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Tesla’s 1.3 Billion Mile Advantage

The Problem:

Tesla claims it will have at least one million self-driving cars (Level 4+) by the end of 2019.

While these numbers should be taken with a grain of salt, they suggest that Tesla will be among the first car manufacturers to have a critical mass of self-driving vehicles on the road.


In the level 4+ autonomous car future, being able to “rent” a car to a ride-sharing app like Uber, Lyft, Tesla Share, Turo, and others will be table stakes. As a result, car ownership will decrease because car-sharing will be less expensive and more ubiquitous, reducing the actual need to own one.

The real competitive value won’t be in the hardware or even in the self-driving technology alone. It will be in the car’s ability to harness a network of third-party app developers.

Additionally, once autonomous vehicles ascend to level four capabilities, consumers will begin to value cars quite differently. Industry research has indicated that the make of the car becomes a much less significant factor once the steering wheel is removed and consumers no longer have direct involvement in controlling the vehicle.

The financial implications for car manufacturers is industry consolidation and fewer cars sold.

The real competitive value won’t be in the hardware or even in the self-driving technology alone. It will be in the car’s ability to harness a network of third-party app developers. These developers will be able to craft unique software experiences for consumers by leveraging car and navigation data, controlling car functions, and they will offer a more immersive interactive experience when compared to the seven-inch smartphone.

One million self-driving cars creates a critical mass of consumption for a controlled development platform. As we know, there are only one or two winners in a mature platform ecosystem. One merely needs to look at the video game or smartphone industries: they’re dominated by Xbox and Playstation and iOS and Android, respectively.

So, if Tesla is slated to hit one million consumers first. Who’s second?

The Opportunity in Car Innovation

Auto manufacturers can build their own development platform to rival Tesla’s. Their objective is to be second to hit one million consumers using a controlled development platform.

The car manufacturer with the #2 controlled development platform will grow sales at the expense of car manufacturers not using it. The platform will monetize the $5.4 trillion transportation services industry and increase margins by taking a fee on any and all consumer spending for software on the development platform.

Not pursuing this opportunity would be a huge mistake for an automaker. Instead of defining the industry it helped create, those not daring enough to create a platform will merely become hardware suppliers, akin to how Samsung and Huawei make phones for Android.

The Endpoint

Millions of software developers will create apps for the OS in the car. There will be many more ride-sharing apps beyond just Uber and Lyft. Short-term rentals like Turo and Getaround are also options.

Other potential travel apps include tour guide apps that will replace the multi-billion dollar tour bus industry or shuttle apps like Via and Chariot.

There will also be many other categories of apps in addition to ride-sharing apps like drive-through dining apps, games and entertainment, navigation, weather, productivity, and shopping, to name only a few. Dynamic weather mapping apps that aggregate the temperature from every car on the road. Dynamic Google Street Views that are constantly updated with the latest information gathered from the cameras used for autonomous driving. The list of potential innovation goes on and on, without an end in sight

A new interaction model will rise to the occasion allowing consumers to interact with this new wave of software in a fun and engaging manner. Touch and voice will solve the riddle for the next generation. Is it voice control like Amazon Alexa? Or motion like Microsoft Kinect? Or some combination of both?

The development platform for the autonomous car will be the next major platform for developers to build software. As we’ve seen multiple times before, no one wants to end up like Windows Phone, Nokia, Samsung, or Nintendo Wii. There is no third place when it comes to harnessing an ecosystem of software developers. Only first and second.

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