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris.

Also like Apple, Tesla understands that it isn’t selling just a product, but rather an “ownership experience.” When you look at automobile ownership as an overall experience, you’re bound to come to the conclusion that there are certain parts of the experience that people really dislike, and smarmy car salesmen are near the top of the list. Another obvious conclusion is that the car buying experience is hopelessly outdated.

We’ve been banking online for decades and buying consumer goods without setting foot in a store. Even the process of buying and selling real estate has moved online to a great extent. When it comes to buying a car, however, we still have to drive all the way out to the airport road and endure a long and tedious sales ritual that hasn’t changed much since the 1960s.

Tesla’s efforts to make car-buying more pleasant date all the way back to the Roadster days, as former Tesla VP George Blankenship explained in depth in a recent talk. The company’s direct-to-consumer sales model is loved by auto buyers, hated by politically powerful auto dealers, and surely envied by the legacy automakers who, for better or for worse, are firmly bonded both legally and financially to their existing system of independent dealerships.

The Tesla sales model saves money by cutting out the middleman, it gives the company near-total control over the way its vehicles are presented to buyers, and it gives buyers a direct relationship with the automaker. As a recent article in Fortune points out, it also delivers another unprecedented benefit: it brings buyers (and their money) into the car-buying process before the company builds a single vehicle.

“They managed to sell so many Model 3s, even before the Model 3 was in its final design stages,” says Tim Huntzinger, an automotive designer who teaches at the ArtCenter College of Design in California. “It was almost like they were doing Kickstarter for cars. They were able to bring in hundreds of millions in revenue before actually creating final tooling for the vehicle.”

“That’s huge for the automotive industry,” said Huntzinger. “For the entire history of the automotive industry, you had to spend millions or hundreds of millions to even turn a cent. Many companies have gone out of business that way.”

Tesla

Instagram: thevictorlifestyle

And the benefits of this system don’t just flow one way – Huntzinger believes that buyers are empowered by being involved in the process earlier. “To get feedback from customers early in the process – that’s totally new and totally different. The purchasing experience is so different [from what] we’ve all been forced into with the dealership model. It’s super-refreshing to see the customer being put first.”

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Written by: Charles Morris

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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51 Comments on "Tesla Is Redefining The Automotive Industry"

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HVACman
From the article: “They managed to sell so many Model 3s, even before the Model 3 was in its final design stages,” says Tim Huntzinger, an automotive designer who teaches at the ArtCenter College of Design in California. “It was almost like they were doing Kickstarter for cars. They were able to bring in hundreds of millions in revenue before actually creating final tooling for the vehicle.” “That’s huge for the automotive industry,” said Huntzinger. “For the entire history of the automotive industry, you had to spend millions or hundreds of millions to even turn a cent. Many companies have gone out of business that way.” First question: re: “selling Model 3’s before the final design stages” How many people who placed reservations believed they were “buying” the Model 3? Comment: re: “before actually creating final tooling for the vehicle.” and ” Many companies have gone out of business that way.” Good points. Tesla is actually exploring a new way of going out of business. Here’s how. Step 1: Take hundreds of $millions in non-committed refundable deposits. Step 2. Announce you are on-schedule and officially “in-production”, then “deliver” the first production vehicles to hand-picked inside owners while telling all other… Read more »
Another Euro point of view

In your step 1 “Step 1: Take hundreds of $millions in non-committed refundable deposits”

You forgot:

“by using a stone age marketing trick which is to use an improbable low sticker price for your future product”

Actually this reservation system is the one and only “ponzi” aspect of Tesla business. Using those deposits to cover at least in part current operational losses. So, in Tesla situation, that pressure they have to always announce more new products. Like this semi thing, announced for 2019, that is a year from now, in which factory ? which assembly line? One does not make a truck factory delivering “100K trucks by year”, in a year and half. Key to this business is to gather the most gullible & idiotic fan base one may possibly find. It raises more question about the education system that produces this fan base than about the truck industry.

Recoil

Funny how the only people that want your point of view are those over on seeking alpha. Now go tell them to short Tesla some more so we can laugh at how much money they keep losing.

ffbj

Yes, they are LOL’ing all the way to the poor house.
Or in another idiom:
The Samurai are starving yet they are still using toothpicks.”

