The automotive industry is going through an innovation shift where manufacturers are trying to achieve new heights of technological and design innovations every day to lure customers. Tesla Motors, Inc. is an American automotive company which is well renowned in the market for manufacturing luxury electric vehicles. Tesla is swiftly pioneering in the automotive industry leveraging information and technology systems (IT/IS) with a combination of highly intelligent hardware and software system (Newcomb, 2015, para. 3). The technology and IS integrated in the Tesla cars permit Over-the-Air (OTA) software updates and Autopilot features. OTA was first launched in Tesla cars in 2012 with Model S (Newcomb, 2015, para. 3). Since the adoption of “OTA software update” technology in tesla cars, it has created a competitive advantage for the company over other well established automotive manufacturers including BMW, GMC, Ford and others who are still trying to develop and integrate the OTA technology in their cars (Zhang, 2016, para. 2).
This paper analyzes implementation of hands-free and feet-free travel experience also called Autopilot feature in Tesla cars powered by Over-the-Air IS technology. First, this paper describes a brief background of Tesla Motors Inc., current information system trends and their requirements in automotive industry, and Tesla’s competitors. Second, the paper analyzes OTA technology used to push firmware updates, support autopilot, and its influence on automotive industry. Third, the paper presents tesla’s competitive environment in automotive industry, its trading partners, and how tesla is leveraging OTA for sustainable competitive advantage. Next, the paper analyzes economic feasibility to implement autopilot supported by OTA in all models, compares best case, worst case, most likely case and its value towards the success of the company. Lastly, the paper explains organizational implementation of self-driving cars powered by OTA at a large scale.
1. Tesla’s Self-Driven Electric Cars
Powered by Over-the-Air (OTA)
Technology
Ghanesh Kulkarni
ISM 6026
April 18th, 2016
1
2. 2
$2.7 B
$35 B
0
5
10
15
20
25
30
35
40
2015 2022
Recall Cost
Sage, A. (2015, September 29). Big Auto look to tech companies to fix cars over the air. Retrieved 03/28/2016 from
http://www.reuters.com/article/us-autos-wireless-idUSKCN0RT0BV20150929
Fig. 1: Estimated Car Recalls by 2022
4. 4
The Context
32,000 Road Fatalities
US
$1.3 Trillion
Global
$5.6 Trillion
Fig. 2: Accidents Cause Damage to the Society
Fig. 3: Autonomous cars will contribute to Economy
5. 5
The Context
IT Influence on
Automotive Industry
Tesla’s Founders
Fig. 4: Tesla pioneering automotive innovations
Fig. 5: They founded Tesla Motors in 2003
6. 6
The Technology
Fig. 6: Over-the-Air Connectivity Fig. 7: Updates pushed via Network
Fig. 8: Car’s Internal
System Architecture
9. 9Competitive Environment
Strength
1. Environment Friendly Image
2. Integrated IT Platform
3. Brand Positioning as Innovative
and Technology Company
4. Direct to Customer Business
Model
5. Supercharging Stations
6. Business Partners and Investors
Weakness
1. Delays in Production
2. Limited Product Line
3. Lack of Experience in
Automotive Industry
Opportunities
1. Increased Production from
Gigafactory
2. Increased Environmental
Awareness
3. First Movers Advantage
Threats
1. Experienced Industry Leaders
2. Regulatory Restriction could
discourage Auto-Pilot R&D
Efforts
10. 10
The Economics
2015 Gross Revenue: $4.05 Billion
2015 Net Income: $923.50 Million (35% increase from 2014)
30% Profit Margin
Investing $5 Billion on construction of Gigafactory
Actively Increasing Network of Supercharging Stations
Focused on building a pool of Talented Automotive
Professionals
Major Highlights from Annual Report Submitted to
Security and Exchange Commission (SEC), 2016
SEC.gov. (2016, February 2). Form 10-K - Annual report. Retrieved 04/01/2016 from
http://www.sec.gov/Archives/edgar/data/1318605/000156459016013195/0001564590-16-013195-index.htm
11. 11
The Economics
Impact on Cost V/S Value Addition
