What Does the Success of Tesla Mean for the Future Dynamics in the Global Automobile Sector?

Item Type Journal paper
Abstract

After reading Jacobides, MacDuffie, and Tae (2016), the success of Tesla in launching a new automobile company in a crowded sector puzzled us. Jacobides, MacDuffie, and Tae (2016) had convinced us that developing the capabilities to become the manufacturer of a complete, safe automobile system would be quite difficult. Researching the development history of Tesla, we have pieced together the key features of how Tesla achieved its successful entry into the automobile sector. From this we have concluded, based on the development time and costs associated with the Tesla Model S, that a well-funded company could develop a new electric vehicle (EV) from scratch and move it into production within 3 to 5 years, by spending $1–2 billion of capital for design, development, and manufacturing. Without a doubt, increasing production to the levels of mass producers would take much longer, but the Telsa example demonstrates that new entry into the industy has become feasible. Tesla’s trajectory, from start-up on the brink of bankruptcy to a company mass producing electric vehicles within 5 years, raises important questions about the future of the global automobile sector. What would prevent Apple and Google, two companies that clearly have the resources to fund $2B in R&D, from entering the market and contesting fiercely with the dominant OEMs such as GM, Ford, VW, Mercedes, and Toyota? There are already many ventures in the Chinese electric automobile sector, such as BYD, Qiantu, NIO, and many more. Inspired by the success of Tesla, why would Chinese software and internet giants such as Tencent and Alibaba not enter this large market given that Tesla did not have prior experience and was able to get a successful car ready for sale within 5 years? In this perspective piece, we offer our reflections on the implications of the success of Tesla for the dynamics of the global automobile sector. We will appraise the chances that Chinese firms will for the first time become leading players in pushing the frontier of automotive technology, a goal that has eluded them over the past 30 years despite massive government efforts to create strong home-grown auto companies.

Authors Perkins, Greg & Murmann, Johann P.
Journal or Publication Title Management and Organization Review
Language English
Keywords e-vehicles, Auto industry, Tesla, competitiveness
Subjects business studies
HSG Classification contribution to scientific community
HSG Profile Area None
Refereed Yes
Date September 2018
Publisher Cambridge University Press
Place of Publication Cambridge
Volume 14
Number 3
Page Range 471-480
Number of Pages 10
Publisher DOI doi.org/10.1017/mor.2018.31
Official URL https://doi.org/10.1017/mor.2018.31
Contact Email Address peter.murmann@unisg.ch
Depositing User Prof. Ph.D Johann P. Murmann
Date Deposited 13 Nov 2018 16:55
Last Modified 13 Nov 2018 17:08
URI: https://www.alexandria.unisg.ch/publications/255669

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Citation

Perkins, Greg & Murmann, Johann P. (2018) What Does the Success of Tesla Mean for the Future Dynamics in the Global Automobile Sector? Management and Organization Review, 14 (3). 471-480.

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https://www.alexandria.unisg.ch/id/eprint/255669
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