Mark C

Don’t forget that some of us, me included, are so wanting a change in HOW we buy a car, plus we note that Tesla is the ONLY auto manufacturer that is, beyond all doubt, 100% committed to a clean energy transportation system and we eagerly / willing plunked down our $1k deposit that only offers us the possibility of ordering the ponzi car of the future at some unknown future date.

Since you believe this to be a ponzi scheme, you simply need to keep you money in your pocket so you won’t be crying when all of us reservation holders figure it out.

Paul Smith

Nobody forced you to go short on Tesla stocks. No pity here.

William

Shorting Tesla is asking for the same results, as taking a long position in Ford.

If you want some more of the EV investment circle the drain pain, double down on the above Tesla short/ Ford long positions!

Pushmi-Pullyu

HVACman said:

“Tesla is actually exploring a new way of going out of business.”

I’ve noticed that HVACman’s Tesla bashing has been getting stronger and stronger over the past few months.

Are you now a committed Tesla short-seller, HVACman? Because you certainly are parroting some of the FUD that the short-selling Tesla Hater cultists are churning out!

If you’re not a Tesla short-seller, then you’ve become a useful idiot for them. Either way, that’s pretty sad.

theflew

Whether he’s a short seller or not is anything in his list not true?

Pushmi-Pullyu

I’d say that in general, nothing on the list is completely true, and some of it is utterly untrue. For example, the idea that Tesla hadn’t created “final tooling” for the production line isn’t merely wrong, it’s ridiculous.

Of course, you can point to the shocking non-operation of the production line for battery pack assembly at Gigafactory One, which was (and perhaps still is) a serious failure of “tooling”; but that has nothing to do with assembly line tooling at the Fremont auto assembly plant.

Steve

You gotta admit… the conventional manufacturers are STUCK. They are glued to this immovable object, the dealer model. The dealers love servicing cars that need servicing. As soon as you make a car that needs none or very little servicing, they hate you. What’s more, they bicker and fight with one another, so if you try to get them all to move in concert with each other it’s like herding cats.

Tesla on the other hand can control all of its outlets and they all dance to the same tune with zero latency.

dinhh68

Do explain ICE manufactures promise EVs to come out in “two” years. Promises were made in 2015 for 2017… 2016 for 2018… 2017 for end of 2019. Now the new promise is “sometime in 2020”.

Every month there’s a new “concept” out.

Do you see the trend here?

theflew

No automaker outside of GM said they are releasing an EV except for GM. Jaguar might have said 2017 but it’s 2018 instead. Most were always 2019/20 and it doesn’t look like that’s changing.

Ron M

Tesla just announced there taking Model 3 orders now from 1st time Tesla buyers.

Ray

Why can’t Tesla do a “sister car” type deal with another manufacturer to sell the Model 3 when the Federal rebates expire? Like the Ford Taurus, Mercury Sable type of thing. Partner with a company like Mazda. Mazda gets the EV credits from the CARB and people can still buy the Model 3 with the rebate. It won’t happen, but why not?

ffbj

..um because it would be a nightmare?

(⌐■_■) Trollnonymous

…..and you’d have to go through a Stealership and feel like you got ripped off ramrodded with no KY.

theflew

My lease of a Bolt EV took 45 minutes at the dealership. Maybe you’re doing it wrong.

Corvus

When you got your lease on the Bolt did you get the $7500 federal credit or did it go to GM Finance?

ffbj

The later, that’s why it only took 45 minutes.

Ziv

The credit always goes to the bank on a lease. The only question is whether the person leasing the car has enough knowledge to demand that the credit be reflected on the payment they will be making.

jm

Actually that’s a pretty friggin’ clever idea. They’ve partnered with Lotus and MB in the past, why not someone else for this?

Pushmi-Pullyu

Tesla partnered with Lotus for its first car because it was necessary, and because at that time they didn’t have their own auto assembly plant. Going forward, Tesla is going to want to be in control of producing and selling its cars, not farm that out to another manufacturer.

And Tesla’s deals with Mercedes and Toyota to manufacture EV powertrains wasn’t even remotely like the partnership you suggest. Those former deals were cases of Tesla acting as an auto parts supplier.

ffbj

Those are good points, and while working with another manufacturer is something tesla has done in the past, I think nowadays they are viewed with great trepidation by the other auto manufacturers.
So it’s an unlikely scenario, from both sides.

