New narrative in the auto industry is that they have a software problem. Same as Nokia ten years ago. “We just need to invest in software to get back in the game”. Unfortunately this strategy failed; Nokia disappeared (in smartphones). Why? Thread below. $TSLA $BMWYY $DMLRY etc
First, investing in software doesn’t make sense. Software is a living animal, which starts like a baby, 3 guys in a dorm, and grows a full childhood before being grown up. If you “invest in software”, you create a Frankenstein. Ugly and dangerous.
Second, SW is the tip of the iceberg. The real key to success is end to end integration. Making a car like an iPhone. Perfectly pulled together. SW is where lack of integration is the most visible (can’t do OTA updates, our SW is fragmented), but integration matters everywhere.
Third, electric powertrains are not commodity. Tesla is 10 years ahead and catching up on this will be tough, long, and costly. Apple’s hardware has always been awesome, and I always smile at those explaining Apple is a SW company. Not true. HW matters,Tesla’s HW is awesome.
Last, innovation matters everywhere. Tesla improved range by 10% re-engineering cooling & heating across the car, and is die casting cars like children toys. No SW in there but a pace of innovation about 5x faster. What takes a year elsewhere takes less than 3 months at Tesla.
Bottom line: when Fox Business asks me what I think of Tesla worth more than the top 9 automakers combined, I just say it is largely justified. The latter are in trouble and the former will benefit from that for at least a decade. This is disruption.

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