The Rise of the First All-Electric Smartcar Suite Powered by AI

By combining the Tesla smartcar cycle diagram with the Tesla smartcar strategic positioning and evolution diagram, it becomes immediately apparent that two major events are about to unfold in a very narrow window in time. During this small window we strongly believe that the first event will be the emergence of the first all-electric smartcar suite as shown in the upper right quadrant of the Cyclefund smartcar cycle diagram and the second event will be the introduction of the first affordable all-electric smartcar for the mass market as shown in the upper right quadrant of the Cyclefund smartcar strategic positioning and evolution diagram.

Based on publicly available case studies and theories from Cyclefund Research on two prior generational technology cycles, the PC tech cycle and the post-PC tech cycle, we have evidence that the first firm to successfully market a dominant suite of products (such as the Microsoft Office suite of productivity applications during the PC era) or successfully launch a dominant premium mass-market product (such as the Apple iPod nano ultra-portable digital music player during the post-PC era) is likely to rule the entire era for more than a decade.

Given this, the key question now becomes, "Is Tesla about to market a dominant suite of products or launch a dominant premium mass-market product for the smartcar phase of the EoT era?" In this section, we seek to answer this fundamental question by leveraging Cyclefund competitive strategy and differentiation matrices for Tesla vs. BMW.

Competitive Analysis Tables for the Rise of AI-Assisted Smartcars

In this section, we present the multidimensional structure of the competitive analysis tables to be used to rigorously examine the relative strengths and weaknesses of market-leading smartcar suites from Tesla and BMW in mid-2016.

Competitive analysis tables for each of these top smartcar suite vendors share a unified organizational structure defined by a rectangular matrix consisting of eighteen unique columns and three primary rows. The 18 columns represent the key dimensions for competitive analysis. The 3 primary rows represent the core smartcar product categories that make up a smartcar suite. The three smartcar categories include:

1. Premium Sports Sedan for the Luxury Market
2. Premium Sport Utility Vehicle (SUV) for the Luxury Market
3. Premium Sports Sedan for the Mass Market

Smartcars in all three of the categories above provide wireless Internet connectivity (cloud connected), artificial intelligence (AI) driving assistance (AI assisted), or semi-autonomous AI driving control (AI controlled or AI powered).

With the fundamental structure of a competitive analysis table well defined, we can now list the key dimensions for analyzing the competitive position of a particular cloud-connected AI-assisted/powered smartcar suite vendor. In this context, the key dimensions for competitive analysis are defined as follows:

1. Product name
2. Length in inches
3. Width in inches
4. Weight in pounds (lbs.)
5. Power in horsepower (HP)
6. Zero to 60 MPH (miles per hour) in seconds (sec)
7. Overall Driving Range in miles
8. Cargo Capacity in cubic feet (cubic ft.)
9. Display size in inches, type (touch/non-touch), and orientation (portrait/landscape)
10. User Interface brand, version, and features (wireless over-the-air updates, control paradigm, navigation system, station locator)
11. Artificial Intelligence features (lane tracking, lane change, off ramp, summon, auto park, collision detection, lane departure, active cruise control, blind spot detection, night vision)
12. Fueling Stations in number (estimated count Q3 2016) and type (supercharging, destination charging, gas station)
13. Fueling Rate in miles of range per thirty minutes of charging (miles/30 min) for battery powered cars and gallons per minute (gallons/min) for gasoline powered cars
14. Overall Fuel Economy in miles per gallon gasoline equivalent (MPGe) for battery powered cars and miles per gallon (MPG) for gasoline powered cars
15. Safety Rating from National Highway Traffic Safety Administration (NHTSA) in stars and rating category (all, driver, passenger, rollover)
16. Powertrain Warranty in years and mileage
17. Construction Materials in material type (aluminum, steel, high strength steel, carbon fiber, plastic) and material location (frame, body panels)
18. Base Price in US dollars (estimated price Q3 2016)

With the key dimensions well defined, we can now develop comprehensive competitive analysis tables for each of the top smartcar vendors offering compelling smartcar suites of cloud-connected AI-assisted/powered smartcars to consumer, business, government, and education users worldwide in 2016. In the next section we present and discuss competitive analysis tables for Tesla and its all-electric smartcar suite for 2016 and BMW and its flagship smartcar suite for 2016.

