It may seem laughable to the cutting-edge technologists in Silicon Valley, but the biggest threat to the Valley’s beloved and revolutionary carmaker — Tesla — just might be doddering old General Motors.
Tesla, of course, is a media and stock-market darling. Against long odds, the upstart company headed by entrepreneur Elon Musk has created two gorgeous electric cars, the Roadster and Model S, that have seduced drivers with a suave blend of engineering, performance and novelty. While other upstarts, such as Fisker — and even some long-established carmakers, such as Saab — have failed during the past few years, Tesla (TSLA) has thrived. Its stock is up nearly 400% this year, prompting even Musk to say it seems overvalued.
So it’s easy to dismiss GM’s claim that it plans to develop batteries that will be able to move a car 200 miles on one charge, at a cost of $30,000 or so — close to the range of the Model S, at less than half the cost. GM’s most prominent electric car, of course, is the Chevy Volt, which can travel about 35 miles on one charge, starts at $34,000, and is approximately as exciting as a minivan.
GM launched the Volt in 2010 amid a huge hype campaign that ended up making the car seem like a failure. GM badly missed initial sales targets and has since resorted to discounting to keep Volts moving off the lot. It hardly helps that GM took a huge government bailout in 2009, leading critics to deride the Volt as a foolish government science experiment.
GM can be a formidable competitor, however, when it funnels its resources into focused projects. And it has two big advantages over Tesla. The first is scale, which is vital to profitability in the car business. Since the costs of designing and manufacturing a given automobile are huge, it’s essential to be able to spread them across the largest possible sales base. Like other big automakers, GM can develop technology for one car that it uses in a dozen different models or more. Tesla’s tiny product lineup doesn’t allow for that, which is one reason it's lost money five years in a row, and only recently turned its first quarterly profit.
GM also has proprietary battery technology that could turn out to be a game-changer if the automaker can manage to get costs down and range up. Unlike Tesla, which relies on off-the-shelf battery technology it harnesses in a unique way for automobiles, GM has been working to develop breakthrough batteries since it launched the doomed EV-1 project in the 1990s. It hasn’t quite succeeded, needless to say, but GM has the deep pockets and staying power to keep nursing the technology until it matures.