Automakers Should Be Terrified Of One Company — And It's Not Tesla (TSLA)

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Tesla Model X Detroit 2014

On Monday at the Detroit Auto Show, General Motors revealed a $30,000 electric concept car that will theoretically get 200 miles per charge.

Before we get started here, it's worth noting that electric cars aren't really the story in Detroit this year. In fact, for the most part, electric cars are kind of over (for now) in the auto industry.

That doesn't mean Tesla is over — quite the contrary, CEO Elon Musk's startup looks pretty good these days, even though the stock has sagged since last September.

But for the most part, the electric car market is a market of one. Tesla has the space to itself.

The story in Detroit is ... the comeback of the auto industry overall, and of the Detroit Big Three — General Motors, Ford, and Chrysler — in particular. And what a comeback! Last year saw nearly 17 million in new car and truck sales in the US. Gas is around $2. Big SUVs and luxury cars are selling like crazy.

And at the Detroit Auto Show, expensive, over-the-top supercars are being unveiled left and right.

The Chevy Bolt, the $30,000 concept EV from GM, is in this context really more of a signal than anything else.


That signal is directed at Tesla. GM is demonstrating that if it wants to build a mass-market EV, it can. Not that there aren't other automakers who've already made this case. Nissan has been selling the Leaf for years, and Honda has its Fit EV. Neither can do 200 miles per charge, but that's a matter of battery size and cost. Larger batteries and a steeper sticker price would mean increased range.

So the Bolt isn't intended to kill Tesla's Model 3, the mass-market EV Tesla plans to bring to market on 2017.

No "Tesla killer" here.

But I disagree with Slate's Will Oremus that the Bolt could counterintuitively be a good thing for Tesla — despite what Tesla says.

I asked Bob Lutz, GM's former product czar, about this last year, and he was fairly direct about the reality of Tesla's market position.

"There's nothing about [Tesla's] battery technology that can’t be copied by another car company," he said. "Or it could simply buy batteries."

Lutz argued that Tesla's success is due in part to design, and I tend to agree with him. Prior to Tesla, electric cars were boring and virtuous. After Tesla, they are hot, fast, and sexy.

Tesla Roadster red

The bottom line is that although Tesla has managed something astonishing in creating the first truly new American car company in decades, Elon & Co. are still at the beginning of a long road that many hope will eventually lead the sales that take Tesla outside its current luxury niche.

Additionally, there's nothing to be gained by "killing" Tesla. General Motors and everyone else in the auto industry is perfectly happy to let Tesla assume all the risk of developing electric cars. It is, after all, still a gigantic risk, Tesla's $26-billion market cap notwithstanding.

In this sense, Tesla is a glorious laboratory. So far, its cars have been incredible. I've driven them all and have been totally blown away.

Others have, too. Ford CEO Mark Fields told Wall Street analysts last year that "[w]e have driven the Model S, torn it down, put it back together, and driven it again — we're very familiar with that product."

Tesla DriveWho knows, maybe in 20 years the roadways of America will be thick with electric cars and many of them will be Teslas. Even then, with Tesla thriving, there might be little incentive to kill it. Automakers would see instead a robust market for electric cars and generate a rich pipeline of new models.

So what GM is ultimately saying with the Bolt is, "Hey, we can do this, too." GM is reminding Tesla that GM is a gigantic industrial enterprise with vast design, engineering, and manufacturing capabilities.

The Bolt is just a car with a different kind of motor — and not some radically different motor. Electric propulsion is hardly a wild departure from the norm. It's been around for a century. But the economics of gas have simply made more sense.

Overall, it wouldn't be terribly hard for the traditional auto industry to get rid of Tesla. Musk's company currently builds basically one car at one factory. That car has captivated its target market, which is willing to pay $100,000 per vehicle to join the party.

Musk however makes no bones about what's needed to vindicate Tesla's growth story: hundreds of thousands of EVs with the Tesla badge on the front. So conventional car-makers could just wait for Tesla to achieve that lofty goal — and then use their vastly greater manufacturing capacity and pricing power to undermine what would be, even if Tesla does great, a relatively minor US and global market share.

But once again, just because you can do that, you probably don't.

Still, why not remind the pioneer that he's out there on the edge, all alone, from time to time?

You blaze the trail and we'll stroll the road to follows.

If there's anybody the auto industry should be worried about, it's Google.

google selfdrivingcarYes, Google.

Because while Tesla now stands for innovation in the auto industry, Google, with its self-driving car, stands for a massive disruption of the way we think about mobility. Tesla is at least in the same general road as the rest of the auto industry. Google has mind-bending ideas about what a road even means.

There's a good reason why no one at the Detroit Auto Show is talking about "Google killers." These guys are pros. They know who to fear.

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