I live in beautiful Calgary, Alberta - ‘oil country,’ and home to the most entrepreneurs per capita in Canada. I was born and raised in Vancouver, a city which prides itself on its progressive culture and green initiatives. Point is, I have some perspective on both sides of the energy table. I love what oil enables economically, and I’m fascinated with green energy technology.
However, until last week, I didn’t see electric cars taking over our roadways anytime in the next twenty years. Historically expensive, there are battery disposal concerns for the environment, and, unless buying a Model S, electric cars just weren’t that sexy to me - a key for any consumer. But, Elon Musk has done it again…
Last week we witnessed a massive inflection point for the car industry, a moment which I believe will flip the entire sector upside down. From the way auto executives will have to market new models, to how they design them, and whether or not they even have a gas tank, Musk has just made every auto executives’ job much harder.
Musk and Tesla Will Transform Roadways
I’ve always been a fan of Tesla, and more specifically Elon Musk. The guy is an inspiring entrepreneur. He shoots big. So when Tesla revealed its more affordable Model 3 last week, the whole world paused. Musk has turned car launches into tech launches, akin to what you would see from Steve Jobs when revealing a new iPhone. And Musk has the reverence of not only the business world and bureaucrats, but the consumer too, top to bottom.
Tesla’s Model 3 launch revealed a slick, affordable electric car with incredible specs. Now, the middle class can own a bad ass Tesla with all the bells and whistles imaginable for a $35,000 price tag - nothing like this has ever been done before. Musk pulled it off because he knows how to market, and obsesses over design features and performance specs.
Tesla’s Business Model Like No Other Car Company
Tesla cars can be bought in shopping malls… And that’s exactly what happened after revealing the Model 3. Interested consumers rushed to the malls, in some cases days in advance, to put down a $1,000 refundable deposit to guarantee they receive their very own Model 3 sometime in 2017. Aside from on the television or computer, these consumers have never even seen the car! They aren’t even aware of many of the specs… It’s incredible. Within 48 hours of the reveal, Tesla reported to have collected over $100 million in deposits.
So how did Musk pull this off?
Tesla spent its R&D capital on quelling the negativity consumers have toward electric vehicles. The stereotypes, which were warranted in the past, for affordable electric vehicles are that they have no power, don’t look sexy, aren’t safe, and run out of energy too quickly. Being the genius that he is, Musk attacked and defeated the negative perceptions of electric cars with the Model 3. This is a great lesson for entrepreneurs: Provide the unexpected by over delivering. Spend the time and capital on R&D to change the paradigm of your industry and consumers will love you for it.
The Tesla movement is unlike anything I’ve ever seen in the consumer world. This is way more significant than any iPhone. Cars are the second biggest purchase 99% of the population will ever make. People camped out for days in front of Tesla stores just to lay down a deposit for a car they’ve haven’t touched, never mind test driven.
When the consumer buys into your product the way they have with Tesla, you’ve transformed the game. You call the shots. Your margins will skyrocket, but your competition will stiffen. Because of that, I believe we just witnessed the beginning of the end for gas vehicles used for city commuting. The consumer has spoken.
Stay hungry,
Aaron
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