Trip Chowdhry: GM, Ford And VW 'Disadvantaged' Compared To Tesla

In an email sent to investors on Wednesday, Global Equities Research’s Trip Chowdhry shared a look into Tesla Motors Inc TSLA.

General Motors Company GM said on Wednesday that it would not use “over-the-air” (remote or OTA) upgrades for its safety-critical vehicle system. So, does it make sense to applaud them, Volkswagen AG (ADR) VLKAY VLKPY and Ford Motor Company F announcements from CES about their connected cars when they cannot perform over-the-air updates? Chowdhry questioned this line of logic within his recent email to investors.

Why Tesla Leads The Space

Automakers are “fundamentally limited and disadvantaged because Dealership Network Rules prohibit OTA Updates,” the expert expounded. The rules state that only "authorized auto dealerships" can perform software updates.

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However, Tesla’s position is different, as auto dealership rules do not apply to its cars. Thus, its vehicles can perform OTA updates. The company has “perfected its OTA Technology and has a 10 year technology lead over every other Auto Manufacturer,” the email explicated.

“With increasing amount of Software inside the connected car, the software from various ECU's (Electronic Component Unit) has to be frequently updated,” Chowdhry continued.

So, by design, Tesla’s vehicles have in-place cloud infrastructure that allow the company to perform OTA updates for every vehicle it has ever sold. On the other hand, traditional automakers have no such built-in capabilities.

Some investors may argue dealership rules will change to allow OTA updates. But, even if this were the case, “how many years will it take for them to perfect OTA updates?” Chowdhry posed.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.