Bidness Autos - Is Tesla Motors Electric Car Really Disruptive? Researchers and Analysts Divided

Christensen does not believe so, but analysts at UBS think otherwise.

Tesla Motors (NYSE:TSLA) seems to have revolutionized the automobile industry by coming out with a product that seems to have taken the world by storm, or for that matter, “disrupted” the world. Indeed, the Model S car is heralded as “one of the best cars in the world" at Edmunds.com, based on a report from the Consumer Reports, and also dubbed as the safest car ever tested according to the National Highway Traffic Safety Administration.

However, some are not entirely convinced. Clayton M. Christensen, a professor at Harvard University, believes that it is nothing more than a “sustaining innovation” by Tesla and points out that electric cars were first prototyped by the Japanese, thanks to automobile giants, Honda, Toyota, etc. The company is simply bettering the product that was conceived and brought to reality less than a decade ago. In addition, it is offering the product that has an incrementally better performance.

However, the professor does state that electric golf carts have a greater chance of positively disrupting the overall automobile industry, pointing out that those products are seriously underperforming relative to customer expectations, which can more likely be ‘disrupted’.

Some claim that Christensen’s statement is missing a link. UBS analyst, Steve Milunovich, said that Christensen had predicted limited victory for iPhone in its early days, which came in at a pretty high-point price and is now viewed as sustaining relatively to other mobile companies, such as Nokia. Christensen then had to take those words back, suggesting that iPhone has successfully disrupted the personal computer industry.

Mr. Milunovich also suspects that while Tesla (TSLA) cars may not be disruptive due to the fact that, as mentioned early, it was a prototype that was developed many years ago, but consumers are finding it to be a new product category, simply because it is a “new product” to them.

CEO, Elon Musk, also thinks the same. His electric vehicles will be “disruptive” in a way such that he predicts that revenues will soar 50% for the next decade, due to the strong sales growth of its hybrid electric vehicles. He also pledges to spread the revolution of its electric vehicles by allowing its competitors to use its patents and to share its Supercharger infrastructure with any vehicles made by competing manufacturers.

Therefore, it raises the question, “Will the company’s bold move to quickly expand its manufacturing capacity, coupled with its ability to launch its 2017 Model 3, help it secure a viable position as the ‘front-runner’ of the industry?” Only time will tell with a few years down the line.

Tesla Motors stock price dropped down at $236.61, a drop of less than 0.10%.