By rigorously analyzing the smartcar suite offerings from these leading vendors, we seek to answer three central questions:

1. Which smartcar suite vendor is likely to come out on top in 2016?
2. Which smartcar suite vendor may rise?
3. Which smartcar suite vendor may fall?

The answers to these questions may surprise smartcar competitors, automotive analysts, and technology investors. From our previous work on PC and post-PC competitive strategies, we know that for any given class of smartcar there exists a set of game-changing product features that enables a firm or group of firms to create a new smartcar capable of achieving a dominant market position relative to all existing competitive smartcars for a period of time.

Let us consider and explore the competitive analysis tables associated with the rise of the first all-electric smartcar suite to find out. Before we proceed, please note that competitive analysis tables have two forms, a standard form and a redline form. The standard form of a competitive analysis table is referred to as a competitive strategy matrix, whereas the redline form of the competitive analysis table is called a competitive differentiation matrix.

Tesla vs. BMW AI-Assisted Smartcar Suites in 2016

The first row of the strategy matrix represents the Tesla Smartcar Suite and contains three sub-rows. The first sub-row represents the Model S luxury sports sedan, the second sub-row represents the Tesla Model X luxury SUV, and the third sub-row represents the prospective Tesla Model 3 sports sedan. The second row of the strategy matrix represents the BMW Smartcar Suite and contains three sub-rows. The first sub-row represents the 5 Series luxury sports sedan, the second sub-row represents the Tesla Model X smart SUV, and the third sub-row represents the prospective Tesla Model 3 smart sedan.

By highlighting core Tesla smartcar features that provide competitive advantage (in green) and competitive disadvantage (in red) relative to BMW smartcar features in mid-2016 and by doing the same for BMW smartcar features relative to Tesla smartcar features, we transform the Tesla vs. BMW competitive strategy matrix presented above into the powerful and visually insightful competitive Tesla vs. BMW differentiation matrix below.

Tesla vs. BMW AI-Assisted Smartcar Suites in 2016 with Differentiation Highlights

We formally refer to the Tesla vs. BMW competitive differentiation matrix above as The Rise of the First AI-Powered All-Electric Suite of Cloud-Connected Smartcars with Competitive Differentiation Highlights. By examining the highlighted elements of the matrix, we can quickly identify, list, and expand upon the relative competitive strengths and weakness of each of the cloud-connected AI-assisted smartcars that constitute the mid-2016 Tesla and BMW smartcar suites, and we do so for each vendor in the next six sections.

Tesla Model S Premium Sports Sedan for the Luxury Smartcar Market

As illustrated in the competitive differentiation matrix for the Tesla smartcar suite above, the Tesla Model S premium luxury sports sedan possesses the following twenty competitive strengths:

1. Power rating of 532 HP for the Model S P90D
2. Zero to 60 MPH acceleration performance of 2.8 seconds for the Model S P90D
3. Cargo capacity of 31.6 cubic feet
4. Display size of 17 inches
5. Touchscreen display type
6. Over the air (OTA) updates to user interface
7. OTA updates for vehicle optimization
8. Charging station locator
9. Lane tracking assistance
10. Lane change assistance
11. Highway off-ramp assistance
12. Auto pick-up assistance, referred to as Summon
13. Auto park assistance
14. Collision detection assistance
15. 3,400 destination charging stations worldwide
16. Overall fuel economy of 95 MPGe for the Model S P90D
17. Safety rating of 5 stars in every category
18. Powertrain warranty of 8 years with unlimited mileage
19. Aluminum frame
20. Aluminum body panels

In contrast, the Tesla Model S possesses the following four relative competitive weaknesses:

1. Weight of 4,936 pounds for the Model S P90D
2. Overall driving range of 206 miles for the Model S 60
3. Fueling rate of 14.5 miles of range per 30 minutes of charging time using a Tesla wall connector
4. Base price of $109,500 for the Model S P90D

Weighing the 20 positive competitive strengths against the 4 negative competitive weaknesses of the Tesla Model S, we believe Tesla offers global customers a compelling premium luxury sports sedan that will likely shape and redefine the all-electric smartcar industry for the next decade.

