Paul, thanks a ton for dropping in. Great article, and I look forward to reading the rest of your coming series. Living in Detroit, I'm keenly interested in this: This is a hugely complicated issue in the auto industry. Firstly, there's a bit of market irrationality in Tesla's market cap compared to GM's, but that's not really the issue here. GM has to deal with global politics, whereas Tesla doesn't. Anyone who doesn't think that global politics hasn't hampered the traditional auto companies' ability to compete on electric cars, isn't really paying attention. For example, Buick spent years developing an electric car for sale in China (where a huge number of Buicks are sold). Everything from the design to the engineering was in place, prototyped and ready to go. That is, until the Chinese government said, "Thanks, we'll take it from here." To which Buick kindly replied, "Go f--k yourself," so to speak. Problem is, they can't make enough money just selling the cars in the US, so the project was scrapped. Tesla has no such trouble, given that they're just selling expensive toys to rich people. 'Expensive toys' isn't a real global market and never will be, no matter what the product. We see the same thing with solar, if I'm not mistaken. China has been undercutting US production for years (of course it doesn't help that the GOP here tries relentlessly to score political points by hoping that our home grown companies fail). So, I guess my question to you is, how does the world deal with China? They're the elephant in the room when it comes to international trade. They help to create the race to the bottom economically and environmentally. If there's not global political agreement in place (as you suggest is unnecessary), then how do American and European companies compete with them?I haven’t mentioned the revolution underway with electric cars, where Tesla is valued at more than half of GM – despite the latter producing 300 times as many cars! Do you think the market knows where that is going?
Sure, China is subsidising things as everyone does (Worldwide subsidies for fossil fuels are (from memory) over $500 billion, not counting externalities). They are no longer however racing to the bottom environmentally. They are overall a positive force in renewables, driving mass production and therefore allowing huge growth in installations (where most of the jobs are btw) in the US and other rich countries. We can't compete on manufacturing when things go to mass production so we have to compete on higher end products, that applies to all things, not just renewables. I'm very positive about China on energy (vs most people who just see coal but I see the response being game changing.
Tesla has made it clear that their approach is to start with expensive EVs at the outset, and then use efficiency of scale, increasing demand, and improved R&D to move down towards the mass market with each successive release. I can't see why GM shouldn't be able to take the same approach in the US. Perhaps they can't walk it down between brands that are divided into fiefdoms? That said, the Volt seems to be doing well enough, and I am sure that GM will make the transition to an EV fleet, even if it is behind Tesla. I'm not arguing that China isn't a factor, but I'm not convinced it is the largest one in the difference between Tesla and GM stock prices.Problem is, they can't make enough money just selling the cars in the US, so the project was scrapped. Tesla has no such trouble, given that they're just selling expensive toys to rich people. 'Expensive toys' isn't a real global market and never will be, no matter what the product.
Not the biggest difference in stock price. The biggest difference in being able to bring product to market. Tesla's stock price reflects the crazy irrationality of tech stocks; they can be understood much more in terms of Facebook than the GM, GE or Exxon. They will learn some lessons once they earnestly try to break into China. It's a place where IP isn't really thought of with any sanctity. Right now, GM can only operate on scale, whereas Tesla builds on spec, I'm sure.