The Hybrid Trap:

Why Most Efforts to Bridge Old and New Technology Miss the Mark

Forthcoming, MIT Sloan Management Review (2018)

Fernando F. Suarez
D’Amore-McKim School of Business, Northeastern University
360 Huntington Ave., Boston MA 02115 - Dodge Hall 474
Email: fsuarez@northeastern.edu / Tel. +1 617 373-6028

James Utterback
MIT Sloan School of Management
100 Main Street, Building E62-467, Cambridge, MA 02142
Email: jmu@mit.edu / Tel +1 617 253-2661

Paul von Gruben

Technische Universität Berlin, Economics and Management
Marchstraße 23, D-10587 Berlin, Germany
Email: p.vongruben@inno.tu-berlin.de / Tel: +49-172-4323954

Hye Young Kang

Questrom School of Business, Boston University
595 Commonwealth Ave., Boston MA 02215
Email: hyk@bu.edu / Tel. +1 617 378-7274

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 The Hybrid Trap:
Why Most Efforts to Bridge Old and New Technology Miss the Mark

About the research

This article is part of our ongoing research project about incumbents’ and new entrants’
strategies during periods of technological transitions. We place particular emphasis on
the role that hybrid products play during those transitions (products that mix elements of
the old and new technologies). While we have collected anecdotal evidence of
technological transitions and their respective hybrid products in many industries, some of
which we use in the article, our study is largely based on a large-scale longitudinal data
collection in the U.S. automotive industry. Our data covers the entire period of
technological transition from the mid-1990s where the first electric vehicles (e.g. GM
EV1) and the first hybrid cars (e.g. Toyota Prius) emerged, to 2015 when the industry is
decisively moving towards electric vehicles. We have collected detailed technical and
market data on every single model introduced by each of the companies competing in
the U.S. market, and conducted semi-structured interviews with leading industry
participants and industry experts. We have produced detailed histories and case
analyses of the strategies followed by major auto manufacturers, and have traced how
their strategies have fared in the market.

Technological transitions tend to be challenging for firms, particularly in mature

industries with entrenched incumbents. Common wisdom has it that incumbents are
taken by surprise and fail to invest in the new technology, therefore wasting the
opportunity to be early entrants in an emerging market that will later grow to become
mainstream. While it is true that the uncertainty that accompanies technological
transitions makes it hard for incumbents and new entrants to act early, this is not always
the case. It is not unusual for existing firms to be the first entrants into new technologies,
often introducing the first products with the new technology to the market. Their real
problem is that they are hesitant entrants without conviction and lacking a vision that
would allow them to lead in the new technology. Such lack of conviction often leads
incumbents to produce “hybrid” products, mixing elements of the old and the new
technology. As we show below, no matter whether they are early entrants or not, a
hybrid product strategy leaves even the best incumbent companies in a
disadvantageous position as the market evolves and starts to switch to the new
technology. We call this situation the hybrid trap.

The transition from internal combustion engines (ICE) to electric vehicles (EVs) is
probably a textbook case in how these processes unfold, and the risks that hesitant
entry and a hybrids strategy bring to a whole industry. Several ICE incumbents were
early entrants in the emerging EV market, but they soon abandoned their expensive EV
projects to continue to focus on their ICEs or, in the case of some of them, hybrid cars
that combined both types of technologies. That left a wide-open space for new
competitors to enter and focus solely on the new technology, the most successful of
them being Tesla. It was not until they saw the success of Tesla that the ICE incumbents
– large, powerful firms with abundant resources -- gradually started to question their

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hybrid strategies and slowly started to realize that pure-EV cars could reach the
mainstream market. As of mid 2017, most ICE producers are frantically trying to catch
up on EV technology and announcing EV models to be released in the next 2-5 years.
The final tipping point that awoke the industry to the fact that the era of EV cars had
arrived was the unprecedented demand for Tesla’s mass-market car, the Model 3, which
had topped 455,000 reservations by summer 2017. While it is too early to assess what
the final outcome will be – Tesla still has steep challenges in their road to become a
prominent automaker in the EV industry – the truth is that, to a large extent, the Tesla
scare has been a self-inflicted injury for the car industry. One that carries lessons
relevant to many industries which may face similar transitions, and whose incumbents
may also fall in the hybrids trap, such blackberry did with the advent of the iPhone and
Android phones.

