(notably the giant battery factory outside Reno)—not to mention its
Edison-like, visionary leader—suggest Tesla has the potential to bust
out of its specialty niche and become a mass market player.
Tesla’s first volume production car, the Model S, swept the
industry awards, garnering the first-ever unanimous selection as
Motor Trend’s Car of the Year, the highest scoring car Consumer
Reports ever tested, the “Car of the Century” by Car and Driver, and
the “Most Important Car Ever” by Top Gear.^15 In 2015, it was the
highest-selling plug-in electric car in the United States—despite selling
for twice the price of its competitors.^16
The car that has the potential to turn Tesla into an automobile
powerhouse is the forthcoming Model 3. Starting at $35,000, it
registered 325,000 reservations (requiring a refundable $1,000
deposit) within a week of its announcement.^17 Few firms get access to
$325 million in capital for a year at zero borrowing cost. This is a
horseman-grade achievement around storytelling.
Still, quite a few variables stand between Tesla today and
becoming a Fifth Horseman at some point in the future. Indeed, the
company faces challenges beyond those faced by traditional auto
companies, as it needs to set up vast networks of charging stations and
service stations (where backlogs are an issue), set up global
distribution, deal with an array of government subsidies and
expectations for electric cars, and manage regulators in the back
pocket of the auto industry. However, what appear (now) to be
obstacles could end up being the type of analog moats that sustain a
giant. Tesla does as well as any current company against the T
Algorithm.
Compare Tesla to our criteria. Its product is unparalleled in quality
and technical innovation. Tesla is not just an electric car; it’s a better
car across several dimensions, including a massive and beloved
touchscreen-based dashboard, over-the-air software updates (big
data/AI), an industry-leading autopilot mode, and design touches (like
rethought door handles) that customers love.
Tesla controls the customer experience in a way that no other car
company has done, or will be able to do without radical and costly
changes. Automobile firms fail the vertical test, as they have pursued a
capital-light strategy with independently owned dealerships that are