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Tesla Is Many Things But Not An Auto Industry Market Disruptor


Topics:  Tesla

Tesla Is Many Things But Not An Auto Industry Market Disruptor

John Goreham, TorqueNews
8 July 2019


Tesla is a fascinating company with compelling products, but the auto industry disruption Tesla is often credited with is hard to justify.

Tesla Dealership Original Honda Chevrolet Truck
Tesla is the child of two Silicon Valley-based founders (Elon Musk is not one of them) and the culture of that technology incubating region is a big part of Tesla’s culture. One aspect of this culture is that of being a “disruptor” to the industry in which a product is marketed. Every company and every tech leader wants to be thought of as a “disruptor.” A person or company that changes the traditional way an industry operates, particularly in a new and effective way.

An easy example to understand of a vehicle market disruption is American Honda. In 1959 American Honda opened for business in a small shop in California. Six years later the company had over 70 percent market share in America’s motorcycle market. Honda’s marketing model became the model.

Another example that is perhaps more timely is that of mobile phones (or smartphones, or smart devices, call them what you like). When Apple dropped the iPhone a decade ago, it almost immediately gained significant market share and the basic iPhone design, though there were already phones that did much of what the iPhone did, became the template going forward. Today, Apple has 40% of the U.S. market for mobile smartphones and about 20% globally. The legacy brands that had the most U.S. market share, Motorola, Blackberry, and Nokia, are now almost insignificant as providers of such devices in the U.S. Market. Only Samsung makes a competitive product that has similar market share in the U.S. And, let’s face it, Samsung’s design is pretty much Apple’s design. Tesla’s impact on its industry is nothing like this level of disruption, as we will illustrate.

Before we begin, since some may consider this story a straw-man argument, here are just a few examples of who specifically is calling Tesla a disruptor of the auto industry:
- Teslarati (and Instinet) "Tesla is disrupting the auto industry just like Salesforce disrupted software: Nomura"
- Inside EVs (And Loup Ventures) "Tesla Is So Much More Than An Automotive Disruptor"

There are also those who have questioned whether Tesla is a disruptor before we took a turn:
- Harvard Business Review "Is Tesla Really a Disruptor? (And Why the Answer Matters)"
- MIT Technology Review "How Disruptive Is Tesla, Really?"
- Business Insider "Tesla Is Not Disrupting The Car Industry"

Tesla History
Tesla’s first product was really not a good example of what we think of today as a Tesla vehicle. The Roadster was a Lotus car with a drivetrain swap. As awesome as it was, it did not disrupt anything, barely sold, and went away without a replacement model. However, Tesla’s next product, the Model S was a big deal. It was the first electric car in the modern age that wasn’t a bummer, or a compromise, or just for a few hard-core EV fanatics. If you don’t like the Model S you have a mental problem that should be addressed. The Model S has now had years of regular sales and is still one of the top-five EVs for sale in America. It has also proven to be a top-seller in its car class. It was a successful new car from a new car company.

Tesla Takes A Lead In One Segment
Tesla continued to refine its products and the newer Model 3 is a down-market, smaller-sized version of the basic idea behind the Model S. Everyone loves the Model 3. It’s a great car and without a doubt, it has had a big impact on the individual segment it sells within. That being the compact/midsize (call it the 3 Series-size) premium/performance market. To say that Tesla now dominates that individual segment is fair. Tesla is the sales leader in that specific segment by a wide margin and that is not debatable. Also, many buyers who may otherwise have purchased some other green vehicle (Prius, Lexus CT, Lexus GS Hybrid, Volt, Bolt, Leaf, etc.) do definitely shop the Model 3. Some buy one. However, the more obvious cross-shopper is the BMW 3 Series, Audi A4, Lexus IS, Mercedes C-Class buyer.

Tesla Fans’ View & The Facts
Tesla fans see the cars they love as being a disruption to the auto industry, but is there objective proof? Arguably not. Tesla is for sure a very strong player in the premium/luxury segment. However, that entire segment of the auto industry overall is very small. Individually, the second-tier of premium/luxury brands which Tesla now is part of, each have minuscule sales compared to any of the larger, more mainstream companies and brands. For example, the Honda Civic is larger in sales than the combined sales Tesla or from any of the automakers that Tesla is now the same size as. And that is just one Honda model that it sells in high volume. Honda has four high-volume models that are always near the top of their segments in sales. And Honda is arguably the smallest of the “larger” automakers in America and globally. Toyota, Ford, FCA, GM, and Nissan in America are at an entirely different level of sales. Globally, VW is also at this higher level.

Unlike disruptors such as Apple with its 40% phone market share, Tesla’s U.S. new-car market share right now is about 1%. With about 17 million vehicles sold annually in America, Tesla, with its now maxed-out production capacity, makes up less than 200,000 annual vehicle sales in America. Even if Tesla succeeds beyond its wildest dreams, and it dreams big, Tesla may one day in the next decade represent 3% of the U.S. total vehicle market. A 3% market share is not disrupting anything. Particularly if that product is sold at a financial loss.

Source: https://www.torquenews.com/1083/tesla-many-things-not-auto-industry-market-disruptor

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