
Tesla is copying Apple's business model - walterbell
http://blog.erratasec.com/2015/12/tesla-is-copying-apples-business-model.html#.VmGBZHo8KrV
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aetherson
There is some value in this article, but the author is super careless with his
terms and comparisons, and his point suffers for it.

He wants Costco (low cost, low price, high volume, slim overall profit) and
Apple (low cost, high price, medium-to-small volume, large overall profit) and
Tesla (currently I believe high cost, high price, low volume, negative overall
profit) to be the same, and so he constantly elides the differences. I think
that overall his point is that Costco and Apple are fundamentally about having
low costs that allow them to make a different volume/price tradeoff than their
competitors, but he constantly confuses price and cost, and contradicts
himself about Apple's volume.

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devsquid
Yea I have been noticing people really trying to make the Apple and Tesla
comparison lately. It just feels so forced.

-edit random thought- Seems like a whole lot of wealthy tech writers/bloggers want to sell themselves on getting a Tesla because somehow its similar to buying an early mac. There should be a specific term for the tech version of Keeping Up With The Joneses. I wonder how many of them drink soylent and order their quarters off of quarterly. I realize I am on a 'startup centric' site but god damn man some introspection is good people.

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klipt
> Seems like a whole lot of wealthy tech writers/bloggers want to sell
> themselves on getting a Tesla because somehow its similar to buying an early
> mac.

Surely if you think Apple/Tesla is going to be great, the smart move is to buy
early _shares_ , not early products? The products will still be
good/relatively cheap in future - the shares won't.

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greglindahl
Indeed - anyone who bought a Model S in late 2012-early 2013 would have made
$500k+ had they bought stock instead.

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robotresearcher
> doesn't have somebody like a Steve Jobs, or even a John Ivy, who obsesses
> over every small detail to make everything perfect.

Ah, irony.

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xiphias
,,Car innovation is continuing beyond the electric model and self-driving
features -- Tesla needs to be up near the front on all of them.'' The author
hasn't even read the Secret Tesla Motors Master Plan.

[https://www.teslamotors.com/blog/secret-tesla-motors-
master-...](https://www.teslamotors.com/blog/secret-tesla-motors-master-plan-
just-between-you-and-me)

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ebbv
This article is full of a lot of crap. There is a good parallel to be made
between Apple and Tesla, but this article spends a lot of time babbling about
nonsense (whining about overpriced bottled tap water when that's found at
every single grocery store on earth in 2015?)

As far as Tesla trying to make a cool brand; every brand tries to do that.
That's not what makes Tesla like Apple.

What makes Tesla like Apple is that it is willing to compromise in ways that
most of their competitors aren't; they are willing to have higher price tags,
deliver products late and risk a lot of money by investing in something that
could fail. Apple exmpales; the iPhone, the Apple Watch. Tesla examples; the
Supercharger network and the Gigafactoy. They are not willing to compromise on
quality. They may fuck up and make a quality mistake (inevitably they do), but
they will not deliberately compromise on quality the way competitors will in
order to meet a target price point.

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S_A_P
This seems grossly oversimplified, and Im not really even sure its correct.
Tesla is trying to (mostly) bootstrap themselves, so the obvious path here is
to build expensive, higher margin products vs commodity products. I also think
you are giving Apple way too much credit for calling it their business model.
Apple follows a similar business model to the fashion industry, or the jewelry
industry. There is no new secret sauce here. Market goods to "discerning"
users for more money than commodity purchasers. Is the only point of this blog
to get "Apple" and "Tesla" in the same heading?

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untilHellbanned
I think the OP's point is that Apple is not like the fashion industry. Fashion
items like Ferrari cars (pointed out by the OP), look nice but actually don't
work that well. Whereas Apple products look nice and work well.

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threeseed
It really isn't comparable.

In the areas that Apple competes there are a handful of serious competitors
and they deliberately place themselves in markets where they know they can
offer a superior experience. In the automative industry there are dozens of
competitors. And most of them over at least some cars that are higher in
quality than Tesla. And of course none of them have the problem of electric
cars namely range and worrying about recharge locations. Which is a concern
for the mainstream masses.

For me Tesla is more like the Windows Phone. A great product but with quite a
lot of uncertainty around it's longterm future.

