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Tesla is in the process of discovering that the electric car was in fact never a disruptive innovation in the Christensen sense. It's a sustaining innovation. U

Tesla is in the process of discovering that the electric car was in fact never a disruptive innovation in the Christensen sense. It's a sustaining innovation. Under the sustaining innovation model, the upstart is not likely to succeed because the innovation plays the the incumbents' strengths. It's just taken time for the industry to respond. I say this because I interpret Tesla'a nonstop obsession with self driving as an admission they're in a race they will lose. The feature is a gizmo that appeals to techies and can, for a time, prop up sagging unit margins. But it's a nice to have bobble at best compared to the real prize of dominating the car market. Christensen book, The Innovator's Dilemma even specifically identifies the electric car as a potentially disruptive innovation, mapping the path an upstart could take to eventually dominate the car market. Tesla never took that path, and instead did the exact opposite. It sold social status to wealthy customers rather than basic transportation to an abandoned market.

prottog 4y ago
> It sold social status to wealthy customers rather than basic transportation to an abandoned market. I thought their plan explicitly was to start with low-volume, high-margin exotic cars (the Roaster), followed by the slightly higher-volume luxury car (Model S), then progressively going towards higher-volume, lower-priced cars, with each step funding the development of the next. Are you looking for the Toyota Corolla of the EV market?
- solarkraft 4y ago
  It does feel like they're pretty comfortable selling expensive cars for now while others are expanding info the cheaper segments.
- Swenrekcah 4y ago
  I don’t own an EV but wouldn’t the closest one to that be the Nissan Leaf? I see them all around me and the marked for used ones, all the way back to 2012 models seems to be strong.
  - giobox 4y ago
    It never sold that well and is being phased out of Nissan's range: https://www.caranddriver.com/news/a40613694/nissan-leaf-being-phased-out/ https://www.caranddriver.com/news/a40613694/nissan-leaf-bein... While they were a dime a dozen in the bay area and a handful of wealthy urban markets, its been hugely outsold by the more expensive Model 3 and Y despite being on sale since 2011 and didn't sell anything close to Nissan's hopes for the model.
  - pornel 4y ago
    Leaf is a "city car" which is an euphemism for very short range and slow charging using a dying standard. MG4 is the cheapest EV (£30K) sold outside of China that could reasonably compete with a Corolla. There isn't much else in the cheap bracket. e-Niro and ID.3 start at £35K.
    - Swenrekcah 4y ago
      I know it’s not a Corolla, but it might be the Corolla of the EVs. It is inexpensive for an EV and seems to be a reliable and durable car. I’m almost sad to hear it’s going to be discontinued but for myself, when the time comes, I’ll be taking a good look at whatever Nissan will be offering.
      - pornel 4y ago
        Leaf is one of the early EVs, and it lacks proper battery cooling. This has shortened life of its batteries. Expect all contemporary EVs to age better than Leaf. Nissan Ariya is technically average, and rather pricy. It's technically comparable to ID.4, but 25% more expensive. Or for the same money you can get Ioniq 5 or Kia EV6, even in their higher trims, and they charge twice as fast.
    - flopsamjetsam 4y ago
      In Australia we now have the BYD Atto 3 (AUD$45k plus on-road costs) from China, and the MG ZS EV (AUD$45k plus ORC).
sho_hn 4y ago
> I say this because I interpret Tesla'a nonstop obsession with self driving as an admission they're in a race they will lose You don't need to interpret there; it's one of the few things Musk has been relatively consistent and forthright in admitting to. EV technology alone is not a very wide competitive moat, it was clear that other OEMs would be able to catch up to it. The mechanical and electrical engineering required is not a big challenge for the supply chain and a lot of the components were already available off-the-shelf. I believe he has said something similar to "without Autopilot Tesla is worthless" or some sort of dramatic statement like this - it's supposed to be their competitive moat going forward, so there's a lot, no pun intended, riding on it and making the market believe it's going well. This is doubly true because Tesla is arguably not doing great at scaling out the stuff that makes the other OEMs be able to participate in the overall industry business model. Tesla has made very impressive strides in bootstrapping and building out a volume production network etc., but what other OEMs do in having stable and predictable schedules and refresh cycles for a number of underlying platforms and car lines is still a very different ball game. Just look at how long in the tooth the S/X and even the 3 are getting without a full makeover or how long the Cybertruck is taking. Also a full refresh cycle of the factory network when you switch from one carline gen to another etc. is a milestone Tesla still has to manage.
- ChuckNorris89 4y ago
  > "without Autopilot Tesla is worthless" There's nothing too special about their autopilot compared to what other manufacturers offer. Musk's fast and loose claims about what Autopilot cand do "in the next six months" or "around the corner" were overhyped exaggerations designed to sell cars at best or Theranos style lies at worse, hoping that by the time people wise up about the false promises, Tesla's engineers will have something to show for close enough to what he promised which will buy hem more time to create more hype to sell more cars. Rinse and repeat. The thing is Tesla can't maintain their wide moat as the other manufacturers are catching up. Grown up friends of mine were rabidly buying Tesla stock, basically putting their life savings into it, and when I asked them why, they kept telling me "because Tesla's innovations would make the other car manufacturers obsolete". Now they're pissed at him.
jackmott42 4y ago
>It sold social status to wealthy customers rather than basic transportation to an abandoned market. That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery battery. You can get tons of power for almost not additional money, mass or volume. So building something like a 5 series BMW is very easy to do and make competitive. Building a Honda fit is very hard. The nissan leaf is the closest thing to that, and people don't want it because it can't really do road trips.
- nradov 4y ago
  Taking a long road trip with multiple people in a subcompact "penalty box" car the size of a Honda Fit is kind of a miserable experience regardless of what kind of motor it uses. People mostly only do that when they have no other options.
