Tesla is at risk of being steamrolled by the next big transformation in how we get around
It's story is exciting: the first viable new American car company since Chrysler was established in 1925, selling all electric vehicles with world-saving and world-changing ambitions, driven by a charismatic Silicon Valley billionaire who also wants to send rockets to Mars.
But the auto industry is littered with exciting stories that ultimately didn't pan out. Tesla has defied the naysayers for years, dodged bankruptcy, and captured the attention not just of the public, but of the traditional car business. But that doesn't mean Tesla can survive the disruption, rapidly accelerating, that it helped set in motion.
We were so much younger then ...
The electric-car narrative is both aging and failing to thrive. Pretty much every other electric-car startup that launched around the same time as Tesla has gone out business. Established automakers talk a good game around electric, but the business is still almost entirely internal-combustion. No one is buying electric cars; they make up only about 1% of current global sales, and in some markets, especially the US, they're declining.
The new hot story is self-driving vehicles. Uber just dropped a bombshell by announcing that it's unleashing a small fleet of self-driving Volvos on Pittsburgh, jumping ahead of Lyft and its old-school patron, General Motors (GM and Lyft are aiming to launch their own urban driverless fleet in the coming months).
Ford said Tuesday that it will have a bunch of fully autonomous cars - no steering wheels, no pedals - on the road in 2021.
Tesla of course has its ever-evolving Autopilot semi-self-driving technology on highways and byways right now. But Musk and his team are taking an incremental approach, adding to the system as they go. The new game, however, appears to steal a page from the Google Car playbook: go hard for full autonomy and try to get the driver out of the picture as soon as possible.
The wind has shifted. So will Tesla be able to change course?
A long checklist
It's a legitimate question, because Tesla currently has a lot on its plate. Let's just run through it all:
- Launch the $35,000 Model 3 on time in 2017
- Get better at meeting delivery objectives for the Model S sedan and Model X SUV (Tesla has come in at the low end of guidance for two years running)
- Bring the Gigafactory, a massive battery making facility in Nevada, online
- Hit a Musk-mandated production target of 500,000 vehicles annually by 2018
- Integrate SolarCity into the Tesla business model, via the multibillion-dollar acquisition
- Grow Tesla's energy storage business
- Make sure Autopilot remains the state-of-the-art for self-driving tech that doesn't use pricey Lidar-based systems
The critical issue is that Tesla, in succeeding as a car company, is now suffering the price of that success. It may have a market cap nearing that of Ford and GM, a pair of 100-year-old automakers, but it's enduring serious developmental pains as it strives to achieve major car-company manufacturing scale.
And because the car business, electric or otherwise, is so capital-intensive, Tesla isn't any longer in a position to run like a lean startup. Musk hopes to radically improve the production process, but no one has made a significant leap since Toyota in the 1980s. Building anything as complicated as cars in industrial volumes challenges the Silicon Valley ethos of go fast and fix it later. A 4,000-lb. vehicle that's designed to go 80 mph just isn't the same as a software platform or a smartphone.
Core strengths
Autonomy isn't the core business of any global car makers, so they have the luxury of exploring it as a side project. Autonomy is potentially integral to Uber's future business, given that eliminating the cost of human drivers would monumentally enhance prospects for profits. So for CEO Travis Kalanick, owning a capable fully autonomous technology, of the sort that could develop out of the Pittsburgh pilot project, is vital.
It remains to be seen whether the autonomous leap we're currently witnessing in its first stage will go according to expectations. The real world is a messy place, and humans are optimized by evolution to deal with mess. Computers aren't.
For Tesla, the risk that it will get steamrolled by a disruption of the disruption that it set in motion is substantial. I wouldn't consider this unusual. Sometimes, a transitional company has to set the stage for a future that it can't participate in.
That said, the only automaker that has a very advanced and thus far quite safe self-driving technology in the road, every day, in thousands of cars, is still Tesla. That advantage can't be discounted. But it shouldn't encourage Tesla to get too comfortable.