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A decade later, Tesla now officially a threat to the auto industry

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.

Tesla Model SWhile 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.

teslaForbes 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.

Tesla CEO Elon Musk

105 Responses to “A decade later, Tesla now officially a threat to the auto industry”

  1. stephenpace

    @Brad Mueller The $7500 federal tax credit actually comes from the person buying the car (e.g. if you aren’t paying in at least $7500 in taxes, you can’t claim the credit). Few people are happy with how the government spends money. For instance, I might complain that the government provides a mortgage interest deduction because I don’t have a mortgage, but I recognize the government would like to increase home ownership and therefore has decided to provide an incentive for people to buy homes. I might complain that the government spent $2T on wars that didn’t improve anything, and perhaps made things worse. In the case of the $7500 EV credit, my interest and the government’s interest have aligned–they want to improve air quality and reduce reliance on foreign oil, so they decided I can keep some of the taxes would otherwise pay into the government that year in exchange for helping be an EV pioneer. Now, you can complain about that, but in the end $7500 is a tiny amount helping to create a huge technology shift, and that is something I agree with.

  2. Bob Starling

    Capitalism discourages the innovation of new ideas, when the old ones are still operational and making a profit. No reason to get a new goose if the old one still craps golden eggs.

    • Brad Mueller

      Freemarket capitalism IS markets. You two need to review you r understanding of what a market is.

      Bud you need to see haw badly Tuckers were built.

      At the end of WW2 Henry Kaiser was probably the most successful entrepenuer in the country. He wanted to build a car company to compete with GM and Ford. He had a couple of hundred million to spend. A shitload of money in 1945. So Kaiser bragged the CEOs of GM and Ford that there was a new player in town. In each case he was asked how much he was willing to spend to enter the game. Kaiser bragged 400,000,000!. The CEOs of GM and Ford independently sat down and figured out how much it would cost to start a new car company. The figure they both arrived at was over a billion dollars in 1945.
      Both Kaiser and Tucker were undercapitalized

  3. Scott Williams

    No one hates free markets more than capitalists. They just scream for free markets when they need it to get a seat at the table, then when they get it, they want it shut down.

  4. James Robertson

    Small problem with your analysis: Tesla is only profitable due to government largesse. They raked in a few hundred million in fees from car companies that did not sell “enough* electric cars in California. Remove that indulgence fee mandated by government and…. you have a luxury item manufacturer that is losing money. The only ones who are worried about Tesla are those who aren’t smart enough to handle Excel.