The next decade or so of automobile travel undoubtedly belongs to Tesla. 12 years after the firm started selling its first completely electric offering, the Tesla Roadster, Tesla has become the largest electric vehicle (“EV”) maker on the planet. In fact, Tesla’s capitalization had reached $107 billion by mid-January, exceeding that of Ford and GM combined to become the world’s second most valuable auto company behind Toyota. So how has Tesla Inc. (NASDAQ: TSLA) managed to disrupt a centuries-old industry in just less than two decades?
It deals in both hardware and software. Back in 2011, Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz wrote that “software is eating the world,” and Tesla has shown just how disruptive software can be. By developing software on unique hardware, Tesla can send out updates, improving an EV’s software functionality every few weeks, just as one would experience on an iPhone or a computer operating system.
Additionally, their hardware requires far less moving parts compared to traditional vehicles, containing around 20 moving parts compared to the 2,000 in gasoline-powered vehicles. Tesla drivers don’t have to spend money replacing mufflers, going for tune-ups, and doing expensive oil changes, an area traditional automakers earn a lot of profit from.
Tesla has simplified the buying process to an astonishing degree. Have you ever gone to a dealership to buy a petrol or diesel-powered vehicle? It can be quite an ordeal from start to finish, and most consumers list buying a car as the worst shopping experience imaginable. Tesla, however, has made buying their EVs a breeze. Just go onto their website, pick a model, add the features you want, place your deposit, and schedule pickup. It’s the same business model that has allowed Amazon to flourish and Tesla has taken great advantage of that.
It has consistently made improvements in battery technology to reduce the cost of EV ownership. Did you know that it is cheaper to own and maintain an EV in the long run compared to the cost of ownership for traditional vehicles? During its recent battery day, Tesla announced plans to develop a battery that would reduce cost per kilowatt-hour while improving range and power. The improvements in battery tech will enable the firm to save a lot in production costs, allowing it to pass down those savings to the consumers.
It has attached itself to a cause relevant to the times. Most developed governments are planning to achieve net-zero emissions over the next two decades, and this involves phasing out petrol and diesel-powered vehicles in exchange for electric vehicles. Not only does aligning itself with the going green movement give Tesla a leg up among consumers who are conscious of their carbon footprint, but it also attracts national subsidies meant to incentivize EV adoption.
As Tesla continues to improve its technology, increasing range and reducing the emissions its EVs produce all while making their products affordable, the EV maker can only go up.
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