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Elon Musk has been mixing the auto industry with Tesla for years. What are Tesla’s success factors that have allowed the company to make the competition look so old?
As Tesla became known to a wider audience, climate change remained a theoretical construct for many people. For the managers of BMW, Daimler and Volkswagen, the idea of battery cars was, at best, a technical gimmick. That was in the mid-2000s. Meanwhile, the California challenger remains a niche supplier, but founder, CEO, and principal shareholder Elon Musk’s company is the market leader in electromobility and scares off car manufacturers. established automobiles.
Musk even recently announced an electric car for the equivalent of just over € 21,000. What makes Tesla so powerful compared to the best dogs in the automotive world from Detroit to Munich, Stuttgart and Wolfsburg to the Japanese city of Toyota?
Innovative force and infinite will to implement
First, Tesla only has Elon Musk. The South African-born manufacturer is characterized by vision, foresight and responsibility, whereas until recently a manager of established manufacturers had to have primarily “gasoline in their blood”. But Musk’s greatest strengths are probably his insight, his innovative strength, and his endless will to implement.
Everything Musk tackles appears to be turning out to be a hit, be it the payment provider Paypal, the space company SpaceX, the numerous smaller projects, or Tesla. And the Silicon Valley company is approaching tasks in a whole new way, just as many of the region’s successful startups have done and gone global corporations.
Like many mobile phone manufacturers, Tesla has its own operating system and thinks from its own software, as Stefan Bratzel from Bergisch Gladbach’s Center for Automotive Management explains. That is why software and associated digitization are the second success factor for the company. The company’s experience in new electronic architectures, their programming, wireless updates, the associated security requirements and the networking of the car with the cloud are decisive.
In any case, this is how Elmar Degenhart, head of the main supplier Continental, analyzed the uniqueness of Tesla. Musk has created a smartphone on four wheels that, in simple terms, is controlled by a chip that is the brain of the car. Vendors can interact with the Tesla operating system. In Palo Alto, the developers understood how to build a car around software based on their own program code.
German manufacturers, on the other hand, almost never write software themselves, but their main vendors do it and then have to combine the different architectures. Digitization is a big challenge and a big change for automakers coming from the mechanics sector. Volkswagen recently realized how complex software in a car can be. During the production of the all-electric car ID.3, which, like a Tesla, had its own operating system, serious problems arose with the software that delayed the start of delivery.
Better range with the same battery size
The third competitive advantage is the battery or battery cell. This is already reflected in the structure of the company. While German suppliers are active in car manufacturing and possibly also truck or motorcycle production and offer financial services, Tesla is active in all three fields of car construction, the solar industry, and energy storage. The company takes a completely different approach to essential battery technology than established automakers. Thanks to the clever combination of software and battery, Tesla can achieve a better range of its vehicles with the same battery size.
Many experts now judge that Tesla is several years ahead of its competitors in battery manufacturing. This applies, for example, to the control system, the much lower demand for the controversial element cobalt for the cell, and production costs. Tesla also sources the battery cells from Panasonic, LG and CATL, but is playing a key role in development.
Former Audi development chief Peter Mertens judged accordingly in an interview with the trade magazine “Auto, Motor, Sport” recently: “We all slept a bit and we did not take the battery problem seriously enough.” Now European manufacturers depend on Chinese and Korean battery cell manufacturers. In the meantime though, they are catching up, some of them getting into battery production and deepening their knowledge of chemical processes in cells.
Daimler’s example shows how much established automakers underestimated the old upstart Tesla and the future importance of electric mobility. The Stuttgart-based group had a 9.1% stake in Tesla in 2009. In 2014, the group again sold the last parts of the package. Tesla was valued at the equivalent of € 23 billion at the time. That corresponded to a huge estimated return of 1000%.
Tesla is currently worth the equivalent of € 320 billion on the stock market and, from today’s perspective, Daimler has sold its stake too early. To this day, some German manufacturers cling too much to the old ways of thinking. This slows down the acceptance and promotion of innovations.
Hardware-to-software organization conversion
Tesla’s fourth success factor is immaculation itself. The company, which was founded in 2003, was born and grew up in the green field, has never built combustion engines and never had a successful business model that needed to be protected. This made it possible for Palo Alto developers and engineers to tackle all tasks smoothly and completely rethink the electric car from the start. The reverse is the case with established competition, which has often been successful in building gasoline and diesel engines for over a hundred years, has become increasingly specialized and has optimized production methods.
While Tesla built a platform for the electric car, most established manufacturers only converted their existing vehicles to electric cars at first. The Audi E-Tron is based in principle on the Q5, the Mercedes EQC on the GLC and the Opel E-Corsa on the traditional Corsa. This meant that engineers always had to make compromises, because vehicles were never intended to be electric.
An example is the existing transmission tunnel that divides the interior of each vehicle. However, the focus has now changed. With the Modular Electric Drive Kit (MEB) and the Premium Platform Electric Kit (PPE), Volkswagen has created two basic platforms for electric vehicles. An PPE-based Porsche Taycan doesn’t have to hide behind a Tesla in view of the chassis, charging technology, and workmanship. On the contrary, strong competition is growing here.
In general, German manufacturers have started to develop more and more from a hardware organization to a software organization, so that hardware, i.e. car production, will always remain a very important core competence. However, software is another differentiating feature that is becoming increasingly important, generating customer data and ensuring customer access. When it comes to semi-autonomous and, at some point, fully autonomous driving, it will also be decisive for the game, because then the vehicles will have to process huge amounts of data.
Control the car with the brain thanks to Neuralink?
Meanwhile, the Tesla brand, fifth, has also become a major competitive factor. Elon Musk has managed to position Tesla as a global premium brand in just seventeen years. Toyota, for example, with its luxury brand Lexus and Nissan with Infiniti, despite considerable efforts, has never succeeded in this. In Europe especially, Lexus and Infiniti have remained pure niche brands to this day.
All of this has led to Tesla producing and selling only a fraction of the vehicles compared to BMW, Daimler and Volkswagen with a fraction of the employees, but with the equivalent of 320 billion euros, it has a market value that is almost twice as many as the three German providers. together. The future is traded on the stock market, and investors believe it belongs to Tesla, although Tesla’s quarters with profits can almost be counted on one hand.
It will be interesting to see how Tesla faces the growing competition, because from this year more and more electric cars and hybrid models that combine internal combustion engines and batteries will arrive on the market. Tesla will be able to defend its leadership for a long time, but the intensity of the competition is increasing significantly. On the contrary, headlines shouldn’t expect Tesla to slow down and get sluggish.
Recently, the company surprised by wanting to produce the body almost from a single mold instead of around seventy parts. Auto expert Ferdinand Dudenhöffer from the Center for Automotive Research in Duisburg sees this as a revolution in car production. Additionally, Musk is working with his neurotechnology company Neuralink, which he founded in 2016, on a brain-computer interface that the brain should use to communicate with a computer. In the future, the driver could control the car directly with the brain.
The greatest strength and the greatest weakness at the same time
A spinning mill? Anyone who believes it has already lost because they underestimate Elon Musk, who is followed by about 39 million people on Twitter. But Musk is Tesla’s greatest strength and weakness at the same time. Probably no other company depends so much on well-being and grief, ideas and whims, as well as the intensity of its CEO’s will to implement. The California automaker benefits greatly from this, but it’s also a huge risk.
You can contact business editor Michael Rasch Twitter, LinkedIn and Xing, as well as NZZ Frankfurt on Facebook.
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