Ten reasons to admire Tesla

Ten reasons to admire TESLA

Tesla was founded 16 years ago, in July 2003, and has achieved significant success selling electric cars. With more than 700.000 vehicles sold since its inception, it was a breath of fresh air in a 100+ years old industry that shaped the world of mobility in the 20^th century, but which was somewhat stagnant and mature in the 21^st.

And it has done so very much in a silicon valley start-up style, breaking the preconceived rules of car manufacturing and distribution. Doing it with a clean sheet of paper that has resulted in significant differences in their product and the client experience.  Tesla has invested heavily in electric drivetrains, battery technology, autonomous driving and a network of proprietary charging stations[1].

Although they have sold more than 240.000 vehicles in 2018 and more than double that figure since their inception, they still need to prove the financial viability of their business model.  Tesla has only generated a positive net income in a quarter, never for a full year.

The market for electric vehicles (EVs) is quickly growing worldwide, but the incumbents are now reacting and launching many products that compete directly with Tesla´s.  In my opinion, there is still significant uncertainty about the long-term viability of Tesla as an independent vehicle manufacturer. 

There are, however, no doubts in my mind that Tesla has shaken and fundamentally changed an industry that was in its second century of existence showing little innovation in their business fundamentals.  Just that fact is cause for celebration and why I have come up with these 10 reasons to admire Tesla.

1.    It has successfully entered a very difficult industry with huge barriers to entry.

To put things in perspective, the only independent new brand (not owned by other manufacturer) that has entered the automotive market in the western world[2] in the past 50 years has been McLaren, and it has done so leveraging their car racing and engineering know-how plus in small volumes of the ultra-luxury sports cars segment.

The main reasons for the lack of new entrants are a crowded, mature market, and the huge capital requirements needed.  Designing, engineering, sourcing all components, tooling a factory, manufacturing and selling cars that are reliable and meet the myriad regulations to be allowed to commercialise them, is a task that has proven too difficult to undertake for newcomers.

We have seen, of course, new brands being launched, like Acura, Lexus and Infinity or DS in the luxury segment.  Or existing, dormant brands being revived, Dacia, Mini or Bugatti.  But all of them have been managed by established manufacturers[3] in an effort to reach new segments without stretching their existing brands.

Tesla started from scratch, fitting some batteries and an electric engine into an existing Lotus Elise and turning it into a high performance Tesla electric roadster.  In 2012 they launched their first totally new car, the Model S and, since then, have launched the Model X (2015) and the Model 3 (2017), with other lines in the pipeline (Model Y, Cybertruck pick-up, new Roadster, and Semi truck).

The audacity of Tesla is the choice of a different drivetrain technology altogether (electric engine being fed by batteries) that has allowed them to build clear differentiation from what was offered in the marketplace at the time. Additionally, they have done it with a blanc sheet of paper, their own design and manufacture.  And on top of it all, they still managed to fulfil all the regulatory requirements (most of them safety related).

Interestingly, Tesla has not been the first to market in the 21^st century with a battery electric vehicle (BEV).  Nissan launched their Leaf model in 2010 and Renault launched the Fluence electric in 2011 and the Zoe in 2012.  However, those early entries were done by existing OEMs, using their well proven design and manufacture capabilities.  Tesla has entered the market as a true start-up, not relying on any existing infrastructure or know-how[4].  And they have chosen a premium segment as their entry point.  That was a very brave proposition, given some recent history of failed entries into that segment[5].

Tesla has sold to date more than 700.000 cars, not much compared to the production of the big manufacturers.  But a significant number that places them as the clear leaders of the premium electric car category.

2.    It has a meaningful mission that it is accomplishing.  “Accelerate the world´s transition to sustainable energy”.

I personally admire companies that have a clear stated mission of how they want to influence the world we live in a positive, forward looking manner.  In many cases, the missions have been added on top of an existing company as a means of providing direction to its strategy and engagement for the different stakeholders. 

