Tesla, the Electric Vehicle

The Tesla is first and foremost an Electric Vehicle. An EV represents more than just a change in the form of energy our transportation runs on, Tesla’s Model 3 success threatens an upheaval of the entire automobile industry and its business model.

This stems from the inherent nature of an EV. Compared to an ICE vehicle, an EV is more elegant in its operation, with only a dozen moving components compared to hundred of working parts in a combustion engine. Fewer moving components naturally reduces maintenance.

This does not bode well for the thousands of auto dealers around the world who make most of their profit through servicing existing vehicles.

Deloitte’s analysis of Australian auto dealers revealed that only 5 percent of a dealer’s profits come from new car sales, with the whooping 50% of profits coming from parts and servicing. Similarly, the National Automobile Dealers Association also claimed that dealers on average make three times as much profit from service as they do from new car sales. This is consistent with other countries such as India.

Tesla’s insistence on selling their vehicles through their own storefront instead of going through dealers is a reflection of this. By selling their vehicles in-house, Tesla can deliver superior customer experience (no haggling!) and better experience buying an EV compared to buying from dealers. This helps in shaping Tesla brand from just another automobile manufacturer to a lifestyle brand.

A huge stumbling block for the widespread adoption of EVs is the lack of charging infrastructure, especially when compared to gas stations servicing gasoline-powered automobiles.

For EVs, charging is more about parking than refueling on the go.

This actually makes the provision of a viable EV charging infrastructure theoretically easier, as charging stations can simply be installed in existing garages instead of having to plan out charging stations like for gas stations. With solar energy approaching or even exceeding grid parity already, charging stations can also be powered by solar energy instead of being connected to the grid. This reduces the load of charging on the grid, and all the other planning considerations associated with linking a power-hungry outlet to the grid.

Currently, tax or monetary benefits are only provided at the point of purchase of a new EV. There is little take-up among developers or landlords to incorporate EV charging into their properties, with many contending that the costs are high, or that L1 charging is sufficient.

This strikes to me as short-sighted. Regulations encouraging the provision of charging outlets for EVs should be commonplace. Tesla has already offers free wall connectors to properties. Without these incentives, the push for EVs by public institutions is doomed to fail.

The Autonomous Future

The Tesla is not merely an electric vehicle, it will be an autonomous vehicle. Elon Musk’s goal for Tesla has always been an autonomous driving experience (will you call that driving by then?), and he has placed great urgency in developing this capability.

The potential disruption by AVs is well-researched and documented (here, here, here and many more). The interest from traditional automakers in autonomous vehicles has also been enthusiastic (here, here and here again), with competitors coming together to form Deepdrive, an alliance that will look at Artificial Intelligence for automobiles.

AVs, combined with an on-demand/ fleet ownership model, threatens everything that the auto industry currently understands. There is a tacit agreement among the incumbents that something big is brewing, and that for the term “Software is eating the world”, the “world” apparently also includes the automakers. What these technological trends mean, is that the automobile industry is returning to its roots — instead of asking the customers what kind of vehicle they want to drive, the question becomes: How can I provide mobility for you?

Given that AVs’ uptake will be gradual, urban planning will have to account for a mix of AVs and non-AVs on the road at the same time. Will there be separate lanes or facilities designated for AVs? Will traffic lights even be needed to direct vehicles? Yet if there were no traffic lights, how would pedestrians navigate the cities and streets?

If an autonomous fleet become commonplace, the number of cars needed on the road will drop dramatically, with one analyst even predicting that number of vehicles on the road will plummet by 99%. What does this mean for the number of garages, when parking lots account for more than one-third of urban space and many of these garages sit on current prime real estate?

That does not even include the amount of time spent by drivers cruising for parking. Instead of open-air car parks and garages having to be factored into urban planning considerations currently, what are the kinds of possibilities that will be unlocked with all this land suddenly free?

What happens to the millions of trucking logistics jobs that will be made redundant by AVs? Yet without these drivers, how would logistics companies make their deliveries in urban cities populated by mainly high-rise apartments? Will the advent of the autonomous cars spell the demise of public transport such as buses?

This section is littered with so many question marks, simply because the introduction of the AV is on many levels, a radical change from transportation as we know today. When we talk about urban planning and infrastructural improvements, there are considerations ranging from the hardware to politics. As David Roberts puts it succinctly-

“In transportation we are about to witness the collision of an irresistible force (new technology) and an immovable object (existing infrastructure).”

The Connected Car and Third Space

As drivers are freed from the mundane of driving with autonomous driving becoming commonplace, what then are people going to do? Throughout the world, the amount of time spent for commuting is staggering. In 2014, Americans spent a total of 6.9 billion hours stuck in traffic. On average, the British spend almost an hour a day commuting. This gets worse for developing cities, with the people in Beijing or India stuck in commute for close to two hours a day on average.

With the inevitable coming of AVs, what are people going to do with all the free time in the vehicle. This is where I think Tesla’s 15-inch display will come in:

This is 15 inches of attention gold mine for marketers and content makers. How many other scenarios or situations in the world will you get 1–2 hours of uninterrupted time with your audience. People are going to be freed from the dread of jams. In fact, jams can look like a beneficial thing granting commuters an hour or so of productive time.

But beyond just being a mere addition to the ecosystem where “Mobile Eats the World” or “computers on wheels”, a connected car presents a possibility for a social space for commuters to interact in ways that is not possible with individual smartphones.

With or without virtual reality (VR)(could the whole windscreen become a display?), it is possible for the car to be transformed into a third space beyond the home and workplace. In the autonomous fleet model, could there be a service whereby strangers and friends congregate in a more intimate setting for interaction and travel? Could there be public transportation that allows for interaction opportunities for pedestrians, and promote the creation of a more vibrant city life?

Undoubtedly, just as with Paypal, SpaceX and SolarCity, Elon Musk has broken new ground with the Tesla for automobiles and transportation. But compared to his other ventures, Tesla’s contributions feel more at home. Together with the other entities looking at EVs and AVs, it’s something that impacts the livelihood of billions of urban dwellers around the world.

Summarizing:

• Tesla’s Model 3 will usher in the age of Electric Vehicles with its affordable mainstream price point, exquisite design and superior branding.
• The EV revolution will result in a major reshuffle of traditional automobile industry entire value chain and supporting ecosystem. The winners will be automakers able to a) differentiate themselves through branding for ICE vehicles for enthusiasts, or b) hop onto the EV trend. The losers will be automakers producing mainstream ICE vehicles as they hopelessly fight against EVs increasing affordability (with batteries, the main component of EVs, experiencing a predictable fall in price)
• Adoption of EVs is very much predicated on adequate infrastructural planning, which city administrators should take note of more.
• The Autonomous Vehicle movement will creep along silently, until it’s everywhere without us realizing. This will require radical thinking of how our urban infrastructure handle AVs, the impact on AVs on the business model of businesses (logistical), and how our economy will produce the requisite number of jobs to replace those the AVs will displace, which will be in the millions.
• When you are doing things that are productive during traffic jams, then, by extension, jams aren’t necessarily that big of an evil? Transportation planning would have to take into account of Vehicle-to-Vehicle (V2V) communication and Vehicle-to-Infrastructure integration.
• The driver is now free. What does this mean for commuters? A whole new world of time and available attention is unlocked for brands.
• Automobiles represent the next evolution of mobile beyond smartphones. Cars can also be considered as smartphones on wheels. The wealth of data that comes along with fully connected cars allows for integration of transportation with other facets of consumer consumption.

I can’t wait for the future to come.