  - SoftTalker 4y ago
    Yes cars like the Honda Fit are only for people who cannot afford a nicer, bigger car. Very few people actually prefer them. Their advantages are low cost and high fuel economy, which are the biggest factors forthe bottom end of the market.
  - BaseballPhysics 4y ago
    Never owned a Fit, I take it? My wife and I owned a Fit for over ten years. We took many long roadtrips (i.e. 8+ hours in the car). For a couple with no kids, it's perfect, with a decent amount of cargo space, and great mileage. Frankly, outside of North America, small cars are by far the norm rather than the exception. The American SUV or pickup are quite literally jokes in other parts of the world for how absurdly large they are.
- DoingIsLearning 4y ago
  > That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery. Kind of, you can also change the other factors in the equation like that startup building 'Lightyear' with the light weight platform, aerodynamics and with PV panels [0] [0] https://lightyear.one/lightyear-2 https://lightyear.one/lightyear-2
aeturnum 4y ago
I think they initially had hopes that they would be able to make some disruptive innovations in auto manufacturing - but all the evidence suggests they went way over their skis as Teslas are notorious for having extremely poor fit and finish. The failure to deliver on self driving is in line with a history of failing to deliver. You can include the weird hype around the Tesla humanoid robot on this list too imo.
rtkwe 4y ago
I think that was part of why FSD was such a core pitch from the beginning. IF Tesla had managed to crack that to the actual fullest it could have been the game changing thing to put them ahead. The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock. Too bad they hard committed to camera only sensing which is looking like a major mistake given how little headway they have against traditional car safety features.
- eldaisfish 4y ago
  If one takes a moment to think about the value of a private car participating in a public taxi fleet, the idea collapses completely. Public transit is difficult, so is a taxi fleet. A part is labour - drivers specifically - but equally large portions are maintenance, insurance and related things. Even if Tesla developed robo taxis tomorrow, there are numerous legal, regulatory, liability and willingness hurdles to overcome. There is also the issue of which markets robo taxis would address. Old-world cities tend to have good to excellent public transit. The value is largely in limited regions - north america being one.
  - rtkwe 4y ago
    True but that's still a huge market and if it were demonstrably safer than people driving you could work through the insurance and liability issues in fairly short order. Also even European cities with great transport are often choked by cars and parking issues. London in particular seems to have issues with the volume of vehicles that could be at least partially helped by car share robo-taxis. There were tons of potential issues but it still formed the ideological core propping up any semblance of rationality to Tesla's pre-crash stock price. IMO it's still way over valued but it's at least no longer larger than every other major car manufacturer combined.
- inkcapmushroom 4y ago
  >The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock. Sounds miserable, I wouldn't want to get back to my car after work and find some passenger had ruined it in some way. Bodily fluids, smoking weed in it, leaving trash, the possibilities are endless!
brookst 4y ago
I agree with your interpretation, but I don't think Tesla is discovering this. I think they've known that the electric car was a mere sustaining innovation, while a true self-driving car is disruptive. That's why they've tried to sell their electric cars as self-driving cars. Unfortunately for Tesla, you can't just hang an "automobile" sign on a faster horse and declare yourself the owner of a disruptive product.
leesec 4y ago
What are you talking about lol. The whole point of Tesla has always been able to achieve scale so they can sell mass market cars.
kentlyons 4y ago
Using Christensen's theory against Tesla is an interesting one and one I've thought about. I largely think batteries and EV's are a red herring as far as Tesla goes and this type of analysis. I think it is much closer to a new market disruption. Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. The iPhone targeted different values than the dominant "smartphones" of the day. The attacks against Tesla to me feel very analogous to the attacks agains the iPhone. But I guess only time will tell. As an aside, I actually think the advantages of Tesla are its willingness to constantly improve the product - from software OTAs that make the cars better years after purchase to fundamentally reworking manufacturing (eg mega casting). They've taken Toyota's Kaizen and cranked it up to 11. As far as the rest of the auto industry, I think there is probably a cheaper worse play (low end disruption). EVs are much simpler to make and that's going to wreak havoc on the auto supply chain (needing it to be much smaller/leaner). And it would also seem the dealer's days are numbered - both as a dated sales model as well as their revenue drying up (fewer repairs to make). Do any of the encumbants disrupt themselves (knowing it is inevitable)? Or is there another player that comes in? (And I don't think Tesla really fits this role).
- BaseballPhysics 4y ago
  > Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. Can you expand on this? When the iPhone came out there was literally nothing like it on the market. It genuinely redefined what could be done with a phone, and it doing so, completely changed the category. Nothing that Tesla is doing rises to that level of disruption/innovation, at least as far as I can tell. What, exactly, are they doing that brings you to this conclusion? > But I guess only time will tell. I find this so strange. Tesla has been around for... let's see... 20 years. The S is over 10 years old now (production started in late 2010). The iPhone came out in 2007. A blink of the eye later and the smartphone was ubiquitous. You say "time will tell", but... how much more time, exactly?
recuter 4y ago
You're a bit too late with that observation I think as Tesla is no longer the upstart. > The feature is a gizmo that appeals to techies and can, for a time, prop up sagging unit margins. But it's a nice to have bobble at best compared to the real prize of dominating the car market. The feature and all the rest of the hype somehow got it this far.. it might break 2m ($100B revenue) cars sold in 2023. That's about as much as Mercedes. BMB is 2.5m. So it has wiggled its way by sheer tyranny of will, luck, and incumbents dragging their feet to being in the top 10. Otherwise I'd agree with you but the bluff, improbably, worked out. They are here to stay.