CDAVIS

From article: “Tesla sees the automobile as part of an “ecosystem”… The electric vehicle will not be simply a plug-in replacement for the legacy gas-burner, but rather a part of a new paradigm that includes charging infrastructure, vehicle autonomy, new ownership models and renewable energy.”
————————-

Traditional car makers vision/plans stops at plug-in replacement… and that part is basically motivated only by minimum compliance requirements.

CDAVIS

Tesla vision/plans starts at plug-in replacement… and then Tesla provides a wide ecosystem around the Tesla EV.

The above posted EVANNEX article does a great job pointing out that Tesla is in the business of selling the EV “experience” rather than selling EV cars. It’s a significant distinction that to this day most traditional car makers and automotive analysts don’t grasp.

theflew

The problem is their EV experience is expense. Most people just want a car that gets them safely between point A and B with an appropriate level of comfort and convenience. This isn’t a religion – it’s a car.

CDAVIS

@theflew said: “The problem is their [Tesla] EV experience is expense…”
—————

Upfront cost continues to go down… same a flat panel TVs. TCO is currently often lower.

theflew

TCO doesn’t matter to must people. They only see upfront cost. The fact they’ll put $35/week in gas doesn’t go into the purchase calculations.

Axtrader

The Seeking Alpha crowd should go drive a Tesla before shorting it; they’ll think twice. Tesla is a driving experience from another planet! We received our Model X in December and the invite to design our Model 3 last week. We’ve joined the Tesla family, and are staunch supporters and strongest evangelists! Can’t wait to see the first legacy car manufacturer go the way of Kodak, Blackberry and Nokia!

gagaga

Assume, Tesla builds the best cars in the world. If they are only able to sell it at a price that leads to horrific losses, it may be an automotive succes, but its an entrepreneurial failure. At the stock market we trade companies, not cars. (disclosure: short Tesla via long dated puts)

Pushmi-Pullyu

If Tesla was getting “horrific losses” on selling its cars, then wouldn’t it have gone out of business years ago?

You short-sellers keep predicting Tesla will collapse within 3 months or less. That’s been your mantra for quite a few years now.

Eventually, even the most dimly aware person will realize that Tesla’s rapid growth is proof that it’s very, very far away from being in danger of collapsing! And that cuts the legs out from under nearly every single Tesla basher claim.

Tesla’s global automobile sales totals:
2012: 2650
2013: 22,300
2014: 31,655 (+41.95%)
2015: 50,580 (+59.8%)
2016: 76,230 (+50.7%)
2017: 101,312 (+32.9%)

Go Tesla!

Tim Kulogo

It’s like saying your neighbor is losing his shirt on all these crazy business deals he keeps making, and you keep saying this while the years go by and he builds a new house and buys a boat and a nicer car and a bigger boat and a pool and so on and so on. Don’t companies that are losing money close down plants and not open new ones?

Tim Kulogo

They built the roadster to fund the development of the model S/X. They built the model S/X to fund the development of the model 3/Y. How could the model 3 development have ever been funded if the cars don’t make money?

ffbj

I have been shouting, using CAPS.
DON’T SHORT TESLA! To no effect. It’s a result of a cognitive bias that persists on both sides of the question.
Shorts will buy no good news or views of Tesla & vice versa for the longs.

As humans we tend to be lazy and avoid cognitive dissonance. We want to be around people who have similar ideas, and points of view. This only serves to re-enforce our views and we are hopelessly locked into our own mental fortress ready to defend against anything that would breach the walls of our mental construction.

There is no remedy but you can consciously try to adopt the viewpoint of the other side by going to the places where that point of view is supported.

theflew

Tesla are nice looking and well performing cars. But they are also priced out of 90% of the car buying market. You have a $100k+ Model X and you’re getting a $50k+ Model 3. You’re in the 5% club in the united states.

Pushmi-Pullyu

You say that like it’s a bad thing. 😉

Seriously, Tesla needs to sell in the market segment where it can compete. If that’s only the $50,000 and above market, then that’s where it needs to stay. Tesla would like to sell cars at a lower price point, and I’m confident that it will when it can profitably do so.

