IoT-4-Automotive 6 of 5 bonus: The Digital Ripples of Tesla Model 3

Feb 19, 2020 Update: If you are building an electric car in competition to Tesla you have to be able to see if you can beat their Model 3 sales.

This blog is part 6 of a 5 part series on smart cars, oxymoronish. The first blog was ‘The Self-Driving Automobile Revolution is Already here’ . The second was ‘ The Future of connectivity- 7 reasons to connect your car’. The third was ‘Baseline Planning for Connected Cars’. The fourth was Baseline planning for Connected Cars. Your Automotive Strategy. The fifth was on Security. This is a bonus 1, thus reading 6 of 5, on the digital disruption ripples of Tesla 3 that reaches far beyond automotive industry.

So far, we have been reading, and writing, about the Digital Disruption in the future. Today we take a deep dive into the digital waters of the automotive industry, Tesla’s model 3 and the ripple effect this has already had, is having and will have on a macro scale. Love to hear your comments on this article.

The long-awaited Tesla Model 3 today is a digital enterprise defining moment in more ways than most of us can visibly perceive. Finally, a low cost EV that will give 215 miles per charge in a world surrounded by 70 miles or so- this range makes 90% of trips in the US now viable by an EV. The final goal is 400 miles- as that is what a tank full gives us today.. The unveiling of a mass produced electric vehicle is a triumph to the passion, resilience and vision of just one person – Elon Musk. All the others are simply riding the digital tsunami that Elon has created and it is in the wake that most ‘me-too’ investors will surf while some will succeed and others will simply fall off or drown into the digital waters below. The unveiling is not only a coming of age for the automotive industry but a digital harbinger for every industry, enterprise and service on the market. The strange paradigm is that while Tesla stocks make it the most valuable automotive company on the planet, Ford on the other side continues to slip despite meeting and in some cases exceeding market predictions. ‘Tesla has finally promised and delivered what customers needed from the very inception of this industry’ while the fallacy of Ford is that they are not demonstrating a leap into this new digital future and continue to invest into the rearview mirror. Tesla will use some of the fundamental principles of Ford from over a century ago via using economy of scale and mass producing to build affordable cars of the future.

The nay-sayers, mostly competitive contributors, are figuring out questions like what if it does not meet our expectations? What if this goes wrong or that. As far as I can predict all this no longer matters, at least to the general public.

If model 3 does well it is a win-win-win-win-win-win (when was the last time you saw so many wins in a single string) situation for the company, industry, electric cars, customers and the nation. If Model 3 is a drastic failure, probability 0.1%, it is still a win for Tesla and the industry as they will pick up the strings from the points of known failure and most probably update the software in real-time across the entire platform. If it comes to a total grinding halt, probability 0.05, then I for one can bet that Elon will once again learn from the lesson, place all his bets and funds on the next step to success. That is how he has played the game so far and that is how he will probably continue to play this game into the future till he reached Mars. So no matter how you look at it Tesla has already changed the global market by pushing customers, countries and automotive manufacturers towards EV and then autonomous electric vehicles. 

Win 1: The EV disruption-  Tesla has already succeeded in pushing EVs into mainline. In 2016 Tesla manufactured more electric cars that the polling pundits predicted the entire electric car volume could be by 2030. Polls are so outdated I wonder why we continue to depend on them. The question we all need to ask ourselves is What business are we truly in? Model 3 is going to be the best value for money for any automobile ever produced (source Elon Musk). With Elon's solar roof the value goes higher. With Elon's Battery pack it goes still higher. With Elon's Boring company it kind of becomes science fiction fun when we can fly in our cars underground.

Win 2: The ripple effect on Automotive: Due to the success of Tesla Chevrolet has Bolt on the road, BMW has 13, Nissan has leaf. Most importantly Volvo has committed to an electric Pivot by 2019 that is a monumental investment and confirmation of not only the future of EV, but the automotive industry in totality.

