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Is this the auto industry’s Amazon moment?

Tesla’s stock price is up about 450 percent this year, making it by far the most valuable car company in the world, despite just four quarters of actual profits. It’s also worth more than JP Morgan Chase, Procter & Gamble, and MasterCard. Ridiculous, right?

Maybe not. Maybe Tesla is worth its nearly $400 billion market cap or even more. What if this is the auto industry’s Amazon moment, and Tesla is the company that stands to benefit?

Like mom and pop shops and even big box stores, mainstream automakers might not be ready to take on the challenge of the progressive company with the new, big idea. Amazon did it in retail and now Tesla could do it to the auto industry.

A head start on developing its electric cars put Tesla in this position. Tesla launched its Roadster, in 2008, almost a decade after GM ended its experiment with the modern era’s first electric car, the EV1. In 2012, the Model S became the first electric passenger car to be embraced as cool by the public. It lessened our dependence on foreign oil, and it appealed to luxury shoppers for its sleek styling, viable range, immediate throttle response, and advanced driver-assistance technology. Perhaps more than that, it became a status symbol for Hollywood celebrities, Silicon Valley techies, and well-heeled Americans who wanted to make a green statement. Charismatic CEO Elon Musk only made the show more fun to watch and the club more appealing to join. 

In my eyes, Tesla is a cult. That could be the very thing that grants it this Amazon moment. Buyers and fans view Musk as a genius and the cars as the only true electric vehicles. To devotees, Musk can do no wrong, even when he’s goosing the stock market or denying the severity of the coronavirus; to them the cars are the best, even if they are built in a tent and have build issues like mismatched interior panels, ugly welds, and inconsistent panel gaps. Apple is a cult, too, and that makes it worth every penny of its nearly $2 trillion market cap, admittedly with better manufacturing.

Tesla has come a long way with those build issues while also continually increasing range. Those advances have only helped Tesla become synonymous with the electric car. I used to think Tesla would lose that distinction once brands with longer, more proven track records of building reliable cars got into the EV game—brands like Audi, BMW, Mercedes, and Porsche on the high end and General Motors, Ford, Honda, Toyota, and Hyundai/Kia on the low end.

Well, Audi, Porsche, GM, and Mercedes have built electric cars, and they haven’t yet gained appreciable traction with buyers, though they might. They’ve been joined by Hyundai, Kia, and Jaguar, too. No great shakes so far. A slew of new EVs are also on the way from Ford, GM, and Volkswagen. Will these vehicles catch on with buyers? That could be a tough row to hoe.

The problem for all the established brands is convincing buyers that they can build EVs. Not only that, but their EVs have to resonate with the zeitgeist like Tesla has, and they need to be at least competitive with Tesla on range. 

So far, no automaker’s EV can achieve the range of a Tesla. The Tesla Model 3 Long Range is EPA-rated at 322 miles of range, and the Model S as high as 402 miles. The Porsche Taycan has 192 miles of range, the Audi E-Tron 218 miles, the Nissan Leaf 226 miles, the Hyundai Kona Electric 258 miles, and the Chevrolet Bolt 259 miles. We don’t even know what the range of the Mercedes-Benz EQC is because a vehicle that was supposed to arrive in 2019 is still delayed with no end in sight. Ford is targeting 300 miles of range for the Mach-E, so it could be the first EV that’s truly competitive with Tesla. 

Still, Tesla also has the jump on all of them for charging infrastructure..

If established automakers can’t change the perception of their customers, they could begin falling by the wayside and Tesla’s lineup could grow to proportions that make Mercedes’ look small. If Tesla is the only viable EV brand in the industry, it will have to cover all the market segments—and with the Cybertruck on the way, a van or people-mover discussed, and last week’s suggestion that an affordable $25,000 car might arrive in 2023, it’s arguably on the way to that.

The Amazon moment could also let some other new brands make headway. They have the big idea, too, and they will only be associated with electric vehicles. Rivian is generating buzz with its attractive designs, and Lucid looks enticing with promises of 500-plus miles of range.

Everyone knew the switch to EVs was coming, but it got more real when California announced its plan to require all passenger cars and light trucks to be zero-emissions vehicles by 2035. California represents 11.7% of the U.S. auto industry and the ZEV states that follow CARB regulations could bring that up to 30% if they follow suit. Tesla’s ready for that, which could mean its valuation is valid or even low. Maybe Tesla is a $1 trillion company in an EV future that it dominates. The other brands aren’t ready, and at least one has admitted it. 

“Currently, Tesla has larger batteries because their cars are built around the batteries. Tesla is two years ahead in terms of computing and software architecture, and in autonomous driving as well,” Audi CEO Markus Duesmann told a German publication in July.

The issue for established automakers is not only an engineering problem, but also a design and marketing one. Not only do they need to find a way to compete with Tesla for range, despite Tesla’s decade head start, they also need to design cars that resonate with buyers and market them to capture their imaginations. Maybe it’s one of perception too: Maybe we gravitate to the Amazons and Teslas of the world because they’re uncomplicated choices.

If automakers can’t solve these problems, they could lose their customers just like retail stores did when Amazon had a better idea. How it all plays out will define the auto industry in the next decade and beyond.


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