In summary, while the Tesla Model S is still pricey, heavy, and somewhat inconvenient to charge on-the-go, it represents a state-of-the-art AI-assisted cloud-connected electric-powered premium sports sedan for the luxury smartcar market that is extremely fast, remarkably safe, surprisingly spacious, well-constructed, and very smart.

BMW 5 Series Premium Sports Sedan for the Luxury Smartcar Market

As illustrated in the competitive differentiation matrix for the BMW smartcar suite above, the BMW 5 Series premium luxury sports sedan possesses the following twelve competitive strengths:

1. Weight of 3,814 pounds for the 528i
2. Power rating of 560 HP for the M5
3. Overall driving range of 500 miles for the 528i
4. Heads-up display
5. User interface gesture controls
6. Auto park assistance
7. Collision detection assistance
8. 600,000 gas stations worldwide
9. Fueling rate of 3 to 10 gallons per minute
10. High strength steel frame elements
11. Aluminum body elements
12. Base price of $50,200 for the 528i

In contrast, the BMW 5 Series possesses the following three relative competitive weaknesses:

1. Power rating of 240 HP for the 528i
2. Zero to 60 MPH acceleration performance of 6.1 seconds for the 528i
3. Overall fuel economy of 17 MPG for the M5

Weighing the 12 positive competitive strengths against the 3 negative competitive weaknesses of the BMW 5 Series, we believe BMW continues to offer global customers a compelling premium luxury sports sedan that will initially hold its ground as the automotive industry transitions from gas-powered to electric-powered sports sedans over the next decade.

In summary, while the BMW 5 Series is sluggish off the line at the low-end of its product line, inefficient a the high-end of its line, and lacks sophisticated AI assistance features, it represents a state-of-the-art gas-powered premium sports sedan for the luxury smartcar market that is remarkably nimble, convenient on-the-go, finely constructed, and relatively affordable.

Tesla Model X Premium Sports Utility Vehicle for the Luxury Smartcar Market

As illustrated in the competitive differentiation matrix for the Tesla smartcar suite above, the Tesla Model X luxury sports utility vehicle possesses the following twenty one competitive strengths:

1. Width of 81.5 inches
2. Power rating of 532 HP for the Model X P90D
3. Zero to 60 MPH acceleration performance of 3.2 seconds for the Model X P90D
4. Cargo capacity of 77.0 cubic feet
5. Display size of 17 inches
6. Touchscreen display type
7. Over the air (OTA) updates to user interface
8. OTA updates for vehicle optimization
9. Charging station locator
10. Lane tracking assistance
11. Lane change assistance
12. Highway off-ramp assistance
13. Auto pick-up assistance, referred to as Summon
14. Auto park assistance
15. Collision detection assistance
16. 3,400 destination charging stations worldwide
17. Overall fuel economy of 93 MPGe for the Model X 60D
18. Expected safety rating of 5 stars in every category
19. Powertrain warranty of 8 years with unlimited mileage
20. Aluminum frame
21. Aluminum body panels

In contrast, the Tesla Model X possesses the following four relative competitive weaknesses:

1. Weight of 5,381 pounds for the Model X P90D
2. Overall driving range of 200 miles for the Model X 60
3. Fueling rate of 14.5 miles of range per 30 minutes of charging time using a Tesla wall connector
4. Base price of $115,500 for the Model X P90D

Weighing the 21 positive competitive strengths against the 4 negative competitive weaknesses of the Tesla Model X, we believe Tesla offers global customers a compelling luxury sports utility vehicle that will likely redefine the performance, safety, and intelligence standards of the SUV market over the next decade.

