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As I most recently pointed out in https://news.ycombinator.com/item?id=18712442 https://news.ycombinator.com/item?id=18712442, there is good reason to believe t

by btilly 8y ago

As I most recently pointed out in https://news.ycombinator.com/item?id=18712442 https://news.ycombinator.com/item?id=18712442, there is good reason to believe that all the other car manufacturers are going to learn the hard way that their interests do not align with their dealers. Which means that consumers will learn that they shouldn't go to existing car companies to buy electric cars. Which does not bode well for the future of existing car companies. (This is a prediction that I've been aware of for around 20 years now. And the form of the problem - that existing tech manufacturer's wind up hamstrung by their existing supply and sales networks, is a common one for companies that get destroyed by disruptive innovation.)

reitzensteinm 8y ago
This is a bizarre argument to me, and I remember thinking that the last time you "pointed it out". You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It's not going to be all roses, but Tesla shunning dealers hasn't exactly been either, from a service quality and cost structure perspective. Porsche doesn't seem to have any trouble shifting Taycans, doubling their production from an initial 20k to 40k units a year (simultaneous to Tesla cutting their X/S production from 100k to maybe 80k). Here's my prediction: legacy auto manufacturers will continue to be years behind Tesla, but if and when the space matures that'll stop mattering. At that point, Tesla better stop acting like a startup and have their shit figured out, lest they become the Myspace of EVs.
- btilly 8y ago
  You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It would be far from the first time. One of the biggest problems is for a company whose internal incentives and business model are based around one set of market assumptions to rethink it all and do something else instead. Both The Innovator's Dilemma and The Innovator's Solution touch on this. The latter one in particular walks through how internal structures and incentives have caused company after company to fail to figure out how to sell products that they know consumers are buying. The two most common problems being that it is very hard to cut your own margins to match a low margin competitor, and it is even harder to convince a third party sales distributor to cut their margins. Anyways this is something that I've been aware of for close to 20 years. In another 10 years you'll be able to decide whether I was wrong.
  - reitzensteinm 8y ago
    Yeah, I've read them too. But you're not saying that it's a challenge the industry will face, you're saying the death is a fait accompli, and the entire traditional auto industry is not real competition to Tesla (your words from your linked post). I don't need to wait ten years to decide that you're wrong; even if your prediction turns out to be correct (which it might), assigning a 100% probability to this outcome is absurd, and if you could reliably do this you'd be a trillionaire. Since we're reading the tea leaves via business school curriculum, what about a little Prisoner's Dilemma? Let's assume that consumer demand exists for EVs (which Tesla has basically created single handedly), and EVs aren't profitable when slotted in to the cost structure of a traditional dealership due to the lack of maintenance. Dealers try every trick in the book to steer customers away from EVs. Why wouldn't a percentage of dealerships defect, rebrand and focus exclusively on EVs? They'll enjoy abnormally high sales, and be profitable on the margins from new car sales alone. Dealerships that insist on only selling ICE vehicles will stick around for a while, but nobody will start one, and the number will be reduced by attrition. The total number of dealerships fall and the EV transition is completed over a few decades. So to be clear: you assign a zero percent probability to this happening?
    - btilly 8y ago
      The probability is not 100%, but I believe it to be very high. As for your hypothetical, the reason is that the dealers that try to do that won't make a sufficient profit to their business model unless they sell EVs at a very significant premium to published list price. And it will be very hard to sell consumers on letting them do that. Even if you could get consumers to accept those prices, the industry would then face the problem that the margins on EVs from traditional car manufacturers have much higher margins than the EVs from startups like Tesla. Which will make them uncompetitive in the marketplace. This gets us back to the classic problem that it is hard to get organizations to significantly cut their margins. And even harder to convince your business partners to do so for your benefit.
      - reitzensteinm 8y ago
        You are assuming that Tesla and future competition can operate their own dealerships more efficiently. They don't get their physical presence for free, and the cost is baked in to the sales price just the same way. Maybe Tesla can pull that off but there's no reason to expect other EV manufacturers will until they hit massive scale.

by btilly 8y ago

reitzensteinm 8y ago

This is a bizarre argument to me, and I remember thinking that the last time you "pointed it out". You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It's not going to be all roses, but Tesla shunning dealers hasn't exactly been either, from a service quality and cost structure perspective. Porsche doesn't seem to have any trouble shifting Taycans, doubling their production from an initial 20k to 40k units a year (simultaneous to Tesla cutting their X/S production from 100k to maybe 80k). Here's my prediction: legacy auto manufacturers will continue to be years behind Tesla, but if and when the space matures that'll stop mattering. At that point, Tesla better stop acting like a startup and have their shit figured out, lest they become the Myspace of EVs.

btilly 8y ago
You're essentially saying that tens of thousands of dealers and hundreds of billions of dollars worth of car companies are going to go out of business because they can't find a mutually beneficial incentive structure. It would be far from the first time. One of the biggest problems is for a company whose internal incentives and business model are based around one set of market assumptions to rethink it all and do something else instead. Both The Innovator's Dilemma and The Innovator's Solution touch on this. The latter one in particular walks through how internal structures and incentives have caused company after company to fail to figure out how to sell products that they know consumers are buying. The two most common problems being that it is very hard to cut your own margins to match a low margin competitor, and it is even harder to convince a third party sales distributor to cut their margins. Anyways this is something that I've been aware of for close to 20 years. In another 10 years you'll be able to decide whether I was wrong.
- reitzensteinm 8y ago
  Yeah, I've read them too. But you're not saying that it's a challenge the industry will face, you're saying the death is a fait accompli, and the entire traditional auto industry is not real competition to Tesla (your words from your linked post). I don't need to wait ten years to decide that you're wrong; even if your prediction turns out to be correct (which it might), assigning a 100% probability to this outcome is absurd, and if you could reliably do this you'd be a trillionaire. Since we're reading the tea leaves via business school curriculum, what about a little Prisoner's Dilemma? Let's assume that consumer demand exists for EVs (which Tesla has basically created single handedly), and EVs aren't profitable when slotted in to the cost structure of a traditional dealership due to the lack of maintenance. Dealers try every trick in the book to steer customers away from EVs. Why wouldn't a percentage of dealerships defect, rebrand and focus exclusively on EVs? They'll enjoy abnormally high sales, and be profitable on the margins from new car sales alone. Dealerships that insist on only selling ICE vehicles will stick around for a while, but nobody will start one, and the number will be reduced by attrition. The total number of dealerships fall and the EV transition is completed over a few decades. So to be clear: you assign a zero percent probability to this happening?
  - btilly 8y ago
    The probability is not 100%, but I believe it to be very high. As for your hypothetical, the reason is that the dealers that try to do that won't make a sufficient profit to their business model unless they sell EVs at a very significant premium to published list price. And it will be very hard to sell consumers on letting them do that. Even if you could get consumers to accept those prices, the industry would then face the problem that the margins on EVs from traditional car manufacturers have much higher margins than the EVs from startups like Tesla. Which will make them uncompetitive in the marketplace. This gets us back to the classic problem that it is hard to get organizations to significantly cut their margins. And even harder to convince your business partners to do so for your benefit.
    - reitzensteinm 8y ago
      You are assuming that Tesla and future competition can operate their own dealerships more efficiently. They don't get their physical presence for free, and the cost is baked in to the sales price just the same way. Maybe Tesla can pull that off but there's no reason to expect other EV manufacturers will until they hit massive scale.