Tesla Model 3: A Success Story for the Entire Sustainability Movement?
April 21, 2016
On March 31st, Tesla Motors launched its Model 3. In less than three days, Tesla received more than 300,000 reservations, worth over 10 Billion US$ in sales. This is more cars than they sold in total during the relatively short history of the brand.
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It is also more electric cars than have been sold by any global car manufacturer in total during the past five years (Nissan leads with 200,000). In short, it’s definitely a success, and many investors have talked about this as Tesla's "iPhone-moment". So what can we learn from Tesla? And what impact may it have on the automotive industry and the sustainability movement in general? In this article I will outline 3 key learnings and consequences of Tesla Model 3.
Strategy: Tesla has had a clear strategy, which they consistently worked with for ten years. The company first used it when it unleashed the Roadster as a niche product into the luxury car market: the first fully electric sports car that combined the benefits of electric driving with a sleek design. With the Model S and X it continued to conquer this niche market. Now, all is done to finance the journey and the capabilities to be able to address the mass market with model 3. To learn: set up a clear road map towards your long term sustainable goals, financing the journey with the short-term business cases you find possible.
Technology and Innovation: Tesla does not compromise on the product just because it is sustainable - the performance of the car excels in safety, driver assistance and motor power; innovation at every level that triggers customer desires. The performance focus is also combined with business model innovation - new ways to sell the car and a general worldwide included in the price of the car. To learn: Innovate fiercely without compromising on any parameter. This requires focus on a smaller product portfolio.
Consumer engagement and advocacy:Elon Musk started his Model 3 presentation by reconnecting to climate change. His messages are clear and simple and have been repeated again and again over the years. He wants to revolutionize the automotive industry using customers as participants. Customers are no longer merely consumer, but are part of a movement intended to improve the world. This concept has led to a form of Tesla worship - something similar to how Apple used to be underdogs in the PC world. To learn: The combination of a great product and a revolutionary act to save the world is a successful consumer concept that can be utilized.
So what impact does Tesla Motors have on the automotive industry and the sustainability movement in general?
It was not long ago, VW predicted that electric cars would only reach a maximum of 1% of the market by 2030. Looks like they’re going to be proven wrong. Tesla Model 3 will, if it is delivered on time and at scale, shake up the automotive industry and hopefully speed up the others in the industry.
Comparison with the iPhone killing off market leader Nokia, however, is unfair. Tesla lacks the ability to scale production. Therefore, their economic impact on the competitors will be marginal. Furthermore, the supply of lithium-ion batteries is also likely to limit the ramp-up of electric cars, especially if all car brands catch on. To be able to meet its target of 500k cars per year, Tesla plans to hold 50% of the worlds lithium ion cell factory capacity. Elon Musk hopes that it will advance the mass market production of cost-effective lithium-ion batteries, making it more interesting for other car manufacturers to start making electric cars. Thus it’s likely that today's automotive industry will not be revolutionized by Model 3's potential success, but rather undergo a faster but very welcome evolution.
The symbolic value of the Model 3 for the sustainability movement should not be underestimated. The car has long been the daily reminder of a necessary evil of modern man's lifestyle. Consumers will be inspired by how a better life (by having a nice car in the driveway) can be combined with a sustainable world, which will probably spill over to higher requirements to other products as well. Who wants to run the old lawn mower on gasoline when your neighbor goes to work in his electric car?
Speaking of a revolution, that is precisely what the automotive industry needs to respond to the climate and smog challenges we face. In the end, it might just be one tiny detail about the Model 3 that will turn out be more important in this light than the full show: standard automation hardware to support autonomous driving. On the other side of 2020 we can imagine self-driving cars on our roads, which will probably mean we will get by with much fewer cars than today. As outlined in a study by Columbia University, the need for cars will be less than 20% of what it is now to meet the mobility demand. Apparently, what will ultimately turn out to revolutionize the automotive industry is likely the notion that no one will want to own a driverless car.
This article is an article by Tomas Haglund & Joost Brinkman (Accenture alumni).
Accenture the Netherlands
Accenture the Netherlands
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