How Tesla Plans To Lead The Electric Car Market

Hi, this is Nabila Merci and you're watching a Strategizer video. Last week we heard in the news that Volkswagen's diesel cars, which some customers prefer to gasoline cars because they pollute less, were in fact producing much more CO2 than what was claimed by the company. This might be the little push that will drive green consumers to buy electric cars, which are much more sustainable. Electric cars aren't that common though. If you look at the life cycle of the electric car, you'll see that we're still its early stages. What happens today is that the cost of production of an electric car is still very high, even higher than the price of the car itself. So the electric car is only accessible to wealthy people. And manufacturers today don't even make any profit. Most products start with this phase though. If you remember, the smartphone and laptops were at some point luxurious items and then they became mainstream. But once the product cost starts to decrease, sales soar and companies have the opportunity to tap into the mass market, which is really where things get interesting. Companies can finally make a profit and they can cover the cost of R and D, of product development and so on. But getting there isn't easy at all. Only the companies that have the right business model and a product that the market finds attractive will win this race. A lot of companies will fail to do this and will die along the way. The electric car was invented a long time ago, so why is it still in the early stages of its life? The main reason is because no electric car manufacturer was able to create a value proposition that would meet the mass market's needs. The gasoline car though, did a really great job at meeting customers needs. So let me show you why the gasoline car has been much more popular than the electric car. On the right side of the value proposition canvas, I'm going to sketch my customer profile. This side of the canvas focuses on the customer's jobs to be done, their pains and their gains in terms of jobs to be done, which are the needs that the customer is experiencing. Customers want to get from a point A to a point B. Sometimes they want to go on long distance trips. They want to show an image of success with the vehicle that they own. They want to have the freedom of being completely mobile. They want to buy a vehicle that meets their personal values and obviously they want to travel safely. Now what are the pains that they might experience when they're trying to fulfill those needs, those jobs to be done? Thinking about my case, I know that having to park is a real pain or Another pain is the cost of purchasing a vehicle or insuring it. The pace that the vehicle is going to take, the limited range of the vehicle, the pollution that it creates, wasting time when you have to refuel a car, and so on. But there are a lot of positive outcomes that are related to those jobs to be done as well. A beautiful car will get us a lot of compliments. We will enjoy a car that has a long range, that is safe, that will make us satisfied. Now let's look at the value proposition of the electric car. First, how does the electric car relieve pains and create gains? The electric car costs more at the purchase where you spend less. On the long run, it pollutes less and is better for the environment. It's not as loud as a gasoline car, which makes the experience much more enjoyable. Now let's have a look at the gasoline car. The creek refueling helps you get on the road as fast as possible. And the average range of gasoline cars is around 300 miles. So that's really convenient for long distance trips. Finally, gasoline cars are the most affordable cars that you can get on the market. Gasoline cars have been the preferred vehicle for the mass market because they create much more value for customers. They meet more jobs to be done. The electric car is good, but it has a weaker value proposition because the jobs, the pains, the gains that it addresses are not as critical. So the fit isn't there. Okay, so now I'm going to talk to you about two companies that try to get the world to switch to electric cars. The first one is Better Place and the second one is Tesla. Better Place wanted to address two pains that people experience with electric long charging time and short range. The idea was to create a network of charging stations where electric car owners could swap their used battery with a new one, and that in less than two minutes. So this would allow people to travel long distances without worrying about a dead battery in the middle of nowhere. And they wouldn't have to wait for the battery to recharge at the station. They could just go right away. The problem is that Better Place invested in costly charging stations when it did not have evidence that drivers were ready to switch to electric cars. And they were not even interested in Better Places concept. When it deployed stations, there were very few customers and very few cars compatible with its batteries. Better Place had a bold vision, but it was completely disconnected from what was happening in the real world. Most people were still using gasoline cars and electric cars weren't that attractive to them. Because of that mistake, it blew up nearly $800 million. Tesla has a bold vision as well. But it balances it with evidences from the market. It faces the same reality as Better Place. Most people buy gasoline cars. Tesla is like anyone else on this market. It doesn't know what customers want. So it makes cheap and small experiments to decrease this uncertainty and decrease the level of risk. Tesla doesn't know if people are willing to purchase expensive electric cars, but it knows that people are willing to spend money on luxurious sports cars. It's a fact. We see it every day. So in order to justify its price tag, Tesla created an electric sports car that cost about the same as regular sports car. Here is its value proposition. Tesla cars are beautiful and stylish cars. They're rated the safest cars ever tested and they can go from zero to 60 miles per hour in three seconds. Just like Better Place, Tesla wants to address the pain of not being able to do long distance trips. But instead of rolling out a network of stations around the country, Tesla first tested its supercharging stations in areas that had a high number of Tesla owners. And that was to verify if the idea would indeed get traction. Tesla also wanted to reduce the battery charging time. So it tested a concept of swappable batteries, just like Better Place. But evidences showed that there wasn't a strong interest in swappable batteries. Tesla's long term vision is to make affordable electric cars and to generate profits by tapping into the mass market. Tesla is doing three things to accelerate the adoption of electric cars. First, it's investing its revenues back into research to drive down the cost of its batteries and to drive down the price of its cars. The second, and the most controversial move that it actually made recently was to make all of its patents public. That means that any other company can use its powerful battery technology and it could potentially steal Tesla's competitive advantage. But Tesla is competing against gasoline cars at the moment. If there aren't any more electric car manufacturers to help it drive adoption, Tesla will die. The third thing is that Tesla is ready to fight competitors by creating the right infrastructure to produce at scale. It has built a massive factory that's waiting to offer electric cars to the mass market. It's hard to tell if Tesla will be able to become profitable or if it will produce its affordable electric car. Who knows? But one thing is clear. Tesla has avoided many traps that better place fail in by minimizing the risk of failure with cheap tests and by focusing on what would bring value to customers. Thanks a lot for watching and feel free to share this video. If you liked it. Bye.