With the release of Tesla’s Model 3 tonight to the first 30 customers (really just Tesla employees, according to multiple reports), it’s easy to lose sight of how far this young automaker has come — and how much impact it’s had on the rest of the industry.
Most of the commentary around the Model 3 is focused on the stakes for Tesla, and many are parsing over every tweet by CEO Elon Musk for clues about the car’s cost, interior, and what sort of options will be available. But how has Tesla changed they way we shop for and drive cars? What realities about the nature of the business has it forced its competitors to face? Let’s examine this more closely:
When Tesla first released Autopilot in October 2015, Musk cautioned drivers to “be quite careful.” After all, this was the first time that semi-autonomous technology of this level was being offered in a commercial vehicle. Musk acknowledged that "some people" may take their hands off the wheel regardless, adding, "We do not advise that.”
He was right, of course. It only took a couple of days for YouTube to fill up with videos of Tesla drivers treating their cars like they were fully autonomous, sometimes with frightening results. The videos were proof that some people will always react idiotically when handed a new and powerful technology. And more than that, it sent a clear signal to the rest of the auto industry about the direction it was headed.
Of course, it wasn’t a fully autonomous vehicle in the vein of a Google car — the primary feature of Autopilot was what Tesla called Autosteer, which keeps the car in its current lane once you're already on the road and manages speed and distance from the car ahead of it.
Autonomy isn’t just a science experiment being fussed over by a few Silicon Valley eggheads. It is the end goal for all cars, and Musk was giving regular people their first taste. Since Autopilot’s first appearance, all the major automakers have announced their own plans to roll out semi-autonomous or highly automated systems. GM is equipping the Cadillac CT6 with Super Cruise. The Mercedes-Benz S-Class is getting Drive Pilot. Nissan has ProPilot. Audi says the new A8 will be Level 3 autonomous. And on and on.
With the release of the Model 3, the big question now is where Autopilot is heading. Last year, Tesla split with auto vision startup Mobileye and embarked on its own path toward automation. Since then, Musk has announced that all Tesla models will be equipped with technology to make them fully driverless. If there’s no update on the future of Autopilot at tonight’s event, it seems safe to assume that the departure of Mobileye was more damaging to Tesla’s project than the company is letting on.
Hands-free will soon be standard in most vehicles, with experts pointing to 2020 as the year we’ll start to see autonomous and semi-autonomous cars on the road en masse. But Tesla got there first.
Much like Autopilot forced the big automakers to begin developing their own semi-autonomous systems, Musk’s commitment to bringing electrification to the masses proved to be equally influential. The success of the Model S and X, as well as Tesla’s stock valuation of $56 billion, served as a strong signal about the direction of the industry.
One could argue Musk was too successful in pushing his rivals to embrace electrification. GM beat Tesla to the punch by releasing its mass-market EV, the Chevy Bolt, months before the Model 3. But Musk may still have a few tricks up his sleeve. Many will be watching to see whether the Model 3’s base model will have more or less range than the Bolt. Last year, Tesla said the car would run more than 215 miles per charge — but how much more? The Bolt gets 239 miles of range. That’s a lot for a base model, but Musk is hyper-competitive and not likely to let that slide.
By 2040, analysts now say that 54 percent of all cars sold on the planet will be electric. France’s environmental minister said yesterday his country would ban the sale of all fossil fuel-burning vehicles by 2040. The UK was quick to follow. And Volvo said it would stop selling gas-only cars by 2019. Welcome to the Tesla party.
If you look at all the electric vehicles on the market today, they all sort of look the same... which is to say, not great. Most are squat, ugly hatchbacks with some odd design feature or accent. None have the smooth, sinuous look of the Model S, or the capacity for surprise like the Model X. The forthcoming Model 3 has been criticized as being the ugliest of Tesla’s three vehicles. But that hasn’t stopped nearly a half million people from forking over $1,000 in deposit to reserve one.
Electric cars are still very much in their infancy. Though they enjoy blanket media coverage (ahem, guilty), the EV market still has yet to take off. Sales of electric cars represent just 1 percent of the record 17.55 million cars sold last year in the US. And a recent survey of 2,500 American found that 60 percent were still “unaware of electric cars,” eclipsing concerns such as range or charging station availability.
But would as many of us be talking about electrification with the excitement and energy we are today had Ford or Nissan gotten to market first? Tesla made electric cars cool and desirable. By transforming its vehicles into rolling tablets, Tesla invited comparisons to that other manufacturer making consumer products so popular that people line up days before their release. (You know the one I’m talking about.)
Look inside a Tesla, and the comparison to Apple really comes into focus. Granted, other automakers haven’t made as bold a move as to replace the center instrument cluster with a 17-inch touchscreen tablet. But those other legacy automakers are burdened with decades of history. As noted by my colleague Lauren Goode in her review of the Model S, “Tesla came into existence at a time when this kind of in-car technology was foundational, not evolving.”
This is where things get ominous. Tesla’s ability to update the software of its vehicles with over-the-air updates is probably the one thing that makes the rest of the industry highly vulnerable to obsolescence. Case in point (and apologies if this makes anyone feel old): the Model S launched five years ago, and there are still very few cars on sale today capable of delivering OTA firmware updates.
“They continue to sell vehicles that are incapable of learning and improving and are highly vulnerable to obsolescence,” said Morgan Stanley analyst Adam Jonas in a recent note to clients, according to Electrek. “Car companies have had ample opportunity to tear apart Model S’s in the lab. We suspect Tesla’s vertically integrated in-house software capabilities and its willingness to assume the risk of hacking make the difference.”
Of course, the legacy automakers are beholden to their franchise dealerships as both middlemen and service providers, which OTA updates would obviate. Tesla isn’t encumbered by these relationships, preferring instead to rely on direct sales to its fan base. This way it can fix bugs by pushing updates instead of relying on dealerships to service the vehicle. And software updates are easier to handle when you’re a boutique brand, while most big companies would confront challenges when scaling up.
Tesla has also helped define the outsized role Silicon Valley has come to play in the auto industry. Before Tesla, you could count the number of startups working on automotive technology on one hand. Now, every few months, a new “Tesla killer” emerges to make a grab at Musk’s crown.
Faraday Future, Lucid Motors, NextEV, and others are all trying to replicate Musk’s strategy by building luxurious (or in the case of FF, ultra-luxurious) electric vehicles, build a fan base, and then use the profits and capital to build a mass-market empire. Musk himself has only just reached that crucial stage now. Whether it will be successful will depend on a variety of factors, including his company’s ability to ramp up high-volume production to a level never before seen.
“Our goal when we created Tesla a decade ago was the same as it is today,” Musk wrote back in 2013, “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.”
Musk notes that it took considerable time and trial-and-error to get Tesla where it is today. “If we could have done that with our first product, we would have, but that was simply impossible to achieve for a startup company that had never built a car and that had one technology iteration and no economies of scale,” he said.
Musk disproved most assumptions about the near-impossibility of creating a brand new car company out of whole cloth. And then he went on to bend the entire industry to his vision of the future. Whether he can maintain his mission will depend entirely on the next few months and the rollout of Tesla’s next vehicle. Hyperloops and high-speed tunnels are just a distraction. Keep a close eye on the Model 3. It will tell us everything we need to know.