In summary, while the Tesla Model X is still relatively pricey, quite heavy, and somewhat inconvenient to charge on-the-go, it represents a state-of-the-art AI-assisted cloud-connected electric-powered premium sports utility vehicle for the luxury smartcar market that is extremely fast, unprecedentedly safe, remarkably spacious, well-constructed, and very intelligent.

BMW X5 Premium SUV for the Luxury Smartcar Market

As illustrated in the competitive differentiation matrix for the BMW smartcar suite above, the BMW X5 premium luxury sports utility vehicle (SUV) possesses the following thirteen competitive strengths:

1. Weight of 4,680 pounds for the sDrive35i
2. Power rating of 567 HP for the X5 M
3. Overall driving range of 470 miles for the sDrive35i
4. Heads-up display
5. User interface gesture controls
6. Auto park assistance
7. Collision detection assistance
8. 600,000 gas stations worldwide
9. Fueling rate of 3 to 10 gallons per minute
10. Safety rating of 5 stars front impact and 5 stars side impact
11. High strength steel frame elements
12. Aluminum body elements
13. Base price of $54,700 for the sDrive35i

In contrast, the BMW X5 possesses the following relative competitive weakness:

1. Overall fuel economy of 16 MPG for the X5 M

Weighing the 13 positive competitive strengths against the single negative competitive weaknesses of the BMW X5, we believe BMW continues to offer global customers a compelling premium luxury SUV that will initially hold its ground as the automotive industry transitions from gas-powered to electric-powered SUVs over the next decade.

In summary, while the BMW X5 is notably inefficient a the high-end of its product line and lacks sophisticated AI assistance features, it represents a state-of-the-art gas-powered premium SUV for the luxury smartcar market that is convenient on-the-go, finely constructed, and relatively affordable.

Tesla Model 3 Premium Sports Sedan for the Mass Smartcar Market

As illustrated in the competitive differentiation matrix for the Tesla smartcar suite above, the Tesla Model 3 premium mass-market sports sedan is expected to possess the following nineteen competitive strengths:

1. Cargo capacity expected to be largest in class
2. Expected landscape display size of 15 to 17 inches
3. Touchscreen display type
4. Heads-up display
5. Over the air (OTA) updates to user interface
6. OTA updates for vehicle optimization
7. Charging station locator
8. Lane tracking assistance
9. Lane change assistance
10. Highway off-ramp assistance
11. Auto pick-up assistance, referred to as Summon
12. Auto park assistance
13. Collision detection assistance
14. 3,400 destination charging stations worldwide
15. Expected overall fuel economy of 90 MPGe for the Model 3 50
16. Safety rating of 5 stars in every category
17. Powertrain warranty of 8 years with unlimited mileage
18. Expected aluminum body panels or elements
19. Expected base price of $35,000 for the Model 3 50

In contrast, the Tesla Model 3 is expected to possess the following two relative competitive weaknesses:

1. Overall driving range of 206 miles for the Model 3 50
2. Fueling rate of 14.5 miles of range per 30 minutes of charging time using a Tesla wall connector

Weighing the expected 19 positive competitive strengths against the 2 negative competitive weaknesses of the Tesla Model 3, we believe Tesla will offer global customers a compelling premium mass-market sports sedan that will fundamentally disrupt and transform the all-electric smartcar industry over the next five years.

In summary, while the Tesla Model 3 will be somewhat inconvenient to charge on-the-go, it will represent a state-of-the-art AI-assisted cloud-connected electric-powered premium sports sedan for the mass smartcar market that will be affordable, safe, spacious, well-constructed, and like its older and more expensive siblings very very intelligent. Moreover, Tesla will likely surprise competitors, analysts, and investors by introducing new battery pack and drivetrain options for the Model 3 that will forever alter the yardsticks by which production vehicle performance is measured.

