One of the frequent comments I hear from Tesla (TSLA) bulls is how Tesla is a disruptive company and that electric cars will revolutionize the car industry. Many Tesla shareholders also seem to think that Tesla is the next Apple (AAPL), and Elon Musk the next Steve Jobs. Well, I agree with them, Tesla is like Apple - the Apple of the 1990's.
Apple in that decade had a hardcore set of loyal fans who bought computers from Apple because either they didn't like Microsoft (MSFT), because they liked the more stylish looking computers from Apple or because they belonged to a small niche of creative types: designers, photo and video editors etc who found Apple's hardware and software were better for their needs. Tesla buyers today buy the Model S cars because they don't want to buy an ICE vehicle, they like the look of the vehicles or they want the high performance that Tesla's cars provide.
However, Apple's success in the 21st century came about because its products appealed to the mainstream. These products met Clayton Christensen's definition of disruptive because the iPod, iPhone and then iPad all either offered new capabilities and features, or were products that offered a subset of existing features at a reduced price.
The iPod disrupted the music industry by allowing people to buy only singles instead of albums in addition to having a smaller form factor. The iPhone wasn't the first smartphone, Nokia (NOK) had released one before, but the iPhone's touch screen was ideal for consumption purposes such as surfing the web and other uses. Likewise the iPad couldn't do everything that a laptop could but for specific things' such as media consumption it was better and cost less.
Tesla's cars don't do anything that ICE cars can't already do. This point can't be emphasized enough. Yet ICE cars can do things that electric cars can't, namely: fill up virtually anywhere. Now, in my previous article on Tesla I got some push back from readers and Tesla car owners on that point. They insisted that the ability to charge up their electric car at home meant that there was effectively millions of charging stations available compared to only 100,000 gas stations in the U.S. They also felt that once Tesla's supercharging station network had been established that would eliminate or at least great ameliorate range concerns for electric vehicles.
Car manufacturers don't boast about the size of the fuel tank in their latest models
Lets, for the sake of argument, concede that point. It still remains the case that no ICE car buyer ever takes into account the ease or not of refueling his car when it comes to choosing a vehicle. Car manufacturers don't boast about the size of the fuel tank in their latest models, nor do gasoline stations boast about how their fuel pumps fill at twice the rate of neighboring stations. So at best all electric vehicles can do is draw ICE vehicles on that score, while realistically it's going to be a negative consideration for electric vehicles.
As far as the automobile industry is concerned the only things that could possibly be considered disruptive are:
1. Self driving cars.
2. Collaborative consumption or car sharing.
3. A radical reduction in cost
Tesla or at least Elon Musk did suggest that they were working on making their cars work on autopilot. This is short of the full automation that you get with Google's (GOOG) self driving cars and any rate has nothing to do with electric vehicle technology, Tesla's core competency.
If car sharing services like Zipcar or Getaround take off that would represent a real disruption to the industry. So far however, only a handful of people use these services.
A disruptive product or service needs to be better or much cheaper
This only leaves cost. If an electric car is cheaper to buy or run then consumers might be interested in one, even if the car's range is less than ideal. The Nissan (NSANY) Leaf for example has only a 75 mile range but the price is $36,000, half that of Model S. With tax subsidies a Nissan Leaf costs less than $30,000, which is the average price of a new car. So the Leaf meets the definition of a disruptive product: something which is inferior in some respects (range) but costs less to own and operate. How well has it done? Unfortunately, the Leaf has only sold around 1500 a month in the U.S.
This suggests to me that consumers really desire the full range and conveniences of an ICE car and the only way to deliver that with an electric vehicle is to have a very large battery pack, enough for a 300 mile range, plus an extensive network of supercharging stations. Cars with a 300 mile range battery pack simply cost too much now and will do so for as long as battery costs are in the $200 per kilowatt-hour range.
Tesla hasn't disrupted the car industry yet nor is it likely to do so while battery costs remain as high as they are now. And if battery costs do drop it will be the battery maker that will be the disruptive force in the industry, not Tesla.