Tesla is copying Apple's business model

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.

> 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.

,,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-...

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.

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?

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.

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.

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.

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...

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.

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.

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.

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