BMW 3 Series Premium Sports Sedan for the Mass Smartcar Market

As illustrated in the competitive differentiation matrix for the BMW smartcar suite above, the BMW 3 Series premium mass-market sports sedan possesses the following fourteen competitive strengths:

1. Weight of 3,320 pounds for the 328i
2. Power rating of 425 HP for the M3
3. Zero to 60 MPH acceleration performance of 3.9 seconds for the M3
4. Overall driving range of 411 miles for the 328i
5. Heads-up display
6. User interface gesture controls
7. Auto park assistance
8. Collision detection assistance
9. 600,000 gas stations worldwide
10. Fueling rate of 3 to 10 gallons per minute
11. Carbon fiber frame elements
12. High strength steel frame elements
13. Aluminum body elements
14. Base price of $38,350 for the 528i

In contrast, the BMW 3 Series possesses the following two relative competitive weaknesses:

1. Display size of 6.5 inches for the 328i
2. Overall fuel economy of 20 MPG for the M3

Weighing the 14 positive competitive strengths against the 2 negative competitive weaknesses of the BMW 3 Series, we believe BMW continues to offer global customers a compelling premium mass-market sports sedan that will initially hold its ground as the automotive industry transitions from gas-powered to electric-powered mass-market sports sedans over the next decade.

In summary, while the BMW 3 Series suffers from a small user interface display at the low-end of its product line, consumes fuel inefficiently a the high-end of its line, and lacks sophisticated AI assistance features, it represents a state-of-the-art gas-powered premium sports sedan for the mass smartcar market that is legendarily nimble, fast, convenient on-the-go, finely constructed, and affordable.

Tesla vs. BMW: Which Vendor has the Best Smartcar Suite for 2016?

In the previous six sections, we presented a detailed competitive analysis of leading AI-assisted smartcar suites for the first time based on well-established competitive strategy and competitive differentiation frameworks from Cyclefund Research. The analysis was conducted in early Q3 of 2016, and it included the following smartcar suites from two leading smartcar vendors:

1. The Tesla smartcar suite for mid-2016
2. The BMW smartcar suite for mid-2016

Both suites above included individual market leading products from Tesla and BMW spanning three fundamental classes of smartcar vehicles: premium luxury sports sedans, premium luxury SUVs, and premium mass-market sports sedans. Based on our detailed analysis of the relative competitive strengths and weaknesses of individual vehicles from the two leading smartcar suite vendors, we present the following best-in-class awards for mid-2016:

• Best Premium Luxury Sports Sedan in mid-2016: Tesla Model S
• Best Premium Luxury SUV in mid-2016: Tesla Model X
• Best Premium Mass-Market Sports Sedan in mid-2016: BMW 3 Series

More importantly, we present the best suite award for mid-2016 as well as the best expected suite for 2017 as follows:

• Best Premium Smartcar Suite in mid-2016: BMW Smartcar Suite
• Expected Best Premium Smartcar Suite in 2017: Tesla Suite of AI-Assisted Cloud-Connected All-Electric Smartcars

The key takeaway from this analysis is that Tesla's all-electric smartcars and smartcar suites are strongly expected to offer superior value to global customers in 2016 and 2017 relative to BMW's gasoline-powered smartcars and smartcar suites. Moreover, given that BMW's all-electric fleet of smartcars and smartcars suites is not projected to be ready for production release on a global scale until the turn of the decade, Tesla has a generational opportunity to fundamentally disrupt and radically transform the automobile industry before even its strongest competitors have time to react.

Strategic Games Model Emerging X-Pattern Diagram for AI-Assisted Smartcars

Within both the consumer and commercial segments of the automotive industry, we foresee a narrow window in time where a new-game approach pioneered by Tesla for mass producing AI-assisted all-electric smartcars surprises traditional businesses adhering to an old-game approach for mass producing gas-powered vehicles. Within this narrow window in time, we believe that old-game businesses will experience rapidly declining market share relative to new-game businesses.

