Aug 24, 2020 (Nikkei) - As Elon Musk's Tesla blows the doors off Toyota, it is painfully clear how slow Japan Inc. has been to get the memo.
It is easy to get sidetracked by the spectacle surrounding a man of Howard Hughes-like eccentricity. Musk's Twitter feed alone is almost as nutty as @realDonaldTrump -- and apt to send Tesla shares for the occasional wild ride.
Even though it sells a fraction of the 10 million vehicles each that Toyota and Volkswagen do annually, Tesla's market capitalization is in overdrive. The most financially valuable auto company dwarfs the combined market cap of General Motors, Ford and Fiat Chrysler. Its roughly $370 billion valuation is equivalent to Hong Kong's annual gross domestic product. Fitting perhaps, with Tesla taking China's market by storm.
Not that Japan has noticed. Musk once hoped it would be his second-biggest market. Japan sales are such a small share of the 367,500 cars Tesla delivered in 2019 that it does not disclose them. Explanations why include: limited brand recognition; a small dealer network; questions about its capacity to service cars; a direct-to-customer model at odds with Japan's obsession with hospitality-centric shopping.
At the same time, Musk appears to confront a John DeLorean problem. Will posterity also remember Musk as a brash showman who couldn't deliver on his hyped vehicles? Clearly, Tesla's share-price-versus-sales ratio has many on Wall Street and in Silicon Valley with popcorn out waiting for the bubble to burst.
But forget the stock rallies and weird founder worship that fuel the Muskian cult of personality. The Tesla-versus-Toyota drama says a few things about why Japan Inc. is stuck in first gear as upstart economies throughout Asia shift upward.
One is a continued obsession with hardware over software. What Toyota long missed about Musk is that he is not selling cars. He is selling an iPhone with wheels. The vehicle itself is merely a medium to market the software undergirding the iTunes-like community that he is building.
The data Tesla collects from users, their environs, interests, tendencies, travel habits and the range of behaviors will arguably be more valuable than the engines and high-performance batteries powering them. This enables Tesla to hone the customer experience, while discerning where the market will veer next.
Tesla reminds Japan that disruption is a necessary evil for economic evolution. In a February 17 deep dive into Toyota's Tesla problem, the Nikkei Asian Review looked at Japan-centric worries about upending supply chains. Tesla makes its own chips and constantly tweaks its Model 3, Model S and Model X vehicles on the fly.
