Under Siege: Big Auto losing ground as Tesla advances
Is Big Auto under siege from Tesla Motors? Will Tesla leapfrog the industry with superior electric vehicle technology coupled with a shared autonomous fleet? John Divine of U.S. News and World Report* writes, "legacy carmakers are behind the ball on some of the industry's most powerful and inevitable trends. Automakers are falling behind... [so] let's just get this out of the way: Tesla Motors (TSLA) is an agent of chaos in its industry."
"Tesla will absolutely have a huge impact" on the traditional auto industry, according to Ale Resnik, CEO and co-founder of the online automotive marketplace Beepi. Innovation is in Tesla's DNA, Resnik says, "in contrast to traditional automakers, who are now partnering with technology companies. In a world in which cars will have more software and are quickly becoming computers on wheels, Tesla has an advantage."
Big Auto is evolving, but its progress has been sluggish. "In a matter of years, an industry more than a century old is being turned on its head. While slow to adapt, entrenched industry titans are in fact working seriously on electric vehicles, autonomy and mobility... but it may very well be 'too little, too late' for old-school industry leaders that spent too long with their heads in the sand."
Source: Forbes via Chunka Mui
What does this mean for Big Auto? "The auto industry doesn't have time to ignore its true innovators, and traditional automakers must absolutely invest in, and seek solutions to, this phenomenon we call the 'clockspeed dilemma' or they risk becoming obsolete very quickly," according to Gary Silberg, a partner and national automotive leader at KPMG in Chicago.
Is Big Auto pushing into the electric vehicle (EV) market? Barely, and the EVs they're making (thus far) are sub-par: "Traditional automakers are making electric cars too. They're just not very good. The 2016 Nissan Leaf, for instance, has a range of just 107 miles... The Volkswagen e-Golf is all electric but gets just 83 miles per charge; the Ford Focus Electric has a range of 76 miles."
Image: Moniteur Automobile
In contrast, "Tesla has been making all-electric vehicles with ranges of more than 200 miles since 2008, when it came out with its first car, the Tesla Roadster. Today, the company has two vehicles, the Tesla Model X, an SUV, and the Tesla Model S, a sedan, that also go more than 200 miles on a single charge... [and] the wild popularity of the Model 3 – Tesla's first truly affordable, mass-produced car – signals the beginning of a major shift in consumer tastes."
Shared Autonomous Vehicles
Divine writes, "Do you really think millennials – who are frequently impugned by the mainstream media as wanting everything served to them on a silver platter, yesterday – will opt for a gas-guzzling, non-autonomous car that they can't turn into their own money-making ride-hailing service while they sleep?" Tesla already has future plans in place to make: "autonomous vehicles that can drive themselves around and pick up fares for you while you work or sleep, reducing the cost of owning a Tesla and flooding the market with mobility options."
Big Auto is scrambling, "GM in particular seems to realize the importance of investing in tomorrow's technologies today and took a $500 million, 9 percent stake in Lyft in January. Two months later, it bought a San Francisco, California-based startup that develops self-driving car technology, Cruise Automation, for over $1 billion." Even with these attempts, Silberg comments that, "Almost every week we see new examples of the automakers announcing plans to fight becoming irrelevant. Now we just have to see which plans pay a dividend and which plans fail."
*Source: U.S. News and World Report