Does success breed success?
Kaizen is a Japanese word for improvement. In manufacturing circles kaizen is used to describe continuous improvement – constantly refining processes to improve the quality of the outcome.
In an earlier article I made the point that the small batches forced by limited manufacturing might created an opportunity for Japanese manufacturers to identify and solve problems quickly and iteratively. The result was a surge of reliability and quality in their automobiles and electronics. There was a time in the 1990s when many thought that Japan’s industrial supremacy would take over the world.
Perfection or progress
Toyota is famous for making cars with a very low defect rate. Toyota and its luxury brand Lexus perennially top reliability charts. On reliability alone, Tesla ranks poorly.
Nevertheless in 2015 Consumer Reports, a body known for being ruled by logic more than passion, called the Tesla Model S P85D “the best-performing car that Consumer Reports has ever tested.”
Yes, this is an apples to oranges comparison, since Tesla’s electric drivetrain is entirely different from anything Toyota offers, but that’s the point. To strain the metaphor, Toyota is making better and better apples, while Tesla made an orange.
As cars approach perfection
Cars are getting more reliable all the time. Manufacturers have competed on reliability for generations. The story of Tesla vs Toyota highlights that as defects per car approach zero, all the other factors that make a car appealing become more important.
Tesla views itself as an innovation company. It’s cars do not have model years. Every improvement they make is built into successive cars without waiting for another model year.
Toyota, by contrast, is often criticized for relying on dated but reliable platforms and drivetrains.
A spike for an airbag
“If the government wanted people to drive safely, they’d mandate a spike in the middle of each steering wheel.”
This colourful quote comes for economist Gordon Tullock who argued against seatbelts, saying that the confidence they bestow would make drivers more reckless. When you consider how flimsy and clumsy older cars were, vehicle death statistics have dropped surprisingly little over time, only dropping by half in the last twenty years.
This same logic applies to reliability. If people wanted a reliable conveyance, they would choose a Corolla. And yet Tesla today has a market capitalization (a proxy of the value of a publicly traded company) of 55.956B USD while Toyota’s is 171.746B USD. Toyota is triple the market cap of Tesla, while making nearly one hundred times more cars.
Falcon wing doors
The lesson here is that while constant improvement is laudable, what people want is something new, something that speaks to desire and status. Toyota has built its reputation on making doors that fit more precisely, but Tesla is making cars with falcon wing doors.