Rivalry between General Motors and Tesla to determine future of auto industry


General Motors Co. CEO Mary Barra stands next to the Chevrolet Bolt EV electric car at CES International in Las Vegas. Tesla and General Motors have a budding rivalry that could help determine whether Detroit or Silicon Valley sets the course for the future of the auto industry. Right now Wall Street is favoring the upstart led by flamboyant Elon Musk to the established icon headed by the more restrained Mary Barra. (AP Photo/Gregory Bull, File)

Orlaith McCaffrey

Associated Press

DETROIT — When General Motors Co. CEO Mary Barra introduced the Chevrolet Bolt at the CES gadget show last year, she took a shot at Tesla.

The uncharacteristic insult from Barra highlighted 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 auto industry’s future.

An objective comparison favors GM. It has made billions in profits since returning to the public markets in 2010. GM got the Bolt, a $36,000 electric 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 $33, the price of its initial public offering seven years ago. During that time, Tesla shares have soared more than tenfold to $335.

Tesla’s electric cars are the envy of the industry, and its semi-autonomous technology is among the most advanced on the road. And it’s branching into areas with potential for bigger returns, including solar panels, energy storage and trucking.

Still, Musk can’t risk any missteps as Tesla pivots from being a niche manufacturer of high-priced cars to a mass producer. The Model 3 sedan, Tesla’s first mainstream car, is due out later this year, but previous launches have been plagued with delays. Tesla has yet to prove it can build high-volume vehicles with quality and reliability, as GM does. Musk aims to make 500,000 vehicles per year in 2018; GM made more than 10 million cars and trucks last year.

GM, too, is stretching into new areas. Its Maven car-sharing service has 35,000 members in 17 North American cities, and it’s providing cars for ride-hailing services. GM is developing autonomous cars with Cruise Automation, a software company purchased last year.

GM knows the ups and downs of auto sales, but Tesla will have to learn to manage them. If the Model 3 is late and Tesla sales fall, its stock price could drop and reduce Tesla’s access to cheap capital, Ramsey said.

“I don’t think they’re completely immune to economic cycles,” he said.

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