The Model S is by all accounts an excellent car, and I want one, but I am bearish on Tesla the company.
The definition of a disruptive technology is one that starts off objectively inferior but which, on projected technology trends, will meet the market need at some future date. The existing market can recognize these facts well in advance, but when the time comes to switch technologies finds upstart incumbents using the new technology with a cost structure the established companies cannot match.
Electric cars qualify because they do not at the same price have the same range, acceleration, or refuel time as gasoline cars. But all three aspects are improving exponentially over time. On current trends, electric cars will be comparable to or better than gasoline cars on all three metrics within 20 years.
What Elon has done is realized that the cost difference between building a top end car and a bottom end car is not that great, and at the price of a top end car he can deliver equivalent to better acceleration and range, with recharge time that is acceptable to many. This is very unusual - normally the upstarts in a disruptive market start at the bottom of the market and move up. (Indeed that was the pattern that Christensen predicted for electric cars.) But the mechanics work the same way. By the time Tesla can deliver a mass market car at a mass market price, the incumbents won't have the technology or business structure to deliver a competitive car at a competitive price.
For all of the reasons why existing companies will not be able to modify their technology and business structure to what is needed to compete with Tesla, I highly recommend Clayton's followup book, The Innovator's Solution.
Of course they are. They work completely differently from ICE cars and even hybrids to solve the same problem (transportation). That's the definition of a disruptive technology.
Yeah, except unlike an M5, it is a high-tech and environmentally friendly vehicle.
Contrast that to the Tesla, which has been engineered from the ground up to use batteries to power it. The car is a technological marvel, even compared to cars like the M5. And this translates to a driving experience that is different enough from ICE cars* that it makes it a disruptive tech.
*instant acceleration, no engine noise, real-time graphical feedback about the car's systems, etc.
That's one of the central points in the aforementioned book Innovator's Dilemma. Disruptive technologies often start out as expensive products that only attract a small segment of early adopters. This leads established players to ignore them. But new technology often holds greater potential for improvement (easy gains in existing technology have already been tapped). With time, cost is reduced while performance is increased, and it wins over the market.
Tesla may or may not end up being disruptive. But price certainly doesn't rule it out.
If you consider the change in routine fueling habits, too, that's pretty amazing. Plugging in at night vs weekly trips to a gas station is a big deal.
You don't skate toward the puck, you skate where the puck is going. This kind of thinking is why, for example, Toyota was able to build the Prius and GM wasn't.
Japanese manufacturers started earlier, building up the necessary experience, technology, and culture at a time when nobody could sell hybrids without heavy subsidies. They took losses for years, learned the hard lessons early, and kept the disasters small. Then, when the market was finally ready, they were, too.
That's what Tesla is doing... but despite countless historical examples of market disruption, the incumbents will react with great surprise when they get their asses kicked. Today the car costs $100K. Tomorrow they will know how to build one that costs $10K.
A disruptive electric car would be if a golf cart maker made a $7500 car with a top speed of 60mph and a range of 50 miles. No current car customer would want that, but people that couldn't afford a new reliable car, or teenagers whose parents only sort-of trusted them, etc would love to buy it.
ICE automakers can't retool their supply chains overnight (or even over several years) to make an equivelent product.
How are they disruptive? They achieve identical (performance wise, superior) capability with reduced maintenance and reduced fuel cost due to electricity being cheaper than gasoline.
In the short term, the increased cost makes them disruptive only in the high-end sedan market. As the production scales up, this will move into the lower-tier markets. I think you are intelligent enough to get this.
I believe they are/will soon be selling in the UK.
My other mistake was in saying "electric car" and not "Tesla's electric cars". Thanks to all for the interesting discussion.
PS: I still want one.
PPS: I'm still pretty sure that trying to get to scale without a dealer network is what's going to break Tesla's back. Never underestimate the power of the local car dealer.
Those things alone have a hell of a broad impact on American life.