December 22, 2017
It’s not just about making electric cars sexy. Musk’s ultra-ambitious company is reinventing an industry.
In December, at the Los Angeles Auto Show, most car companies used their display space to show off new models and concept cars. Tesla (tsla, +0.84%), the idiosyncratic electric-vehicle maker—which more often than not passes on these industry events—brought a house.
Dubbed the House of the Future, it was outfitted with Tesla-brand solar panels and one of Tesla’s home battery storage units, the Powerwall. Tesla’s fleet of highly sought-after vehicles—consisting of the Model X, Model S, and the recently released Model 3—was there too, of course. The cars and the homes of the future are each components of the state-of-the-art, cleaner-energy ecosystem that Tesla is defining and designing for us all.
There’s an obvious metaphor in that. Few, if any, companies think as big as Tesla: To say the 15-year-old company is merely reinventing the automobile industry would be selling it short. And few, if any, have had as swift and profound an impact on the way we conceive of an object, as mythic and everyday, as the car. “They’re bringing the Internet of things to the automobile, or vice versa—the automobile to the Internet of things,” says Mark Baskinger, a professor at Carnegie Mellon’s School of Design. “That’s really interesting as they’re positioning themselves as a different paradigm.”
Wall Street has clearly bought into the vision. As of mid-December, Tesla’s share price was up 61% in 2017, pushing its market value to $58 billion—on par with GM (gm, -0.80%) and above that of Ford (f, -0.63%).
Playing the role of visionary is Tesla cofounder and CEO Elon Musk. But while some snicker at his grand ideas—let’s go colonize Mars!—the accomplishments of his car company are hard to deny.
From Tesla’s push toward automation and self-driving capabilities to its treatment of car as software (with system updates beamed out over the air) to simply making electric vehicles cool, the traces of Tesla’s new paradigm are increasingly visible in the way more traditional automakers are designing and engineering their cars.
Tim Huntzinger, an automotive designer who teaches in the renowned transportation program at the ArtCenter College of Design, says perhaps Tesla’s biggest influence will be on the well-worn model of how cars are made and sold. “They managed to sell so many Model 3s, even before the Model 3 was in its final design stages,” says Huntzinger, marveling at the feat. “It was almost like they were doing Kickstarter for cars. They were able to bring in hundreds of millions in revenue before actually creating final tooling for the vehicle.”
It’s been an almost unprecedented success. Says Huntzinger, “That’s huge for the automotive industry. For the entire history of the automotive industry, you had to spend millions or hundreds of millions to even turn a cent. Many companies have gone out of business that way.”
Huntzinger, who compares Tesla’s ethos to Apple’s, adds that the elevated role of the consumer in that process is also transformative. “To get feedback from customers early in the process—that’s totally new and totally different.”
There’s also the radical approach Tesla has taken with the car-buying experience—to make it pleasurable, by placing its stores in malls and letting people order their cars online. “The purchasing experience is so different [from what] we’ve all been forced into with the dealership model,” says Huntzinger. “It’s super-refreshing to see the customer being put first.”
A version of this article appears as part of our “Business by Design” package in the Jan. 1, 2018 issue of Fortune.