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Tesla Is a Tech Company Masquerading as a Car Maker, and Others Should Follow Suit

December 28, 2018 by Luke James

While most may think of Tesla as another car manufacturer, the thriving company is actually much more than that. Other businesses in the technology sector have a lot to learn from Tesla's wins.

When will people begin to understand this?

Although Tesla manufactures cars, they are in no way a car company; it is the company's technological innovations that have earned them their success. Without these, Tesla would be nothing other than just another car company producing nice-looking saloons and sedans.

In fact, there are far more similarities between Tesla and other companies operating in the tech sector than there are between other companies operating in the automobile industry.

Image courtesy of Pixabay.

As a First-of-Its-Kind Company, Tesla Has Caused Headaches for Investors

The question of whether Tesla is a car or tech company may appear to be a little nonsensical; however, it is anything but. For investors, it is a question that carries weight.

If you take a look at and compare tech and automobile companies throughout recent history in the context of finance, there is one thing in common. Tech companies tend to hold or even increase their value whilst reporting losses, whereas automobile companies do not.

This obviously places potential investors in a precarious position. For those who have always invested in automobile manufacturers, they may not be comfortable investing in a tech company—and vice-versa. Also, there is the question of what exactly is going to drive the company's value—its vehicles or its tech?

Whilst I accept that Tesla's end-product, their cars, reflect deep roots in the automobile industry, it is clear to see that Tesla is very much a tech company. After all, what other cars can be updated and improved automatically when they are already on the road?

From Batteries to Solar Panels: These Are What Make Tesla

Don't get me wrong, the Tesla may be a very nice car, but it is not the car itself that has made Tesla the successful and groundbreaking company that it is today. It is Tesla's tech.

Tesla may make a car, but Apple makes the iPhone and Microsoft make the Xbox. What makes Tesla a technology company is its ecosystem: software that makes their car work, AI and machine learning algorithms that are developing autonomous driving, and batteries that can be supercharged in as little as an hour. Without these elements, Tesla is just another car—unspectacular with vast competition.

When was the last time General Motors, Toyota, or BMW produced an update for one of its cars over the air? Never.

Image courtesy of Pixabay.

Tesla Is Not Afraid of Acquiring Tech Companies

And rightly so. There is very little point or value to be gained by Tesla acquiring other car manufacturers. A quick look at Tesla's three tech-related acquisitions further illustrates our point that Tesla is a tech company masquerading as a car manufacturer.

  • SolarCity: a provider of solar power systems. This acquisition aided the company in producing a Model S fitted with solar panels for battery charging on the move.
  • PERBIX: a machining manufacturer, to further their factory automation efforts. Tesla's factories can be supplemented by Tesla's AI and machine learning algorithms.
  • Grohmann Engineering: a German engineering company. This company was taken over by Tesla to further their driverless vehicle aspirations.

It is these bold moves by Tesla that have prompted other big names such as Intel to acquire companies in the same verticals that Tesla operate. Intel, for example, purchased Mobileye—a vision-based advanced driver-assistance system—in 2017 for $15 billion.

Given that Tesla prohibited Grohmann from contributing to the production of competitor vehicles such as BMW, this move by Intel could disrupt the driverless vehicle market.

Image courtesy of Pixabay.

What Other Companies Should Learn From Tesla

Looking at Tesla as an automobile manufacturer is limiting. Instead, the consensus should be that Tesla is a technology company that leverages its tech product and IP to manufacturer cars.

As we have seen, Tesla's groundbreaking tech and unique ecosystem has allowed the company to produce cars that are environmentally friendly, future-proof, and go far beyond simply being electric cars.

Leading the way in automated driving, redefining the battery, introducing supercharging, and being a pioneer in solar power are all things that Tesla has done or is doing—they are not just another car company. As a company that seems to be doing the impossible, Tesla is set for unprecedented success and traditional car manufacturers and those who invest in them should take note.

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