The Digital Matrix Book


Tesla’s Model 3 Launch: Is it the Automotive Industry’s ‘iPhone Moment’?


Tesla has been in the news lately — it launched Model 3 on March 31 and had received 276,000 preorders by April 3 — each with $1000 deposit. The product is likely to be shipped by end of 2017 and many will likely get to drive their cars only in 2018. That is at least 18 months — if not more — from now.

s I reflected on it, I cannot help but think of the parallels between Elon Musk’s launch of Tesla’s Model 3 and Steve Jobs’ launch of Apple iPhone in 2007. I am not talking of their presentation styles, charisma, charm or personalities. I am simply focused on the business model shifts.

It is now well accepted that iPhone changed the course of telecommunications industry. Can we see expect similar future effects on the automotive industry with Tesla Model 3?

There were smartphones before iPhone and mass market electric cars have been contemplated before Tesla Model 3 announcement. GM’s Chevy Bolt is expected by the end of 2016 while Tesla Model will be a year later. Ford, Toyota and every major automaker have been working on electric car. Just as smartphones before iPhone (Motorola and Nokia come to mind) faded very quickly after iPhone introduction, would electric vehicles from today’s industry incumbents fail to gain traction? Should some of them abandon their product ambitions even without launching — strategic retreat of sorts? BMW blog discusses why Tesla 3 is a serious competitive threat. In the telecom industry, Apple and Samsung control more than 100% of the industry profits while other manufacturers lose (Huawei and Xiaomi are poised to break even soon).

Apple’s iPhone introduced touchscreen and redefined how individuals interacted with phones. Similarly, Tesla designed the automobile with distinctive features including a 17 inch touch screen, software-defined autopilot (extended from Model S), seating for 5 and enhanced range-per-charge to 215 miles (GM’s Chevy Bolt is about 200).

Apple deepened its direct connection with its consumers through phsyical stores and app stores. Tesla is enhancing its direct link with the owners through direct Tesla Stores, service locations and over-the-air software updates.

Tesla Showroom

Tesla Showroom

Moreover, Tesla is accelerating the deployment of its network of fast charging stations — Superchargers not only in USA but globally.

Apple’s iPhone started in USA with exclusive contract with AT&T Wireless in 2007. Nearly a decade later, it is available globally. Tesla started with limited sales in the Palo Alto/Silicon Valley area and is now establishing a global footprint.

Product announcements need to be backed up with efficient, finely-tuned supply chains. Apple had to establish its global network of suppliers and manufacturers to scale up iPhone’s availability and Tim Cook’s operational mastery complemented Steve Jobs’ innovative vision with the product and the associated business model.

Elon Musk’s vision for mass-produced electric vehicle is supported by the design and construction of its gigafactory in Nevada capable of producing 500,000 units annually. More important: By 2020, this Gigafactory at full capacity and produce more lithium ion batteries annually than were produced worldwide in 2013.

Tesla’s Gigafactory in Nevada

Tesla’s Gigafactory in Nevada

Apple influenced important strategic conversations about the future of smartphones. Google followed suit with Android. Together these two companies have influenced and impacted the shape of evolution and transformation of the telecom industry over the last decade.

Automotive industry incumbents have been dabbling with electric power trains for sometime. Tesla is influencing the conversation about sustainable transportation. Google is also very much in the picture with its self-driving car. Apple is also very much in the picture with Car Play and rumored secret project with perhaps bigger ambition.

Elon Musk and Tesla are clearly seeking to influence the future of automobiles. I cannot help but think that this could be the ‘Apple iPhone moment’ for the automotive industry.

Venkat Venkatraman