We love to hate Tesla. In truth, we love to hate Elon Musk. He is clearly an insane genius who is busy reinventing the world, in imitation of the world in which he would like to live. And yet…
Tesla is now the most valuable automotive company on the planet. That is even after the near scandal last year when Musk was about to buy back shares and people did not like it.
While this may be a valuation based on the fact that Tesla is about the future and always has been, it is a real slap in the face to the rest of the automotive industry.
The rest of the automotive industry, like many other industries, is suffering from a legacy hangover that is all but insurmountable.
Like many industries, including our old friend telecoms, the dinosaurs are fighting back by being defensive. The latest tactic is the merger between Fiat Chrysler and Peugeot.
As Cyrus Mewalla says in his latest newsletter, “the global automotive industry – worth $3.5 trillion in annual revenues – faces four concurrent disruptive threats: the connected car, the electric vehicle, autonomous driving technology and the concept of transport-as-a-service”.
As a result of this, the value of disruptive companies who tick all of those boxes is going to beat – every time – the legacy guys trying to keep up.
And Tesla, and Musk, are nothing if not disruptive.
While the automotive world may be at a slight tangent to our normal discussions, it is emerging as the third battleground. There is the home, there is the office and now, with autonomous cars (OK, a little way away yet), there is the space in between, to entertain, inform and address.
It is interesting that there really is no arena or industry (if you must) on earth which is not ripe for disruption. We are used to banking, we are used to telecoms, we are even used to farming. Now, the automotive, $3.5 trillion a year industry, is suffering exactly the same pressures that everyone else is.
In fact, looking at automotive and banking, it almost seems as if telecoms is getting its act together and might be poised for a period of real positivity.
Sadly, that kind of turnaround comes at an enormous cost. The question is whether the value of the automotive industry will be worth that level of investment, or, as Mewalla says, the defensive mergers will simply sink most of the industry into a state of stagnation that will allow Tesla and whoever follows to flourish at their expense.