Low cost, low speed LSEVs disrupting the market in China

There’s no denying that low-speed electric vehicles are widely sold and used in mostly rural areas of China. They are outstripping traditional EVs by volume. This has been widely reported in multiple outlets, although most EV outlets tend to focus on the much more expensive 3D-printed or GM-affiliated SAIC version.

A quick visual primer on disruptive innovation to see what the question is all about is important.

Disruptive innovation framework image courtesy Christensen Institute

Per the model, the only disruptive innovations are those that are low-end or new-market disruptions, either serving the lowest budget existing buyers with a lower-cost, differently featured offering, or bringing entirely new consumers to the market with a solution.

According to Bartman and team, Tesla didn’t fit that bill in 2015, but was better considered as a sustaining innovation. As Bartman concluded:

“… because it’s a sustaining innovation, theory predicts that competitors will emerge. Our analysis concludes that a competitive response won’t happen until Tesla expands outside its current niche of people who prefer electric vehicles to gas-powered cars—but if it expands by creating more variety (such as SUVs) and more-affordable vehicles, competition will be fierce.”

It’s an interesting and perhaps academically appropriate take, but as the Tesla Model 3 is now the #4 selling car of any type in the USA and the Tesla Model S is dominating its market segment in North America and Europe without any real competitive response on the roads, it misses the mark. Partly, that’s because of a question considered key by the team, “does it create new value networks, including sales channels.”

Bartman et al. appear to have missed Tesla’s innovations around distribution channels and the incredible drag on incumbents due to their existing dealer networks. Some of the clarity around why electric vehicles are so problematic to dealership models has become more public since 2015, but it was observable then. Similarly, Bartman et al. appear to have focused solely on the car as a car, not the car-as-an-app, the car-as-an-autonomous vehicle and the charging model innovations, all of which are much harder for legacy manufacturers to replicate than simply a luxury electric sedan.

Is it important whether Tesla is a disruptive or sustaining innovation? Only to academics, really. Tesla is leading and part of a massive disruption to the automotive industry, and the industry is lagging badly.

In 2015, Bartman et al. also made an assertion that the area of actual disruptive innovation was the “neighborhood electric vehicle,” souped-up golf carts used for security and in retirement communities. He also referenced the developing world as a place where this would emerge.

Low-speed electric vehicle growth 2015-2017 image courtesy Christensen Institute