Fiat Chrysler CEO Sergio Marchionne may have a tighter focus on profitability than on innovation. His previous statements about wanting to partner with Google or other companies for self-driving technology reflect that view. In a recent lunch meeting with Car Magazine, Marchionne spoke about Tesla. His comments ranged from the attention the company is getting from its Model 3 pre-orders to declaring Tesla an icon but one that can be copied, as reported by Electrek. Everything he said makes sense if viewed through the lens of near-term profitability, less so through the eyes of an innovator.
Marchionne, who once asked people not to buy the Fiat 500e because the company lost money on every unit, doesn’t see how Tesla can possibly plan to make money on the Model 3 with its starting price of $35,000. Considering the huge number of Model 3 reservations and the resultant increase in stock price, the FCA CEO drew an analogy to a market bubble. He doesn’t see the long-term profitability.
“Electrification may be the next big thing, but I’m amazed by the impact of Tesla’s new Model 3,” Marchionne said. “With 300,000 orders in hand, their stock is up — again. It reminds me of the internet bubble. But where is the business model that will work in the long term? People should realize that there is nothing another company cannot replicate …”
Marchionne said that if Tesla can figure out how to make a profit building electric cars, then FCA or any other company can copy what it does. That sounds like old-school automotive business savvy. But if that’s really the FCA CEO’s plan for future tech cars, it misses three points about the Tesla business model and other companies that are reinventing how they design and build cars, not even counting the intellectual capital that comes from years of developing electric-powered cars from the ground up.
Tesla is averse to reliance on third-party suppliers and internalizes anything it can’t get outside both in adequate supply and quality. Tesla is building a gigantic battery plant to supply its cars, charging stations, and home energy business. And while it’s partnering with Panasonic on the gigafactory, Tesla is ensuring the supply of power for its platforms. And last, and perhaps the most difficult to copy, Tesla is not just learning how to build cars, it’s focused on learning how to build the machines that builds them, learning how to improve factory efficiency. And re-inventing the factory is what may support long-term profitability.
Marchionne also said that Tesla had “… created an icon, just like Apple did with its iconic iPhone. Is this not an approach FCA could mimic?” He went on to say again that he didn’t see how Tesla could be profitable in the long term, but that both companies were in the same business and FCA could always do the same thing if it were profitable.
A point that Marchionne appears to miss about icons is that you can’t just copy one and have the same success. Just ask Nokia, Blackberry, and Motorola.
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