Foot, horse, car, Tesla. Evolution is gradual but, sometimes, we have quantum leaps that represent unprecedented advances in the way we do things. One of those was the Fax machine, giving instant documentary transmission. Another was the email, which personalized and democratized communications. Then came the mobile phone, a device that clearly signals your status. In the way that if the business card you receive doesn’t have it, that person does not want you to call him. Fact.
Tesla, and what Tesla represents is one of these. A device with not only the potential, but pretty much the certainty to upend our personal transportation business model. And one we should welcome and dread on equal measure.
We tend to think of Tesla as a car company that is trying their best to get off the ground, with a supposedly overpriced stock value and one that will fall victim to the traditional manufacturers’ economy of scale the moment they prove to be successful. And that could be quite the myopic view.
© Tesla
But what if they were not a car company? And furthermore, what if they had not the slightest intention of becoming a car company?
Tesla is not in the business of making cars. They are in the business of developing a fully autonomous transportation unit. Today, that’s called Level 5 Autonomous driving. To get to that, they need a bunch of smart coders to develop the logic, a bunch of smart system integrators to develop the APIs that allow different systems to communicate and generate data points, a handful of lobbyists that will, on first instance, allow the 2-ton weapon to move on its own next to voters, and then probably remove said voter from the steering wheel, and most of all, they need an idea and a vision. The idea is free, but all the other elements need a ton of money, and a ton of time. Someone has to pay.
Thus, Musk created that first Tesla that was a lotus with an electric motor. Then the Model S, for the wealthy early adopter. Then the Model X, for the wealthy family person, and now the Model 3, for the ecologically conscious middle class. Even their IPO-like model of taking a down payment from prospective customers to build the production facilities to make the pre-sold item was a clear indication of their OPM strategy when it comes to development. And I don’t blame them. Their task is truly titanic.
But whether they succeed commercially or not is quite unimportant. The goal remains the democratization of energy and the change of our car ownership model. And to prove that, let’s take a brief look into how we are doing it now.
On average, several studies have determined that our personal vehicles stay 95% of the time parked. That means the average passenger car is performing its basic function of moving passengers 5% of the time. But we have to be careful with averages. They rarely represent the majority. Thus I am going to invent a median usage of 25%. That is five times the average in hopes that the safety factor is good enough.
Then, the average mileage per car and per year is 20,000Km. That is at least one service call per year, at an average cost of, say… 200$. Then factor insurance, parking expenses, registration and, yes, traffic fines, to get a cost of… what… 1,000$ per year?
So, now imagine the executive going to the finance manager of a company with the proposition of a capital expenditure, with a 15 to 25% depreciation value per year, with fix costs of 3% of the asset value per year and with an estimated life of 5 years. All the while having a usage of 25%. And now think about the distance the executive is going to fly from the kick out of the office the finance manager is going to invest on his ass. Our current car ownership model makes zero financial sense, but so far we have no alternative. We are, however, very close to a radical change in the ecosystem.
What Tesla, and Waymo, and Uber are proposing is a revolutionary transportation concept. They are proposing a transportation unit. Not only a driverless vehicle, but a non-driver vehicle. With no manual controls.
A bit more data: 87% of traffic accidents are caused by human error. And of the remaining 13%, more than half are due to poor maintenance by, again, the human. This means that if we took the human off the wheel, 92% of the car accidents we log every day are gone. Seems sensible.
The organic bag of water off the wheel, you will only request a car when you need to go someplace. A car will materialize, take you and disappear. Disappear where? Well, to pick someone else or to self-charge. Self-charge where? And here is where the democratization of energy comes into place. Much like the horse could eat grass anywhere, we now have electricity everywhere. It’s just a matter of the public selling their energy to the transport unit. And on who is going to plug the vehicle, a simpler induction transfer or a robotic coupling will do.
At this point, what’s the advantage of keeping a cumbersome piece of street furniture that belongs to you?
Last, and here is the green part, since the electric car is, essentially, a washing machine, service requirements are minimal. Because you don’t own it, the unit usage will go from the (admittedly invented) 25% of the time we use our cars today, way up to high 80’s and, because the useless driver is no longer allowed to cut in line, create an accident or stop “for 5 minutes only so that I can take my kid from school”, ETA’s become reliable, predictable, exact. Traffic jams are about to disappear.
I won’t get into Big Data Analytics, predictive pattern detection or machine learning to explain how you will have a vehicle available and near you pretty much whenever you need one, or how the connectivity while in transit will enhance work efficiency way more than the potential transit time losses. Just believe it will.
As for who owns these driverless vehicles? Whose car is going to show up at your door? Initially, private investors. People that buy the car and Uber it to other people. Then, the manufacturers themselves or the public transportation companies. Now, you don’t need to believe me, but Volvo and Porsche are already experimenting with pilot programs where the client is paying a subscription fee, rather than entering and acquisition contract.
The digital camera took a couple of years from turning Polaroid into a bankruptcy. Anyone remembers Olivetti right after the computer printer? When was the last time you saw a pocket calculator for sale? Tesla may not become the vehicle manufacturer, but I doubt that’s their intention. And the forays into solar panels and the fact that their main production facility makes batteries seems a good indication.
The pity is that only a few car manufacturers realize that they are the Polaroid and Olivetti of the digital camera and computer era. And that, in the best of scenarios, the market requirement for their products will be reduced by, say, 75%? And within… 10 years at best?
And finally, for the stubborn petrol head, I just say the same way you can still ride horses, you will be able to drive cars. Just not on the road.
I think.