Tesla Will Win It All
The race for self-driving cars will have exactly one winner and it won’t even be close
I finally did it. I finally decided that my next car was going to be a Tesla. It took a long time for me because years ago Elon Musk himself had personally convinced me that he could never succeed as a CEO and there was no way I was going to get stuck with one of his cars that was sure to fail.
By “Win It All” I’m not just talking about the electric car race or even the car industry in general, I mean transportation: personal, Uber, taxi, even rental cars — everything.
I am not an industry watchdog or even an industry insider, but I do carefully study technology trends and focus on innovation as a CTO for Korn Ferry, (NYSE: KFY) a global organizational consulting firm. In my work, I focus on designing large scale systems, user experience and bringing technology products to market. So… I think about these things.
Two months ago, the idea that Tesla will win it all hit me after a visit to one of their dealers — but, honestly, up until then, I was never that bullish on Tesla.
Elon personally turned me off of Tesla
10 years ago, Elon Musk has personally kept me from buying his stock — which would have made me the fortune some of my friends had made. How did this happen?
Elon was the commencement speaker at my nephew’s graduation from Art Center in 2010, a very prestigious design school in Pasadena, California. A coup to get someone that famous to speak at their school — we were all looking forward to it.
He was, in my opinion, the worst commencement speaker I had ever seen. Somehow he must have decided that the address was not worth his time and he would just “wing” it. To sum it up, where most speakers ended their speech that year with some form of “So, class of 2010, my best advice to you is this:…” Elon ended his speech with “So, um, yeah. I guess that’s about it. Does anyone have any questions?” It was awful.
So bad, in fact, that when a friend suggested I get into Tesla Stock as he did, I politely declined. “There is no way that someone who speaks so poorly could ever sustain anything of value as a CEO.” Boy was I wrong.
The day I saw him the stock price was $31.52 a share.
ugh.
mind: changed
So then fast forward to a few months ago when my wife and I finally went into a Tesla “dealership” to pick out a car for her. We had been sold on electric transportation several years back as a way to cut down my commute as it allowed me to sheepishly slip into the carpool lane alone, but now we had finally decided to go all the way and get the gold standard.
I had been seduced by Tesla simplicity. Tesla elegance. I had coveted my friend’s Tesla. I drank the Kool-aid. I still thought their stock was way overpriced but sustainable. Range anxiety didn’t really apply as it would be my wife’s daily car to tool around town but also use on date nights or for events we needed to show up in style — we were all in.
So what was it about the visit that sent me into a tailspin and had me out of there thinking that Tesla was actually way undervalued and convinced me to immediately move a substantial investment into Tesla?
It was one statement by the salesperson “You can lease or purchase it outright but we do not offer a lease to own program.”
“Why not?” I asked, curiously.
“We think we are close to getting fully autonomous, self-driving approval. If we do, we want all of the cars back that we can to compete with Uber and Lyft.”
At that point my mind basically shut down and their entire plan unrolled in front of me and I realized that no one could compete, and Tesla will win it all.
#omg #epiphany
Look at any arms race you will see all of the press and all of the attention paid to the tip of the arrow. In the case of self-driving vehicles: all of the attention is focused on can the car drive itself? Uber, Google, Apple, Tesla, dozens of startups — all you hear is the testing that they are doing around the “can it drive itself” question.
To bring a self-driving car to market, however, you need way more than just the ability to drive. You need:
- Production-ready cars in the field ready to pick people up. Cars that have been retrofitted or even created specifically to be self-driving
- An interface to passengers in a way that they feel safe and understand what they are doing
- A process and facilities to maintain and refuel the car
- A ready supply of parts for retrofit and repair
- You need to train customers on how to use it and maybe even nationwide training centers where people can learn how to use your product
Uber, for example, is said to be heavily invested in self-driving cars, but I’ve always thought their biggest hurdle is not the driving, it is convincing users to get in the back of an empty car. How will they feel safe?
Has Uber even started on the interface to help users feel in control? How do I ask the car to let me out or change the route? Would it be enough to have these interfaces in an app or would it need to be in the car on some sort of touch screen? How does Uber convince their drivers to give up driving? How will they contain the backlash? How do they redirect the self-preservation instincts of current drivers who will see these self-driving replacements as competition for their livelihood?
Their plan may very well be convincing drivers to retrofit their cars to self-driving so they can monetize the cars without them in it but now will they really have to have a retrofitting program that does every variation of Uber an Uber-X? Is this even remotely practical? I don’t think so. Would drivers even do this knowing that their share of the fare would likely drop even more?
Google and Apple may be making great strides in self-driving, but they don’t manufacture cars so they will have to partner. Again all of their development is focused around driving — what about passenger communication and interaction?
In my opinion, once the “cars can legally drive themselves” hurdle has been met — the only company that will be able to put it into production within 5 years is Tesla. In fact, I think Tesla could start taking advantage of it within months after this sort of approval.
Tesla’s Transition to a Service Company
Putting it all together, I think Tesla has been setting itself up for an entirely new model that I don’t see people talking about. Here it is:
- Tesla has hundreds of thousands of customers that are already trained to do the level of self-driving they are comfortable with.
- Tesla has hundreds of thousands of customers who are trained to use a card for access to their vehicles. They are trained to use an app to summon their cars. They are trained that once they get into the car it automatically configures itself.
