5 Reasons Why Tesla Is Way Ahead Of Traditional Automakers

Tesla Inc's TSLA recent breakout market performance is proving its skeptics wrong as by mid-January, Tesla's market capitalization had reached $107 billion. It ran over the giant German automaker Volkswagen VWAGY and has become the world's second most valuable auto company behind Toyota Motors TM. Tesla's valuation now even reached the point of exceeding that of Ford Motor Company F and General Motors GM combined.

Speed In Innovation

Tesla's speed in innovation in the market for high-end vehicles resembles the capacity of Google Inc GOOGL and Amazon.com, Inc. AMZN more than of an automaker. And its soaring market valuation is a clear sign to all automakers that they'll need to develop more innovative, Tesla-like business models not only to thrive- but to survive..

Development Strategy

Like Apple Inc AAPL, Tesla builds its cars by developing software on unique hardware, much like Microsoft Corporation MSFT does with its Intel chips. This way, Tesla is able to update and further enhance cars' software functionality with ease. This sharply contrasts to the traditional auto industry practice.

With fewer parts, the total cost of Tesla ownership also ends up being significantly lower than of an internal combustion vehicle. There's no need for expensive oil changes, tune ups, replacing mufflers, etc. The automakers whose profitability is affected by their service businesses can understand very well how beneficial this factor is..

Companies Taking Some Of The Action

There are several companies who anticipate the action of Tesla and other electric vehicle automotive companies. By innovating side products that help electric vehicles or by giving a different perspective of the use of the electric vehicle a new market seems to open up.

Franchise Holdings International FNHI released fillings this morning with additional funding for its innovative solar tonneau cover named TerraVis. The cover is developed to bring on demand power to electric pickup trucks with the goal to extend the driving range of the electric vehicles with solar power. Nissan NSANY tries to take some of the action by aiming for the most affordable all-electric car on the market while Fiat Chrysler FCAU aims for people who only need a car to drive through the city with the Fiat 500e.

Tesla Cuts Out The Middleman

Tesla is known for not spending money on expensive ads. This is because Tesla knows its consumers are smart and that they will find them. Buying a Tesla is relatively simple: you go online, pick a model, add your features, place your deposit, and schedule the pickup. When a buying process is tailored this way, the consumer is in control as the middleman is eliminated, along with the misery it usually takes to achieve a good deal.

Battery Technology

Tesla's battery-powered vehicles are significantly simpler compared to traditional cars with internal combustion. They also have significantly fewer parts per vehicle: around 20 versus the 2,000 in internal combustion engines. Tesla has recently acquired battery manufacturing companies and will incorporate new kinds of battery-related technologies into its vehicles, which could further reduce the cost of ownership.

Being Green

Tesla is riding the market wave trend as it is the symbol of going green to reduce global warming.

From a marketing point of view, while other automakers will be doing their best to catch up in years to come, Tesla is already ahead in building a carbon-free, zero pollution  future. And being green is the future.

An Existential Threat

Software is eating the world and software is a big part of Tesla's advantage. Last year, even Volkswagen admitted that Tesla to be its "serious competitor." The biggest challenge that not only Volkswagen but also other leading automakers face is that they lack the expertise required to compete in the new age.

Tesla and its flamboyant CEO Elon Musk have redefined more than a century old industry as it is no exaggeration to say that Tesla turned the entire industry upside down – and it took it only 16 years to redefine its future entirely. Traditional automakers must now find new ways to adapt to the EV era. And given how already far behind they might have to do what legacy tech companies do when startups disrupt their core markets — they buy their competitors to consolidate the market.

And this activity is likely to start soon. Let's be clear, of course that there are security risks with software cars, there is no way to avoid this. But Tesla can use it to its advantage and further fortify its leadership role by showing how these risks can be effectively managed or perhaps even mitigated- with Tesla, you never know what Elon Musk can come up with!

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