Is Tesla Creating A Kodak Moment for the Auto Industry?

In a Fast Company article on March 19th, Jon Gertner profiled Tesla Motors and their upcoming vehicle, the Model S. Gertner talks with Elon Musk, CEO of Tesla, about the Model S and Telsa’s future. The entire article is an interesting read but a specific segment of the article really caught my attention:

"Musk and others at Tesla contend that the Model S may be the first mass-produced car ever designed, from the ground up, with the specific purpose of being an EV; therefore any design conventions of gas-burning technology have been avoided."

The Model S is not merely a car that happens to be have a battery pack rather than a fuel tank - rather the entire vehicle has been designed from scratch, keeping in mind that the vehicle is an EV and not gas-powered. There are other electric vehicles on the market, but all of them have been designed as an extension their of gas-powered vehicle brethren (see the Nissan Leaf - a modified version of the gas-powered Nissan Versa). This is important because electric vehicles have much less, and much smaller, machinery under the hood, thus the existing norms of sedan industrial design can be revisited. The chassis can be completely retooled. Electric vehicles don’t have an engine, so the extra space vacated by the absence of an engine can be used for additional trunk space, more leg room, or whatever Tesla envisions. Tesla is the first company with the opportunity to exploit this space, and it has the chance to redefine what a sedan is — how it looks, how it works, and its feature set. The Model S is a 21st century vehicle.

The guts of the Tesla Model S. PHOTO BY JOAO CANZIANI.

Toyota, GM, Ford, Kia, and every other automaker needs to take notice of what Tesla is doing. The rules of the game are changing in the automobile industry seems to have its head stuck in the sand, despite most automakers offering some kind of electric vehicle or hybrid. To illustrate my point Bob Lutz, former vice chairman of GM and the head of the Volt initiative, was quoted in the article saying:

"The media might have you believe, Gosh, in 10 years it’s all going to be EVs. But it’s just not happening. The average American consumer is delighted with gasoline vehicles and is in no rush to change."

While I am no seer, I would hardly make the claim that the average American consumer is delighted with gasoline vehicles, especially with volatile (and rising) gasoline costs, or that EVs won’t explode within the next 10 years. The limiting factor with electric vehicles are batteries - smaller, more efficient batteries mean electric vehicles with greater range. Tesla is positioning itself to be the chief benefactor of such advancements, as its cars are already being built with batteries and electric motors in mind as opposed to engines and fuel tanks. Today, EVs are not ready for mainstream adoption. But they are the future, and the future is quickly approaching.

This situation strikes me as extremely similar to Kodak’s plight from Profile of Kodak: From Film to Digital Photography that we discussed in class last week. Kodak was a pioneer of digital photography, but found itself incapable of converting that head start into a profitable business because it was too preoccupied with its existing products and services that were centered on an aging technology: film. The auto industry is testing the water with electric vehicles and hybrids, but it is not committing to them. They see electric vehicles as a novelty and a luxury. Tesla sees electric vehicles as the future for all drivers and they are working hard at delivering that product now. Film didn’t begin to die for nearly fifteen years after Kodak began working on digital photography. While gasoline powered vehicles may not begin to fade for decades, advancements in battery technology and changes in consumer tastes may shorten that time table dramatically. In my opinion, Tesla is the only player who is ready to take advantage of the EV movement. Their patents, production processes, and expertise building the Tesla Roadster give them a leg up over an industry "delighted with gasoline vehicles."

What do you think? Is the auto industry priming itself for a Kodak collapse or is Tesla going to burn out before EVs are adopted en mass?