Is Autopilot Tesla’s Only Lucrative Asset

Tesla Model S Night Front Lights Blue
Tesla Model S Night Front Lights Blue

Recently, there was an article about how the Autopilot is Tesla’s only most lucrative asset. The article did a good job comparing Tesla’s camera based autopilot system versus other’s using LIDAR. LIDAR based systems do offer advantages in accuracy and potentially less software. However, it is a much larger and heavier system and does not work well in bad weather such as rain and fog. Tesla’s system depends on multiple cameras, radar and a lot of software to make autopilot work. In general, I believe the electric cars lend themselves more suitable for full driving automation due to precise software control over mechanical parts such as steering and drive train. Due to extensive mechanical connections in the traditional ICE cars, they cannot be automated as well.

I do believe that the Tesla’s Autopilot is one important competitive asset that Tesla has and it is actually a fact. When I look at the current competition such as GM, Nissan, Jaguar, none of these companies offer an autopilot system that comes close to Tesla’s system.

If you look at the new and coming soon Audi E-Tron SUV, it offers different driver assist systems similar to Jaguar’s I-Pace. However, none of these systems are as sharp as the Tesla’s Autopilot.

Also, Tesla is developing their own system including CPU to power the Autopilot in-house. Many others including Audi and Jaguar rely on other tech companies such as Intel and NVidia to develop their autonomous systems. Tesla has also been collecting driving data for years and by now has enough to almost fully automate the whole process. Other automotive manufacturers, on the other hand, would need to partner with tech companies that have this data and developed an autopilot system. Tesla can later sell their system to others for the premium if they choose to.

In addition to the Autopilot, however, Tesla also has following assets and technologies to maintain competitive advantage:

  • Supercharging Network
  • Automatic over the air Software Updates
  • Batteries Factory

Regarding Supercharging network, there are competitors such as Electrify America and others will join sooner or later but still Tesla has the largest network in the USA and across the world today. And, Tesla’s supercharging network is growing. So, the competitors have a long way to catch up.

As far as the over the air software updates, I believe Tesla is the only company today which offers this feature and it actually works. The competition is catching up such as Jaguar and Mercedes and others will join slowly. However, the support for over the air software updates varies and does not offer full updates similar to the way Tesla does it. Also, Tesla develops and owns the whole software update infrastructure. Other companies, on the other hand, have to partner with external software tech companies to make this work. This again gives Tesla a competitive advantage in the long run.

Regarding Tesla’s battery factory, how can this not be considered as a strategic asset. Yes, Tesla is partnering with Panasonic but still does have factory which in the long run will save cost and become a strong competitive advantage. Others must purchase their batteries from external suppliers at a premium. They may even have to purchase batteries from Tesla.

In my opinion, Tesla currently has and in the long run will grow the following assets to maintain competitive advantage:

  • Supercharging Network
  • Automatic over the air Software Updates
  • Batteries Factory
  • Autopilot and large collection of driving data

The cost of batteries is still too high and this keeps the prices of EVs in the upper range for most consumer to afford. Even with Model 3, if you add up all of the features that BMW 3 series offers, you end up paying a premium for having an EV. Also, Model 3 is sedan and most consumers seem to prefer small SUVs over the sedans. I think, the Model Y has a better shot on winning a larger consumer market. But, again, the Model Y pricing will play a big role in consumer decision making.

The demand for EV is growing but slowly. In our area, I already see so many Model 3 cars and few Model S and Model X cars whereas two years earlier, to witness any Tesla on the road was a surprising event.

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