Buyers can be confident because Chevy has 3,000 US dealers to service the new electric vehicle, she said. The implication was that Tesla, with just 69 service centers nationwide, can make no such promise.
When General Motors CEO Mary Barra introduced the Chevrolet Bolt at the CES gadget show last year, she took a shot at Tesla. Buyers can be confident because Chevy has 3,000 US dealers to service the new electric vehicle, she said. The implication was that Tesla, with just 69 service centers nationwide, can make no such promise. The uncharacteristic insult from Barra was designed to highlight the difference between 108-year-old GM and Tesla, a disruptive teenager. It also acknowledged a budding rivalry that could help determine whether Detroit or Silicon Valley sets the course for the future of the auto industry.
The tale of the tape favors GM. It has made billions in profits since returning to the public markets in 2010. GM got the Bolt, a USD 36,000 car that goes 238 miles per charge, to market before Tesla’s Model 3. Tesla, the 14-year-old company led by flamboyant CEO Elon Musk, has never posted an annual profit. Yet, as both CEOs face shareholders for annual meetings Tuesday, it is Barra who must explain to skeptical investors why GM’s future is as bright as Tesla’s. GM’s stock is trading around the USD 33 price of its initial public offering seven years ago. During that time, Tesla shares have soared more than tenfold to USD 335. Wall Street now values Tesla at about USD 55 billion, compared to around USD 50 billion for GM.
Despite efforts to paint themselves as technology companies, automakers can’t shake their giant, capital- intensive global manufacturing operations. The huge investment needed to build vehicles yields low profit margins compared with tech companies that make software or cell phones, says Michael Ramsey, an analyst with Gartner. GM’s net profit margin in 2016 was 5.7 per cent. By comparison, Alphabet Inc, parent of Google, had a 22 per cent margin.
Although it’s an automaker, Tesla started in the tech bucket and remains there in the eyes of investors and buyers, Ramsey says. Still, the big changes in the auto industry are in the early stages. Electric vehicles make up less than 1 percent of global auto sales and fully self-driving cars are years away. The economy can falter and company fortunes can shift. Already this year, sales in the US and China are slowing, and GM pulled out of the European and Indian markets because they weren’t profitable.
Tesla’s electric cars are the envy of the industry, and its semi-autonomous technology is among the most advanced on the road. Musk says Tesla’s California assembly plant, which used to be GM’s, will soon be among the most efficient in the world. And it’s branching into areas with potential for bigger returns, including solar panels, energy storage and trucking. “Tesla is absurdly overvalued if based on the past, but that’s irrelevant. A stock price represents risk-adjusted future cash flows,” Musk tweeted in April.
Still, Musk can’t risk any missteps as Tesla pivots from a niche manufacturer of 84,000 high-priced cars per year. The Model 3 sedan, Tesla’s first mainstream car, is due out later this year, but previous launches have been plagued with delays.