How The Model 3 is Destroying Tesla

Tesla Model 3

If the story of Tesla was somehow a metaphor for stories from the Bible, then the Model 3 is Judas making sure everyone at Tesla is on their way to the last supper, assuring their shepherd is approaching his final resting place (that cross is for you Elon). Maybe it was always Tesla’s destiny to be a sacrificial lamb of sorts, ending up in the same situation as many other pioneering companies, often not lasting long enough to see the technology they introduce make it to mainstream profitability. Ultimately, the Model 3 will bring forth a real test of faith in electric car kingdom that Tesla built.

You see, the Model 3 betrays everything consumers love about Tesla, and at the same time reveals those in charge of the company don’t understand their clientele at all. As it turns out, car companies in America only operate in two models, high volume or high margin, and with each comes a specific set of expectations that have to be met if you want to continue in that space. Tesla was the latter, high margin, but the Model 3 changed everything.

Exclusivity

The first expectation of running a high margin, or premium brand, is exclusivity, which when speaking plainly, means these brands produce a low volume of products. Premium brands often justify their product scarcity by including extravagant materials or assembly methods as a part of their production process, enabling product owners to reference things like hand-stitched leather, individually assembled, or first of its kind, when talking to others about their new toys.

Model X with Falcon Doors Open
Photo courtesy of Mashable.com

In Tesla’s case, it’s Falcon Wing doors on the Model X, Ludicrous mode on the Model S, and street legal lithium batteries on the Roadster, that check all the appropriate branding boxes for a premium brand. These features, combined with lower product availability, meant consumers looked forward to random encounters with the vehicles in real life, hoping to catch a glimpse of how a Tesla embodies the concept of cool. Then came the Model 3.

The Model 3 is a contradiction in how premium brands operate, and when Tesla announced it at a $35K price point with the specific goal of being a mass-market vehicle, I could almost hear the other Tesla owners cringing. In the minds of premium brand owners, the proliferation of the Tesla badge to everybody and their mother would seemingly make the symbol on their vehicle less valuable, as if they were mathematically averaging the prices of the cars together. American’s don’t tolerate this kind of behavior. You can’t use the same branding for bargain vehicles as you do for premium ones.

Tesla’s could have easily avoided this mistake by using the same branding strategy as every other car manufacturer in America. In “Merica,” car companies use different brands to divide their consumer base between their operating models, one brand for volume, and another one for margin. That’s why there’s a GM and Cadillac, Infinite and Nissan, Ford and Lincoln, etc.

This two prong approach has enabled U.S. car manufacturers to maintain a certain amount of exclusivity on some brands, while simultaneously achieving the cost efficiencies of scale with another. More importantly, the dual branding strategy protects another expectation of premium brands – cost.

The Cost Correlation

Time to Cost Correlation

When there’s a limited supply of anything, most of the time, the cost of that product naturally increases, delivering a price point that inherently leads to more margin. Premium brands use this natural correlation of exclusivity and cost to perpetuate their brands further, promoting an emotional response that evokes admiration and envy. The combination of these two emotions is what brand experts like to refer to as aspirational, and Ferrari is a perfect example of an aspirational brand.

Do you know why I don’t drive a Ferrari? I can’t afford one, and for the people that can, that is part of the allure of owning one. For everyone with the same budgetary constraints as myself, the astronomical price tag associated with a Ferrari isn’t off-putting, it provides an immediate understanding that a person driving one must be doing pretty well for themselves and makes us wonder how we can achieve the same thing.

Tesla’s vehicles used to inspire the same type of awe as a Ferrari when they pulled into a parking lot, but the release of a reasonably priced version calls everything we know about the brand into question. A Tesla never had the practicality of a Nissan Leaf or the design of a Toyota Prius, and surely didn’t carry a similar price tag. A Tesla was always expensive, exclusive, and impractical, just like an aspirational car brand should be. All of that went out of the window with the Model 3.

Before the Model 3, when people asked me about owning a Tesla, my answer was the same as it is concerning a Ferrari, “I can’t afford one.” Since the release of the Model 3, it’s different, when people ask me why I don’t drive a Tesla, I have to consider if I really want one. Being able to afford one has forced me to consider the features of a Tesla, like reliability, charging time, and driving distance. I had to ask myself, is this the best car for me at 35K? For a lot of consumers, the answer to that question is no, which proposes some harsh realities for Tesla, and the future of electric cars.

Tesla’s Red Pill

Red Pill and Blue Pill

The reason the Model 3 ruined everything about Tesla is that it snapped everyone back to reality, not just consumers, but Tesla was well. Besides exposing previously oblivious consumers to serious considerations about owning an electric vehicle, it also presented questions about Tesla as a car company. The effort to reach critical mass has surfaced several issues about various aspects of Tesla, making everyone consider if they have the production capacity, infrastructure, and sales tools of a high volume brand.

In the end, the production Model 3 broke the rules of a premium brand and made us all lose faith in the dream that made Tesla great. All we’re left with is the harsh reality of having taken the red pill rather than the blue one. I should have heeded the advice of Cypher in the Matrix and realized “ignorance is bliss.”

