Tesla Going To Do What The IPhone Did

Technology keeps advancing.

The adage to remember is winner take most. This is how things work in the technology realm. We see it with mobile phones, operating systems, and social media.

For this reason, we have to start looking at the automobile industry through this lens.

When it comes to Tesla, many keep proclaiming competition is coming. Of course, this was the case since 2017. Where are they?

Leaving that aside, there is something much bigger shaping up. This is where the lessons from the mobile phone industry could be applicable.

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$600 For A Phone?

There was a time when the idea of spending $600 for a phone would be thought absurd. In fact, that was the case when the IPhone was introduced. Many felt it was doom to failure because very few would spend that much money on a device of that nature.

Also, who was Apple? They were a niche computer company. What did they know?

The industry was dominated by two telco powerhouses, Motorola and Nokia. The latter has an enormous share of the mobile phone market. The former was one of the leaders in the two-way radio market. The transition to mobile phones was sensible.

This was the landscape when Apple entered with its smartphone. The detractors were many and few thought it would do much. Certainly, Nokia did not feel threatened by the idea of a smartphone. They simply ignored it, chalking it up to a niche product.

We know how that ended. Apple is now one of the most valuable companies in the world and Nokia is the one who is niche. Motorola is still strong in communications' infrastructure but not in the consumer product end of things.

Ironically, people did spend $600 for a phone. Actually, it was more than niche. More than 1 billion have been sold over the last 15 years.

While there are other players, nobody comes close to the profitability of Apple. In fact, they take the lion's share of the profits.

Is this something that Tesla is looking at duplicating?

Tesla Might Be Building An Insurmountable Lead

For all the talk of competition, it appears that it might come from the Chinese automakers, not the legacy companies. The ones who built cars for the past century are quickly turning into Nokia and Motorola. We are seeing the new players stepping up.

Tesla is at the head of the list. Right now, the only barrier they have is production. Demand is strong and does not appear to be waning. Anytime an analyst claims that it is, the time until delivery gets longer. This is occurring as the company is ramping up production with, now, 4 Gigafactories. Rumors are they are scouting a 5th one, likely going in Canada.

One the keys appears to be software. This is where the legacy automakers are falling short. If Tesla is going to start building software applications, which their self driving technology is, they will have a huge lead.

Think about it this way:

What if Tesla does bring self driving to market? What will that does to everyone else? It is logical that those companies would require it also. How do they get it? The answer is to license it from Tesla.

How do things look if Tesla is getting $5,000 (just a number I picked) in licensing fees on EV that it does not manufacture. There are roughly 80 million vehicles sold each year.

The writing is quickly on the wall. Take a look at the numbers, especially over the last few years.

Tesla Financials

If the company has 2-3 more yeas of similar growth, it will easily cross $100 billion in revenue with a gross profit of more than $35 billion.

It is all about growth at this point and time and in an industry that is stagnant the last couple years, this makes it really stand out.

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