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aianus
> namely range and worrying about recharge locations. Which is a concern for
> the mainstream masses.

I don't think the masses drive 200 miles a day on the regular. That's $500+ a
month in gas.

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crabasa
Daily isn't the problem, it's the weekend excursions.

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peteretep
In America. Much of the rest of the developed world considers 400 miles of
driving over a weekend to be crazy talk.

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LukaAl
In Europe a weekend, or even a daily trip if you happen to live close enough,
to the mountain in winter for skiing is considered common and acceptable.

The distance is well inside the range of Tesla's battery if it wasn't for the
altitude and the cold weather. If you don't have a charging station at your
destination, better start walking...

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peteretep
In the part of Europe I'm from, we have trains for this eventuality...

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crabasa
I'm glad we've zeroed in on "in the part of a continent that I live in" from
your initial pan-Europe generalization.

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peteretep
I'm glad we've uncovered the fact that you consider "the developed world" to
be the continent you're from... O_o

It would also be worth adding that the part of Europe with good train coverage
is "much of it".

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devsquid
Lucky. "America", ie the US, is pretty huge and empty. When I was in college,
my friends would often drive about 350 miles one way to go home for the
weekend/holidays. Public transportation is so much shittier here than many
other "developed" countries I've lived in. Sucks because I've never owned a
car lol.

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peteretep
I wonder if subsidised petrol also adds to it. It'd be a rare Australian (in
my experience) who attempted to regularly drive between major cities
(excluding Canberra) - they'd just fly.

I also get the impression that air transport in most of the rest of the world
is much much more reasonable. AirAsia has made most of Asia pretty accessible,
there are a gazillion competing low-cost airlines in Europe, and Australian
air travel seems to be cheap enough that I have friends who city hop at
weekends without much effort.

Of the four continents I've lived for more than a year on, North America and
Africa see people taking heroic car journeys, Europe and (South East) Asia
much less so.

Finally there seems to be a real class divide on public transport. Middle-
class Europeans and Asians will jump on a coach, where I don't think any of
the Americans I know have every been on a Greyhound bus...

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devsquid
I have ridden my share of Greyhound's man. They are always very long and if
you have a bad driver they are quite scary.

Where I went to college, flights were often canceled and cost around 300$ one
way. Between cities in the US we do have pretty competitive prices for
flights. Cars were definitely the preferred means of transportation and if you
car pooled the cheapest.

Oddly enough we had an ok bus system, it was pricy but the fare was included
in your tuition.

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joslin01
This is a really good way of looking at the two companies though I would argue
"copying" is a bit strong. I think the author just found a common approach
among the two namely that Tesla & Apple both are attempting to operate as a
luxury brand pushing high volumes of "cheap" products.

It briefly touches upon objective vs subjective quality and does so in a way
that it brings back memories of _Zen and the Art of Motorcycle Maintenance_.
What _is_ quality anyway? The author makes the case that Apple is an
inherently quality brand through and through, and to do so, must invest into
its own supply chain in order to get quality parts at a cheap cost. He then
naturally draws the comparison to the Gigafactory Tesla is building. His
conclusion is that the Tesla Model S (which he owns) will be how Tesla is
ultimately perceived as a "quality" product. When it cheapens all the parts
and sells a 35k car, presumably this will be like Apple selling iPhones. I
think it's a worthwhile comparison.

It's also something to just generally keep in mind about branding. Many
engineers might have snarky things to say about a marketing or executive
moves, but customer perception is a huge deal. Android has generally stayed
ahead of Apple in terms of releasing mobile features, but the higher-income
earners still prefer Apple to Android. Why is that? These are the really
interesting discussions, but no of course Tesla is not copying per se.. it's
just trying to make a lot of money and well, selling cheap products at high
costs because of perceived quality is a hell of a way to do that.

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devsquid
Apple was founded on bringing usable computers to the middle class.

Tesla targets a high end niche market.

My middle class parents, would never dream of buying a Tesla but they have
purchased Mac computers for as long as I have known them.

Honestly I don't see a huge amount of parallels other than they share a common
fanbase, tech nerds and these fans want to lump them together, and they are...
both businesses competing in the modern economy.

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crabasa
[Tesla] was founded on bringing [electric cars] to the middle class.