- Tesla is already producing vehicles with self-driving capabilities with a 6 thousand dollar upgrade to full self-driving that can be done retroactively.
- Tesla is already handling their own insurance.
- Tesla has a nationwide network for vehicle repair.
- Tesla has thousands of charging stations nationwide.
- Tesla has leased “stores” nation-wide rather than a legacy retail dealer network that they would have to dismantle as Tesla transitions into a service company. These stores are already basically tiny demo areas — the exact sort of tiny retail space you would want to set up to sell access cards and demo how to access self-driving features for the uninitiated. Any other car company making a transition to this future would have to explain to their large independent dealer networks how it is in their best interest to abandon their massive dealerships and be happy with just doing repairs. Tesla has no such painful conversations in their future.
- Tesla has thousands of people each month leasing cars which means that thousands of used cars will be returned to them each week 3 years from now. Giving them a large scale, cheap supply of cars nationwide to start a service business.
Instant Car Rental
So, let’s say you lease a car. Before you return it, Tesla gets the magic approval to allow cars to drive themselves unattended on roads in your area.
When you go to return your car, Tesla says “Thanks for the car, but you can go ahead and keep your key card. Whenever you need a car, just go into the same app you’ve been using for 3 years and summon a car. When the car comes to you, the key card in your pocket will be automatically configured to let you into the car. Get in and the car will configure itself to you as it always has. Drive wherever you want to go. Get out and go into the app and click “return the car” and the car will drive to the next customer.”
Certainly, Tesla could forgo the card altogether but it may be a nice touch to spur brand loyalty and give them a “Tesla” they could carry in their pocket.
The Zero Garage Lease
Then, if Tesla wanted it could really up the ante: Oh, by the way, if you need a car every day, you can use our new “zero garage lease”. Pay us $199 a month and you can get a car up to 3 times a day, every day and you can free up your garage for other things.
Not a taxi replacement?
We all envisioned self-driving cars as the taxis from Total Recall or an Uber with an empty front seat. Now, thinking of the Tesla model, self-driving cars aren’t really replacing the taxi as much as they are replacing the rental car with a short-term lease that could even be only a few minutes long. As users get more comfortable, could they certainly treat it like a Taxi? but a self-driving taxi service is not a day one requirement — it is something that could be evolved to. In the mean-time, they can treat it as their own car: Just get in and drive.
Look at the issues Tesla solves with this strategy: at launch, you don’t have to teach customers to get into a self-driving car in the back seat — they can get into a similar car to what they’ve owned for years and treat it exactly the same.
They never have to be afraid of the self-driving feature because the only time it really needs to drive itself is when the car comes to you — empty. Do you care? I won’t. Once I get in — then I get behind the wheel and drive or I let it drive me — whatever I’m comfortable with.
This is really the transition the world needs to self-driving. Again, hundreds of thousands of users are already being trained with this interaction every day in the exact same cars that will evolve to self-driving. Hundreds of thousands of users are already letting their car drive them autonomously: Most everyone I know that has it says it is a must-have if I’m purchasing a new Tesla.
Tesla Wins it all
The magic of what I now envision the Tesla plan to be is that the car only really needs to drive itself when it’s empty and that’s when users don’t have to worry about it. This is brilliant because it removes the single biggest barrier to self-driving as a service: getting users comfortable enough to use it. Users are already playing with the “summon” feature every day and once the new full self-driving version comes in — you just summon a car. Period. No fears to overcome. It drives up to you, you walk up to it and the door opens. Easy. Now — you decide — if you want it to drive you from there. Once you are done, you get out and it drives away. Again, easy. No fear.
Tesla has no Uber-like driver group it needs to make happy, no 3rd party cars it needs to retrofit, no new user interactions it needs to develop or train its user on.
Tesla already has the cars, over-the-air updates, self-driving capabilities built-in or upgradable, charging network, repair network, insurance plans and most importantly — It already has users trained on the core aspects of their user interaction.
In short, Tesla has no competition in the self-driving car space. If there is some secret sauce, some magic threshold that Apple or Google will cross before Tesla and they want to enter this space — my sense is their only hope to beat Tesla to market is to buy Tesla at any price. Period.
If they buy Tesla, they get a turn-key operation to pour their secret sauce into otherwise they will have to start down a long road to build a Tesla-like operation with a partner and this would take years.
In even half the time it would take any competitor to get ready to launch a self-driving product, Tesla would likely hit its own finish line and still get to market years before the competitor’s launch.
So, did we end up buying a Tesla? No. Instead, we took all of the money we were going to use and purchased Tesla stock. My wife wasn’t happy until she saw that it started going up, and up, and up. Now she’s okay to wait. I am happy to wait for the “zero garage lease” and will sign up as soon as it is available.
I’m only sorry that Elon spoke so poorly that day in Pasadena because I would have invested in him sooner and made a small fortune. It’s understandable, though, in retrospect he was too busy planning his world domination to be bothered with writing a speech. In the years since his actions have done more to inspire a generation of designers than any words could have anyway.
So, thank you, Elon, if you are listening: You have envisioned a self-driving future that is practical, well-thought-out, complete, and can arrive sooner than anyone expects.
I, for one, can’t wait.