Manufacturing Cost per Vehicle $62,000
Autopilot Activation Charge $3,000
80% Owners paid Activation Fees in 2015
Fig. 13: Best CaseFig. 12: 5 year Projections
17. References 17Bergen, M. (2015, October 14). With New Software Rollout, Tesla Accelerates Toward Fully Self-Driving Cars. Retrieved 02/18/2016 from
http://recode.net/2015/10/14/with-new-software-rollout-tesla-accelerates-toward-full-self-driving-cars/
Bullis, K. (2013, August). How Tesla Is Driving Electric Car Innovation. MIT Technology Review. Retrieved 03/22/2016 from
https://www.technologyreview.com/s/516961/how- tesla-is-driving-electric-car-innovation/
Calpito, D. (2016, January 11). Tesla Curbs Model S Autopilot Features, Yet Elon Musk Promises Driverless Cars Going Cross-Country in 2018. Retrieved
02/25/2016 from http://www.techtimes.com/articles/123277/20160111/tesla-curbs-model-s-autopilot-features-yet-elon-musk-promises-driverless-cars-
going-cross-country-in-2018.htm
Dalton, M. (2015, December 12). Nations Unite in Global Agreement on Climate Change. The Wall Street Journal. Retrieved 03/22/2016 from
http://www.wsj.com/articles/final-draft-of-global-climate-change-deal-is-complete-1449906731
Energy.gov. (2014, September 15). The History of the Electric Car. Retrieved 03/23/2016 from http://energy.gov/articles/history-electric-carFord:
Ford Motor Company. (2016). Company Timeline. Retrieved 03/22/2016 from http://corporate.ford.com/company/history.html
Gao, P., Kaas, H. W., Mohr, D., & Wee, D. (2016, January). Disruptive trends that will transform the auto industry. Retrieved 03/23/2016 from
http://www.mckinsey.com/industries/high-tech/our-insights/disruptive-trends-that-will-transform-the-auto-industry
Gilbert, D. (2015, August 6). Tesla Model S hacked: Researchers discover six security flaws in popular electric car. International Business Times. Retrieved
03/26/2016 from http://www.ibtimes.co.uk/tesla-model-s-hacked-researchers-discover-six-security-flaws-popular-electric-car-1514352
Heisler, Y. (2015, November 4). Elon Musk: Not having a self-driving car in 15 years will be like still owning a horse. Retrieved 03/23/2016 from
http://bgr.com/2015/11/04/tesla-self-driving-cars/
Hirsch, J. (2015, March 19). Elon Musk: Model S not a car but a “sophisticated computer on wheels.” Los Angeles Times. Retrieved
03/24/2016 from http://www.latimes.com/business/autos/la-fi-hy-musk-computer-on-wheels-20150319- story.html
Indiagarner. (2013, June 6). Relationship between Human beings and Cars. Retrieved 03/24/2016 from
https://indiagarner.wordpress.com/2013/06/06/relationship-between-human-beings-and-cars/
King, R. (2014, May 15). At Tesla, Software Takes the Driver’s Seat. The Wall Street Journal. Retrieved 03/24/2016 from
http://blogs.wsj.com/cio/2014/05/15/at-tesla-software-takes-the-drivers-seat/
Konrad, A. (2013, October 17). Tesla Now Connects Every Car to Internet through AT&T Wireless, but it’s Not 4G LTE. Retrieved
03/31/2016 from http://www.forbes.com/sites/alexkonrad/2013/10/17/tesla-att-connected-cars/#32c855e1359a
18. 18Loveday, E. (2014). Tesla’s Model S App. Retrieved 04/02/2016 from http://insideevs.com/video-9-to-5-mac-selects-tesla-model-s-
app-as-iphone-app-of-the-year/
Mahaffey, K. (2015, August 7). Hacking a Tesla Model S: What we found and what we learned. Retrieved 03/25/2016 from
https://blog.lookout.com/blog/2015/08/07/hacking-a-tesla/
MarketWatch.Com (2016, February 24). Annual Financials for Tesla Motors Inc. Retrieved 04/01/2016 from
http://www.marketwatch.com/investing/stock/tsla/financials
Mearian, L. (2015, February 5). Over-the-air software coming soon to your next car. Retrieved 03/27/2016 from
http://www.computerworld.com/article/2880150/over-the-air-software-coming-soon-to-your-next-car.html
Middleton, R. (2015, September 22). Apple targets electric car shipping date for 2019. International Business Times. Retrieved
03/28/2016 from http://www.ibtimes.co.uk/apple-targets-electric-car-shipping-date-2019-1520641
Moritz, S., & Ohnsman, A. (2013, October). Tesla Using AT&T Service in Cars. Bloomberg. Retrieved 03/26/2016 from