Conviction versus Opportunism during Technological Transitions

New markets are often enabled by technological change and created by minds that can
envision a future widely different from the status quo and who are convinced that such a
future must happen. Jeff Bezos invested in Blue Origin not based on short-term financial
calculations, or because his fortune now allows him to invest in wild ideas. He went into
space exploration because he truly believes that the human race must conquer space to
survive and prosper. Steve Jobs entered the computer industry in the 1980s and the
mobile phone industry in the 2000s with the strong conviction that computers and
phones needed to be not only fast and precise, but also intuitive to use and esthetically
pleasing. As other innovators that have changed their companies and industries over the
years, Bezos and Jobs had a vision that they intensely believed in, and were convinced
such vision would become reality. Their vision and conviction drove them to attempt
what many would have considered a wild gamble or simply insane.

Nothing could be further from the vision and conviction shown by Bezos and
Jobs to create or reshape industries than the hesitant and start-and-stop entry of existing
automakers in the emerging EV market in the 1990s. Table 1 provides a brief summary
of the EV journeys of six leading ICE firms that showed efforts to enter the EV market:
GM, Ford, Toyota, Nissan, BMW, and Daimler-Benz, based on detailed accounts we
have collected for this research. The general picture that comes out of our study is
simple: despite the fact that some of these companies were engaged in exploratory EV
research for some time and that some even entered the EV market early, none of them
had the vision and conviction that would grant them a leadership position in the
emerging market. They all decided to pursue a hybrid product strategy.

The Market Creators

As with most technological transitions, an “innovation champion” with courage and vision
was needed to change the status quo. Electric cars today are immediately associated
with Tesla and Elon Musk. To be fair, there were other EV visionaries that did not make
it as far as Musk. Shai Agassi masterminded A Better Place around the same time when
Musk was planning Tesla’s first car, the roadster, by 2005. Agassi was able to raise
close to a billion dollars for his battery-swap technology, but ultimately he could not get
enough traction and the venture was forced to the ground1. That’s how innovation works:
many try, but only a few make it to the end. Interestingly, Agassi’s A Better Place
required that existing car manufacturers adopt the technology for their cars…many of the
same automakers that had lobbied against the ZEV mandate (a 1990s California

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regulation requiring a small percentage of cars to be “zero emission” in eight years) that
would have accelerated the emergence of the EV industry.

Elon Musk chose a different route: Tesla would ultimately make their own cars,
without having to depend on the existing automakers. Tesla’s first car, the Roadster,
announced in 2006 and released in 2008, used the chassis of an existing Lotus car. It
was the first EV to use lithium-ion battery cells and have a 200+ mile range. In addition,
the Roadster was stylish, fun to drive and reached 60 miles/hour in less than 4 seconds
(faster than the Porsche 911 GT). The hype around the environmental friendly, premium
sports car was immense. Multiple celebrities were counted among Tesla's first six
hundred Roadster owners, including George Clooney, Matt Damon, Leonardo DiCaprio,
Sergey Brin, Larry Page, and David Letterman. In 2009, Musk announced the Model S,
a luxury sedan, designed 100% in-house, with a 300-mile range, which hit the market in
2012. In 2015, Tesla started selling its crossover luxury SUV, the Model X.

