Established carmakers may scoff at Elon Musks firm, but like Apple and the iPhone, it heralds a massive shake-up of the auto industry
Two interesting things happened last week. One was Teslas delivery of the first batch of its Model 3, the companys first affordable car. (If you think $35,000, about 26,500 is affordable, that is.) The second was a diesel summit held in Berlin, a meeting where the bosses of Germanys leading car manufacturers (VW, BMW, Audi, Ford, Porsche and Daimler) got together with ministers to ponder the industrial implications of the emissions-cheating scandal and the decisions of the British and French governments to outlaw petrol cars and vans from 2040.
Although no one in the car industry will say so, diesel technology has been a dead duck since the emissions-cheating scandal erupted, followed by the revelations of how polluted Londons atmosphere has become, with emissions of nitrous fumes from diesels being blamed for much of the problem. And the fallout is already being seen in the sales figures. In January, for example, UK registrations of new diesel cars were 4.3% down on a year ago, while petrol car sales were up by 8.9%. If youre a rural resident who doesnt worry too much about the environment or resale value, then you can already grab real bargains in the diesel car market. And for the time being petrol heads can feel (relatively) cleaner than thou. But ultimately, the game is up for the internal combustion engine.
And not before time. It still seems incredible that in the 21st century we propel ourselves along using the energy provided by controlled explosions in metal cylinders. But the industrial fallout from switching to electric cars will be colossal. Some of the impact will be obvious and direct for example on petrol stations, some of which will become charging stations, while many others may just wither and die. Because most car journeys are short, owners of electric cars will opt to recharge at home, something they cannot do with conventional vehicles. On the other hand, given that it takes significantly longer to recharge than to refuel, the switch may mean enhanced retail and catering opportunities for the stations that remain.
Then there are the innumerable second-order effects. Electric cars are much less complex than conventional cars. They require much less maintenance and the skills required to maintain them are different. They are also likely to last longer. They are much quieter and have zero emissions. On the other hand, a nation that recharges its car batteries at home will make different demands on the national grid. And electric cars are critically dependent on batteries, the manufacture of which is in turn critically dependent on the supply of certain rare metals. And so on.
As the hoopla around the Model 3 rollout erupted in California and the crisis meeting opened in Berlin, I found myself thinking not about cars but about mobile phones. Ten years ago this summer, Steve Jobs launched the iPhone with much the same pizzazz as Elon Musk rolled out his new saloon last week. And, outside of the Jobs reality distortion field, the world yawned. First of all, the mobile phone business was a mature industry, then dominated by massive outfits such as Nokia, RIMs BlackBerry, Ericsson, Sony. Apple had no experience in the field. It could only get a single network carrier AT&T (formerly Cingular) to sign up. The damn thing didnt have a keyboard. And you couldnt even change the battery when it wore out. Nice try, Steve.
And so Nokia, Microsoft, BlackBerry and co went back to sleep, confident that their mastery of a mature industry would see the parvenu off. Apple knew how to make computers; they in contrast, knew how to make phones. Now I get the same vibes from the carmakers. They have mastered the very difficult art of manufacturing safe, affordable, attractive cars in colossal numbers; Elon Musk, for his part, has taken an age to deliver 30 count them, 30 Model 3 electric saloons.
If this is indeed the way the industry thinks, then its giants are making the same mistake as the established telecoms firms made 10 years ago. They are focusing on the maker, not the technology. The significance of the iPhone was not that it was made by Apple but that it represented a new vision of the mobile phone as a powerful, handheld, networked computer that also happened to make voice calls. It was the beginning of the smartphone, a device that has changed the world. And most of todays smartphones are not made by Apple.
The same holds for cars. The significance of the new Tesla is not that it is made by Elon Musks startup, but that it represents an embodiment of what cars will be from now on vehicles powered not via a series of controlled explosions but by smooth, silent, high-torque, non-polluting motors. The automobile industry, in other words, has just had its iPhone moment.