- First mover advantage in electric vehicles, massive mindshare
- Only Tesla has chosen a straightforward all-electric approach for it's business. Tesla designed cars from the ground up. No need to consider legacy business.
- Tesla are vertically integrated and they completely control supply chain. In addition to hardware, software, and retail, Tesla also owns and operates manufacturing facilities. Vertically integrating battery pack production at its Gigafactory is why Tesla is the only high volume EV manufacturer today.
- Legacy carmakers outsourced much of the core work of building cars. What they still specialise in is building internal combustion engines (ICE) and ICE drivetrains. If the world transitions away from those, automakers no longer have much of a competitive advantage to hold their privileged places near the top of the economy.
- Great hardware and software integration. Tesla technology-driven architecture was developed internally enables flexibility and OTA (over-the-air) software-upgrade-ability across the entire domain. In contrast, traditional architectures implement technology additively to the legacy infrastructure as a bolt-on making the technology clunky.
- Amazing software. Tesla is a silicon valley startup and software is in the company's DNA. Tesla’s cars are often described as “computers on wheels”. They are software controlled. This allows new features to be added, upgrades, improved user interfaces, voice control, and more. The big screen is central to the car and not a de minimis afterthought. Tesla has a large in-house software team to deliver these features that are vital to the driving and ownership experience of Tesla.
- The european and asian car companies are not agile and willing to experiment, as such they are slow and do not understand software to the same extent that a silicon valley company does
- Autonomous driving. All of Tesla’s cars have their full AutoPilot sensor suite of cameras, radar, and sonar. Tesla’s vehicles are connected cars. This means they can receive new software over-the-air. This allows Tesla can test their AutoPilot updates in shadow mode on hundreds of thousands of cars driving millions of miles before rolling it out to customers. Even cars that don’t have enhanced AutoPilot or self-driving features enabled are helping to contribute to Tesla’s validation efforts. Tesla has more than 300,000 cars on the road around the world gathering valuable feedback for their AI. Tesla gathers driving data and they already have more data than Waymo....data is the new oil, everyone else is playing catch-up
- No dealerships, people buy cars from Tesla direct online:
- All other companies have to charge 30% more as dealer need to make margin
- At legacy automaker dealerships do not want to sell electric cars as they would not make money on after sales service
- Tesla make cars on order (bit like the original Dell business model), hence no expensive stock at dealerships
- No other car company has a global charging network to help consumers easily migrate to electric vehicles
- Car comes standard with leading safety features. No other car has achieved higher NHTSA safety rating.
- Amazing talent. If you were fresh out of school and wanted a job at a car company, would you rather work at one of the legacy car companies or at Tesla? Tesla is an innovative Silicon Valley company that makes sexy fast cars. If you want to work in battery tech, AI, automation, or many other fields, Tesla is the place that is treading new ground.
- Tesla have amazing customer loyalty, a fanbase that other car companies dream about. They have Apple-like devotion with people lining up to buy their first affordable mass production vehicle.
- Tesla has massive investment in factories and charging network that require a massive outlay of capital. Tesla has plans for similar factories in Asia and Europe as well. Other automakers are only tepidly dabbling in electric vehicles without any significant investment in any battery technology or charging network.
- Legacy car companies claim to support the electric revolution yet they spend millions lobbying to sway government proposals to maintain high emissions. Legacy car companies are only making low volumes “compliance” cars and some are still working on fuel-cells or hail-marry internal combustion solutions.
Why does a dominant company leading industry diminish even after decades of huge scale and profitability? The answer is that large successful companies fall under the trap known as the Innovator's Dilemma, this can be caused by the following:
- There is a change in technology, process or business model and the old company fails to adapt quickly to customer demand
- They fail to invest heavily to change their business
- As they move to new business model they incur huge costs
- They try to protect traditional high profit margin business, fear of cannibalising their legacy high profit margin business
- Investors are not happy to see profit margins decline as company plays catch up to change their business, they refuse changes required to progress the company. Shareholder are driven by quarterly earnings
- Startup disrupter has suddenly larger scale in new field and even has brand recognition
- Investors in startup have greater appetite for risk, knowing that a startup is a longer term investment. Completely different type of investor
- Legacy company finds itself in unusual position of following rather than leading, they lose the cool factor
- Legacy company takes leadership in industry for granted and becomes large, slow and inefficient. Processes are cumbersome and large amount of red tape
- They are slow to react to change and take a wait and see approach
- The same movie has played hundreds of times in the past (think Kodak, Nokia, Blackberry, Saab, IBM, Taxi industry)
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