Very rarely I have seen a company whose reason of existence and full activity are so aligned with the mission that guides them. 

Tesla states their mission as “Accelerate the world´s transition to sustainable energy”

With its entry into the mobility landscape with the first really successful EV, they have shaken the industry and accelerated its transition from internal combustion engines (ICE) to electric engines (EV).  Given that transportation (cars, trucks, trains, planes, boats) is one of the biggest contributors to CO2 emissions (around 25% of total in 2014), by opening the market to EVs and forcing other players to develop competing EVs, they are indeed being true to their mission[6]

3.     It has a powerful brand name, linking it to the origins of electricity (Nikola Tesla)

There is a lot of subjectivity, of course, in my assessment of the Tesla brand.  But there is no denying that they have managed to create a space for themselves in the very crowded landscape of automotive names, without any significant investment in advertising.

The Tesla brand is very consistent with the products they sell.  First of all, it is relevant to their business.  Nikola Tesla was a Serbian-American inventor that contributed to the development of the alternating current electricity supply system that is ubiquitous today.

Secondly, it is short and easy to pronounce in most languages.  And finally, it is supported by a simple logo and futuristic letters, all conveying the image of an avant-garde new player for the car industry.

4.     It has changed the distribution patterns of the industry, by avoiding dealers and selling direct via internet

The car industry has relied on a very mature and tested model for distributing and servicing its vehicles, via a network of franchised dealers in every territory they want to cover.  Those dealers helped provide reach, a buffer for inventory, physical proximity to the customer, quick information on the quality of the product and after sales servicing.

But dealers are also an expensive means of distributing cars.  And in the global world of internet, bricks and mortar reach is not a big issue anymore. 

Tesla has been brave to sell direct and foregone the costly set up of a franchised dealer distribution network. It is obviously a cheaper and quicker means of distributing cars.  The remaining challenge will be the after sales and repair services for the vehicles sold.

But kudos to Tesla for stepping out of the tested path of car distribution and once again shaken the industry by doing so[7].

5.    It has successfully introduced in a mature industry the newest trends in technology

Our beloved cars are evolving from simple transportation tools to connected mobility devices.  The only entertainment included in the car up to very recently was the stereo system, be it radio, CD or MP3.  In the 21^st century, however, the mobile technology has jumped on board the car, incorporating navigation, full internet connectivity and a myriad other functions (concierge services, wifi hotspot, online search, voice command, gesture command, mobile phone mirroring…). 

The most radical change inside the car in the new century has been seen in the now called infotainment system, and Tesla has been a significant accelerator for that trend.

Tesla has made the infotainment experience closest to the one we are used to on our mobile phones and tablets.  By incorporating a huge and extremely responsive tactile screen in the dashboard with sharp graphics, which concentrates almost all commands and functions needed while driving the car.  This includes infotainment, climate, customization of some driving parameters, seat adjustments and, in the latest Model 3, even the orientation of the ventilation loovers.

I personally prefer physical nobs and buttons to a touchscreen.  They allow to make adjustments by relying on tact alone without the need to take the eyes off the road.  And I believe the aggregation of commands around the i-drive knob pioneered by BMW and later used in similar fashions by many manufacturers is the best compromise of a physical input device with multitude of functions.

But the influence of Tesla has been so profound that the trend is now clear.  More and more cars are incorporating tactile screens as the dominant input and information mechanism for operation.  Dual screens are common in some brands (Audi, Land Rover), with one acting as traditional infotainment, while the other one takes care of all climate and driving parameters customization.  There seems to be no coming back from the tactile screen as information and input device inside a car and, to date, Tesla seems to have the edge of the most intuitive and responsive design among the car industry.  Another reason to admire Tesla.