prottog 4y ago

> It sold social status to wealthy customers rather than basic transportation to an abandoned market. I thought their plan explicitly was to start with low-volume, high-margin exotic cars (the Roaster), followed by the slightly higher-volume luxury car (Model S), then progressively going towards higher-volume, lower-priced cars, with each step funding the development of the next. Are you looking for the Toyota Corolla of the EV market?

solarkraft 4y ago
It does feel like they're pretty comfortable selling expensive cars for now while others are expanding info the cheaper segments.
Swenrekcah 4y ago
I don’t own an EV but wouldn’t the closest one to that be the Nissan Leaf? I see them all around me and the marked for used ones, all the way back to 2012 models seems to be strong.
- giobox 4y ago
  It never sold that well and is being phased out of Nissan's range: https://www.caranddriver.com/news/a40613694/nissan-leaf-being-phased-out/ https://www.caranddriver.com/news/a40613694/nissan-leaf-bein... While they were a dime a dozen in the bay area and a handful of wealthy urban markets, its been hugely outsold by the more expensive Model 3 and Y despite being on sale since 2011 and didn't sell anything close to Nissan's hopes for the model.
- pornel 4y ago
  Leaf is a "city car" which is an euphemism for very short range and slow charging using a dying standard. MG4 is the cheapest EV (£30K) sold outside of China that could reasonably compete with a Corolla. There isn't much else in the cheap bracket. e-Niro and ID.3 start at £35K.
  - Swenrekcah 4y ago
    I know it’s not a Corolla, but it might be the Corolla of the EVs. It is inexpensive for an EV and seems to be a reliable and durable car. I’m almost sad to hear it’s going to be discontinued but for myself, when the time comes, I’ll be taking a good look at whatever Nissan will be offering.
    - pornel 4y ago
      Leaf is one of the early EVs, and it lacks proper battery cooling. This has shortened life of its batteries. Expect all contemporary EVs to age better than Leaf. Nissan Ariya is technically average, and rather pricy. It's technically comparable to ID.4, but 25% more expensive. Or for the same money you can get Ioniq 5 or Kia EV6, even in their higher trims, and they charge twice as fast.
  - flopsamjetsam 4y ago
    In Australia we now have the BYD Atto 3 (AUD$45k plus on-road costs) from China, and the MG ZS EV (AUD$45k plus ORC).

