Behzod Sirjani and Ravi Mehta Dive Deep on the EV Market Speed Bump for Apple, Rivian and Tesla

Behzod Sirjani and Ravi Mehta Dive Deep on the EV Market Speed Bump for Apple, Rivian and Tesla

Behzod Sirjani and Ravi Mehta Dive Deep on the EV Market Speed Bump for Apple, Rivian and Tesla

Apple's car project is dead, Tesla missed earnings, and Rivian's stock is down. So, what's going on here? We deep dive on this very topic with our guest Behzod Sirjani, our guest co-host Ravi Mehta, and of course, the one and only Fareed Mosavat!

The Adjacent User Theory 🎯

The EV market might be experiencing what Bangaly Kaba calls the "Adjacent User Theory". Products find their fit with a core user, but as they exhaust that base, they move to an adjacent user. The needs of these users change, and product-market fit can loosen.

The Core User vs The Adjacent User 🔄

Early adopters of EVs were environmentally conscious, trend-conscious, and generally higher earning. Now, as we think about EVs growing to the rest of the US market, people have different needs. They live in different areas, they may need hauling capacity, they may not have EV charging networks near them, and they may not be able to afford EVs at the current price points.

Signs You Hit the Adjacent User 🔎

1) If your user acquisition isn't keeping pace with your growing audience size, it might be time to reevaluate your strategy. For instance, with a million DAUs, having 10,000 sign-ups is great. But scaling up to 2 million DAUs should ideally bring around 20,000 sign-ups to maintain that ratio.

2) Speed bumps turn into roadblocks. Behzod's initial concerns about purchasing his Tesla are also shared by many car purchasers today. Overcoming these mental barriers often boils down to a shift in risk appetite. Early adopters are typically more willing to take on substantial risks, but this isn't the case for everyone. When speed bumps prevent begin preventing purchasers, you have likely moved on from the core.

Tesla’s Strategy - More Faster, Cheaper, Quicker 🏃

Tesla’s strategy is to focus on software and make the hardware limited in SKUs and customization. They aim to produce more cars at a lower cost and push them out. In areas like the Bay Area or Seattle, there is a perfect storm that works for Tesla - high availability of superchargers, a high first-adopter mentality, high environmental consciousness, and a high propensity of individual homes that enable charging. However, that is not what the rest of the world looks like.

You're in a Bubble if Priuses Outnumber F150s Near You🫧

Kevin Weiss, a friend of the podcast, mentioned to Fareed that there are like 10 times more F150s sold than Priuses in America. For fun, Fareed counted around the Bay area one day and tallied up 26 Priuses before a single F150 showed up. Bubble officially burst. And honestly, while the Cybertruck and The Rivian are pretty cool, it's a stretch to picture them coming anywhere near replacing the F150.

Tesla's One-Size-Fits-All Strategy? A Tight Squeeze for the Diverse Car Market 🚗

Cars are far from being a single-use-case product designed for a singular JTBD. They fulfill a spectrum of needs, which is precisely why brands like Subaru offer over 15 models and Toyota boasts more than 30. Each variant is meticulously crafted to meet specific consumer requirements. Tesla, however, adopts a distinct approach with their business model, emphasizing a streamlined selection of models.

Ravi sheds light on the dual motivations behind car purchases: utility and personal expression. It appears, though, that the electric vehicle (EV) market has yet to fully resonate with the preferences of traditional F150 buyers.

Fareed introduces an intriguing perspective regarding the social value derived by early adopters. Like the initial buyers of the Vision Pro - for some, the value centers more around taking a picture for Instagram than the utility the product provides. However, as the initial buzz fades, the emphasis naturally shifts towards the utility of the product. This shift explains why car manufacturers invest considerable effort in refining the utility aspect for each customer segment and releasing aesthetically differentiated yearly models - to capitalize on both utility needs and personal expression.

Tesla's strategy of maintaining a limited product range may indeed streamline operations, but it also poses a challenge. As Teslas become more commonplace and undergo minimal annual updates, they also deplete their social value more quickly.

The EV Shopping Experience? More Similar To B2B Than You'd Think, Says Behzod 🛍️

"You often have multiple constituents. You have to think about switching costs. You have to consider interoperability with other tools in your stack. Am I driving on paved roads? If not, I probably need a lifted vehicle. Can I reasonably access charging? If not, I probably need a hybrid or a gas car. Can I afford this? Does this make sense for all my contexts of use? Is my partner comfortable with this? Does this fit our kids, bikes, whatever? There are just so many more factors.” - Behzod Sirjani

Understanding Apple’s Decision to Pull Out of the Car Project 🍏

1) Staying close to the core: The best moves are relatively adjacent. The closer you are to the core profit from the core, the better.

“That's the beauty of the AirPods. Such a wonderful little business. Shitty business if you're just building headphones. Great business because you own the iPhone and it's so deeply integrated that it's an awesome company, an awesome product, an awesome business. So, to me, that's my mental model framework for analyzing these things. And that's, again, why the car felt so out of band, you know? It just doesn't look or feel or act like any of the other things” - Fareed Mosavat

2) The commoditization of the Car:

“I think one of the things that Apple has done remarkably well is even though they are a hardware company, they have been incredibly thoughtful about only getting into hardware spaces where the hardware is not a commodity and where owning the hardware has some long-term benefits. And so for many years, there was conjecture that Apple was going to release a TV, that they were going to have some HDTV. And for a little while, HDTVs were novel, and potentially Apple could release hardware that was better than what was out there. But I think they saw the writing on the wall, which is, ultimately. TV hardware is going to get commoditized. And the way that we own this market is we own the software layer.” - Ravi Mehta

Further, “the motion that works for iPhones and for laptops does not work for a durable good. And if we are a business with a certain kind of consumption pattern and a certain margin profile, Maybe building durable goods is not the thing that we can justify.” - Behzod. Priuses and Teslas often last for 10 years, with limited reason to buy a new one every 2 years. Whereas the iPhones and Laptops - despite minimal utility changes - have enough social value to get users to purchase a new one every few years.

3) The risk/reward is mismatched: The brand risk associated with releasing a car (especially a self-driving one) is high, and the reward - owning a significant share of the car market - is unlikely. Additionally, Apple already owns CarPlay in most vehicles through the software interface, so it’s not clear what owning the hardware does for them. The only unique thing Apple could build is self-driving software, but that opens Apple up to a whole new world of risk - Imagine Apple Self-Driving causing a fatal car crash - it doesn’t feel like that is a risk Apple has the appetite for.