Tesla Will Not Decide the Future of Transportation
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When my Uber arrived, I was thrilled that it was a Tesla Model S. The automatic door handles extended to meet my hand. Stepping inside the first thing you notice is the massive in-dash screen. As the car started to drive away, it was difficult to avoid gazing up into the sky, through the glass roof. It was the coolest ride down Las Vegas Boulevard, an impressive experience I owed to the vision of Elon Musk.
Not exactly known for its innovation these days, GM has made an enormous bet, and a warning shot to the likes of Elon Musk at Tesla. The message appears to be — we see your bet, and we raise you.
For decades, General Motors (GM) has been known for little more than maintaining the status quo and asking the Government for money due to its lack of foresight. That changed this past week when it announced layoffs of over 14,000 employees and the closure of five facilities in North America within the coming year. It is a big move for the legacy automaker. They are shutting down entire lines of vehicles and will save $6 billion in the process.
It is not just GM. Ford is decimating its own passenger car lines, ending the Focus, Taurus, Fiesta, and Fusion. It will save the company $14 billion as trucks and SUVs are where the money is at.
In the White House, it may seem perhaps like GM has bitten the hand that once fed it in its hour of need. Spewing his usual hot air and hyperbole (usually babbling about nothing at all) President Trump has already performed his usual knee-jerk come-out-fighting-no-matter-what thing. It is unclear how it could be more evident that Trump does not care about the future, nor the future of Americans. It is evident in many of the decisions and policy already enacted. Trump cares about Trump, but mostly about things that make him look bad. The layoffs will be occurring in the heart of the Midwest, where rural populations sent him to the government to “shake things up.” More and more it appears he has disrupted to the point of breaking what America once had, and the future that it may have earned for itself. It is unfortunate that the big news has been lost in the political fallout.
General Motors explained that the move is part of its restructuring towards what the future will be, and that includes electric cars and self-driving vehicles. Lately, the White House has been far more concerned with the past than the future, and it appears evident that policy and decisions are coming from someone at the top who knows nothing about the auto industry and nothing about innovation.
The obnoxious signals from Washington are that innovation is the enemy and that it is more important to impede progress in order to continue standing still. There have been rollbacks of emissions and environmental dumping standards, and there is a repeal proposed of the Clean Coal Act, which decreased emissions from coal and oil power plants. The Guardian reported that investment in dirty fossil fuel projects have doubled under the Trump administration, like extraction from tar-sands which are notoriously inefficient and dirty. But it doesn’t stop there. Proactively raising vehicle fuel emissions standards have come under attack. Even if other countries who may produce more fuel efficient cars and trucks (like Canada) are likely to see tariffs placed onto their products to send into oblivion. It seems that the politicians whom are elected to protect and have the best interests in mind are working to ensure that we all die from our actions, these consequences are known as climate change.
The current threat to end subsidies for electric cars would not just punish GM. It also would punish consumers and our delicate environment. The federal tax credits of up to $7,500 for electric vehicles does not only help people make the switch to newer, cleaner technology, but it also helps stimulate the entire world transition to that future. It seems, however, that forward is difficult when the country is speeding full-throttle in reverse trying to outrun its fate — all for the sake of making things the way they used to be.
That is a critical misalignment because people actually want electric cars. In fact, they want them more than ever. A survey completed earlier this year by the American Automobile Association (AAA) shows that over 20% of Americans (that’s 50 million) would prefer an electric vehicle as their next purchase.
Even though there’s an effort to ensure that the status quo is maintained — the future is not built by governments or old men in white buildings (or is that white men in old buildings?) The future is created by the young revolutionaries. It just usually takes a really long time. The people know what they want their future to be, and they will not be held back.
Truth be told, GM knows a thing or two about moving backward. The company once bolstered its own future by infamously co-purchasing the trolleys and cable car networks of entire cities between 1938 and 1950. Those transportation systems were then shut down and destroyed. Los Angeles in part owes its traffic problems and smog to the GM takeover of its public system during that time.
When GM made moves forward decades ago with the EV1 electric car (featured in the documentary “Who Killed The Electric Car?”), the company eventually recalled the vehicles and destroyed them at the dismay of their owners. Instead, General Motors backed its briefly popular monstrosity Hummer line of vehicles. The vast profits from its sales were a brutal slap in the face to electric cars and their enthusiasts. Ironically, had GM continued along the trail it blazed with the EV1, it would be decades ahead in the electric car market, instead of struggling to keep up. History always looks obvious in the rear-view mirror.