sho_hn 4y ago

> I say this because I interpret Tesla'a nonstop obsession with self driving as an admission they're in a race they will lose You don't need to interpret there; it's one of the few things Musk has been relatively consistent and forthright in admitting to. EV technology alone is not a very wide competitive moat, it was clear that other OEMs would be able to catch up to it. The mechanical and electrical engineering required is not a big challenge for the supply chain and a lot of the components were already available off-the-shelf. I believe he has said something similar to "without Autopilot Tesla is worthless" or some sort of dramatic statement like this - it's supposed to be their competitive moat going forward, so there's a lot, no pun intended, riding on it and making the market believe it's going well. This is doubly true because Tesla is arguably not doing great at scaling out the stuff that makes the other OEMs be able to participate in the overall industry business model. Tesla has made very impressive strides in bootstrapping and building out a volume production network etc., but what other OEMs do in having stable and predictable schedules and refresh cycles for a number of underlying platforms and car lines is still a very different ball game. Just look at how long in the tooth the S/X and even the 3 are getting without a full makeover or how long the Cybertruck is taking. Also a full refresh cycle of the factory network when you switch from one carline gen to another etc. is a milestone Tesla still has to manage.

ChuckNorris89 4y ago
> "without Autopilot Tesla is worthless" There's nothing too special about their autopilot compared to what other manufacturers offer. Musk's fast and loose claims about what Autopilot cand do "in the next six months" or "around the corner" were overhyped exaggerations designed to sell cars at best or Theranos style lies at worse, hoping that by the time people wise up about the false promises, Tesla's engineers will have something to show for close enough to what he promised which will buy hem more time to create more hype to sell more cars. Rinse and repeat. The thing is Tesla can't maintain their wide moat as the other manufacturers are catching up. Grown up friends of mine were rabidly buying Tesla stock, basically putting their life savings into it, and when I asked them why, they kept telling me "because Tesla's innovations would make the other car manufacturers obsolete". Now they're pissed at him.

jackmott42 4y ago

>It sold social status to wealthy customers rather than basic transportation to an abandoned market. That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery battery. You can get tons of power for almost not additional money, mass or volume. So building something like a 5 series BMW is very easy to do and make competitive. Building a Honda fit is very hard. The nissan leaf is the closest thing to that, and people don't want it because it can't really do road trips.

nradov 4y ago
Taking a long road trip with multiple people in a subcompact "penalty box" car the size of a Honda Fit is kind of a miserable experience regardless of what kind of motor it uses. People mostly only do that when they have no other options.
- SoftTalker 4y ago
  Yes cars like the Honda Fit are only for people who cannot afford a nicer, bigger car. Very few people actually prefer them. Their advantages are low cost and high fuel economy, which are the biggest factors forthe bottom end of the market.
- BaseballPhysics 4y ago
  Never owned a Fit, I take it? My wife and I owned a Fit for over ten years. We took many long roadtrips (i.e. 8+ hours in the car). For a couple with no kids, it's perfect, with a decent amount of cargo space, and great mileage. Frankly, outside of North America, small cars are by far the norm rather than the exception. The American SUV or pickup are quite literally jokes in other parts of the world for how absurdly large they are.
DoingIsLearning 4y ago
> That is more an artifact of the physics of electric cars. To get the range the masses want, you need a large, heavy, expensive battery. Kind of, you can also change the other factors in the equation like that startup building 'Lightyear' with the light weight platform, aerodynamics and with PV panels [0] [0] https://lightyear.one/lightyear-2 https://lightyear.one/lightyear-2

aeturnum 4y ago

I think they initially had hopes that they would be able to make some disruptive innovations in auto manufacturing - but all the evidence suggests they went way over their skis as Teslas are notorious for having extremely poor fit and finish. The failure to deliver on self driving is in line with a history of failing to deliver. You can include the weird hype around the Tesla humanoid robot on this list too imo.