Seriously, it seems like commenters either aren't reading this article and/or
have a bias against Tesla.

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devsquid
I did read the article. Tesla sells sport/luxury cars. They plan on expanding
in the future to 30k+ cars, when it happens then they will be a company that
sells mid~high end/sport/luxury cars.

I am bias because I label Tesla as a company that sells the products that it
sells? I don't get it.

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LukaAl
This article is interesting but very naïve in is approach. First of all what
he describes it is not a business model but part of the value proposition, and
more specifically the value discipline. Yes, I'm using the Treacy Wiersema
model[1].

So for instance saying that the low cost competitor couldn't afford to spend a
little more on quality is dead wrong. If the customer you select values cost
over quality (I'm not even looking into customer intimacy, the third
discipline he misses) the are willing to pay a premium upfront for a product
that is affordable over the lifetime (Total Cost of Ownership). That's why
even in the volume market it is not always the one with the lower price to
win. And different company could compete carving out a little different
market.

Apple is for sure in the quality area. Tesla? My guess is that Tesla is in the
Total Cost of Ownership, so totally different business model. Look how much
they stress on the lower maintenance cost. Look at the direct distribution
model that cut the costs down. Look at the free recharge at their supercharger
network. Look at the calculator on how much you save buying a Tesla. Want more
details? Their new battery factory will produce battery also for competitors
to get to a scale big enough to reduce price. They open sourced their patents
so other company will use their technology de facto increasing the consumption
of component they need (lowering the price) and doing R&D with them.

Another aspect, Tesla is pretty much a vertically integrated company, even in
a market where sourcing component and sharing platform is common, they produce
a lot in house (e.g: the batteries). This is common when you look for the
lower Total Cost of Ownership (it's in contrast with management mantra, all
people that read just the first chapter of Traecy Wiersema book and not the
next 19). On the opposite Apple outsource a lot even in a market where
outsourcing is common. They do this to get the best component from the
producer that happens to be able to provide it.

I know my analysis seems to be counter-intuitive, but if understanding and
replicating Apple's business model (or Amazon, Tesla, Southwest, Nordstrom)
was easy and intuitive I guess there will be no more Apple. I'm not even
saying that I'm 100% right, to be fair...

[1][https://hbr.org/1993/01/customer-intimacy-and-other-value-
di...](https://hbr.org/1993/01/customer-intimacy-and-other-value-disciplines)

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vilhelm_s
So according to his analysis, the things that keep Apple/Tesla in their market
dominant position is (1) their brand communicates "quality" and (2) they have
enough capital that they can make cheap quality products with a one-time
investment.

If those are the key advantages, Tesla might be in trouble when Apple releases
their own electric car. Apple already has the "quality" brand, and has much
more capital.

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andyware
Why did he have to use an Apple power supply as an example. Why? Everything
was going so well. FYI Apples power supplies are the first i've ever seen to
break by single loop tangle and they cost so much. Like WTF, it makes me rage
a bit. I've never had another power supply wire break on me but I've had about
5 apple wires break so far and that's with me being super careful.

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Riegerb
I agree, although I think Musk is thinking much more fundamentally than cars
with Tesla... we as a civilization need an efficient way to produce, store,
and consume energy from the sun. The car is a logical near-term path/product
to advance the 'store' and 'consume' technologies while having a near-term
positive environmental impact and a sustainable business model.

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threeseed
I also suspect that Tesla is a battery company that happens to sell cars.

But there's a problem. There is just so much R&D being done in energy storage
devices and battery technology that Tesla will need to do quite a bit of M&A
in order to stay relevant. That's a weird thing to do whilst you are still
selling cars.

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Riegerb
Yes. I would associate Tesla with Samsung as much as with Apple. Samsung
LCD/OLED technology is in many high-end mobile device for example, even though
they have flagship products that directly compete.. they are selling the more
fundamental technologies. In the same way, Tesla (Elon) would much rather be
selling batteries to many other car manufacturers and home battery storage
manufacturers (the patent release makes a lot of sense within this line of
thinking).

The challenge with energy storage is not only in the R&D, but also in the
manufacturing at scale, cars are a great avenue to approach this challenge.

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tobltobs
Fifa is copying Apple's design. Look at this thing called football, round
corners everywhere.