The aggressive moves by Tesla managed to produce reactions from some of the
existing automakers, particularly Nissan and BMW. Nissan released an all-electric car,
the LEAF, in 2010, aimed at the mass market. BMW unveiled in 2007 a new strategy
labeled “project-i,” centered on alternative mobility concepts and new materials. The first
product was the experimental “Mini-E,” an EV version of the popular Mini Cooper that
was produced in 2009, and first made available to 500 US customers for a lease rate of
$850/month. Daimler-Benz also produced test quantities of its Smart vehicle, the Smart
ED, in 2011, directly as a result of a successful experiment using Tesla technology.
However, except for the LEAF, these were low-volume productions that were not
apparently backed by a strong commitment to the new technology. Even in the early
2010s, the mainstream auto industry was not yet seriously embracing electric vehicles.

Instead, most of the industry was focused on a different kind of strategy, best
illustrated by what went on inside GM at the time. Seeing the Tesla Roadster at the
Detroit Auto Show in 2006, Robert Lutz, GM Vice-Chairman reportedly challenged its
company2, “All the geniuses here at General Motors kept saying lithium-ion technology is
10 years away, and Toyota agreed with us—and boom, along comes Tesla …How
come…a startup, run by guys who know nothing about the car business, can do this,
and we can’t?3 While Lutz proposed that GM built a fully EV affordable car, other GM
executives argued that the technology was not there yet for such car. They suggested
that GM should instead develop a “transitional car”, a hybrid vehicle that had a small
battery pack with an all-electric range of 38 mi (61 km) and a small gasoline-powered
engine acting as a generator to extend the range, but without a mechanical connection
between the engine and the driving axle. This transitional car would therefore be
electrically driven but ICE-backed and therefore would avoid the limitations prior EVs.
The envisioned vehicle, the Chevrolet Volt, went on sale in December 2010.

The Hybrid Trap

GM’s transitional car was just another example of the strategy that ICE incumbents had
been following for years to respond to the technological transition. Auto incumbents were
obviously not staying still; they were doing what many incumbents in other industries do
during times of technological transitions: focus on designing and producing “hybrid”
products. Hybrids are products that velcro both the old and the new technologies in a
single product, or that at least combine elements of each. Examples of hybrids during

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technological transitions in different industries abound, with one of the most famous
being Kodak’s attempt to create, as noted in their 1991 Annual Report, “film-based
digital imaging” by releasing their Photo CD product. Another good example is
Blackberry’s response to the emergence of a new generation of phones illustrated by the
entry of the iPhone and Android-based devices (see the side box, “Blackberry and the
Hybrid Lemon”).

Blackberry and the Hybrid Lemon

RIM’s (Blackberry) reaction to the emergence of the iPhone (and Android devices)
provides another good example of the problems that focusing on hybrids can create for
incumbents. Seeing the instant success of the iPhone which had an exclusivity
agreement with AT&T, Verizon sought RIM’s help for a counter-attack. As expected from
our arguments here, RIM’s proposal to Verizon was to release a hybrid product: a new
Blackberry Bold phone that would have a touch-screen display like the iPhone, but also
a traditional (hardware) keyboard like all other Blackberry phones.

It was only Verizon’s insistence in having a touch-screen device that resembled the
iPhone that convinced Blackberry to move away from the old-technology-leaning hybrid
they had proposed. The result, however, was another hybrid, the Storm. The storm did
move Blackberry somewhat closer to the new technology and design paradigm that was
emerging in the industry, but the company could not abandon its allegiance to their
traditional technological design. The Storm, while featuring a glass screen like the
iPhone, required users to press down the screen in order to replicate the click and tactile
experience that was a hallmark of all previous Blackberry phones. Unwilling to let go of
their old paradigm, RIM had produced a “velcro” design that not only took much longer to
produce than expected (RIM was 15 months late with the Storm), but also became a true
“lemon” in the market. The hybrid digital-tactile screen was excessively prone to failure
forcing RIM to replace most of the phones they sold in 2008… only to then see those
replacements returned as well. The Storm hybrid ended up being a total failure.

