What Does the Success of Tesla Mean for the Future Dynamics in the Global Automobile Sector?

After reading Jacobides, MacDuffie, and Tae (2016), the success of Tesla in launching a new automobile company in a crowded sector puzzled us. Jacobides, MacDuffie, and Tae (2016) had convinced us that developing the capabilities to become the manufacturer of a complete, safe automobile system would be quite difficult. Researching the development history of Tesla, we have pieced together the key features of how Tesla achieved its successful entry into the automobile sector. From this we have concluded, based on the development time and costs associated with the Tesla Model S, that a well-funded company could develop a new electric vehicle (EV) from scratch and move it into production within 3 to 5 years, by spending $1–2 billion of capital for design, development, and manufacturing. Without a doubt, increasing production to the levels of mass producers would take much longer, but the Telsa example demonstrates that new entry into the industy has become feasible. Tesla’s trajectory, from start-up on the brink of bankruptcy to a company mass producing electric vehicles within 5 years, raises important questions about the future of the global automobile sector. What would prevent Apple and Google, two companies that clearly have the resources to fund $2B in R&D, from entering the market and contesting fiercely with the dominant OEMs such as GM, Ford, VW, Mercedes, and Toyota? There are already many ventures in the Chinese electric automobile sector, such as BYD, Qiantu, NIO, and many more. Inspired by the success of Tesla, why would Chinese software and internet giants such as Tencent and Alibaba not enter this large market given that Tesla did not have prior experience and was able to get a successful car ready for sale within 5 years? In this perspective piece, we offer our reflections on the implications of the success of Tesla for the dynamics of the global automobile sector. We will appraise the chances that Chinese firms will for the first time become leading players in pushing the frontier of automotive technology, a goal that has eluded them over the past 30 years despite massive government efforts to create strong home-grown auto companies.

Download Article: G. Perkins and J.P. Murmann, “What Does the Success of Tesla Mean for the Future Dynamics in the Global Automobile Sector?” Management and Organization Review, 2018

There are three commentaries on our articles that make for a very spirited debate.

J.P. MacDuffie, “Response to Perkins and Murmann: Pay Attention to What Is and Isn’t Unique about Tesla” Management and Organization Review, 2018.

H. Jiang, F. Lu, “To Be Friends, Not Competitors: A Story Different from Tesla Driving the Chinese Automobile Industry” Management and Organization Review, 2018.

D. Teece “Tesla and the Reshaping of the Auto Industry” Management and Organization Review, 2018.

Finally, Liisa Välikangas provides an introduction to the “Forum on Tesla and the Global Automotive Industry”  Management and Organization Review, 2018.