Why petrol cars will not exist in 10 years

tesla charging

If you haven’t already realised, cars are no longer machines, but rolling computers. This also means that cars will move from being powered by fossil fuel engines to electric motors. It’s already started, and it is going to happen much more quickly than we anticipate. I’d go as far to predict that there will hardly be a petrol car on the road in 10 years. Here’s why:

When cars transition to rolling computers, the Law of Accelerating Returns applies. Innovation goes from incremental and factory-based to curve-jumping and technology-driven. You’ve probably heard of Moore’s Law – the maxim that states that computing power will double roughly every 18 months while prices halve. This maxim and many other accelerating technology laws will apply to the production of cars, laws which make the end product better and cheaper by significant degrees. The revolution which transformed smart phones, cameras, laptops, solar panels and flat screen TVs is about impact the auto industry.  Let’s take the pricing example of the Tesla Electric car range:

1st car – Tesla Roadster:  $109,000 (released 2006)

2nd car – Tesla Model S: $75,000 (released 2012)

3rd car – Tesla Model 3: $35,000 (projected – release due 2016)

Not only has each model been progressively cheaper, but also far better in terms of range (distance per battery charge), safety and features.

It’s the same pricing pattern we saw during the personal computing revolution. Here is where we get an entire curve jump. The Tesla model 3 is so cheap that an electric car is no longer a plaything for Silicon Valley types, but a viable new car option for everyone. This is because the switching costs get very close to zero. Why? Because the running costs of having a Tesla Electric car does not include the cost of petrol. (Tesla already have 453 free super charging stations and the cost to fully charge the battery at home is around $3). This means the average consumer can use their saved petrol money towards acquiring a brand new car without increasing their weekly expenditure. For example:

Model 3 Tesla

  • Cost to buy = $35,000
  • Avg petrol p.a. = $3,120
  • New funds available = 8.9% of purchase price.
  • Avg Cost new car finance = 6-7% unsecured interest rate.

When the Model 3 arrives, it only takes some creative financiers to change the landscape of the auto industry virtually overnight.

Want a new car at no cost?*

*Just give us your weekly petrol bill and drive away in a sexy new high tech Tesla!

It’s when this happens that we transition to an all-electric car world. The transition will be as swift as the smart phone – in a few short years, non-electric cars will be a lot like feature phones.

This is exactly how disruption happens. It’s not the product itself, but often the change in the business model around it which leaves industry incumbents blindsided. When there’s an opportunity for consumers to get into a superior product with low or no switching costs, they will always take it.

Buckle your seat belt.

Marketing genius, social pitching & worst case scenarios

Yes, I have been writing, just in other places. So here’s 3 recent articles I’ve put out there which could have been put here:

Why Elon Musk has delivered a genius level marketing play by opening up the Tesla patents.

The less often sited social side of pitching your startup or idea.

What’s the worst case scenario as a failed entrepreneur?

Back posting tomorrow – I promise.

 

 

The competition is invisible

I recently saw a prototype for the Google self drive car – It’s picture is below and looks kinda cute / cool / weird.

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Anyone who follows the technology world will know that Google have successfully driven their self drive cars without incident for more than million miles. But up until now, the cars have been retro fitted Toyota and Lexus’s – other companies cars they fitted their self drive technology to. This is a bit of a shift in the projects trajectory. The Google car, is quite It’s further proof that information, when distributed freely and easily changes the physical world too. That dramatic changes in information, have dramatic impacts on all things physical. But what it should remind business people is that we simply can’t know who our competitors are any more. In a world where everyone has access to all the major factors of production we end up with a global demarcation dispute. Non linear competition where brands and big businesses get blindsided by category newbies. We’ve already seen it in retail, music and media, and we are about to see it in every form of hardware and manufacturing. The established industries who should, could and would provide the next level of innovation probably wont.

Tesla is already around half the size in market capitalisation of GM and Ford after a few short years in the market. And as we can see by this post the auto industry better get ready for new players from the technology world – Google, and possibly even Apple. The auto industry would do well to remember that cars are about to become mobile lounge rooms, and all the high tech companies are already competing for the ‘lounge room’ in the house. Next they’ll be competing for the lounge room in transit. A preemptive sense of future irony right there. Even small players like Tomcar Australia (which I have an interest in) have proven you don’t need to own a factory to make best in category vehicles and disrupt an established industry base.

I also read yesterday about two absolute powerhouse Australian companies (both in the top 10) Coles and Woolworths better get ready for a new set of competitors. And while they mentioned a siphoning of revenue category by category, I believe they have a much bigger problem coming their way:

What to do with 1000+ stores when no one goes to a grocery store to get their shopping.

And no, this is not like discretionary retail which can be made a social, fun and entertaining experience. Grocery shopping is a chore and technology has a habit of removing chores from the human experience. Not many people run fast or lift heavy things for a living. And mind you, the word computer, was originally a job title, not a machine.

In the food industry there is a term called ‘share of stomach’. What share did the food company get of the stomach. Which is the type of measure which is used to assess the truth about who the competition is, and where the revenue threats lie. I feel as though every industry needs to develop their own ‘Share of Stomach’ metric so they can see the real change in their industry. Maybe all industries related to transport need to measure share of human movement? Self driving cars, aren’t just a competitive play against legacy auto industries, but it’s hard to see city car parks being a valid business when we can ‘send our car home to our driveway’ and get it to pick us up later. It also raises questions about what relatively new businesses like Uber will do when cars don’t need drivers? Chances are they’ll need to become a system which organises and delivers our cars?

Just like life, the real life threatening diseases are from entities our body hasn’t encountered before and built a natural defence against. At times like these, a tectonic shift, business would do well remember lessons from the natural world.

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Just start working

If you want to work with someone, or for someone, people falsely believe that they have to ask for permission.  That they need approval to start  working with those who inspire them. The opposite is true and if we really want to work for someone, then all we need to do is start working for them. Start being a resource and creating value to what they do. It’s probably the best way to end up doing business with someone. To prove your capability, to demonstrate effort and to do it without asking for anything in return in the first instance. To be the resource.

I recently happened upon a great example of it. Aspiring advertising graduates went right ahead and did that for Tesla Motors. Here’s an advertisement they created below.

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The interesting thing is that it got a all the way to Elon Musk.

Screen Shot 2014-03-22 at 3.22.00 pm

Just think about it, they’d never be able to get a meeting with him, to pitch an idea for an advertisement (mind you Tesla does not do any traditional advertising and does’t really need it – which is what happens when you make great products). But the lesson here is a vintage case of modern day bootstrapping. If we have resources at our disposal for connection and creativity, there’s nothing stopping us from using them. It’s those who create first without asking for anything who win respect and future opportunity.

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Reality, Comedy & Venture Capital

The story of the court jester is an important one. Largely employed by rulers to entertain during medieval times, they served not simply to amuse but to criticize their master and their guests. The jesters position was one within a the power structures of society. Rulers knew that their servants had neither the position or the courage to drop a truth bomb or two, and so this role was outsourced to the local fool.

The problem today, is that most leaders, CEO’s and entrepreneurs don’t have a personal jester to keep them in tow. Maybe we should. It’s also fair to say that the technology and Venture Capital realm could do with an injection of reality now and again. I recently happened upon a video of famed inventor Nikola Tesla as if he was transported from the past directly into Silicon Valley. He was pitching his concepts to a group of VC’s whose responses were both hilarious and predictable. Another classic example which proves we often have more to learn from the Court Jester than the local hero who has already made bank. It seems as though we too have our own Jester, in the form of video spoofs.

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