At times of rapid technological development, it makes sense to rent rather than buy
Elon Musk’s reply on Twitter to the owner of a Tesla asking how to retrofit his vehicle, manufactured some years ago, with new technological developments announced by the company illustrates the increasingly pressing dilemma between acquiring technology-based products — which basically means just about anything these days — compared to renting them.
Musk’s response is unequivocal and categorical: rapid innovation is absolutely key to the company, its vehicles are going to undergo major hardware revisions every 12 to 18 months, and applying the necessary resources to be able to offer upgrade options to existing vehicles would involve slowing down the pace of innovation drastically. In other words, a Tesla, despite its high price, is destined to become obsolete — or at least, not to incorporate the latest developments created by the company — within a year or 18 months from the date of its acquisition, and anybody who doesn’t want to buy into that would be advised to buy another brand.
Many experts believe that the future of cars is for fleet operators to hire them out rather than for us to own them, given that most of us only use them for 5% of their total lifetime: if technology leads us to consider transport as a service rather than as a product, the decision to renew a fleet would become a financial variable in the hands of the operator, which may consider other ways to use partially depreciated vehicles or simply recycle them.
The approach is apparently similar to the products offered by another of Musk’s companies, Solar City: solar power generation equipment. Changing the roof of a house involves a relatively high investment that must be paid for through the savings generated by the facility itself over time. But solar generation equipment is subject to Swanson’s Law, meaning that its price decreases by about half every ten years while increasing its efficiency. In turn, this means that anybody who invests in such an installation might need to replace it a number of times over the years. It’s the same problem with batteries and accumulators: their life is limited by their charge cycles.
Some companies, in order to reduce the initial impact of materials and installation costs, offer alternatives such as renting rooftop space or batteries to exploit the electricity produced, with the owner of the property paying a fee in which his energy savings are incorporated. Under such a scheme, the company decides when the efficiency differential means replacing the equipment, providing other supply options for when the weather makes it impossible to generate electricity. In other words, a fundamentally financial business that makes solar energy accessible to more users.
Will we see these types of formulas and options applied to more and more products? In some countries, Apple offers an iPhone Upgrade Program whereby users lease the device, paying a monthly amount and receiving a new terminal each time the brand puts one out. Does rapid technological progress lead us to a future in which, in order to protect ourselves from obsolescence, we will rent rather than buy?
(En español, aquí)
