I love Tesla! It’s not just that these guys care so much about the environment, but they do it in such an innovating and inspiring way. Starting with the sporty Roadster, through the very sexy Model S,X and 3 to engineering the most powerful roof we’ve ever seen. However, with the latest acquisition of SolarCity I question if Tesla is able to sustain their leading position in the electric car market. Let the history speak for itself.
Tesla is not only the pioneer of highly efficient batteries and electric vehicles but also autonomous driving. With their latest software update they have pushed the bar so high and so early, that no other technology company will be able to catch up any time soon, be it even Google or Uber. It is simply because neither Google nor Uber have direct access to data from so many cars. Tesla’s AI for autonomous driving is based on frequently analysed data from over 100k cars which drove more than 800 million miles, including 140 million purely on Autopilot. It’s a competitive advantage that neither Google nor Uber can beat.
The only companies that Tesla doesn’t have this advantage over are big car makers such as Mercedes, BMW or Volkswagen. The problem is these guys don’t have the agility that Silicon Valley does. They simply woke up too late in the game and they will need to team up with software companies similarly like Volvo did with Uber helping Uber create a first service driving fleet in Pittsburgh. I’ve seen Mercedes’ self-parking car, but there is a hell lots of innovation between a car parking in a set up spot to a fully autonomous car with random objects and real unaware people on the road. With a single camera that is only active when you are reversing, Mercedes is nowhere near autonomous driving capabilities of Tesla, which provides 8 cameras of up to 250m range, 12 ultrasonic sensors and forward facing radar that is able to see through heavy rain, fog, dust and even the car ahead. All of this in every car that leaves the Tesla factories at the moment.
Tesla produces one of the most autonomous and sexy eco friendly cars, it’s clearly the best electric car maker, or is it?
SolarCity acquisition
With the latest shareholder approval of Tesla and SolarCity merger, Tesla might not be just a car maker for much longer. Elon Musk wants Tesla to be an energy/car company. It’s truly remarkable how Elon wants to help reduce fossil fuel consumption and transform our generation to use sustainable energy.
I buy it and fully support it, however it seems like investors don’t. Tesla had a rough few months on the stock market since the SolarCity initial announcement, even despite a strong quarter(when they posted their first profit since Q1 2013) and unveiling the superb and awesome solar powered roof. What Musk is doing for the environment is great, but from the marketing point of view this merger and vision might be risky.
“Marketing is not a battle of products, it’s a battle of perceptions”- Al Ries & Jack Trout, The 22 Immutable Laws Of Marketing
Tesla is selling cars, battery packs and is planning to sell solar roofs. Everything seamlessly integrated. What if in a few years Tesla added taxi services to its portfolio. Might seem like a joke, but with autonomous cars, Tesla has everything in place to get you from A to B, cars and drivers (AI). I doubt Tesla would beat Uber though. Uber is a leader because it was first to disrupt the taxi services market. If you cannot be the first company in the given category, create a new one so you could be a leader too. Autonomous taxi service is definitely a new category that doesn’t exist yet, however Uber is actively working on this aspect as well and if anyone, they will probably be the first to market as they already have a large user base. Saying that, it’s quite far away in the future, not due to software constrains but safety regulations. If Tesla decided to complete in this market, it would further dilute customer’s perception about Tesla.
IBM, with origins reaching 1890, used to be a market leader in PC hardware and software, having monopoly on the market it made a ton of money. Lost it’s position to Microsoft(software) and Intel(hardware). What IBM stands behind? Everything, which means nothing.
Primary directive about building a brand is that you must be single minded. When you try to be all the things to all people, you asking for trouble.
Back in 1978, when 7-Up was simply the lemon-lime uncola, it was only behind Pepsi and Coca-Cola in market share. The Uncola brand was positioned against the rest of the market, thereby offering a true choice. Everybody had it, movie theatres, fast food places, corner stores, supermarkets. It was ubiquitous. Then the company added 7-Up Gold, Cheery 7-Up and assorted diet versions. The more users we can target the better the market share right? Nope, in 2000 its market share dropped to only 2%, sliding further to 1% in 2013. BTW have you even heard about 7-Up??
This concept is called ‘line extension’, terminology introduced by Al Ries and Jack Trout in The 22 Immutable Laws Of Marketing
In order to be successful you have to narrow the focus so you can build a position in prospect’s mind. Nearly in any category, the leader is the brand that is not line extended ie baby food- Gerber, mayonaise – Hellmann’s, microprocessors – Intel.
If targeting everyone is a bad marketing practise, why General Motors is the US car marker leader? GM is a mother company of multiple brands such as Cadillac, Opel/Vauxhall, Chevrolet, each with it’s own concept, values and target market. Think about Volkswagen, one of the biggest car manufacturers in the world, they own brands such as Bentley, Bugatti, Audi, Lamborghini, Porsche, SEAT, Škoda and obviously Volkswagen.
Google realized that they cannot be involved in everything they want to have an impact on and they needed to narrow its scope. On August 2015, Google announced creation of Alphabet Inc., a new holding company, which became a collection of multiple companies, out of which Google is the largest one. Stock market got very excited by this move, stock value increased by %4.1.
Number of products Tesla produces is slowly increasing and sooner or later Tesla might choke on it. At the end of the day, Tesla might loose its strong position in the car sector by creating too many unrelated products under its own name. Especially now, when the competition is slowly catching up, like this all electric beauty from Jaguar that will enter the market in the second half of 2018, exactly when you could drive Model 3 if you ordered today.
If SolarCity was acquired, it should stay as a separate brand with the SolarCity Roof as its main product. Batteries, cars and solar roof could still be seamlessly integrated, but customer perception will be more narrowed. This way we could have the most exciting future, the best Tesla cars in our garage and SolarCity Roof powering all our electricity needs.
Think about it, would you buy EDF Energy electric luxury car even if it was as good as Tesla’s Model S?
Tesla will still be producing awesome cars, but let’s be honest. Tesla is just so much more than a car company. Tesla is a sustainable energy company and it might create a gap for a new electric car leader in a few years.