Why GMFordHondaToyota Fear Not Tesla -- April 19, 2015

I was surprised to see this article downloaded without a subscription: Tesla's not as disruptive as you might think -- Harvard Business Review.

The background:

In the fall of 2014 an investor contacted HBS professor Clayton Christensen with a friendly challenge. Christensen is best known for his theory of disruptive innovation, which describes how firms that introduce rudimentary products can eventually overrun established players by systematically improving the products until they meet the needs of mainstream consumers, generally at low prices.

The investor, a shareholder in the electric vehicle company Tesla, suggested that Tesla’s founder, Elon Musk, is creating a new model of disruption, in which products start at the high end and move down.

During its 10-year history Tesla has made just 59,500 cars, most of which cost upwards of $100,000. But it expects to introduce a model in late 2015 with a sticker price of about $70,000, and in 2017 it plans to launch one for $35,000. Musk is outspoken about his goal: to create an affordable mass-market electric vehicle that will supplant gasoline-powered cars.

The article was too tedious for me to read all of it, but the bottom line:

Think about it this way: All-electric vehicles accounted for just 119,710 of the 16.5 million automobiles sold in the U.S. in 2014—seven tenths of one percent of the market.

Established carmakers are paying little attention to EVs not because they’re clueless but because so few people want EVs. (And they aren’t completely ignoring EVs; consider the all-electric Nissan Leaf and Chevy Volt, each of which outsold Tesla in 2014.)

Tesla is betting that preferences will change—that someday millions of people will want electric vehicles. If that happens, Bartman believes that GM, Toyota, and others could shift to EVs relatively quickly, using their existing manufacturing capabilities, supplier networks, and dealerships to fend off the threat.

Think about that: my hunch is that GM/Ford/Toyota already have plans in their corporate lock boxes (safes) to convert vehicles from gasoline engines to electric motors.

Interestingly, if EVs really caught on, simply take their hybrids, and take out the gasoline engines, and put in a bigger battery.

Don did some quick math on the back of an envelope, or probably the back of a utility bill from MDU:

• Tesla, with all its marketing and promoting, is projected to have 2015 sales of 5.64 Billion.
• Ford is projected to have $143.2 billion in sales in 2015.
• Tesla sales = 4% Ford sales. It would not take much for Ford to shift 5% of its resources to EVs.

The linked article connected the dots for me: answering the question why GM/Ford/Toyota/Honda seem unconcerned about Tesla.

Actually, it's kind of interesting to follow. If Tesla develops an EV:

• that goes 600 miles on a single charge
• has a battery that doesn't take up the entire cargo space
• is competitive in cost to a Honda Civic ($20,000)
• that has universal appear and is flying off virtual dealers' lots

Ford, GM, Honda, and Toyota will be mass-producing the same by the end of the year.

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How Far We've Come

From 1938 --- combining wheat.