Kodak and RIM’s experience with hybrids is of course not unique. Many other
incumbents that focused on hybrids during technological transitions encountered, sooner
or later, the same fate: Typewriter companies producing word processors (a hybrid
between a regular typewriter and a personal computer), gas lighting companies adopting
ideas from Edison’s electric light bulb to improve efficiency by adding von Welsbach
mantles of ceramic filaments4, and more recently, Microsoft’s surface (a hybrid between
a laptop and a tablet), all of them have ultimately underperformed in the market. Our
research has shown that focusing on hybrids, while common, often spells failure for
incumbents. Why? There are two basic problems with a focus on hybrids during
technological transitions: misleading sense of safety, and sub-optimal performance.

Misleading sense of safety. Hybrids can give incumbents a deceptive sense of safety
because incumbents can claim they are “investing in the new technology,” when in fact
that is only partly true. While hybrids by definition do require firms to acquire some
knowledge about the new technology, the problem is that firms that focus on hybrids
always think about the new technology from the perspective of the old one. Also, when
faced with uncertainty, established organizations return to learned patterns, further

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slowing the development of the new technology. This is why most hybrids released by
incumbents, particularly the first hybrids in the market, are an unbalanced mix of the old
and new: much of the old, only a little of the new. The new technology is thought of as a
backup or enhancement of the functions performed by the old technology. For instance,
the first hybrid vehicle, the Toyota Prius, was primarily an ICE vehicle with a small EV
backup: EV power was limited to low speeds and recharged through the ICE engine,
with no plug-in capability. This was still the case for most hybrids in the market up to the
mid 2010s. Moreover, while hybrids can appear to be a reasonable “bridge” strategy
when the technological transitions take a long time to unfold, as in the automobile
industry, the reality is that hybrids never capture a significant portion of the market
(hybrid cars represent two percent of total US auto sales today and will soon be
surpassed by EVs). More importantly, they end up exposing incumbents to inroads from
other actors fully committed to the new technology.

Sub-optimal performance. The second problem with hybrids is that, by the mere fact that
they mix two very different technologies, hybrid cars typically do not optimize or excel in
either one. Resources are divided so that progress toward improvement of either system
is slower than it might be. They also cost more and need to be larger and heavier, since
these products have to be designed to host sub-systems and components for each of
the technologies. Kodak’s Photo CD, for instance, was a bulky, expensive and hard to
use product that was soon superseded by advances in the new technology and cost
competition from the old. Similarly, criticizing the Volt hybrid, Elon Musk noted that when
the Volt’s battery soon runs out of power, “You’ll have a tiny engine pulling around a big
car with a dead battery—you’ll be the worst car on the road.”5

The reason hybrids are a trap for incumbents is simple: time. While hybrids can
attract customers and represent a viable business during the transition years, they end
up distracting the incumbents from making enough progress on the new technology.
Incumbents that focus on hybrids loose precious time they could have used to develop a
real advantage and leadership in the new technology. It is no coincidence that the most
successful companies in producing and selling hybrid products tend to be the slowest
ones to move to the new technology. Figure 1, that plots the number of hybrid cars sold
by auto firms vis a vis how quickly they entered the EV market, show this situation. It is
telling that Toyota, the first hybrid entrant and most successful producer of such cars,
even as late as 2017 has no EV in the market and will only begin mass-producing EVs
not earlier than 2019.

When, during a technological transition, the main players in an industry focus on

hybrid products they give the space to new entrants focusing exclusively on the new
technology. When incumbents are even slow to react to the first signs that the new
entrants are indeed capable of producing successful products based solely on the new
technology (think Tesla with the Roadster and Model S), then incumbents are handing
the entrants a very valuable advantage: sufficient time for them not only to gain
technological leadership and market visibility, but also to build or acquire the assets they
require to be successful in the long run.

Give Them Enough Time…and they will build them

A classical framework in innovation management emphasized that innovators often do

not profit from being early with their innovations because they lack “complementary
assets” to the innovation6. That is, they lack the assets and capabilities that are needed
to scale the innovation into a sustainable business. A classical case when the entrant

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was not given time to establish itself is that of Electrical Musical Industries, EMI, the
British company that invented the computerized axial tomography (CAT) scanner, and
was the first entrant in the emergent market for CAT scanning machines. Despite a
Nobel Prize-winning innovation, EMI could not fend off the fast moves by established
competitors in the medical equipment business, such as General Electric (GE) and
Technicare, who had all the necessary assets needed for a new type of equipment to
succeed: a large, international distribution network, strong manufacturing capabilities,
marketing muscle and reputation, equipment support, training and service capabilities.

