8 Ways Tesla Changed the Auto Industry for Better and Worse
The EV automaker has been making waves for more than a decade now.
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Tesla is the first American automaker to have successfully become a lasting mass-market manufacturer in the modern era. Since its founding in 2003, the automaker’s methods have sent ripples throughout the international auto industry. Many of these changes to the status quo have yielded benefits for consumers, for other automakers, and for the planet. Some, not so much.
To get a better sense of the nature of these shifts, we spoke with Sam Abuelsamid, principal analyst at Guidehouse Insights, a research and consulting firm that specializes in global energy transformation and emergent infrastructure. He provided us with a few insights that demonstrate the importance of these shifts, and underscore the need for further transformation.
Tesla has faced a lot of pushback from dealers for trying to sell vehicles directly to customers, but the idea is catching on, with up-and-comers such as Rivian, Lucid, and Lordstown supporting Tesla’s fight for franchise-law reform. In the meantime, the EV automaker gets around this by exploiting various legal loopholes, such as handling certain parts of the transaction in amenable states and partnering with a native tribe to open a store on tribal land that’s not subject to state law.
Boutique Showrooms Rather than Dealerships
Having showrooms with just enough inventory to allow consumers to browse and test-drive the product line was a radical idea, but it has served Tesla well, with control of the transactions staying with the automaker instead of a franchisee. Tesla also had the good sense to locate many of these galleries in places that would see heavy foot traffic and draw in passersby—a retail strategy that has proven so successful, other automakers are adopting it. Lincoln, for instance, set up a store next to a Lululemon in Arizona, and Mercedes has opened a few pop-ups in major cities.
While these boutique shops have introduced new buyers to the brand, Tesla’s approach isn’t perfect. “The challenge is, they have so few stores and so few service centers, it has caused problems for customers getting service promptly,” said Abuelsamid. Tesla makes up for this to some degree with mobile service, but the program has its limits. “Sometimes a car has to go to a shop,” Abuelsamid said.
Allowing consumers to put down a nominal, refundable fee to reserve a car that is still in development lets a manufacturer gauge real interest—not to mention, it gives the automaker a bunch of capital in the lead up to production. GMC and Ford have recently proven the validity of this by allowing customers to reserve the Hummer EV and F-150 Lightning electric pickups. “If you can get 500,000 people to sign up and give you a few hundred or thousand bucks to hold a car for them, that can help with product planning,” Abuelsamid said. The trouble arises when the manufacturer is late in launching those vehicles, as Tesla has often been, or when it can’t meet the production quantities it promised, as Ford showed with its Bronco. “People can get frustrated,” Abuelsamid said.
Tesla successfully pioneered the concept of ordering a vehicle directly from the factory using an online configurator, and that seems to be the way of the future. “People really like that approach, as it limits the uncomfortable pressure of sitting across from a salesperson,” said Abuelsamid. With the pandemic’s supply-chain shortages, legacy manufacturers have attempted to replicate what Tesla has done, albeit while still involving a dealer to complete the final transaction and delivery. “Americans are increasingly comfortable with the idea of custom-ordering and getting exactly the car they want, even if it requires a wait,” said Abuelsamid.
There will always be people who need to buy a car right away, so keeping some inventory on the lots will be necessary. Dealers will likely appreciate this move, as they’ll no longer need to stock and pay carrying costs on hundreds of unsold cars. More custom configuration also leads to more satisfied customers, as they get the cars they want instead of having to settle for what’s available.
This Tesla innovation, allowing a manufacturer to update a vehicle’s software over Wi-Fi, has been a wild success. Of course, the vehicle has to be designed to accommodate that, which is a shift for automakers, as well as for dealers accustomed to profitable service calls. “The ability to give new features to customers or repair a software-based recall or glitch remotely during the life of the car has been a big bonus,” Abuelsamid said. “Customers love it, and the rest of the industry is emulating it now.”
Over-the-air updates might allow customers to download a performance upgrade or more advanced driver-assistance software, although major improvements aren’t likely to be free. In fact, this capability is paving the way for automakers to sell more features and services with monthly subscription fees.
Proving that EVs Can Be Cool
Before Tesla, most electric vehicles were something a consumer made a sacrifice to own in order to do their part for the planet. Starting with the 2008 Roadster, Tesla changed that paradigm. “Prior to that, most people didn’t think of EVs as something you would aspire to own,” Abuelsamid said. “The industry has since learned that an EV has to be appealing in its own right, not just as an environmental boost. Especially when the cost is still higher than [it is for] an internal-combustion car because of the expense of the components.”
Newer EVs such as the Ford Mustang Mach-E, Hyundai Ioniq 5, GMC Hummer EV, Porsche Taycan, Audi e-tron, and Volkswagen ID. Buzz aim to elicit Tesla-like desirability through design and performance.
While infotainment screen size has been growing since displays first began appearing in cars, Tesla took it to an extreme with the 17-inch unit in its original Model S. This started a trend: Witness the 56-inch Hyperscreen in the Mercedes EQS, which stretches the entire width of the cabin. These displays look neat, deliver a lot of information, and are compelling for customers accustomed to smartphones and tablets, but they may not be the best solution for every use.
“I am personally not a fan of touchscreens in cars when we still have to drive,” Abuelsamid said. “I think they’re a bad interface. I can tolerate them for media controls and navigation, but things like climate and windshield wiper controls? Those should be physical controls that you can operate without taking your eyes from the road.” While needing to locate some frictionless object on a touchscreen can be a distraction, a large display can mean large touch targets, providing some slight mitigation.
When Tesla launched Autopilot in 2015, it made the rest of the industry step up its driver-assistance game. But while it has innovated in this area, Tesla allows drivers to use technologies still under development, and calls its assistance suites Autopilot and Full Self-Driving, even though neither offers hands-free, eyes-off-the-road capability. “When you’re talking about making changes to safety-critical systems, safety has to come first,” said Abuelsamid. “You shouldn’t be relying on your customers to validate your safety. They’re not trained for that, and they don’t know what to look for. You have to do that internally and thoroughly before you ship that system.”