Win 3: Energy containers - Battery technology continues to improve at a surprising rate as does solar energy. Elon has in fact invested in both and he forecasts a house, and roadside EV chargers, with Solar charging accompanies with high density storage that stores all the excess energy for charging the future EV cars. Bloomberg already predicts that by 2038 the number of EV’s will outnumber conventional combustion vehicles on the global roads. So sunny states will become sunnier as time goes on. A word of caution that even though Toyota Prius reached the US shores in 2000 fewer than 15,000 Prius have been sold here so far. But the ripple effect it had on Nissan (leaf), Chevy (Volt and Bolt), BMW i3, VW just announced their EV price reduction by $8,000, etc is proof of success in this area. Additionally, there are around 5 new EV companies in California alone. For one of which we implemented their S/4HANA ERP system and took them from quick-books to a digital platform in a matter of 18 weeks, we presented this at Sapphire and if anyone wants to hear the presentation just email to me and I can send you the MP3. Battery prices are seeing a dramatic technology impact by its evident price change. In 2010 battery costs were around $1,000 per KwH, by 2016 this had dropped to $273 per KwH. Were outpacing every poll and pundit prediction in this sector both for EV's and the battery costs.

Win 4: National Policy Changes- The resilience of the EV technology is opening new political doors in almost all countries except the US which is reversing into fossil fuel technology by withdrawing from the Paris accord. Countries like China, France, Germany, US, Norway and India have already placed benchmarks for increasing the bonus on EV’s and a point of time by when they replace conventional cars on the metropolis roads. In India it is 2025 for Diesel vehicles and 2032 bor all combustion engines from the streets of Delhi. All of them agreed, except the US, to ban these vehicles by 2040- if not sooner.

Win 5: Bringing manufacturing back – This one is a tangential ripple effect that was first brought to focus by a Stanford think tank. Fact 1- Since time immemorial the fundamental rules of locating a manufacturing facility have been to keep it close to either the raw materials or the market. The anomaly to this economic principle is China. Due to China being communist they can control the cost and wages enforced by the communist policy and governance. They neither have the raw materials nor the markets but succeed due to total controls on price and wages, i.e. they can mandate to remain the lowest cost, economies of scale produer Lesson: US is today made in China. We manufacture there due to its low cost of production and transportation. China continues to force local labor under tight communist costing governance. Fact 2- In the US it was always believed that an Automotive manufacturer could only succeed in the Detroit belt due to low cost real-estate, labor and experience. Tesla went and put their plant in the most expensive real-estate in the US, the most expensive work force and a lot of robotics. Lesson: Robotics is the future in manufacturing. If you buy an expensive robot it no longer makes sense to locate tht in China, we might as well place in in the US or the local market areas. This single mind-set will now accelerate taking manufacturing from China to countries of ownership, i.e. the triad countries- US, Europe and Japan. Robotics will change the manufacturing dynamics. Fact 3- The US leadership committed to investing in Infrastructure and the hope of this author is that they do this in the digital infrastructure. One way of getting manufacturing back from the US is the Elon Musk way – high automation, robotics and local economies of scale. Lesson: Use Tesla as a business case from bringing manufacturing back to the US while still producing higher quality at lower costs.

Win 6: National Policies - As we look to the bright future of pollution free mega cities the of the biggest drivers is policy and the strategic enthusiasm of the national leaders. Every nation other than the US, which by the way has the highest per-capita carbon footprint on the planet, is fully committed to the Paris accord. The US is still playing global peek-a-boo games by statements like ‘I will surprise you one of these days’ Without policies in place the future of a clean planet and EV success will remain a tall order’. The emission standards are a policy matter and if the US now removes the emission barriers along with their proposed elimination of EPA then US may soon look like Beijing and Beijing like San Francisco.

Chinese policies are already demonstrating the impact of policies on people. China today buys 50% of the global EV vehicles due to the Chinese government putting pressure on the public, while US heads in the opposite direction. Chinese policies mandate that 12% of manufacturer sales should be EV by 2020. Chine simultaneously offers incentives and breaks to EV vehicles in the form of tax, registration and other incentives. All this while the US leadership heads in the opposite direction – something that has been met by fierce legal thumping from the likes of California, but it is still a leadership and policy driven game in the long run.

