[kentlyons]

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]

> 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?

[kube-system]

The iPhone was seen as a niche device when it was introduced. It was both "too expensive" to be a mass market consumer device and lacked features that the enterprise demanded at the time. At the time, consumer phones were much cheaper, and smartphones were PDAs that made calls -- they were electronic Rolodexes. "Kids don't want to play with a rolodex, they want MP3 players!"

What nobody expected is the power of: people just loving the device. Enterprise IT departments were approached by C-suite folks demanding to use the device. Consumers decided they did want to fork out big bucks for one, and carriers found a way to finance them.

[kentlyons]

There's a few things to unpack here. One is the perception of the iPhone. Eg here's a quote from PC Magazine I saved when it came out: "Poor business e2mail and PIM connectivity. Bad audio quality on phone calls. Tons of GSM buzz on nearby speakers. Virtual keyboard hard to type on. No phone functionality with iPod speaker docks. It’s the best portable media player ever. It’s possibly the most fun we’ve ever had with a handheld device. It browses the Web like a champ. But poor phone call performance and missing messaging options make us unwilling to recommend it as a phone." There are similar other criticisms. It was not part of the category of smartphones at the time as seen by the people using them.

The early criticisms about Tesla's build quality and a lot of the arguments about a battery not being good enough seem to follow a similar argument. Is the original Model S as good as a top of the line gas car at the time? By most metrics used at the time, no. The criticisms in the peer comment by lbsnake7 are similar - those are legacy metrics of a car. However it did find a customer base that valued what it offered, bad seats and poor panel gaps and all (just like the GSM buzz and non-replaceable battery).

As far as the timeline, the slowness has surprised me a bit but I think comes down to a couple of things. One is the turn over time of getting a new phone vs a new car. Cars are much slower. And another (which might be related) is the price point of cars being orders of magnitude larger than phones. And finally, it's taken a good while for Tesla to ramp - it's been supply constrained forever (although there might be signs of that shifting).

[BaseballPhysics]

So you've provided your perspective on why you think the iPhone wasn't that disruptive at the time (though, given that, a year after its launch, numerous phone manufacturers announced their own smartphones, I think you're rewriting history a bit, but whatever, that's not actually the point of the conversation).

At the same time you've claimed Tesla will be the iPhone of the car world. You claimed "In this way [Tesla] is similar to the iPhone coming in and basically killing Nokia, Motorola and Blackberry."

I'm asking why you believe that. Can you expand on that?

I've heard claims of vertical integration, but that hasn't proven to be a major differentiator, and in fact is turning out to be a liability (see: reliance on China).

I've heard claims of manufacturing automation, but that's turned out to largely be a failure.

I've heard claims about the synergy with Solar City and their battery development, but that's proven to be a very small moat, at best.

I've heard claims about the value of OTA updates for software, but that too hasn't been that disruptive, and now other manufacturers are doing the same.

I've heard claims about their abandonment of the dealership model, but that doesn't seem to have been much of a differentiator, and given their service reputation, seems to have become a liability.

Elon is selling the idea that FSD is the critical factor, but FSD is increasingly looking like an unattainable dream, at least with the hardware platform Tesla currently has in the market.

So what's your take? Why do you still think Tesla will be like "the iPhone coming in and basically killing Nokia, Motorola and Blackberry"? What am I missing?

You've also explained why you think Tesla, at 20 years, hasn't yet had the disruptive effect on the market that you seem you be predicting, laying it at the feet of market structure and so forth.

But you haven't explained why you believe that will change, either.

[kentlyons]

It is the part just before you cut in my quote: "it's playing against a different set of customer values". That is how Christensen defines a new market disruption. That is not enough for a successful new market disruption, but is one of his key characteristic of one. So I believe the values people are finding in their purchase of a Tesla are radically different than those buying ICE vehicles.

[BaseballPhysics]

I think that might have been true once but a) the futuristic/revolutionary reputation of Tesla has come down to earth through the trials of the Model 3 and the failure to deliver FSD, and b) Elon's antics, both during COVID and through 2022, appear to have put a sour taste in the mouths of people who bought Tesla's for the values they purportedly represented (sustainability, etc).

So honestly I don't believe this is the case anymore. I think, as more EV competition is entering the market from both new and established automakers, they're now just another EV that happens to have great brand recognition but an eroding brand reputation, a good charger network, average to below average quality, a very weak record on customer service, and a CEO that's just another crazy, out of touch billionaire.

[int0x2e]

I'm far from a Tesla fan myself, but one thing I found really cool are claims by friends who worked with Tesla is that they have a huge lead on mainstream car makers thanks to the fact they design and make a huge part of the cars and "stack" in-house. Rather than 80% of the car (and code) being built by 1st tier makers, packaged by 2nd tier and integrated by your 3rd tier provider, leading to very very slow iteration cycles. One friend even claimed they do continuous delivery on many parts of the hardware on a daily basis (meaning revisions are a frequent thing across the entire stack). I am not sure how much of this is true though.

[BaseballPhysics]

> I'm far from a Tesla fan myself, but one thing I found really cool are claims by friends who worked with Tesla is that they have a huge lead on mainstream car makers thanks to the fact they design and make a huge part of the cars and "stack" in-house.

That might be true, but it's not clear at all that it's good.

Vertical integration carries risks because you now have to run your own end-to-end supply chain, which means you are also responsible for building diversification in that supply chain (as otherwise you end up with single points of failure), which is complex and expensive.

I've heard similar claims about how cool it is that Tesla doesn't have dealerships, but the downside is they also have absolutely horrendous service.

And this is ignoring the fact that how Tesla builds and sells their products is somewhat orthogonal to the question of product category disruption.

No one would've called Apple disruptive if they made yet-another-flip-phone but just built and sold it differently.

[lbsnake7]

This is wrong. Tesla does have the advantage of being the more tech of all the car companies. They have the disadvantage of being bad at the car part. They spent massive amounts of time and energy being vertically integrated as much as possible. Historically car companies outsource everything in the car but their core differentiator (mostly engines). Tesla thought they could do everything themselves because it is cheaper but you are not going to make seats better than someone whose only job is to make seats. This is why they have all the quality problems.

[danans]

> 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.

As much as the iPhone killed off those companies, it grew the market for smartphones more.

There is no significantly growing market for cars like there was for "handheld internet-connected personal computers". Every EV sale is effectively 1 less ICE sale - a 1:1 replacement in the market. Whatever market growth potential exists is in the very price sensitive developing world (South Asia, Latin America, Africa, etc), where EVs will show up en-masse last.

Now that practically every company is selling EVs, Tesla only has its brand to differentiate it, which was at one time significant but perhaps less so lately.

As I see it, their only meteoric growth opportunity (by eating into competitors' market share) would be if they released a $20K, 250+ mile range, 5 seater EV in the very near future - like what the VW Beetle did in its generation.

But that's hard to achieve in an EV (especially from a luxury brand used to high margins), since the majority of the cost of an EV is still in the battery, and that cost doesn't scale down much with a lower price tag.