Unfortunately for EMI, the incumbents in the medical equipment industry (GE,
Technicare and others) reacted quickly and with determination to catch up with the
innovator on the new technology. Indeed, only a few years after EMI had released their
first CAT scanner, the incumbents had not only caught up with the technology but had
surpassed the innovator, offering more advanced CAT scanners to customers (faster,
full body). By acting quickly, they successfully used their resources and complementary
assets to fend off a powerful, innovative new entrant.

Compare the EMI story with Tesla’s experience during its first years in the market.
A new entrant that did not have any of the complementary assets needed for success:
brand name and history in the industry, dealership network, or manufacturing capabilities
in both cases. However, instead of the resolve of the medical equipment incumbents,
the ICE incumbents in the auto industry showed hesitation and lack of conviction with
the new technology as they thought was many years away. Their response during the
early years of Tesla was to continue to focus on hybrids to optimize the traditional
engine in terms of fuel consumption and emissions reduction. As a result, serious
competition for Tesla in the EV front is not expected before 2018. Incumbents found that
designing and producing a software-based purely electric car that optimizes the
performance of the battery and electric motor, as Tesla has done, is difficult. Their delay
has basically given Tesla 10 or more years to build the complementary assets it was
lacking to compete effectively. After years in the spotlight as the most innovative EV
company, Tesla’s brand is now a powerful asset.

Tesla’s unusual direct-to-consumer, Apple-store like distribution and service

network has expanded and gained crucial experience and geographical footprint. Even
their manufacturing capability is now expected to be not only large, but also world-class
with respect to automation and productivity. The jury is still out. Tesla’s new Gigafactory,
focusing on the production of battery cells and battery packs, a key component for the
new EVs, is only in a ramp-up stage at the moment of this writing (the plant will also
produce motors and drive units). Tesla’s output plans call for the production of 5,000
vehicles/month by December 2017 and a tall goal of 500,000 vehicles in all of 2018.
Tesla missed its ramp-up production goals for the first quarter, but the company
reassured investors that it was due to a few production subsystems that had taken
longer that expected to configure. No company has attempted before to produce the
number of electric vehicles that Tesla is planning to produce, and it is likely that the
production of battery packs in large number will be a challenge for most firms.

Leapfrogging the incumbents

Slow incumbent reaction not only gave Tesla the time to build some of the
complementary assets it was missing, such as production capacity, brand reputation,
and distribution capabilities, but also the time to create other complementary assets,
specific to the new technology. Those assets will now help Tesla fend off the late

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entering competition. Tesla acted quickly and decisively to build what is arguably the
most valuable complementary asset for an electric vehicle: a network of fast and
dependable electric charging stations. These “supercharging stations,” whose
deployment began in 2012, are a key reason behind the success of Tesla so far. Tesla
has created a clear advantage with its supercharging network for at least three reasons.

Early Start, Early Lead. Tesla started early to build their network in 2012 and by the
summer of 2017 had the highest number of charging outlets even when compared to the
competing networks that are sponsored by multiple firms. As of July 2017, Tesla had
2,470 DC-fast-charging outlets throughout the US. Two major competing DC-fast-
charging standards and networks exist: CHAdeMO and SAE. The “CHAdeMO”1 standard,
largely supported by Japanese manufacturers, has 1,991 charging outlets in the US. The
so-called “Combo2”2 standard (also SAE-J1772/CCS) mainly supported by American
and European car manufacturers, had 1,460 charging outlets in the U.S.