At the end of the day strategic success will be defined by three factors. The first being national leadership commitment to a cleaner future for our children’s children. If your leaders do not care for you or your children and you resonate with that call the next two points have little bearing. The second is keeping the costs low so more people can get into EV cars. Once again cost is highly policy driven. Countries need to provide higher benefits to the entire EV value chain from suppliers to the end customer. The third is about getting drivers into the car. We can have sound policies and cheaper prices but if the customer does not get into the car for whatever reason the transformation will fail locally. Once more this is driven by policy. So, in all these three policy and leadership is the foundational key.

Tesla has tackled two of these problems the Tesla Model 3, i.e. it is low cost and there is a very large queue of customers that are waiting to get into one- the first one receiving their car today July 28th, 2017. Now all we need is our nation, our leadership and citizens to create the policies that will become the spring board to many great things in the near future.

Takeaway:

1. No matter where you are on the planet help put the foundational policies in place that will remove pollution, from our metropolis cities and then the nation. Ask us how we assisted a EV car manufacturer leverage the digital-drivers by joining our ‘IoT-4-HANA Strategic Enrollment’ on a consumption basis. Get world class SAP HANA ‘Strategic Decision-Simplification and Process-Rationalization’ support. No Contracts or retainer fees- just benefits. Email for your free 60 minutes WebEx to align expectations and deliverables. 
2. At the center of your strategic business future is Digitization. At the center of digitization is IoT. At the end of the Digital Design Strategy is a Very Happy Customer.
3. Focus on the end goal and its testing before your start the project. Keep your eyes on the ‘Business Benefits’ ball right from planning through design, testing, go-live and support phases
4. Plan for strategic business success and not just a technical installation success.

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 ABOUT HARI GULERIA I VP SAP HANA Business Solutions I PrideVel

Supporting Analytics & Digitization design and decision excellence through operational, strategic solutions, advisory & board work.

 Hari has been designing IoT and digitization solutions before they became IoT and Digitization. In our new digitized world of information and decisions Hari is a globally renowned executive leader in the SAP analytics world, an author and a voracious publisher of blogs and white papers. He is best known for permanently living in the future, readers say his book is more relevant today than when it was written seven years ago, and partnering with actual end-users prior to designing solutions. His designs are consistently future compliant. Hari is an engaged, team oriented and actual-user benefit focused global solution leader and has been in successful startup phases across his many tenures and designated divisions, i.e. in IT, Analytics and building the next generation Digital Enterprise, a perfect fit both for mature global enterprise as well as start-up ideas and companies. He routinely assists startup companies align their go-to-market plans.

Hari is the author of ‘BI Valuenomics- The story of meeting business expectations in BI’ a book far more relevant today than it was in 2010 when it was published. He is currently working with Bill Inmon the father of Data Warehousing and TR Palle the Global Business Architect at Genentech/Roche to release a new book on ‘Analytics in the digital Era, and another book called ‘Digital Shock’ as an eye opener of our digital future

With over 10 years of executive level business experience followed by over 20 years of IT consulting leadership experience Hari has been a Business focused technical expert helping companies meet, and often exceed, their business user expectations. He continues to assist Fortune 1,000 companies crystalize and articulate their decision systems and remodel them for the disruptive digital economy, Hari applies his business, consulting experience, and structured scientific skills to provide consistent leadership in deploying vision, strategy and long term-planning that assure high performance information delivery while enhancing competitive decision enablement.

Prior to this Hari worked at three leading IT services companies, first as the Director for SAP HANA Solutions at HP Enterprise Services for the Americas, before that at HCL Axon as the Director for HANA Analytics for North America, and prior to that with SAP America in their Value Realization/Engineering group. In all assignments Hari provided business focused design solutions for IT projects as the right-hand advisor to the IT project owners like the CFO’s and the CIO’s. Hari worked closely with the ‘C’ suite, Program directors, Project Team leaders, External Partners and customer business leads with clear dual focuses. The first being business benefits and the second was optimized TCO deliverables, i.e. “Highest Quality at Lowest Cost”. Hari may be contacted at [email protected]