rtkwe 4y ago

I think that was part of why FSD was such a core pitch from the beginning. IF Tesla had managed to crack that to the actual fullest it could have been the game changing thing to put them ahead. The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock. Too bad they hard committed to camera only sensing which is looking like a major mistake given how little headway they have against traditional car safety features.

eldaisfish 4y ago
If one takes a moment to think about the value of a private car participating in a public taxi fleet, the idea collapses completely. Public transit is difficult, so is a taxi fleet. A part is labour - drivers specifically - but equally large portions are maintenance, insurance and related things. Even if Tesla developed robo taxis tomorrow, there are numerous legal, regulatory, liability and willingness hurdles to overcome. There is also the issue of which markets robo taxis would address. Old-world cities tend to have good to excellent public transit. The value is largely in limited regions - north america being one.
- rtkwe 4y ago
  True but that's still a huge market and if it were demonstrably safer than people driving you could work through the insurance and liability issues in fairly short order. Also even European cities with great transport are often choked by cars and parking issues. London in particular seems to have issues with the volume of vehicles that could be at least partially helped by car share robo-taxis. There were tons of potential issues but it still formed the ideological core propping up any semblance of rationality to Tesla's pre-crash stock price. IMO it's still way over valued but it's at least no longer larger than every other major car manufacturer combined.
inkcapmushroom 4y ago
>The whole pitch of "your car makes money for you while you don't need it" robo-taxis and all the other knock on changes and rental opportunities that would unlock. Sounds miserable, I wouldn't want to get back to my car after work and find some passenger had ruined it in some way. Bodily fluids, smoking weed in it, leaving trash, the possibilities are endless!

brookst 4y ago

I agree with your interpretation, but I don't think Tesla is discovering this. I think they've known that the electric car was a mere sustaining innovation, while a true self-driving car is disruptive. That's why they've tried to sell their electric cars as self-driving cars. Unfortunately for Tesla, you can't just hang an "automobile" sign on a faster horse and declare yourself the owner of a disruptive product.

leesec 4y ago

What are you talking about lol. The whole point of Tesla has always been able to achieve scale so they can sell mass market cars.

kentlyons 4y ago

Using Christensen's theory against Tesla is an interesting one and one I've thought about. I largely think batteries and EV's are a red herring as far as Tesla goes and this type of analysis. I think it is much closer to a new market disruption. Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. The iPhone targeted different values than the dominant "smartphones" of the day. The attacks against Tesla to me feel very analogous to the attacks agains the iPhone. But I guess only time will tell. As an aside, I actually think the advantages of Tesla are its willingness to constantly improve the product - from software OTAs that make the cars better years after purchase to fundamentally reworking manufacturing (eg mega casting). They've taken Toyota's Kaizen and cranked it up to 11. As far as the rest of the auto industry, I think there is probably a cheaper worse play (low end disruption). EVs are much simpler to make and that's going to wreak havoc on the auto supply chain (needing it to be much smaller/leaner). And it would also seem the dealer's days are numbered - both as a dated sales model as well as their revenue drying up (fewer repairs to make). Do any of the encumbants disrupt themselves (knowing it is inevitable)? Or is there another player that comes in? (And I don't think Tesla really fits this role).

BaseballPhysics 4y ago
> Tesla is playing a different game than the rest of the auto industry - it's playing against a different set of customer values (electric might be part of it, but only part). In this way it is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry. Can you expand on this? When the iPhone came out there was literally nothing like it on the market. It genuinely redefined what could be done with a phone, and it doing so, completely changed the category. Nothing that Tesla is doing rises to that level of disruption/innovation, at least as far as I can tell. What, exactly, are they doing that brings you to this conclusion? > But I guess only time will tell. I find this so strange. Tesla has been around for... let's see... 20 years. The S is over 10 years old now (production started in late 2010). The iPhone came out in 2007. A blink of the eye later and the smartphone was ubiquitous. You say "time will tell", but... how much more time, exactly?

recuter 4y ago

You're a bit too late with that observation I think as Tesla is no longer the upstart. > The feature is a gizmo that appeals to techies and can, for a time, prop up sagging unit margins. But it's a nice to have bobble at best compared to the real prize of dominating the car market. The feature and all the rest of the hype somehow got it this far.. it might break 2m ($100B revenue) cars sold in 2023. That's about as much as Mercedes. BMB is 2.5m. So it has wiggled its way by sheer tyranny of will, luck, and incumbents dragging their feet to being in the top 10. Otherwise I'd agree with you but the bluff, improbably, worked out. They are here to stay.