A Christmas Gift From Elon Musk

 

December 25th is generally a day that companies and brands avoid making big announcements… for fear they will be lost in either the noise of the holiday or missed entirely as people “tune out” to be with family and loved ones.

But Elon Musk doesn’t do anything by anyone else’s playbook.

On December 25th, Elon tweeted the following:

elon-musk-roadster-3.0-tweet

This tweet did several things to strengthen both the Tesla and Elon Musk brands:

  1. It started a viral swell, setting the Twitterverse of Tesla enthusiasts on fire with speculation of what was to come
  2. It ensured Tesla’s formal press release would be rabidly consumed and analyzed word-by-word for additional clues
  3. It created even more loyalty with his already passionate customer and fan bases

Let’s be honest, announcing an upgrade to a car isn’t really news in itself, so it’s important to understand the larger context. The Tesla Roadster is a vehicle that hasn’t been in production since 2012, making it clear that Elon’s tweet was just a sheep costume around the wolf.

On Christmas day, Musk was really firing a warning shot across the bow of every automobile manufacturer, indicating that the days of producing a vehicle and supporting it merely through a warranty (and recalls) are over. To be seen is whether he also initiated a change in the mindset of consumers toward a model where existing vehicles will be upgraded incrementally with new technology, prolonging the new car purchase cycle for many consumers.

While this may seem counter-intuitive from an automobile manufacturer’s perspective, it actually stands to benefit manufacturers and consumers alike:

Manufacturers

  • New technology innovation, which is expensive, can be partially subsidized and even turned into a high-margin revenue stream, by offering upgrade packages to vehicle owners
  • The support window for older (or multiple) platforms can be shortened as newer technology is adopted
  • A deeper relationship (brand loyalty) with consumers can be better fostered through a long-term product view
  • Relationships with dealer networks who do the upgrades are strengthened by the new CRM and revenue opportunities this creates

Consumers

  • Technology upgrade packages can improve the safety, range, MPG, eco-footprint, and other aspects of existing vehicles without the full expense of replacement
  • Upgrades may slow down (or change) the way in which automobiles depreciate in value
  • Upgrades demonstrate manufacturers are committed to relationships with their customers for the long haul

Although it’s not a 100% parallel, this is evocative of Apple’s model of selling hardware and continually offering a better experience over its life through software upgrades (e.g. iOS 8 keeps an iPhone 5s relevant in a world of iPhone 6’s). Operationally, it also allows them to be more streamlined by limiting the number of legacy iOS versions they have to actively support.

In case there’s any remaining doubt about Elon’s intention to further disrupt the automobile industry, the closing line in Tesla’s December 26th press release makes his intentions very clear:

We are confident that this will not be the last update the Roadster will receive in the many years to come.

Perhaps “A Call to Arms for the Automobile Industry” would have been a better title. Either way, I expect this will prove to make a happier new year for some, not others.