Why 268 000 Preordered Tesla Model 3?
Tesla Model 3 preorder numbers are in. At the moment 268 000 preorders. Almost a year ago I made a comment on Harvard Business Review and it was republished in the printed, summer edition. Let’s see what I got right and what I missed.
A year ago Harvard Business Review republished online the opinion of Clayton Christensen, who is probably the most influential brain on innovation. As much as I respect his work and how his vision and understanding changed the whole innovation landscape I had a different opinion based on our proprietary method AbilityMatrix.
Let’s see the comment that made to the interaction section of HBR.
“He [Clayton Christensen] coined the term [disruptive innovation] so has absolutely every right for such a verdict. Still my opinion is that if you look beyond the strict “is it disruptive or not?” question, Tesla is offering a totally different customer experience that the key car manufacturers are not able to mimic or compete with. We conducted a research on our own and people are not buying “vehicles” when they buy a Tesla. It might be the surface but they are buying into the “spaceship program” as we called internally. The futuristic experience. So the customers are not comparing Tesla to anything at all. The acceleration can be mimicked but all the bells and whistles that create the experience package, are unique to Tesla only. They have no legacy when it comes to brand image. You can’t turn a Porsche into a Tesla competitor even if you are technically able to. The brand and customer experience expectations set a limit to this.
Some key elements of the Tesla experience: the whole buying process, no refueling costs (if you pay in advance when you buy), no mandatory service checkups, over the air improvements, much less depreciation. And the driving experience. They have totally redefined the customer experience and it is hard to see anybody follow. Leaf and Volt are all flops. And this approach also helps to understand why they struggle in certain countries, like China. Of course they are in the early adopter phase or even before that and we still have to see if they are able to cross the chasm.”
Over the air improvements
Mentioning the so called OTA (Over the air) update option was a huge hit, as Tesla 4 months later introduced the self-driving capability and it was rolled out to not only new cars, but also cars produced in the last 2 years. Guess what, it was rolled out using OTA. This proved not only the huge potential (and the never discussed risk) in adding new features like self-driving but also helps the lowest depreciation in the car industry ever. (Source here)
So low depreciation check, OTA benefits check.
BMW is starting to gain traction with the “i” series. We didn’t conduct a thorough market research but all the people I talked to and were interested in the i-Series never ever had a BMW before. Likewise, the people driving gasoline BMWs are turning down any idea of driving an electric car. This further highlights the point that you can’t change a gasoline car brand into an electric car brand, at least not by losing your old customers. So brand experience check.
With the astonishing number of people reserving the Tesla Model 3 (and actually paying $1000) you can see how the teasing and the buying process works. Car manufacturers have been successful selling cars in advance, but to understand this number: in 2014, the total number of hybrids sold in the US was 452 000. More than half of the whole US market hybrid sales can be covered by the Tesla Model 3 preorders (!). Toyota Corolla is the best selling car in the world, with over 40 million sold in 50 years. In 2015 363 000 new Corollas found their happy owners (Source)
Almost as many Corollas were sold in 2015 as Tesla Model 3. Except in a whole year, not in 3 days….
What we got wrong? I suppose the acceleration is becoming less and less important as nobody complained about the acceleration. And to see the opportunities Tesla has, look at how the wheelbase compares to the Audi A4. Wheelbase is the primary indicator of the possible cockpit size and thus comfort. If you don’t need a combustion engine, your options are unlimited assuming you can think out of the box.
Tesla is not disruptive, according to Clayton Christensen, and he must be right, as this definition is his. But we can still call it game-changing, can’t we? ;)
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Picture from: Tesla Motors Magyarország
