When Apple aired its now-legendary “1984” ad on January 22, 1984, during a commercial break in the third quarter of Super Bowl XVIII, it wasn’t just as a tease for its Macintosh computer, which was unveiled two days later at a shareholder event in Cupertino. The ad also positioned Apple against IBM
IBM was a quintessential company in the context of the book The Organization Man, which was published in 1956. That book explained the nature of large corporations in post-war America that required conformity and was built on hierarchy. Risk was to be avoided. Compliance celebrated. The phrase “No one ever got fired for buying IBM” underlined how all of this led to a safe, stable environment.
As long as the environment didn’t change.
In the context of the “1984” ad and the computer that was to truly revolutionize personal computing, Apple was an agent of change.
Back then it seemed inconceivable that the massive IBM wouldn’t simply squash Apple into pulp in the personal computing space.
But the incumbent didn’t adjust.
In 2005 IBM announced it was selling its PC division to Lenovo, a Chinese company that was founded in. . .1984.
What’s interesting to note is that although Apple is now a significantly larger company than IBM (Apple market cap: ~$3.15 trillion; IBM: ~$264 billion), it still drives forward with change. More than half of its revenue comes from the iPhone. The Mac is only about 8%.
For many years Tesla has been a change agent in the auto industry. Some considered it Apple-like.
But now the environment is changing.
Not only is the company facing serious competition from other vehicle manufacturers, but there are all manner of issues—regulatory and social—that Tesla is facing.
One of the phrases that’s used to throw shade on Tesla is “It’s just like a car company.”
Meaning that it does things in ways that is like IBM did when it was large and in charge. After all, Tesla has had significant market dominance in the electric vehicle space globally, and although that’s declining it is still, at least in the West, in the lead.
For now.
Last week a story in The Wall Street Journal lays out, in devastating detail, what the headline proclaims: “Elon Musk Is Running Out of Road in China.”
As Raffaele Huang, Lingling Wei and Yoko Kubota write:
“For a while, Tesla was the hottest car on Chinese roads, and Musk was the toast of Beijing. Government officials showered the company with incentives, part of a concerted strategy to turbocharge the Chinese EV industry by injecting know-how into the country and spurring competition. Tesla’s sales took off.”
That was then. This isn’t.
As in:
· “Tesla’s market share has shriveled. . . .”
· “Chinese consumers say Teslas increasingly feel tired and out of touch with local tastes.”
· “Tesla’s Chinese staff have voiced concerns to headquarters about the company’s aging products, but their warnings often drew sluggish responses, China-based employees said.”
· “. . .Musk has appeared uninterested in making too many concessions to the market, instead relying on Tesla’s reputation for quality and technology to remain a leading player in China.”
· “. . .Musk pivoted to a strategy of designing a more affordable model which would remove or downgrade features from existing models to save costs and make these cars easier to mass-produce on existing manufacturing lines.”
How are things working out?
Not so well.
The WSJ reporters cite stats from the China Passenger Car Association that have it Tesla had 11% of the new-energy vehicle market in early 2021. As of May of this year it is down to 4%.
And “Smartphone maker Xiaomi, which only started selling EVs a year ago, has about 3%”
So think about the “just like a car company” phrase in light of this.
At one point the Motor City Three had a huge chunk of the U.S. market, which began to inexorably decline.
Companies including Toyota and Honda were offering fresh, often innovative products to the U.S. market. The MC3 ignored and/or simply criticized those vehicles as being irrelevant. They assumed that their position in the market—again, diminishing fast, but still large—and their reputation would be sufficient.
And then, when they decided they, too, needed to have some more affordable vehicles in showrooms their initial way of achieving it was by decontenting their products.
In 1984 GM’s U.S. market share was 45.2%. Ford was at 18.5% and Chrysler 9.2%.
Today the three companies are at 17.8%, 13.8%, and 7.5%
Toyota is in second place to GM with 15.3%, which puts it ahead of Ford. Honda is at 9.1%, which puts it ahead of Stellantis.
Going back to Tesla: its strategy, at least in China, seems very analogous to this. And to what extent can the same be said regarding its approach to the U.S. market?
Climb into a Cadillac Lyriq or a Hyundai Ioniq 5N and compare the fit, finish, amenities, and price point to Tesla models. If Tesla still has an edge in some regards, that edge is dulled.
Musk has said more than once that Tesla shouldn’t be considered an auto company as much as it is a technology company and AI company, that its autonomous driving capability, robotics, and energy storage will make all the difference.
But cars got Tesla to where it is, and the competitors in those three areas are formidable.
IBM once seemed as unassailable in computers as Tesla has in EVs.
There is a lesson there.
Long-time automotive journalist Gary Vasilash is co-host of “Autoline After Hours” and is a North American Car, Truck & Utility of the Year juror. He is also a contributor to Wards Auto and a juror for its 10 Best Interiors UX and 10 Best Engines & Propulsion Systems awards. He has written for a number of outlets, ranging from Composites Technology to Car and Driver.
The TTAC Creators Series tells stories and amplifies creators from all corners of the car world, including culture, dealerships, collections, modified builds and more.
Check out Gary’s essay here and his Substack here.
[Images: Tesla]
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