6.    It seems to have an edge technologically on battery and efficient use of the energy

Those of you who have read my previous article[8] know that I believe the car of the near future will be driven by an electric engine.  The means of providing energy (electricity) to that engine can nowadays be a battery (Battery Electric Vehicle, BEV) that is recharged on the electricity network.  Or hydrogen, which is stored in a tank like fuel and later used by a machine called fuel cell to transform it into electricity that is fed into the engine and water that is disposed of.

Those two means of feeding electricity to the engine (batteries or hydrogen+fuel-cell) are being constantly improved and developed.  I still reserve my judgement on which, if any, will be the prevailing one. For the time being, however, batteries seem to be the ones taking the lead, with most electric cars being launched using them as a means of storing energy.

Tesla only produces battery electric vehicles (BEVs) and has been doing so for the past 16 years.  That focus has given them an edge in two very important factors for a BEV, the batteries themselves and the efficient use of the energy they provide.

Both elements contribute significantly to the overall drivable range of the electric car, which is one of the main concerns for drivers.  Being able to store energy in a more efficiently (in terms of space and weight) and more economically (in terms of cost) way, will greatly influence the usage experience of the electrical car.

According to many reports, Tesla batteries seem to be the industry benchmark for electricity storage technology in a car.  Their high energy density, their cooling and safety systems and their increasingly small use of rare materials[9] seem to be ahead of the development curve of the rest of manufacturers.  The incumbents will quickly catch up, given their vast technological resources and the increasing amounts they are investing in batteries.  But in the current generation of BEVs on offer today, Tesla seems to have a tangible advantage.

In terms of using the stored energy efficiently, Tesla also seems to manage to stay ahead of its competitors.  If we measure the amount of energy needed to drive a given distance (watts per kilometers/miles), and we look at the ratings given by the EPA[10], we see that most Tesla´s vehicles use about 250-300 watts per mile driven, whilst similar models in terms of size and performance from competitors use significantly more energy.  Perhaps Tesla´s software is more efficient in managing the available energy, or they have optimised the whole car to do so, but they seem to still have a clear advantage over current competitors in using the precious stored energy more efficiently.  Another reason to admire them.

7.     It has brought some flamboyancy into a very conservative industry.  Things like ludicrous mode or the easter eggs

These are just anecdotes in the day to day driving experience, but Tesla has applied some of the thinking of the software industry into their cars to bring some detail differentiation into their products.

In an industry dominated by tradition, safety and standardised functionality, it is quite refreshing to see things like a “ludicrous[11]” mode included in the customisation possibilities of the car.  It is simply a performance oriented set of parameters for launching and driving the car, but it is just amusing to see how it has been named and to experience the process of engaging it[12].

In addition, all Tesla´s include some “easter eggs”[13], either via their control screen or “hidden” around the rest of the car.  It is a typical concept of computer software, and in the Tesla cars, for example, it allows to engage a “romance mode”, which fills the screen with an image of a burning fireplace and warms up the interior of the car while stationary.  Or an Atari mode, which turns the screen into a video game monitor with some of the most popular classic games of Atari (only playable while standing still).  There are many more hidden jokes and functionality[14] in every Tesla and it is a testimony to their level of dedication in creating a customer experience that is unique and differentiating in a very conservative industry.  You have to admire Tesla for that!

8.    It has pioneered over the air updates to continuously improve its product

It is a trend that revolutionised the software business decades ago, which Tesla has pioneered in the car industry.  Given the increasing amount of software code included into our vehicles[15], it makes perfect sense to be able to continuously improve it in a way that is transparent to the user.

We are used to the burden of visiting an official dealer of the brand in order to repair, maintain and, if available, update the car.  Things like improvements of the navigation system with newer versions required a visit to the dealer.

With Tesla, their drivers get a notification that a new software version is available to download via the screen in the car or their app.  Just like with mobile phones.  The owner just accepts the download and “voilá”, the car receives a set of improvements instantly and without much delay or effort from the driver.