Feel free to leave comments, questions, or concerns about this article below.

The Ugly Truth About Self-Driving Cars

Driving

Great Expectations

Recently, I’ve been reading a lot of articles that are trying to temper the expectations related to autonomous vehicles, and with great satisfaction, I would like to say…it’s about time. If you bothered to read my article about VR being overhyped and underdelivered, you probably noticed I mentioned some other technologies that fall into that same category, and autonomous vehicles are one of them. It’s not that I’m skeptical about the benefits of the technology, I just understand that achieving those benefits are significantly further down the road than anyone wants to admit. If you don’t believe me, keep reading…

According to IHS Automotive, a leader in automobile industry statistics, at the beginning of 2016, “the average age of all light vehicles on the road in the U.S. had climbed slightly to 11.5 years.” Even if fully autonomous cars were available today, America wouldn’t see any significant market penetration for at least a decade, and most of it would be limited to higher socioeconomic areas. To everyone who thought self-driving cars were going to be bobbing and weaving down the streets of their local cities by 2020, you should probably prepare to be disappointed.

You may be asking yourself, why is the timeline is so important? It’s important because of one of the most significant benefit promised through the evolution of autonomous vehicles is related to safety, and achieving it can’t be accomplished until autonomous vehicles comprise ~90% of all cars on the road. Keep in mind that number is my personal calculation, but until self-driving cars make-up a significant portion of vehicles on the road, cities won’t see any significant decrease in the number of automotive accidents that occur every year.

Human Error

Do you know the most common cause of accidents for self-driving vehicles? It’s human error, the same thing it’s always been. Accidents have been happening for the same reason for as long as I can remember. Someone makes a wrong decision, puts other people’s lives at risk, and placing a computer at the helm of one of the vehicles won’t change this fact as long as there are humans on the road with them. Waymo, autonomous vehicle spinoff from Google, stopped reporting their accidents at the beginning of 2018, making it harder for interested parties to keep up with their efforts to remove human error from the roadways, but the good news is, California has archived all of the previous reports on their site if you’re interested in reading through them.

The most common accident type reported were humans rear-ending self-driving cars. Because computers don’t make decisions, they make calculations; autonomous vehicles will ALWAYS run the risk of being plowed into at a yellow light when there are humans in the cars surrounding them. If a computer controlled vehicle can safely stop before the intersection, it will do so, while its human counterparts can be expected to merely say the light was “pink” when they hit the intersection. Human behavior of this type is precisely why autonomous vehicles face such an uphill battle when it comes to public acceptance.

Humans expect the vehicles around them to make decisions in the manner they do, and that means running into the back of a lot of computer-driven vehicles. Running a yellow light is one of the riskiest human driving behaviors on the road, one that we take for granted as we’re driving with other humans, but it’s also one that computers won’t tolerate. Other behaviors, like coming to a complete stop at a stop sign (never happens in California…) and when turning right on a red light, will all lead to accidents between the computer and human-driven vehicles.

Winner Take All

Computers will always strive to provide an element of society that humans can never achieve, perfection, and their achievement of it will only further highlight human imperfections (more accidents). Ultimately, it will be a human that forces a self-driving car to have to choose between saving the lives of its passengers or taking the lives of other drivers. Right now, some engineer is sitting in a room evaluating a Kobayashi Maru scenario that forces a self-driving car to choose lesser of two evils in an unwinnable situation.

For example, a human driver falls asleep and crosses over into oncoming traffic, and someone has to die. Will your self-driving car decide to save its passengers or the passengers in another vehicle? You won’t know the answer to the question until it’s too late. Simply knowing that an engineer has to program a predetermined outcome into a computer for this scenario is already a scary enough thought. What I’m more afraid of is the method that needs to be employed to significantly decrease the chances of any unnecessary carnage happening as a result of these kinds of scenarios.

In a situation where a catastrophic event is inevitable, and death is an assured outcome, the best way to minimize the damage is to make sure all autonomous vehicles react to the situation in the same way. I’ll give you a second to digest that…

“To prevent additional cars from being involved in accidents, all autonomous vehicles on the road should be running the same system so they can anticipate the calculations of other vehicles in their proximity. Think of it as hive mind.”

If a car suddenly blows a tire on the freeway, every autonomous vehicle should avoid the car, in unison, at the same speed, in the same direction, to prevent any unnecessary collisions. If all the cars are running the same system, the other self-driving vehicles on the road won’t need to guess the calculations of the other vehicles involved; they’ll already know what’s going to happen. Instead of having a ten car pile up, the result is a two-car accident, saving more lives in the process.

This aspect of the technology isn’t frequently discussed, but we all know what it means, someone needs to have a monopoly on self-driving vehicle technology. Even though the United States has antitrust laws in place, to truly reach the pinnacle of efficiently concerning autonomous vehicles, only one technology should be implemented. So I’m putting everyone on notice…the self-driving car market is playing a winner take all game, and they should all know that winning is everything.