Reader's blog: Your next car will be a Tesla

WARNING: ACERBIC SOCIAL COMMENTARY

Now that the Tesla Model S has just been named car of the year, on top of all its other awards, it seems worth pondering whether Tesla will one day rule the (automotive) world?

Every Tesla article seems to produce the inevitable comment thread that yes, they're making something interesting but really it's just a toy, and soon (insert your car maker of choice) will start making electric vehicles and crush this silly little company. Maybe. But I think there are good reasons why it won't be any car company you can name today that will stop them.

First the bad though. Tesla is a minnow. The likes of Toyota, GM and Volkswagen are producing so many more (10.3M, 9.6M and 9.4M in 2013) vehicles than Tesla (about 1000 a week) it's laughable. How will they compete when the incumbents decide to get serious?

Good question, but first, why aren't they aren't facing this competition already? These companies all spend in the tens of billions a year on R&D. I found old numbers from 2009 saying Toyota spent US$9B. Nine. Billion. Dollars. In a year! Seriously, how can you spend that much money and only deliver the Prius?!

Ok, so it's easy to make fun of the Prius, but really, is that the best they have come up with? Why isn't one of the existing giants selling the equivalent of a Model S today? Hint: it's not because they're stupid (that's the people who buy the Prius), or that they can't see the writing on the wall. Any company, especially a colossus like these are driven by their history, their internal politics and above all, their incentives, and none of them have any incentive at all to do what Tesla has done. In fact, they are massively incentivised to do what they've done – nothing – save some fiddling around the edges.

For any one of them, making a Model S would mean tearing up billions in IP built up over decades refining gearboxes, drive trains, engines and their accessories, the computer systems that run them and the chassis it's all package into. So it makes sense that a car like the Model S was only ever going to come from a brand new manufacturer. But does that mean, having 'seen the future' they can't catch up?

The thing is, none of the reasons they weren't first have gone away; they've just become the reasons not to be second. This is a text-book example of the 'innovator's dilemma' (the title of a great book by Clayton Christensen). Even when the writing's on the wall, it never looks like the 'right' investment decision to destroy the business you're raking billions in from today to chase the one that 'might' be the future (insiders can question that right up to and beyond the point it's painfully obvious; go find a Nokia executive to ask).

I have no doubt plenty of people in these companies can already see what's coming, but try convincing the person running the current powertrain division (someone who I would imagine holds considerable sway in a car company today) that they need to give up half their headcount and R&D budget for a new electric motor team. Their reply will rhyme with not f'n likely sunshine.

Even if the incumbents do, finally, get something into the showrooms, five years too late, I still think there are small but crucial aspects to the way Tesla and those that will follow work, which I would sum up as "like a software company". The others just don't have that in their DNA. Over the air updates while your car sits in the garage, latent hardware that's installed months ahead of the software that turns it on (and the departure from craptastic yearly "updates"), cars "learning" from the rest of the fleet, the absence of 'buttons' – replaced with an infinitely changeable display. The list goes on.

These are part of a mindset that is just missing from today's manufacturers. Obviously they have tons of software in their cars today, but that's different from thinking and behaving like a modern software company, and I don't think they would even know where to start in doing so.

So while we'll see plenty of "reporting direct to the CEO" roles being created and incredible show cars doing the rounds, the gap from there to a genuine all-electric competitor to the Model S – and more importantly, to the upcoming Model 3 – won't appear first from any big name car company of today. You've got more chance of seeing something from some combination of Google, Apple, Uber or another totally unknown name, long before you see it in a VW (once they're finished fixing their Diesels), Toyota (who have lost the plot on Hydrogen anyway) or GM (who are busy tackling the big issues like glow in the dark paint!).

Now, there is still that question about manufacturing scale, and the huge disparity in the numbers I mentioned earlier. It is a problem for Tesla, and I think it's why we haven't seen any new players in the market for such long time. However, I also believe there's a reason why it won't matter, which will make a great topic for my next blog...