The range of improvements that have been made over the air is extremely wide.  From the functionality and usability of the central command screen to more driving oriented elements like acceleration, efficient use of energy or even braking performance[16]

Doing over the air updates is the logical step with a connected car, but once again Tesla has really pushed its usage to improve the customer experience and by doing so, has led the whole automotive industry down the same improved path.

9.    It has deployed its own supercharger network

One of the barriers to adoption of the Battery Electric Vehicles (BEV) is their limited range, and the difficulty in finding recharging points when traveling.  Having a limited range and not many places to “refuel” brings on the unfortunately popular range anxiety.

Tesla has worked on many areas in order to almost eliminate that burden for the electric car adoption.  On the one hand, their cars have large batteries and an efficient use of the energy that provides longer range to their vehicles.  On the other, they have invested significantly in creating a network of chargers that is exclusively available to their cars.  At the beginning of this year, Tesla already had more than 12,000 superchargers in 1,422 stations installed.

Most of them are in the US, but they are quickly installing posts in Europe as well.  It is a real competitive advantage and the only element of their offer that they have kept closed[17].  Their charger network is very advanced, being able to charge at very high rates of up to 250 Kw/h in their latest version and very well integrated into the mapping software of their cars.  On any planned trip, the on-board navigation system will plot the stops needed at the supercharger network and continuously update the availability of free posts while on the road.

So, ironically, Tesla has managed to successfully accelerate the transition of the car industry towards electric driven vehicles, but it is creating a barrier that may slow down that adoption rate by making their charging network proprietary to their brand. 

In any case, it is clear that Tesla has invested a significant amount of capital in the creation of their supercharger network and, with it, have given themselves a temporal competitive advantage[18] in the EV industry. 

10. It has made great advances in autonomous driving technology

The car industry is under a perfect storm during these past years.  The transition from internal combustion engines (ICEs) to electric engines as a means of movement is just one of the drivers.  The other three would be the connected car, the sharing economy and autonomous driving.

Tesla is a driving force of change in three of those vectors.  We have already elaborated a bit about its influence on the adoption of electric engines and its developments around the connected car[19].  The real game changer of the mobility industry, however, will be the adoption of autonomous driving technology.  I personally believe there are enough barriers to overcome to make it a slower process than has been advertised and anticipated. 

In any case, there is no denying that Tesla is at the forefront in the development and specially in the deployment of such a technology.  Most of their cars have hardware that allows the engagement of a high degree of autonomous driving.  And their software for that purpose in under continuous development and update.

There is still high uncertainty about the right mix of technology needed to provide the autonomous driving capabilities of the future.  But there is no discussion to the fact that Tesla is capturing, through its installed base of running vehicles, a vast amount of very valuable information that will be critical in the future development of the technology.

Conclusion

Tesla is capitalising on the driving forces of change currently shaking the automotive industry and has carved a significant niche in selling electric cars.  I have tried to summarise in this article some of the brave decisions and moves that have allowed them to reach their current position.  As stated through the text, all of them are reason for admiration, because they have brought much innovation into the slow moving and conservative industry.  What a fascinating time for all car lovers!

About the author:  Jaime Requeijo has been a car lover most of his life.  As a business executive, he has been lucky to combine his passion with work in companies like Peugeot and LeasePlan.  Now he enjoys giving advice on mobility as a consultant and writing about his favorite car topics.

Disclaimer:   This article is not meant to be a technical paper.  Its purpose is to entertain and to inform people about the exciting activities that have made Tesla so unique in the industry.  When mentioning technical aspect, I have tried to do adequate research and careful statement of facts.  I may have made some wrong technological assumptions or imperfect explanations.  If that were the case, my apologies.  Please feel free to contact me if you can help me improve the accuracy of the article (jaime.requeijo@gmail.com).  Thank you for reading it.  I hope you enjoyed it as much as I did writing it!

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[1] Tesla is also present in other renewal technology products, like solar panels and batteries for homes and small businesses.

