Why Tesla Will Never Be A Successful Car Brand

Because it's a technology brand

An old proverb states,  'If it walks like a duck, quacks like a duck, looks like a duck, it must be a duck'. 

 
So anyone studying Tesla should not have been surprised last week when Elon Musk announced that he would make Tesla patents available to competitors. Why? Because from the get go, Tesla has done nothing but walk, quack and look like a tech firm. Musk has eschewed all conventional automotive category behaviors in favor of technology behaviors. 

Economies of Scale vs Innovation Trickle Down?

First, let's look at the way Tesla has approached fostering electric adoption. Let's compare that approach to Nissan, the leading pure all-electric offering from a conventional car company. Both brands have professed a long term vision of mass adoption of electric cars. But each brand has selected their own approach, apparently informed by the lens of their respective categories. 

Since Henry Ford invented the assembly line, car brands rely on economies of scale to drive profit. That's why Nissan chose to aim at the heart of the market, in hopes of ramping up volume quickly to ensure that profit targets would be met through the achievement of volume targets. Volume targets meant that the offering would need to be affordable.  Being affordable meant that Nissan would need to make choices. One choice was to eke out as much driving range (100 miles) as they could with lower cost technology. Think Ford Model T. 

Because technology brands believe in 'trickle down' to drive profit and eventual volume, Tesla chose to aim squarely at early adopters to bring the very best technology to market and then built a decidedly premium offering around that technology.  In doing so, they were able to offer a driving range that is almost 3 times as great as Nissan....at close to 3 times the price. The idea is that, with further innovation, today's technology will become cheaper over time and new technology, with even greater driving range, will take its place in the premium slot.  And because of the halo created by the original premium offering, a mass audience will covet cheaper versions with the original technology, since it is now attainable. Think iPhone 5C.

Hardware vs Software?

The sophistication of new cars means that they are more like mobile devices than analog machines, yet recalls, even when they involve software glitches always require a trip to the dealership. This is because conventional car wisdom views dealership visits as opportunities to sell additional services or even a replacement vehicle. And that makes franchisees happy.

When Tesla was under investigation for vehicle fires last year, it was determined that the low vehicle stance created a risk to the battery casings from road debris. Tesla chose to fix the problem by sending out wireless software upgrades that adjusted the height of the vehicle. No dealership visit was necessary. And because Tesla has a adopted a more tech-like sales and service model, no franchisees were unhappy.

Product vs Ecosystem?

In the automotive business, product is king. Build a great one, and they will come.

But tech brands are much more likely to operate in an environment where products depend upon new infrastructures, connectivity and content. Thus tech brands belong to business ecosystems in which brands serve multiple roles, and form alliances to accelerate innovation. Sometimes these alliances are with suppliers, and sometimes with competitors.

In the Tesla as mobile device ecosystem, it is just as likely that Tesla would build a charging network, as it is that Tesla would offer to share technology with competitors who might in turn contribute back to the ecosystem.

So only time will tell if technology brand behaviors will drive success in a category steeped in 20th century business behaviors.  But if Elon Musk succeeds, he will have also succeeded in moving the automotive category out of the Industrial Revolution and advancing it into the digital age.