Focus on the Key Customer Pain-Point. Conscious of the fact that one of the major
obstacles for EV adoption was “range anxiety” (the fear of running out of battery power),
Tesla not only designed cars with a far-larger range than any of its competitors, but also
planned its supercharger network in such way as to minimize range anxiety for
customers. It is interesting to compare the geographical strategy followed by Tesla and
its two competing networks. Both CHAdeMO and Combo2 have primarily concentrated
in cities or narrow corridors within the U.S. Tesla, in contrast, focused on offering inter-
city charging capacity so that a Tesla owner could drive throughout the country and
always find a supercharger at range. Figure 2 shows these different strategies. Tesla’s
focus on inter-city connectivity was in direct response to the call to quell customer range
anxiety. With cars that could offer a range close to 300 miles, and a network of
supercharging stations along the way connecting most major urban points in the U.S.
map, Tesla owners could think of their cars not only as urban utility vehicles but as a car
that can go basically anywhere.

Technological Superiority. An early and committed start gave Tesla significant

advantages in EV technology, which not only showed in their cars but also in their
charging network. As of summer 2017, Tesla superchargers could charge at rates
substantially higher than the rates achieved by the other two networks that had to deal
with diverging technological levels of the participants in the consortia. Perhaps more
importantly, Tesla’s technological advantage allowed them to follow a “closed”
proprietary model: Tesla Superchargers are only open to Tesla owners. In contrast,
since no other company was so advanced as Tesla in EV technology, or as committed to
invest in the new technology, competitors relied on open standards for their charging
stations. This means that while other EV brands cannot use the Tesla superchargers,
Tesla owners can charge their cars in the other networks using an adapter that comes
with every Tesla vehicle.

Beyond 2017: Will Tesla transform the industry?

Five producers have dominated the U.S. auto industry for years. GM, Ford, Chrysler,
Toyota and Honda accounted for more than 70% of U.S. market share during the last
decade or two. The last major transformation of the industry came precisely in the 1970s

1
Supported by Nissan-Renault, Mitsubishi and Subaru, later also Toyota
2
Supported by Volkswagen, General Motors, BMW, Daimler, Ford, FCA, Volvo, Tesla and
Hyundai

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and 1980s with the entry and emergence of Toyota, Honda and other Japanese
producers. The innovation behind that earlier transformation was actually in processes –
a series of practices, techniques and approaches that came to be known at the “Toyota
Production System”7. Toyota and other Japanese competitors developed a process to
produce cars more efficiently and with higher reliability than the large American firms. As
it is happening now with the advent of the electric vehicles, the leading producers back
then reacted very slowly to the innovation. More importantly, they also tried hybrid
strategies instead of fully embracing the innovation. For two decades, GM, Ford and
Chrysler attempted to introduce elements of the Toyota Production System to their firms
without changing the basic structure and philosophy of their traditional production
methods. The results were seen not only in the bottom line of the American firms, but
also in how consumer preferences shifted: the market share of the “big three” American
firms went from over 80% in the early 1970s to about 40% by 2010.

Will Tesla transform the auto industry as Toyota did decades earlier? It is still
early to tell, but clearly the dominant producers have fallen again into the hybrid trap. For
more than a decade, their effort has focused on hybridizing their different models. Only
now, after giving Tesla 10 years or more to gain experience, critical mass, and visibility
allowing the entrant to overcome many of its liabilities, the major producers are finally
starting to take electric vehicles seriously. But as shown here, Tesla has already gotten
a substantial head start. Figure 3 shows how Tesla is already leading the luxury sedan
market with its Model S, even when compared to traditional ICE luxury sedans. Tesla’s
Model X ranked third in the large luxury SUV category in 2016. Model 3, Tesla’s mass-
market car, just started to sell in mid 2017 and, as noted earlier, has seen
unprecedented demand. If Tesla manages to get even somewhat close to their goal of
500,000 Model 3 produced in 2018, then the Model 3 will become the best-selling car in
America (the best selling car in 2016, the Toyota Camry, sold 388,000 units). If that were
to happen, further changes could come quickly. Tesla has already announced a pick-up
truck and a commercial truck.

