Pay Attention to the Schooling GM is Giving Elon Musk
General Motors is thoughtfully rolling out an electric vehicle infrastructure across the country that Tesla can’t match
Elon Musk is the reigning champion
Today Tesla is the undisputed champion in electric vehicles, producing over half a million automobiles in 2020. That’s huge progress for a company producing only a few hundred cars annually five years ago. But Tesla is in a heavyweight slugfest. They've won the early rounds, but they may be punching above their weight.
Here comes a contender
Tesla’s success has attracted a formidable new competitor. General Motors has boldly proclaimed that it will transition to an all-electric future. GM CEO and Chairman Mary Barra recently told investment analysts that her goal for the company is to overtake Tesla as the heavyweight champion of electric vehicles by investing $27 billion in battery and autonomous technology. She is fully committing GM to becoming the electric vehicle North American market share leader over the next few years.
Swing and a miss
General Motors had an opportunity a quarter of a century ago to be the market leader, but whiffed. They developed the EV1 subcompact, one of the first modern electric automobiles. A disruptive innovation like EV1 needs a patron very high in the organization to protect it from organizational antibodies that inevitably form to reject the invader. Rather than protect the EV1s, GM’s then CEO killed them… literally… recalling and destroying almost all of them over the objections of their drivers. What was he thinking?
Twenty-five years ago electric automobiles were not ready for primetime. The right approach would have been for GM to find a niche market where gas or diesel vehicles weren’t good enough. Perhaps in constrained spaces where fossil fuel emissions choked people. Or maybe where electricity was abundant but gasoline wasn’t. This would have allowed the innovation to thrive and mature, putting GM in the catbird seat today. But you can almost hear the conversation in the executive suite that this market was pitifully small. Why bother? Or worse, electric automobiles were sucking valuable resources away from GM profit centers that executives' bonuses depended on. Follow the money. So sadly, GM abandoned this technology, creating the market void that to Musk’s good fortune he rushed into.
The innovator’s dilemma
A huge advantage gas and diesel-powered vehicles have over electric vehicles is a century’s worth of infrastructure to support them, with gas stations, maintenance centers, and the like spread all over the country. Because electric cars lack a robust support infrastructure, drivers get range anxiety that they won’t be able to charge up when their batteries run low. The fear of getting stranded makes planning trips more tedious and adds considerable stress to a journey.
It’s really hard for a new, disruptive innovation to thrive in a world designed for a more mature solution. Early Tesla buyers blew past these problems because they were buying the prestige of being the cool kids on the block with very expensive cars few others could afford. Targeting them as customers early on was Elon’s brilliance. Even though Tesla's costs have come down as new lower-priced models have been introduced, most mainstream customers won’t tolerate the problems, so they stick with their gas engine cars. While half a million Tesla’s sold is impressive, it’s a drop in the bucket to the 62 million cars sold worldwide in pandemic infected 2020.
GM’s brilliant lesson
Tesla boasts that it sells cars direct to customers without the overhead of a dealer network. GM’s brilliance is what Elon sells as a liability GM turns into an asset. Unlike Tesla, GM can quickly roll out an electric vehicle infrastructure throughout the country. How? By requiring more than 880 Cadillac dealers to pony up $200,000 to acquire tooling, training, and charging stations to support electric vehicles like the Lyriq crossover, Cadillac’s first all-electric vehicle hitting the U.S. market in late 2022.
Now, almost anywhere a GM electric vehicle driver wants to go, they can rest assured of finding electric charging stations, maintenance facilities, and other support infrastructure. This level of security is very important to the average driver. GM owners are not just buying fashionable electric cars, they are buying the comfort of knowing they won’t get stranded wherever they choose to travel. That’s huge as electric vehicles become mainstream and is a capability Tesla will find very difficult to compete against. So the middle rounds of this fight may go to GM.
But, and you knew there was a but was coming, the GM dealer naysayers are howling. Some are just Luddites, resisting a new innovation. Others may think electric vehicles are the future, just not their future. Those GM dealers who sell a small number of Cadillacs each year find it hard to justify a $200,000 investment.
This is where GM’s dedication to being a winner shines through. It’s time for Cadillac dealers to step up to the fight or get out of the ring. GM is paying up to $500,000 each to buy out 20% of the Cadillac dealers unwilling to go the distance. That’s the commitment it takes to be a champion.
