Tesla Motors (TSLA -3.55%) can't really be expected to disrupt global auto sales as just a carmaker. In order to make sense of how much disruption the electric-car maker might cause we've got to look at Tesla as technology innovator.
The emperor's real clothes
At its heart, Tesla is a software developer dressed in a carmaker's robes. The Silicon Valley company has focused on developing its software to be the primary component behind its fleet's sophisticated safety and battery systems, not to mention its infotainment console. The majority of Tesla's software is developed internally by a highly skilled group of electrical, power electronics, software, and automobile engineers. This software focus affords Tesla a flexible and dynamic approach to updating its fleet, something that few, if any, other carmakers have been able to accomplish.
Source: Tesla Website
Wireless recalls
Tesla's software is the first of its kind in the auto market, as it presents a noninvasive and dynamic approach to upgrading the user experience and vehicle safety. For example, in order to fix an overheating problem with its cars' in-home charging units, all Tesla had to do was send out an over-the-air software update to the affected vehicles. The company also went above and beyond this service by also providing
Model S' Infotainment System. Source: Tesla
charger replacements, but Tesla was certain the update alone was an adequate fix. Compare that to almost every other carmaker, which would likely have to do a physical recall of the affected models, and it's easy to see why we have to broaden our classification of Tesla to being more than just a carmaker.
The car of the future
It's also important to consider what Tesla has in mind for the years ahead. Musk has hinted at moving toward an open-source format, allowing people to develop their own apps in order to customize their driving experience. Vehicle autonomy is on the company's mind, too, but that won't be substantially developed any time soon. If Tesla's software isn't a disruptive new technology, then I must be missing something.
Riding the wave
In order to get a better idea of Tesla's potential to disrupt, investors would be wise to consider the technology adoption curve. Right now, the folks that own a Roadster or Model S would be considered innovators, those people we all know that are always in front of the latest gadget trend. Once Tesla jumps into the early and late-majority adoption segments, all bets are off.
Source: Wikipedia, used under creative commons.
This adoption life cycle coincides with Tesla's historical timeline -- at the end of 2013 the company had about 2%-3% of the U.S. premium auto market share. Considering that people are becoming more exposed to and educated about electric vehicles, and taking into account Tesla's unique approach to software, shareholders can expect the company's fleet to claim a larger market share in the premium auto segment in future years.
Not just the 1%
Along with the potential for an increase in share of the luxury segment, the introduction of Tesla's third-generation model will likely expose the automaker to strong growth potential in the midrange auto segment. Gaining relevance within that market may prove vital to the long-term adoption of Tesla, something that shareholders should consider a risk because Tesla yet has no experience in scaling its technology and quality standards down to a more affordable level.
Market share visualized. Source: Tesla
Betting on disruption
Even with all the inherent risks in embracing an investment in Tesla as a technology company, the car company will likely find stability and security in the luxury car market. It will be interesting to see how Tesla's story will change as it moves into more affordable segments. If the electric-car maker can win over the early majority with its mass market product, shareholders might find Tesla's next chapter to be much less risky.
