Here’s the latest Detroit indignity: Tiny Tesla, the electric automaker, is felling giants.
The Silicon Valley startup created in 2003 is worth more in market value than the American industrial icon founded exactly 100 years earlier by Henry Ford, the premier innovator of his time.
Tesla’s not far behind General Motors, either. The promise of game-changing innovation, the hope that someone new can crack the emissions-free code is causing tons of smart money to flow into Chairman Elon Musk’s Tesla.
Nearly $49 billion-worth, to be precise.
With a couple more up days for Tesla, and a few more hints of gloominess for Old Detroit metal, the most valuable American automaker will be headquartered in California. Not Detroit.
The mind reels.
But it shouldn’t. That patch of American innovation on the West Coast has a track record, too. It creates wealth and breathes life into ideas. It makes visions into reality. It gives customers things they didn’t even know they wanted—like that iPhone in your pocket.
Investors believe in Musk’s vision for an electrified automotive future. They don’t care at this point that he doesn’t make a profit peddling pricey electric cars or that he sells a tiny fraction of what Detroit does. Heck, so does Ferrari, which is another reason the traditional auto template doesn’t apply to ol’ Elon.
There’s no disputing that Tesla continues to defy the auto industry’s traditional conventions.
It loses money? The stock goes up. It misses production targets? The stock goes up. It exceeds sales goals? The stock goes up.
GM, Ford and a whole lot of others from Stuttgart to Tokyo wish they had the same deal. But they don’t. And anyone who knows anything about the industry knows investors are not as forgiving with major players as they are with Musk. The double standard may not be “fair.” But it shows the growth gulf separating the traditional auto industry from the high-tech business.
Cue Detroit’s raw legacy of bureaucracy, mediocrity and bankruptcy. Then cue Silicon Valley’s reputation for innovation, iconoclasm and fat profit margins. Who would you bet your hard-earned money on?
Tesla says that by the end of next year it will build 500,000 new Model 3 compacts. They’re expected to sell for around $40,000 and go 215 miles on a charge. And the stock? It's expected to keep going up. Never mind that the segment is already occupied by a Chevrolet Bolt that gets 238 miles on a charge. Or that it soon will be flooded with competing products from across the industry.
Yes, they’re pulling their hair out in Dearborn and the RenCen. A new study this week from Navigant Research ranks Ford and GM first and second, respectively, in the development of self-driving cars and enabling technologies. And yet, their stock goes sideways.
Tesla? It came in 12th.
Tesla may be basking in the can-do-no-wrong glow of Silicon Valley, but it’s not the only player in the interconnected global game of electrification and autonomy. And a winner is not guaranteed.
Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.