Tesla (and everyone) is getting more automated; selling more, just not in the U.S.; selling software upgrades rather than new hardware (but he has new hardware, too)
The first quarter of 2015 may be a watershed time for Tesla Motors. As time marches on, CEO Elon’s Musk’s very different view of the automobile is emerging. For instance, the frequent styling changes of most cars are being passed over for software and under-the-skin hardware upgrades, much like you might expect on a computer. In addition, for the first time in its short existence, Tesla did what virtually every other auto company does—report its sales numbers (more about that later). Among the features being adding to the topline Tesla models are more that move it closer to autonomous driving, something Musk spoke at length about recently.
Over the last several months, culminating in a March 19, 2015, announcement, Tesla has made a variety
of upgrades to its Model S hardware and software, turning models built since October of last year into cars capable of hands-free driving through its Autopilot. That software package will activate a forward-looking camera, a radar sensor and ultrasonic sensors recently added to the Model S. With all of those active, the car will be capable of reading roadside speed signs and keeping the car at the posted limit, change lanes automatically if the driver initiates the turn signal and the road is clear. Musk’s message is clear:
“Most cars don’t improve over time. By contrast, Model S gets faster, smarter and better as time passes. With Tesla’s regular over-the-air software updates, Model S actually improves while you sleep. When you wake up, added functionality, enhanced performance, and improved user experience make you feel like you are driving a new car.”
So Musk may be emulating the strategy that served Volkswagen well for decades with the Beetle, leaving the exterior shape of the vehicle roughly the same and making changes in more substantial (and sometimes less substantial) components. Of course the Beetle was an iconic bit of mass transportation that served the lower end of the market. The Model S is none of that, but may be following the strategy of Daimler with its upscale Mercedes-Benz models that rarely changed. But both of those references are from the past and the recent market looks nothing like that.
Tesla’s latest software update focused on features it promoted as “Range Assurance” for owners, warning drivers before they run out of battery power and routing them to the nearest supercharger. Other features, coming later, will enable owners to remotely summon their cars from their garage. For now, new features will enable automatic emergency braking, a blind spot warning alert, side collision warning and a valet mode that limits speed, locks the glove box and frunk (the Model S’ front trunk) and limits access to personal information in the car’s system.
Musk wants to make you upgrade to get the new features and just accept that the exterior is going to be
pretty much the same. This saves big expenses in new tooling, which is particularly important as Tesla moves closer to launching the SUV-like Model X and then moves on to its Model3. Not that the hardware and software changes don’t come at a cost. The new Model S 70D features a 240-mile ranges and AWD, starting at $76,200, compared to the Model S 85D at $86,200 and full-court press Model S P85D at $106,200. Some upgrades may be free, but like the iPhone, you have to have the most recent model to really benefit from all the new free upgrades offer.
Tesla also touts its wireless delivery of upgrades, but then Tesla doesn’t really have new models to sell its owners , so bringing them into the dealership for an upgrade (the traditional way such things are done in the auto business) isn’t really necessary. And, of course, there aren’t that many dealerships out there, though the number is growing. Some states still ban Tesla’s direct-sales style of marketing.
So on one hand Musk is offering near autonomous technology on his latest model (note it is only available on cars build beginning in fall 2014; time to upgrade!), but when asked about the future of the autonomous car, he deferred:
“We’re a long way from that” because of the great number of legacy cars on the road—2 billion and
climbing. He noted that it would take 20 years to replace the fleet if all the new cars sold today had full autonomous capability. He added that the same numbers applied for the move toward electrification that Tesla is championing.
Still he teased: “In the future they may outlaw driving in a ‘two-ton death machine’,” but then he took the discussion in another path, talking about how safety regulations that make the car so heavy could be relaxed if the autonomous technology were ubiquitous. Besides more vehicles, what does the industry need to get to autonomous cars? A bigger suite of sensors and faster processors, which was a nod to his host at the conference at which he was speaking—Nvidia (which already supplies the chips behind the Model S’ big screens).
In Musk’s analysis, we have a significant “problem” area for current driving. Sub-10 mph ultrasonics handle most issues, he said, and at beyond 50 mph on highways current cars can take care driving
autonomously. It’s 10-50 mph in “complex urban environments where unexpected things happens” that is the “hard” area, Musk stated. In addition, there are government hurdles, where agencies will demand a “large amount of statistical proof” before acting to allow autonomy in vehicles, as Musk said, “typically after it is already happening.”
After these sobering thoughts, Musk seemed to shift gears and get much more positive about the effort he and others are putting into autonomous cars. “I almost view it like a solved problem. We know what to do; it will just take a while to get there. We’ll take it for granted in a few years.”
The subtext of his talk was his view of the car as a software platform. Software platforms get upgrades and can reach new levels when paired with advanced hardware, but their packaging doesn’t need to change.
In early April 2015 Tesla Motors did something they had never done before—they released their quarterly sales figures. The numbers, 10,030, bested some projections, and the estimates of 4,900 sales in the U.S. (Tesla didn’t break out regional sales) dramatically demonstrated the shift of Model S sales to
overseas markets. Even with the addition of the Model X later in the year, Musk cautioned that annual sales would not necessarily be a 4X of this first quarter. And soft sales in China continued to hamper the company’s growth, even while spending on the Model X launch and Model3 development increased.
So Tesla on one hand starts to behave more like other car companies while still pressing its advantage by doing things other car companies cannot or will not do, such as over-the-air software updates. It would be hard to argue it is, as it claims, the most automated car on the road, but it clearly has that goal in its sights and is moving quickly in that direction. As CEO Elon Musk says, we will probably have full autonomy well before it is officially sanctioned by the government. Tesla’s definitely charging toward this future and is something we’ll be watching closely.
Related Stories You Might Enjoy:
Texas Dealers Stymie Tesla
Tesla Battles in Many States
Battle of the Esses—Tesla Vs. Mercedes