Of course, when I say “profits” I mean profits on a per-unit basis… not the overall “net profit margin” which Tesla bashers focus on to falsely claim that Tesla is “losing” money, ignoring the reality that Tesla isn’t losing any money at all — those profits are being reinvested.

ffbj

What’s a decked out F-150 or a Chevy Silverado cost these days?

SansIce

I love this argument – not. Listen the average cost of a car is about 34K:

https://www.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/

Granted you cant get the 35k version of the 3 yet but lets say 40K for the average 3 – with 7500 back from the fed (yes I know it will eventually expire)
you are are at around the price of an average car. What you get is far superior to the average car. The whole price argument is tiresome. You rarely see people site how expensive BMWs are – you can’t compare a 3 to a Prius – sorry.

theflew

The average price of a new car is $34k. The median price is in the low to mid twenties. It takes a lot of Civics to balance out million dollar cars. It takes 8 $25k cars and one 100k model X sale to average to $33k. So you can see people don’t buy $34k cars they buy a lot of Fords, VW, Hondas, Toyotas in the $20k’s to average out the Mercedes, BMW, Ferrari, and exotics.

Pushmi-Pullyu

Tesla “cheerleader” articles like this one are sometimes entertaining, but rarely enlightening. This article is no exception.

What would be far more interesting would be to compare and contrast the impact Tesla has had on traditional auto making, with how much (or how little) Tesla is becoming more and more like a traditional auto maker as it continues to grow.

But then, that would require some critical thought and actual analysis, rather than just parroting Tesla cheerleader talking points.

theflew

Agreed on these points. People talked about how agile Tesla was and how they were different than legacy makers. Those legacy makers are on the verge of starting there assembly lines and they know how to deal with ramp ups. For them it’s not production hell – it’s just business as usual.

ffbj

Yes, making inferior products that cost too much is the hallmark of the legacy industry.

Magnus H

I thought they were disrupting? And now they är redefining?? Where will this end???

Pushmi-Pullyu

It’s not suppose to “end”, unless you mean the end of burning fossil fuels. The business of building better EVs is a process, not a journey with a destination in mind.

Sch

In US the statement from the article may be valid, but not in global perspective, markets differ very much.
In Europe the dealers don’t have that many vehicles on stock, vast majority of cars is manufactured on order and the sales people are not motivated to sell you the crap they have on stock. That does not mean they are all that fair and pleasant, but from the simple motivation point of view, they are a lot better.
Tesla shifted paradigm from product to ecosystem, but is not making money on it. Renault-Nissan chose another way and they are making money on EVs, at least they claim that. GM is loosing 12 000 USD on every Bolt, how do we know? From the Opel Ampera-e case.
It’s more like the US automakers are not able to respond to the changes in the market, but others are pretty fine.
Even VW which hat to spend huge money on Dieselgate is in profit again.
Autonomous driving? Look what Mercedes and Audi are doing, their vehicles have the same or better capability as Teslas, they just don’t call it “Autopilot” when in reality it is not autopilot.
And don’t as about China…

Pushmi-Pullyu

There’s my argument against home schooling.

ffbj

…and it’s a fair one.

Mark C

I’ve sent GM and Ford questions and suggestions on supposed future porducts and was told basically to go away, we don’t need your help/suggestions.

I would’ve loved to have had a Tempest or Lemans version of the 2004 GTO when it came out, because I couldn’t justify a 6.0L V-8, just like asking for a poor-mans SSR without the retracting roof or (again) a 6.0L V-8, or the Ford Forty Nine concept.

Alas, each of those were only made to get the company name in enthusiast magazines and draw interest on the platform at the annual new car shows.

mxs

Let’s not get carried away here, as Evannex often does with Tesla anything.

I would forever credit Tesla for kick starting the transition to EV. But that’s about it. They are doing their way, which is admirable and fun to watch. The old legacy OEM’s will go about it their way.

I find his articles very subjective to the point that I often don’t finish reading them …

Thanatophoric

One should drive a Tesla before forming opinions on their cars. The instant torque and roller coaster-like acceleration is like a drug. I never cared about cars until I drove one. Tesla is selling an addicting experience. Most purchases lose their luster after 6 months; my 2015 S still gives me daily joy. A drive to the grocery store is an excuse to blast off the line and tear through turns.