I wrote about this years ago when summarizing and discussing this wonderful presentation from Tesla cofounder Marc Tarpenning, and I’ve brought it up in numerous comment threads, but it is still something that is little understood and very infrequently discussed. I’m talking about what I think is the #1 reason why large automakers are not throwing themselves into the EV revolution, why their electric offerings and electric programs don’t match Tesla’s. That is: the competitive advantage of large automakers is almost entirely in their knowledge, experience, and intellectual property (IP) surrounding the internal combustion engine (which, of course, is not a component of a fully electric car).
Marc highlighted the fact that auto companies have been outsourcing more and more parts of the car in the past several decades, resulting in almost no competitive advantage outside of the engine (and basic manufacturing economies of scale and supplier connections). He said that the sluggish pace at which Big Auto was moving toward electric transport was one of the key talking points they initially used to attract investors, but after leaving Tesla and consulting a bit for these large automakers, he found out… it was much worse than they had been saying!
Of course, outside of straight patents and IP, the top executives of these auto companies have extensive experience and knowledge of internal combustion engine (ICE) vehicles. Most of them, especially as they approach the ends of their careers, don’t feel comfortable with a massive product shift that basically wipes out the usefulness of their expertise. It’s understandable, even if not morally “right” or “good.”
This is not a situation unique to the auto industry, though. This is basically what happens with any big technology “disruption” or shift. There is great difficulty for a giant incumbent leader to go against 95% or 99% of its expertise and business in order to shift with the market. It’s why we’ve seen the likes of Kodak, Blockbuster, and countless other large companies go under. A great book on this topic you may want to check out is The Innovator’s Dilemma.
This is one reason I’m a Tesla investor. I’m convinced the future of cars is electric, and it’s hard to see anyone competing with Tesla in this realm in the near future. But we’ll see.
