In its recent Annual Report SEC filing, dated March 1, 2017, Tesla explained the importance of its vehicle control and infotainment software. In doing so, it reinforced how this aspect of its engineering and manufacturing efforts has been part of larger, long-term goals for even further development that set Tesla apart from other automakers.
In an era in which most of us are connected 24/7 with personal technology devices, is Tesla really so unique as it claims?
Tesla, Inc. argues that it distinguishes itself from most other vehicle manufacturers in its ability to develop most software and interfaces internally. Its software development engineers are said to possess some of the strongest systems and analytics skills around in order to build Tesla-specific server-based applications and infrastructure. In order to support vehicle manufacturing at the Tesla factory in Fremont, California and eventual lithium ion battery production at its Sparks, Nevada Gigafactory, Tesla software engineers must operate in an atmosphere in which a non-conventional product development philosophy is the norm.
Situated in Silicon Valley in what is generally considered to be the geographic center for technological innovation, Tesla has been able to design a vision of mobility that is powerful, unique, and self-sustaining. But how different is it, really, than its competitors?
Tesla’s jostling for a condescending position above the other automakers rests with it internal software development, which disrupts conventions within an industry that holds desperately onto 100-year-old traditions. As early as 2014, Tesla released its patent holding and claimed that open-source innovation was more powerful than anything one company could do individually. Moreover, by changing the supply chain and borrowing from the electronic manufacturing services (EMS) model of production that is standard practice in the consumer electronics industry, Tesla has been able to bridge the automotive and technology industries and, yet, set itself apart from both through innovations it has fostered within each field.
Drawing upon an EMS model allows Tesla to produce vehicles with a design, components, and manufacturing process more in common with a smartphone or tablet computer than a conventional car. Unlike most automotive manufacturers, Tesla began as a company that conducted internal design and engineering work on its vehicle electronics, and, as a result, the company bristles when too many outsiders influence the Tesla brand. Printed circuit boards in the head unit and instrument clusters have the Tesla label, which is a bit unusual among its rivals.
Tesla has been able to internalize much of its hardware and software development, as well as the systems integration work, through hiring engineers from all over Silicon Valley and beyond. And, while the Silicon Valley culture and the EMS approach to manufacturing were a clear advantage for Tesla originally, Chrysler, Daimler, Ford, General Motors, Jaguar, and Volkswagen, among others, have now followed suit.
It is hard to argue that the Tesla distinction arises from a combination of its legacy of startup EMS practices and its R&D that has produced an EMS years-long lead over the other automakers. Other automakers who came late to the connected electronic automotive world with the transition to the EMS model tended to find it problematic. To play catch-up, some automakers outsourced their infotainment architecture to an EMS provider. This more often than not resulted in technical software problems, numerous software upgrades, and expenditures in the tens of millions of dollars. With associated poor customer experiences and perceptual problems, other car companies have largely found it difficult to recover and gain EMS momentum comparable to Tesla.
Tesla has established benchmarks for infotainment system hardware, software flexibility, and an efficient manufacturing supply chain. The company has innovated powertrain design and been awarded with generally positive responses from the automotive media. While other auto manufacturers continue to learn the EMS ropes, Tesla is an EMS native, suckling and thriving on a technology innovation culture. Sure, the performance and safety systems of Tesla vehicles and their battery packs require sophisticated control software. But it really is more than this.
Tesla’s competitive advantage over its competitors in software design innovation also provides control over the costs and sourcing of parts. Tesla’s philosophical hardwiring to technology has allowed it to grasp an opportunity in a market that was yearning for products to displace existing inferior offerings from traditional car manufacturers.
And that has made all the difference.— Robert Frost, “The Road Not Taken”