Something Old, Something Updated

Software is more important than we think.

Old Chrysler and new Tesla Model 3. Photo: Doug Tengdin

Recently, Consumer Reports refused to recommend the Tesla Model 3 to its subscribers. This is a big deal. The Model 3 is Tesla’s first attempt to produce an affordable, mass-market car, and Consumer Reports is highly prestigious. They have an incredibly powerful reputation for integrity. Their subscription-based model means their writers and testers don’t have to worry about offending a corporate sponsor.

Consumer Report recommendations are big news, and they can make or break a new product. They evaluate performance, reliability, affordability, safety, and a host of other factors when they look at a car – more than most of us can think of when we get to a dealership. When CR’s testers examined the Model 3’s breaking performance, they weren’t impressed. It took the Tesla Model 3 152 feet to come to a stop from 60 miles per hour. For comparison, a full-sized Ford F-150 pickup takes 145 feet.

Tesla’s CEO Elon Musk took the report seriously. He spoke at length with Tom Higgins, CR’s head of auto testing, to understand what the issues were. Tesla uses a combination of traditional braking, electric regeneration, and the electric motors in its systems. Tesla’s braking involves complicated tradeoffs between stopping distance, wear-and-tear, regeneration, and steering ability. After Musk spoke with CR, the Tesla engineers evaluated a more effective braking system algorithm.

Then the company did something totally new. They deployed their new software to consumers via an “over-the-air” update.

Source: Twitter

The results were dramatic. When CR tested their updated Model 3, they found that the braking distance had been reduced by 19 feet, making it similar to other small luxury sedans. It took Tesla about a week to issue the update. The improvement was enough for CR to change their overall rating of the Model 3 and recommend it to consumers.

Software really is eating the world. Every product we buy today is also a service, a stream of updates, corrections, controls, and two-way data flow. It’s also at the center of a community of users, producers, and critics. This will change industrial organizations, making service and support more important than ever. Tesla’s response to Consumer Reports wasn’t dismissive or confrontational. They listened carefully and responded.

The way to sell cars used to be, “prices bring you in, service brings you back.” The new model seems to be, “total value brings you in, updates keep you engaged.” Software updates do raise a question, however: who owns our stuff, anyway?

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2018-05-31T07:19:05+00:00May 31st, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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