http://www.bloomberg.com/news/articles/2013-10-17/tesla-will-use-at-t-service-in-cars
Muoio, D. (2016, April 1). Here is the Tesla Model 3. Tech Insider. Retrieved 04/02/2016 from http://www.techinsider.io/photos-
here-is-the-tesla-model-3-2016-4
Newcomb, D. (2015, March 27). Tesla Update Strategy Leaves Other Automakers in the Dust. Retrieved 03/28/2016 from
http://www.pcmag.com/article2/0,2817,2478816,00.asp
Ninkovic, S. (2015, October 10). The 3 Advantages Of 2-Part Pricing - How Tesla’s Autopilot Could Have Changed Its Business
Model. Retrieved 03/29/2016 from http://www.ev-analyst.com/home/the-3-advantages-of-2-part-pricing-how-teslas-autopilot-
changes-the-business-model
Ramsey, M. (2015). Tesla Ramps up Hiring as Rivals Loom. The Wall Street Journal. Retrieved from 03/29/2016
http://www.wsj.com/articles/tesla-ramps-up-hiring-as-rivals-loom-1451350702
Randall, T. (2015, August). Here’s How Elon Musk Gets Tesla to 500,000 Cars a Year by 2020. Bloomberg. Retrieved 03/29/2016
from http://www.bloomberg.com/news/articles/2015-08-10/here-s-how-elon-musk-takes- tesla-to-500-000-cars-in-five-years
Duffer, R. (2016, April 2). Tesla autopilot turns driver on to not driving. Chicago Tribune. Retrieved 04/02/2016 from
http://www.chicagotribune.com/classified/automotive/sc-tesla-models-autopilot-1210-20151207-story.html
Sage, A. (2015, September 29). Big Auto look to tech companies to fix cars over the air. Retrieved 03/28/2016 from
http://www.reuters.com/article/us-autos-wireless-idUSKCN0RT0BV20150929
19. 19
SEC.gov. (2016, February 2). Form 10-K - Annual report. Retrieved 04/01/2016 from
http://www.sec.gov/Archives/edgar/data/1318605/000156459016013195/0001564590-16-013195-index.htm
Sparks, D. (2015, May 13). SWOT Analysis of Tesla Stock. Retrieved 03/29/2016 from
http://www.fool.com/investing/general/2015/05/13/swot-analysis-of-tesla- stock.aspx?source=eptfxblnk0000004
Sparks, D. (2016, March 2). Tesla Motors, Inc.’s Autopilot is “a Breakthrough Technology.” Retrieved 04/01/2016 from
http://www.fool.com/investing/general/2016/03/02/tesla-motors-incs-autopilot-is-a-breakthrough-tech.aspx
Sparks, D. (2016, January 11). Elon Musk: The First “Summon” Feature Is Just a “Baby Step.” Retrieved 03/30/2016 from
http://www.fool.com/investing/general/2016/01/11/elon-musk-the-first-summon-feature-is-just-a-baby.aspx
Spector, M., & Ramsey, M. (2016). U.S. Proposes Spending $4 Billion to Encourage Driverless Cars. The Wall Street Journal.
Retrieved 03/31/2016 from http://www.wsj.com/articles/obama-administration-proposes-spending-4-billion-on-driverless-car-
guidelines-1452798787
Stall, J. D. (2016). Tesla’s Model 3 Electric Car Gets Requests for 180,000 Vehicles on First Day of Orderings. The Wall Street
Journal. Retrieved 04/02/2016 from http://www.wsj.com/articles/teslas-musk-model-3-orders-surpassed-115-000-within-24-
hours-1459483890
Tesla Motors, Inc. (2016). Tesla’s mission is to accelerate the world’s transition to sustainable energy. Retrieved 03/26/2016
from https://www.teslamotors.com/about
Tesla Motors, Inc. (2016, February 10). Tesla Fourth Quarter & Full Year 2015 Update. Retrieved 03/26/2016 from
http://files.shareholder.com/downloads/ABEA-4CW8X0/1769288916x0x874449/945B9CF5-86DA-4C35-B03C-
4892824F058D/Q4_15_Tesla_Update_Letter.pdf
TeslaTap.com. (2014, October 17). Cost for Autopilot Retrofit. Retrieved 04/02/2016 from
https://forums.teslamotors.com/forum/forums/cost-autopilot-retrofit
Wesoff, E. (2014, May 27). Tesla CTO on Energy Storage: “We Should All Be Thinking Bigger.” Retrieved 03/26/2016 from
http://www.greentechmedia.com/articles/read/Tesla-CTO-on-Energy-Storage-We-Should-All-Be-Thinking-Bigger
Williams, M. (2012, August 14). Tesla CTO talks Model S, batteries and in-car Linux. Retrieved 03/27/2016 from
http://www.techworld.com.au/article/433612/tesla_cto_talks_model_batteries_in-car_linux/
Zhang, B. (2012). Tesla wants to take self-driving cars to a whole new level. Business Insider Retrieved 03/26/2016 from
http://www.businessinsider.com/elon-musk-on-tesla-over-the-air-software-update-summon-feature-2016-1