[2] There are of course new Chinese brands being created in the past decades, but they have yet to prove their capability of selling significant volumes in the more mature markets (US, Europe, Japan).

[3] Acura was launched as a luxury brand in the US by Honda.  Lexus is owned by Toyota, Infinity by Nissan and DS by the PSA (Peugeot/Citröen/Opel) Group.  Mini was a dormant brand that BMW Group decided to re-launch in the 21^st century for the launch of a premium city car.  Dacia was a Romanian brand that used to build licensed Renault models.  In 1999 it was acquired by Renault and relaunched as a value based brand. Bugatti is owned by the VW Group.

[4] Tesla did acquire a car manufacturing plant from GM in California, but they thoroughly refurbished it.

[5] The VW Phaeton comes to mind as well as the recent announcement by Infinity of pulling out of the European market they had entered about a decade ago.

[6] Tesla also produces batteries and solar panels, all of which are in line with their mission.

[7] Incumbent OEMs are trying hard to combine the immediate reach of internet with the need to maintain an existing distribution network.  Tesla is a small player, but it has put significant pressure on the other manufacturers by proving that customers are very happy purchasing direct.

[8] “Switching from ICEs to Electric – Goodbye´s and Hello´s” published on my blog as well.

[9] I am no subject matter expert, but I have researched quite a bit.  Li-Ion seems to be the dominant technology nowadays for car batteries.  They include rare materials like nickel, lithium and cobalt, which, although relatively abundant in nature, have not been mined up to now due to lack of demand and thus generate offer constraints due to sudden spikes of demand.  Cobalt seems to be the most difficult material to source in constructing a Li-Ion battery and according to some industry experts who have torn down the batteries inside Tesla´s Model 3, it includes much lower amounts of cobalt than previous generations of batteries.

[10] Environmental Protection Agency, the US body that sets the norms and controls energy consumption in cars.

[11] “so foolish, unreasonable, or out of place as to be amusing”

[12] There are endless reference videos available, like this one https://www.youtube.com/watch?v=UlhkTx0xKew

Basically, you have to push on the “ludicrous” logic button on the screen for 5 seconds, and a warp star trek like image of flying through the stars fills the screen.  You then get a message asking you “are you sure you want to push the limits?, this will cause accelerated wear of the motor, gearbox and battery” with the option of two boxes for response, one in blue stating “No, I want my Mommy” and one in red choosing “Yes, bring it on”.  It is a bit childish, but no doubt refreshing and capturing the essence of those launch modes available in many performance cars.

[13] In computer software and media, an Easter egg is an intentional inside joke, hidden message or image, or secret feature of a work. It is usually found in a computer program, video game, or DVD/Blu-ray Disc menu screen. The name is used to evoke the idea of a traditional Easter egg hunt

[14] There are many articles available on the topic.  Here is one as an example

https://www.hotcars.com/clever-easter-eggs-in-tesla-cars-people-dont-know-about/

[15] According to this very interesting article by McKinsey, in 2010 some vehicles had about 10 million Softward Lines of Code (SLOC), by 2016 this amount had expanded by a factor of 15, to 150 million SLOCs

https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/rethinking-car-software-and-electronics-architecture

[16] Regarding breaking, in their first trial of the Model 3, the widely read Consumer Reports magazine gave it a poor performance.  Telsa solved it with a quick over the air update and according to CR the braking distance improved by 19 feet!

[17] Back in June 2014, Tesla opened up its patents on battery technology, in a move that some described as tactical in their race with fuel cell to be the technology providing electricity to the EVs in the future.

[18] It will only last as long as a proper network of universal chargers is being built in those countries where a significant number of EVs is being sold.  Many players in different industries like utilities or oil companies and of course car manufacturers are planning large investments in the creation of charging networks.

[19] The over the air updates of their software is the most visible use of the connected car.  But given their installed base of cars and their capacity to uptate them, it will be very easy for Tesla to incorporate all type of “connected car” services into their vehicles in the future.