It’s funny, electric car company Tesla has been building its business for a decade now, but it’s just in recent months that the auto industry seems to be taking Tesla’s innovations as an actual threat to their businesses. That’s because it’s only been in 2013 that Tesla has shown how it can make a small profit and use its popular electric car to compete with competitors in the auto biz. But reacting to a threat when it’s finally arrived, versus skating to where the puck is going isn’t necessarily the best way to run a business. The tech industry is littered with late-movers like Blockbuster or Kodak.
While former GM exec Bob Lutz early on admitted that Tesla helped inspire the creation of the Volt, GM’s CEO Dan Akerson just created a small team within GM to study Tesla and its innovations, Bloomberg reported recently. Akerson joined GM during the bankruptcy and bailout period, became its CEO before its IPO in 2010, and is attempting to breathe new ways of thinking and creating innovation into the aged auto firm.
Tesla — even at this early stage — is already showing how it can compete with the much larger and older auto companies with sales. As Quartz wrote this weekend, there are ten car companies that Tesla now outsells in California, the state with the most Model S customers. That data came from a recent report from the Polk for the California New Car Dealers Association, which also found that Tesla scored 12 percent of the luxury sports category in California the first half of 2013, beating both the Audi A6 and the Lexus GS. Model S accounted for 50 percent of the electric car registrations in California in the first half of the year.
Forbes notes that, in California, sales of the five luxury cars that compete most directly with Tesla Model S — the Mercedes E-Class, the BMW 5-Series, the Lexus GS, the BMW 7-Series and Porsche Panamera – are all down in the first half of the year. This despite the fact that overall car sales in the U.S. and California are up significantly since 2012. It seems like Tesla is already hurting competitors’ sales. And the Model S is just Tesla’s first more luxury mainstream car — it’s carefully building its third-generation less expensive car, which could be named the Model E and which it wants to sell in even higher volumes.
Tesla is clearly hitting its goals at this point, though it still has a way to go to get its Model X and third-gen car on the roads. But GM is smart to try to crack Tesla’s innovation code. GM’s vice Chairman, Steve Girsky, told Bloomberg: “. . . if we ignore it and say it’s a bunch of laptop batteries, then shame on us.”
Electric car entrepreneur Shai Agassi (Better Place founder and former CEO) says in a post on LinkedIn that the auto industry should try to learn more from Tesla’s underlying economics, rather than try to create a competing luxury EV. Electric cars designed by the big automakers, like BMW’s i3, haven’t been so well received. Needless to say, Tesla has a thing or two to teach Better Place — which went bankrupt earlier this year and was bought out by an investor group — like what Agassi notes in his article: make an EV “an object of desire.”
To note, early movers in the auto industry that saw Tesla’s potential to change the business include Tesla investors and partners Toyota and Daimler, both of which backed Tesla early when it was just a young company. They’ve gotten early access to Tesla’s tech and brand value.