Uber and Tesla are showing ominous signs that the era of auto disruption may be about to come to an abrupt end – Business Insider
•Uber’s CEO departed and Tesla’s head of Autopilot left
in the same week.
•The leading disruptors of the auto industry
are experiencing severe challenges.
•Investors and tech enthusiasts have insisted that
transportation is about to undergo profound change — but maybe
that won’t happen.
The much-discussed disruption of the traditional auto industry
was itself disrupted this past week, as Uber CEO Travis Kalanick
stepped down amid a storm of scandal and Tesla said goodbye to
the leader of its Autopilot self-driving program after just six
The Uber situation is far more serious; at almost $70 billion,
the ride-hailing startup is valued more steeply than any
company on Earth. Tesla Autopilot is important, and CEO Elon Musk
has pledged that a self-driving vehicle built by his 13-year-old
firm will make a Los-Angeles-to-New-York run by the end of the
But job one for Tesla is to launch the Model 3 mass-market car
and get it to customers in substantial numbers by 2018
to vindicate a stock price that’s risen over 70% since the
beginning of the year. Autopilot is cool, but also something of a
sideshow as Tesla works to prove that a $35,000 all-electric car
really can capture the hearts and minds of millions of buyers.
In this sense, Tesla is operating just like any other automaker:
build the cars, sell the cars, repeat. This is an often
overlooked aspect of Tesla’s business — which is baffling, as
it’s the core business of every car company in existence. The
dynamics of this industry are well understood.
So Tesla, after more than a decade of profit-free operations and
limited growth, must be up to something far larger. It must be a
daring disrupter of the conventional car business as well as an
energy company, a solar company, a dealer of networked
transportation — all the buzzy concepts that currently captivate
Silicon Valley and the tech elite.
That thinking stopped making sense when Uber began its rapid,
monumental growth trajectory. Here was a startup that was
effectively just an iPhone app that connected freelance drivers
with people in cities who wanted rides and weren’t happy with
Unlike Tesla, Uber didn’t need a factory or a workforce that was
paid established wages, or engineers and designers who could
sculpt aluminum and develop powerful batteries and construct
100,000 complicated machines. Uber was almost preposterously
lightweight, but with a scale that defied belief. The only way
for Tesla to match that would have been to build and sell so many
cars that it controlled the entire auto
But because Uber was so lean and mean, it had no way to create a
vast competitive moat; a pack of software engineers could copy
Uber’s business and launch a competitor without much difficulty.
So Uber and Kalanick had to both fight a winner-take-all battle
with the Lyfts of the world and continue to raise enormous sums
of money to support the company’s spending levels. Uber
dominated, but the price of that domination was hundreds of
millions in quarterly losses.
Andy Kiersz/Business Insider
This vast, dauntingly valued company is now leaderless, with no
CEO, no COO, and no CFO. Investors have sunk billions into Uber
and currently, they have no clear path to exit their risk
with an acceptable return. The entire firm is in the
unprecedented position of requiring a crisis turnaround when just
a year ago it looked as if it could be worth $100 billion.
So the mega-disrupter is in big trouble, while the previous big
disrupter is finding it challenging to continually recast its
disruptive narrative. Tesla, as a plucky electric carmaker, was
exciting ten years ago. But no one can be sure if that business
model wipes out the traditional auto industry, in the manner
that Netflix obliterated Blockbuster.
The obvious conclusion to draw from Uber’s crisis and Tesla’s
Autopilot struggles is that the disruption of transportation so
enthusiastically cheered by the tech industry was ridiculously
overblown. And it wasn’t confined to Tesla and Uber.
Despite Waymo’s partnership with Lyft, the self-driving project
isn’t closer to commercialization now than it was three years
ago. And the Apple Car — “Project Titan” — has pivoted numerous
times, always vaguely and secretively.
Meanwhile, the traditional car industry continues to set sales
records, although it now appears that a booming US market is
plateauing. The record sales are coming from electric cars or
self-driving vehicles, either — they’re coming from highly
profitable, old-school pickups and SUVs.
No dramatic path to the future
The legacy carmakers have found themselves, ironically, in a far
better disruptive position that the alleged disruptors. Ford, GM,
BMW, Toyota, and others can disrupt themselves while still
funding their operations with the conventional business. The
level of disruption just depends on how much cash the familiar
old business is throwing off.
The disruptors, committed as they are to a market-remaking idea,
have to disrupt … or else. Uber and Tesla are not entirely in
that position. Tesla has notable, if not massive, sales to look
forward to, given that the Model 3 has racked up 400,00o
pre-orders and Tesla is doing business in Europe and China. And
Uber stands to be the biggest player in a ride-hailing oligopoly,
sharing the space with Lyft and various local and regional
But the events of the past week do suggest the vast, industry
remaking disruption is collapsing, probably under the weight of
outsized expectations. No one should be needlessly disappointed.
The path to the future is rarely so dramatic.