While an announcement of thousands of jobs being lost and closing factories to curb excess car manufacturing capacity may typically have drawn a negative response from shareholders, the opposite happened. An abnormality that defies expectations usually indicates something new has occurred. Indeed, instead of shareholders running for the door to cash in their chips, they doubled down. Stock in GM surged by 6% on the announcement, because it was not all bad news. It was significant because it takes something big to move the needle at GM with a legacy spanning over 110 years and a market cap over $51 billion.
The announcement is a bold move away from the traditional automotive business. The move puts General Motors into the transportation business, in a step to revolutionize the company before it becomes irrelevant. Perhaps an old dog can learn new tricks.
The competitors to Detroit have far superior vehicles that are more popular. Regardless, at a company with the size, power, and influence of GM, the paradigm shift to self-drive and electric has more potential to drive the industry in the direction of its choosing. The company may revolutionize not just the cars, trucks, and SUVs we choose to buy, but also position themselves to define the infrastructure and the way we “drive” them. GM has not just moved a chess piece on the board, they have moved the entire board itself.
It is a little-known fact that GM has been moving in this direction for a while now, slowly putting the pieces together. For example, GM is the owner of the LIDAR startup company “Strobe” and self-driving car startup “Cruise.” LIDAR, which is an acronym for “Light Detection and Ranging” uses light from pulsed laser beams to measure variable distances. The data is used to create highly accurate 3D imaging of the Earth. The technology is being used by GM to guide self-driving vehicles, by combining a laser, scanner, and a GPS receiver. This is where the excitement is at the company, and why they are hiring hundreds of people for its autonomous vehicle division.
GM is also a shareholder in Lyft, the ride-sharing company. The company injected $500 million into Uber’s biggest rival. Toyota, not to be left behind, invested a similar $500M into Uber. Ride-sharing is projected to be a $6.5 billion market by 2020, and the world’s largest automakers are making big bets that they are on the winning team.
Across the country, far, far away from the legacy in Detroit, Tesla shimmers in the west and promises a future far beyond what we have today. This used to be the voice of Detroit but years of decline and mediocre vehicles silenced it.
With its gull-wing doors, that can do a dance at the push of a button, and its colossal in-dash screens and glass roofs, Tesla is bringing the coolest features that cars have ever seen. Some of them just because they can. Tesla is the current rock star of the car manufacturing and technology world, and the poster child of electric vehicles.
Don’t get me wrong, I love Tesla. However, not everything has to be about Tesla. While Tesla is making the coolest electric cars ever, they are also fighting for their own survival. Its stock price a roller coaster wildly rocking and rolling depending on any rumor or news that indicates which direction the company is moving. I should know, I’m a shareholder. One day it is huge concerns over debt payments and going bankrupt, the next moment the company is the producing above production expectations, its earnings per share skyrocketing, and suddenly the #1 selling domestic car in September. A wild ride indeed.
In one way or another, Tesla and Uber forced the hand of the once world’s largest automaker. But, even though Tesla is seriously challenging the status quo, it has no current ability to revolutionize transportation as a whole. Despite its $60 billion market cap being larger than GM, the company is just not powerful enough to drive to the tipping point (yet).
As much as we are in love with the underdog story and succeeding despite all obstacles, it will not be Tesla that ultimately decides how we get around. With Tesla and others paving the way that the “big boys” appear to now be following, it will be the big automakers following the trends that will lead to the inevitable tipping point to electrics. When that occurs, the power shall shift to the boutique manufacturers who will ultimately usurp the power of the big automakers in the decades to come.
The scale and potential in front of all automakers is enormous. Much like the automobile changed the world and spawned all sorts of secondary businesses like drive-ins, strip malls, gas stations, convenience stores, and so much more, the future of autonomous and electric vehicles will unlock things we have not yet imagined. That will be the future built on the back of the electric car movement.
If there is any doubt that the future of vehicles will be electric, look no further than Tesla, Volvo, and even Porsche. Tesla is making its manufacturing of cars a public spectacle and people love being a part of it. Volvo announced that their 2019 fleet of new vehicles would only include electric and hybrids. Meanwhile, Porsche with its roots deeply in racing and its sexy image, is promising electric cars that charge in just 15 minutes and range possibly beyond what is possible today.
If you want to know what the future of transportation will be, look to the incredible and ballsy move that General Motors made this past week. Its bet on autonomous cars and technology reinforces the decisions made by the forerunners such as Tesla. Perhaps we won’t be driving those sexy cars at all — maybe they will be driving themselves sooner than we think. Let the revolution begin.
