Watching last night I was disappointed when I saw the similarity between the Y and 3, but it took me a while to think through exactly why.
I think the market space for cars is spanned by two sets of dimensions: functional and aesthetic. The functional dimensions are purely objective specs and capabilities together with pricing, while the aesthetic dimensions are subjective - mainly styling but also perceived brand or model attributes where the owner believes they are making a statement by owing that particular make and model of car. Car companies decide to make the significant up-front investments needed to develop and introduce new models in order to expand their market coverage and attract new owners who want a car from the part of the market space that the new model inhabits, thus expending the company’s sales and providing a return on the engineering investment.
Introducing a new model that differs along the functional dimensions is will do this, but so will introducing a new model that differs aesthetically. The classic example is General Motors in its heyday doing “badge engineering” where models from Chevy, Buick, Oldsmobile and Pontiac were all functionally the same car but differentiated aesthetically in terms of both styling and projected brand values. This allowed GM to cover the market and sell more cars than if they just sold the one model from, say, Chevy. Pure badge engineering like this seems no longer to work in today’s competitive world, so the Volkswagen group sells models from Volkswagen and Audi that strongly differ from each other aesthetically, but are also functionally distinct in terms of engineering and specs that differ at least somewhat, even when you compare their offerings in the same functional category. By varying their offerings along BOTH sets dimensions, car companies cover a broader swath of the overall market space.
Tesla’s problem with the Y is that although it is functionally distinct from the 3 and therefore addresses new market space in that way, the 3 and Y are more identical aesthetically than any other pair of sedan and CUV I have ever seen. They are so aesthetically undifferentiated that I think you would need to look pretty hard to know whether the Tesla heading toward you in the opposite lane was one or the other. Perhaps this won’t be as true when seeing the cars in person, but the Y and 3 look less distinct to me than the pre and post-facelift Model S once they changed the nose, or for that matter the pre and post-facelift versions of any other car from any other manufacturer, even though those would be versions of the very same model car. Who would strive to be the first on their block to own a Y when nobody could tell they were.
The point is that by not even changing the appearance of the headlights, or the look of some element of the interiors, Tesla is completely forgoing the aesthetic dimensions of product differentiation, reducing its coverage of the overall market space relative to what it could have been. I believe this means that sales of the Y and 3 together will be less (I’m not sure by how much) than they otherwise could have been.
Taken in isolation, the Y looks to be an absolutely great car, both functionally and aesthetically: probably the car that Tesla should have introduced instead of the 3 since it covers a bigger segment of the market functionally (CUVs instead of sedans). Thus I don’t expect it will be sales of the Y that suffer. However once the Y is available, why would the aesthetically undifferentiated 3 continue to sell in the long run? People who want cheap would only save $2k by buying the 3. Only a very few people who either care about the slightly sleeker lower lines of the 3 (I am one of those) or the slightly better handling of the 3 on the track (I am also one of those) would choose to buy the 3. By being so aesthetically similar to the 3, the Y becomes the 3’s closest competitor by far and will cannibalize its sales, probably beginning immediately. It’s analogous to showing off a car model’s redesigned successor a year and a half before it’s available for sale. In fact I suspect Elon plans to ship the Y in volume earlier than the late ‘20/’21 timeframe that he outlined, but he announced the long dates to reduce the Y’s Osborne effect on the 3 as much as he can.
So that’s why I felt disappointed when I saw the Y. Are my fears justified or misplaced?
I think the market space for cars is spanned by two sets of dimensions: functional and aesthetic. The functional dimensions are purely objective specs and capabilities together with pricing, while the aesthetic dimensions are subjective - mainly styling but also perceived brand or model attributes where the owner believes they are making a statement by owing that particular make and model of car. Car companies decide to make the significant up-front investments needed to develop and introduce new models in order to expand their market coverage and attract new owners who want a car from the part of the market space that the new model inhabits, thus expending the company’s sales and providing a return on the engineering investment.
Introducing a new model that differs along the functional dimensions is will do this, but so will introducing a new model that differs aesthetically. The classic example is General Motors in its heyday doing “badge engineering” where models from Chevy, Buick, Oldsmobile and Pontiac were all functionally the same car but differentiated aesthetically in terms of both styling and projected brand values. This allowed GM to cover the market and sell more cars than if they just sold the one model from, say, Chevy. Pure badge engineering like this seems no longer to work in today’s competitive world, so the Volkswagen group sells models from Volkswagen and Audi that strongly differ from each other aesthetically, but are also functionally distinct in terms of engineering and specs that differ at least somewhat, even when you compare their offerings in the same functional category. By varying their offerings along BOTH sets dimensions, car companies cover a broader swath of the overall market space.
Tesla’s problem with the Y is that although it is functionally distinct from the 3 and therefore addresses new market space in that way, the 3 and Y are more identical aesthetically than any other pair of sedan and CUV I have ever seen. They are so aesthetically undifferentiated that I think you would need to look pretty hard to know whether the Tesla heading toward you in the opposite lane was one or the other. Perhaps this won’t be as true when seeing the cars in person, but the Y and 3 look less distinct to me than the pre and post-facelift Model S once they changed the nose, or for that matter the pre and post-facelift versions of any other car from any other manufacturer, even though those would be versions of the very same model car. Who would strive to be the first on their block to own a Y when nobody could tell they were.
The point is that by not even changing the appearance of the headlights, or the look of some element of the interiors, Tesla is completely forgoing the aesthetic dimensions of product differentiation, reducing its coverage of the overall market space relative to what it could have been. I believe this means that sales of the Y and 3 together will be less (I’m not sure by how much) than they otherwise could have been.
Taken in isolation, the Y looks to be an absolutely great car, both functionally and aesthetically: probably the car that Tesla should have introduced instead of the 3 since it covers a bigger segment of the market functionally (CUVs instead of sedans). Thus I don’t expect it will be sales of the Y that suffer. However once the Y is available, why would the aesthetically undifferentiated 3 continue to sell in the long run? People who want cheap would only save $2k by buying the 3. Only a very few people who either care about the slightly sleeker lower lines of the 3 (I am one of those) or the slightly better handling of the 3 on the track (I am also one of those) would choose to buy the 3. By being so aesthetically similar to the 3, the Y becomes the 3’s closest competitor by far and will cannibalize its sales, probably beginning immediately. It’s analogous to showing off a car model’s redesigned successor a year and a half before it’s available for sale. In fact I suspect Elon plans to ship the Y in volume earlier than the late ‘20/’21 timeframe that he outlined, but he announced the long dates to reduce the Y’s Osborne effect on the 3 as much as he can.
So that’s why I felt disappointed when I saw the Y. Are my fears justified or misplaced?
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