Whether Tesla ends up transforming the industry will also depend on how fast
the ICE incumbents move from now on. Most of them are trying to move quickly into EVs
now, but one must keep in mind that they still have their legacy assets and resources to
contend with, so the forces resisting change within these firms are not trivial. Even ICE
companies that have shown more willingness to move to EVs can suffer setbacks. For
instance, BMW developed and launched in 2013 the BMW i3, their first fully electric car
designed from scratch. With a range of up to 100 miles, the i3 attracted a cadre of new
buyers for BMW, people that had not driven BMWs before, pushing the i3 to become the
4th most-sold EV in the US market after the Model S, the Model X and the Nissan LEAF
(Figure 4). Despite BMW’s large scale EV field-tests with other models, the MiniE and
ActiveE, which could be considered a promising success, BMW still introduced an
alternative version of the i3 with a range extender (the i3 Rex), an ICE engine into the
electric i3 making it a hybrid in 2014. At the same time BMW also announced that it
would focus on hybridizing their existing fleet of models, turning them into PHEVs,
instead of launching more EVs in the near future.

The stark message of our analysis of hybrid product strategies is that they are
usually a lure toward failure. In the midst of threat and uncertainty created by an

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emerging challenging new technology, both new and old competitors will stake out
positions in the new. Combinations of elements of both new and old systems will only
be introduced by incumbent firms. Incumbents’ thinking seems to be that hybrids give
them a foot in the new technology while still taking advantage of their experience in the
old technology. New entrants avoid pursuing hybrid strategies and must succeed or fail
through their exclusive bets on innovation. They surely cannot challenge established
firms on their home turf and stand a far better chance by concentrating every effort on
the emerging alternative. That is what Tesla has done, taking advantage of a
transformation that requires new technological knowledge, new complementary assets,
and benefiting from strong leadership and both investors’ and customers’ appetite for
change. Tesla is also betting on the EV being only part of a larger system that includes
batteries, home charging and back-up systems (Tesla’s power wall), and photovoltaic
technology in panels and roofing materials. If his vision proves to be correct, it might
mean that the Hybrid Trap would be, for most incumbent auto firms, a hole deeper than
they can overcome. If the dominant auto firms continue to fall into the trap perhaps Elon
Musk and Tesla will be given enough time to finish the industry transformation they have
already started.

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Figure 1. Firms that focused on hybrids enter EV markets late
Figure 2. EV Charging Networks: Tesla’s differentiated Inter-City Strategy

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Figure 3. Luxury Sedan Sales in the U.S. Market, 2012 - 2016

50,000

45,000 Tesla Model S

40,000 Mercedes S-Class

35,000 Cadillac CTS

Luxury Sedan Sales

30,000 BMW 7-Series

25,000 Porsche 911

20,000 Audi A7

15,000 Lexus LS

10,000 Porsche Panamera

Audi A8
5,000
Jaguar Jaguar XJ
--
2012 2013 2014 2015 2016

Figure 4. Electric Vehicles Sales in the U.S. Market, 2012 - 2016

10000
Nissan LEAF
9000
Tesla Model S (60KWh)
8000
BMW i3
7000
6000 Fiat 500e

5000 Tesla Model X

4000 VW e-Golf

3000 Chevrolet Spark EV

2000 Ford Focus Electric

1000 smart EV

0 Mercedes B-Class ED (250e)

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Kia Soul EV
2011 2012 2013 2014 2015 2016

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Table 1. Hesitant strategies: Auto industry incumbents and the electric vehicle
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Wired Magazine and NewsWeek: https://www.wired.com/2010/09/ff_tesla/;
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The New Yorker, Friend, Tad (2009-01-07). "Elon Musk and electric cars".
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J.M. Utterback, “Mastering the Dynamics of Innovation”, (Boston: Harvard Business
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The New Yorker, https://www.newyorker.com/magazine/2009/08/24/plugged-in
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Press, 1985).

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