Inside Tesla -- And What's Really Disrupting The Automotive Industry

(The following is an excerpt and edited from the same article published on Forbes homepage)

Earlier this summer, Worm Capital and I published our first report on electric vehicles and solar and wind energy.  In it, we document a core thesis of our firm: We believe electric vehicles, automation, and renewable energies are disrupting entire industries—and it’s happening quicker than most people realize.

While researching this report, we came across the work of Tony Seba, a clean energy guru, Silicon Valley entrepreneur, and Stanford lecturer. Seba’s most recent study on automotive disruption makes the fascinating argument that by 2021, oil prices will collapse, electric vehicles will go mainstream, and that by 2030, about 95% of the U.S. population will be served by electric, self-driving vehicles.  He calls it “Transportation as a Service,” or “Taas,” for short.

Seba sees that the revolution happening in real-time, not in some far off future. Some companies are moving quickly and innovating within the automotive industry, but others are stuck in the past. Tesla, meanwhile, is building Gigafactories all around the world and turning itself into the gold standard brand for fully electric, automated vehicles. We reached out to Seba to talk a little more about his views.

Tony Seba said:
"It's about the inability of the incumbent to make a transition. It's essentially about them being addicted to the existing business model, to the cash flow that it generates, and not seeing that it's going to dry up—and it's going to dry up very quickly. The same thing seems to be happening with the traditional OEMs versus electrification of vehicles. This is a technology that they know well. The inability to transition does not lie in the technology itself, but in the fact that they're addicted to the cash flow that they already have."

"On the other hand, electric vehicles are more like computers on wheels. Things change dramatically very quickly. So back to your question -- how do I see the battle between EV companies and ICE vehicle companies? It's more cultural than it is about their technology itself. That's one. The next one they don't understand, or at least have been denying, is the speed of the rate of change in electric vehicles. Ｗithin two or three years, the mass market could go toward electric vehicles because they're believed to be superior products—they’re cheaper to buy and to maintain and to fuel than the ICE car. "

"What I see, in my latest work, is that a convergences of autonomous technology, electric vehicles and ride hailing—meaning Uber, Lyft and so on—will essentially bring a completely new model of transportation that we call "transport as a service". What we see is by 2021, the cost of transportation service will be so low, 10x lower, that folks are going to essentially stop buying new cars. As a society, we’re going to need 80% fewer cars. So here's what the OEMs are facing: They're facing a market that is going be 70 to 80% smaller what than it is today, and they are facing a market that is only going to buy autonomous electric vehicles. On top of that, you have new entrants. You have all the computer companies that are getting into the car business. If you don't see this as an existential threat, I don't see what constitutes an existential threat. And this is going to happen within the next few years."

"The autonomous disruption is more like a Big Bang disruption, meaning—on the day that the autonomous vehicles are approved, that day the cost of that is going to be ten times cheaper. That date depends, though, on the technology being ready, and more than that, on regulatory approval. Also, it depends on where these AVs are going to be available. They are first going to be available in the highly dense, highly populated cities—San Francisco, New York, Chicago, Los Angeles, Singapore and so on."