The Greatest Innovation in Tesla is… Pricing Innovation

Tesla “recalled” 1.1 million cars. That was the news. But that terminology is very deceptive because for Tesla, no one would be visiting a dealership for a fix. Rather, the EV leader will do an over-the-air software update to deal with the minor issue with its windows. And by its ability to fix that via over-the-air software update, we can understand why this company is unique. Most other car brands will require you to take a trip to your deal.

For Tesla, it is an “update” which is the terminology for software companies. Tesla continues to open a new basis of competition, and that means transforming how to sell cars into the ways the world sells software. They have this business model where a buyer of your car must call Tesla to acquire new licenses since the ones you have are not transferable.

More so, if you want more “capacity” in that car, you can send more money to Tesla and they will add more. If you check it, Tesla has a Basic Plan, Premium Plan and Enterprise Plan – and it is a car company. But if you open the books, that is how you price software.

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People, the main reason why Tesla is valued more than the top 10 car companies in the world combined is because of pricing innovation, not just the engineering feats! It makes selling cars look like selling software. Because of that, investors give it the same multiples as software companies because every car produced by Tesla will keep earning money until it is moved to landfill. No other car brand can say that!

Tesla is recalling some 1.1 million vehicles over fears that the cars’ automatic windows could pinch occupants while closing. The windows are supposed to stop if they detect an obstacle in their path, but Tesla said a possible problem with the system was discovered during testing. The automaker says it will fix the issue via an over-the-air software update. Tesla issued a similar update earlier this year after recalling more than 800,000 vehicles for a problem with a seat-belt alert. No injuries linked to the window issue have been reported, Tesla says.

  • The recall affects select 2017-2022 Model 3 sedans; 2020-2021 Model Y SUVs; 2021-2022 Model S sedans and 2021-2022 Model X SUVs.
  • Tesla CEO Elon Musk has pushed back against calling the issue a recall, saying on Twitter that the “terminology is outdated & inaccurate. This is a tiny over-the-air software update.”

(LinkedIn News)

Comment on LinkedIn Feed

Comment 1: Tesla’s plan of people paying for cars already owned makes me believe that the market is still open especially in the emerging markets. Any person who would build cars and give updates for free will kick out Tesla. But then investors are not an arm of charity organizations. Most might join the bandwagon only lowering the prices charged.

My Response: “Any person who would build cars and give updates for free will kick out Tesla.” – I wish you could show how that worked out for Linux vs Windows. Free software is not a great strategy in this world because most are “cheap”

Comment 2: Tesla car is like your iPhone, you don’t buy and go home completely. For you to keep enjoying more functionalities, you will remain connected to Apple, same applies to Tesla. Competing with Tesla in terms of number of EVs sold will always miss the point, the pricing model guarantees steady income, something that didn’t look like it would be possible in the automobile industry.

Pricing elevated Microsoft, so until a business finds a way to remain connected to customers’ pockets, it will remain an endangered species.

Those who are contemplating on price legislation need to get the memo, we should be talking about giving gas cylinders for free, while using software to ensure that the consumer continues to buy gas from designated stations…

Comment 3: Tesla is also ultimately ahead of the curve by catering to higher aspirations of people. While other car makers were adding wood panels and heated seats to cater to luxury, Tesla focused on catering to people’s interest in the environment, which is it’s optimal selling point, and earned first to market status. Others will keep in Tesla’s shadow unless they innovate something relevant- better. There’s an electric car that goes one better to actually suck up carbon emissions from the air- invented by some students. If they allow owners to earn carbon credits for a certain number of miles driven – and they brand it properly – it will be a big hit. TESLA might want to look into acquiring that company.

My Response: amazing perspective. Many buy that for that “aspiration” as you noted.

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