How the Automobile Industry Can Be Disrupted

I recently wrote why Tesla is not a disruptive innovation. Here, I would like to refer to an example that is disruptive.

“A window into China’s low-speed electric vehicle revolution”

This article by Charlie Paglee describes low-speed electric vehicles, which do not have the safety or comfort features of regular automobiles and sell from 2,000 USD. More than 200,000 have been sold in 2013. Tesla, on the other had, sold only about 20,000 in the same period.

Important points which suggest that these low-speed electric vehicles are much more disruptive than Tesla;

  1. Cheap (sell from 2,000 USD).
  2. Simple manufacturing procedures requiring little capital investment.
  3. Limited features. Slow max speed (38 mph), short range (60-100 miles).
  4. Sustainable business even without government subsidies (or massive injections of venture capital).
  5. Devoid of safety features required of regular automobiles.

One important thing to note is that the automobile ecosystem depends on a lot of infrastructure. For example, filling stations and roads. An equally important component of the ecosystem is the distance between destinations. For example in Japan, an EV would be good if it could travel to the nearest railway station (maybe equivalent of a 30 minute walk), whereas in the U.S., a car needs to travel the distance of the whole commute. Therefore, the disruptive potential will vary depending on the local ecosystem.