The diagram above shows the global annual unit sales over time for competing premium luxury sedans and sport utility vehicles (SUVs) from BMW and Tesla. Specifically, it depicts the following four individual time series plots:

1. BMW Global Annual Unit Sales of 5 Series Sedans and X5 SUVs for 2000 - 2015 (Green Line)
2. BMW Global Annual Unit Sales of 5 Series Sedans for 2000 - 2015 (Red Line)
3. BMW Global Annual Unit Sales of X5 SUVs for 2000 - 2015 (Blue Line)
4. Tesla Global Annual Unit Sales of Model S Sedans and Model X SUVs for 2012 - 2016 Estimated (Purple Line)

We refer to this diagram as the Cyclefund Emerging Unit Sales X-Pattern for BMW 2000 - 2015 Actual vs. Tesla 2012 - 2018 Estimated. Annual unit sales for BMW from 2000 - 2015 and Tesla from 2011 - 2015 sourced from wikipedia.org. Expected annual unit sales for Tesla in 2016 sourced from Tesla quarterly reports.

In accordance with the theory of intragame competition first proposed in the Strategic Games Model, when a new-game approach fundamentally disrupts an old-game approach, an X-pattern in global unit sales is formed within a relatively narrow window in time. During this window in time, old-game executives, industry analysts, and financial analysts are typically caught off-guard when new-game competitors deliver unexpectedly strong financial results relative to old-game competitors. In short, new-game competitors experience accelerating unit sales growth while old-game competitors witness rapidly decelerating or even declining unit sales growth.

As of this writing in early September of 2016, it is still too early to state with a high degree of confidence that a sustainable X-pattern is forming in the market for cloud-connected, semi-autonomous, AI-assisted smart cars between new-game competitor Tesla and old-game competitor BMW. However, by examining the diagram above, we can clearly see a marked ramp in Tesla unit sales between 2012 and 2015 with a concomitant deceleration in BMW 5 and X5 unit sales and outright decline in BMW 5 Series unit sales.

Once these two competitors release their respective vehicle production numbers for calendar year 2016 and calendar quarters Q1 and Q2 of 2017, we will adjust our X-pattern confidence levels accordingly. Our analysis will also need to account for the introduction of a fundamentally new BMW 5 Series design expected to be introduced in late 2016 and released in early 2017.

Conclusion: BMW vs. Tesla - Which One Would You Pick?

In this section, we distill the essence of our 2016 Tesla case study on the rise of the first mass-market premium suite of AI-assisted smartcars into a concise and simple question: "Which car would you choose?"

More specifically, if you could choose between two cars, car A and car B, with the following relative competitive characteristics:

1. Car A is slower than car B.
2. Car A is less safe than car B.
3. Car A is less spacious than car B.
4. Car A burns more fuel than car B.
5. Car A pollutes more air than car B.
6. Car A is less intelligent than car B.
7. Car A costs more to service than car B.
8. Car A has a lower resale value than car B.
9. Car A must be filled at a station.
10. Car A cannot be filled at home, a hotel, a restaurant, an airport, or the office.
11. Car B takes longer to fill up than car A.
12. Car B is heavier than car A.
13. The high-performance versions of car A and car B have roughly the same range.
14. Car A and car B are both attractively styled and handle well.
15. Car A and car B can be purchased or leased for roughly the same price.

Which car would you pick?

Items 1 – 10 clearly favor car B (Tesla). Item 11 and item 12 clearly favor car A (BMW). However, Tesla and its strategic partners are actively working to address items 11 and 12 by expanding the global footprint of supercharging networks, enhancing battery charging technologies, and improving the energy density of lithium ion battery packs. Over time, we strongly believe that the decision to purchase cars with the characteristics of car A will become increasingly clear, which will fundamentally accelerate the mass-scale adoption of AI-assisted all-electric smartcars and usher in a new era of sustainable transport solutions.