As the electric-vehicle opportunity has evolved for startups and established automakers, it's become clear that an overall strategy is as important — if not more so — than getting cars to market.
Tesla, GM, and Ford have each made moves recently that showcase their distinctive EV strategies.
In a nutshell: GM is developing an operating system for EVs, Ford is leveraging its icons, and Tesla continues to turn buzz into billions.
The biggest mistake that auto-industry analysts and observers have made in the relatively short history of the modern electric car is to assume the consumer is all that matters. Demand, the flawed argument went, would bring buyers into the market and enable EV sales to explode. Competition would follow, and Tesla's first-mover advantage would erode.
That hasn't happened. EV sales remain a tiny percentage of annual, worldwide totals, a disappointment to electrification enthusiasts for the better part of a decade. Despite the arrival of compelling EVs from the likes of Chevy, Audi, and Jaguar, among others, Tesla continues to dominate.
However, the EV race has entered a new phase, with established automakers putting some serious money behind their ambitions. General Motors plans to spend $20 billion on its electric future, and CEO Mary Barra has repeatedly declared that the automaker wants to shift decisively away from the internal-combustion engine.
Last week, Ford announced a $700-million new factory dedicated to building the all-electric version of its best-selling F-150 pickup truck, scheduled to launch in 2022; interestingly, the plant will be part of Ford's legendary River Rouge complex in Michigan, possibly the most famous auto manufacturing site in the history of the American industry.
Tesla is keeping pace. On September 22, the company and CEO Elon Musk will hold a battery event in connection with the carmaker's annual shareholders meeting. It's possible that Tesla could reveal a new battery design, with the aim of vertically integrating its manufacturing, lessening a dependence on Panasonic to supply battery cells.
There is also a range of startups entering the fray: Rivian, Nikola, Fisker, and Lucid.
GM, Ford, and Tesla all ultimately have the same goal for their EVs: for them to perform as well as possible on the burgeoning EV market. But each are attacking that goal in different ways, with one common feature: a focus on not the much-debated competition they'll eventually have, but instead the creation of distinctive strategies.
GM: Creating a pervasive operating system for EVs
Earlier this year, GM unveiled its Ultium battery technology and, at an event near Detroit, executives and engineers outlined how Ultium might evolve — especially in terms of limiting dependence on so-called "rare earth" elements such as cobalt.
More recently, GM has: showcased the Ultium powertrains that will be paired with the battery tech for 22 electrified vehicles slated to arrive by 2023; revealed that it would be using wireless battery management to cut down on manufacturing complexity; and entered into a $2 billion deal to produce a pickup for zero-emissions startup Nikola, the Badger, in exchange for an 11% stake in the company.
With Ultium, GM is in effect creating an operating system for EVs, sort of like an Apple iOS or an Android in the smartphone world. Speaking about the Nikola partnership at a recent RBC conference, Barra said deal "validates our technology [and] it allows us to have more people using the technology, which gives us the advantage of scale, which will help us drive costs down."
GM's big bet here is that Ultium will power not just its EVs, but potentially many other non-GM EVs. In addition to Nikola, GM has also partnered with Honda.
So ultimately, if you'll pardon the pun, GM could have Ultium inside a wide range of electric vehicles, to extend the operating-system analogy into the computer chip realm and borrow Intel's famous slogan. The upshot is that GM will control a critical part of the EV ecosystem.
Ford: Building on the legacy of its icons
The electric F-150 plant at River Rouge is just the latest instance of Ford leverage its numerous in-house brands to support its own EV efforts. In 2019, the company unveiled the Mustang Mach-E, a critically important all-electric vehicle that supposed to begin deliveries later this year.
It was the first expansion of the iconic Mustang brand since the car debuted in 1964 and a clear indication that Ford wanted to lead with its strengths as it joins the EV hootenanny. The electric F-150 is another shining example: That full-size pickup nameplate has been at the heart of the the top-selling lineup of vehicles in the US for nearly four decades, the F-Series.
GM is a collection of brands — Chevy, Buick, GMC, Cadillac — so it makes sense for Ultium to join that lineup. Ford, on the other hand, is a collection of icons, such as the Mustang, the F-150, and River Rouge. So the logical way to turbocharge its EVs, if you will, is to leverage those icons to capture attention and generate excitement.
Ford's best, then, is that it can transition the accumulated greatness of the F-150 and Mustang from the gas-burning era to the all-electric one.
Tesla: Riding wave after wave of buzz
Tesla has been on an epic stock rally since the beginning of 2020, minting a market cap that has made it worth more than GM and Ford combined. Critics have pointed out that GM and Ford have been pretty steadily profitable since the Great Recession ended, and that those automakers sell millions of cars and trucks annually, while Tesla still hasn't sold 500,000 in a year.
But Tesla has the buzz, and it isn't afraid to use it. At the beginning of September, the company said it would raise $5 billion by issuing new equity, not long after it announced a 5-for-1 stock split. The raise would take its cash-on-hand position to about $14 billion, a historic high for the company, which is less than two decades old.
That's just one case of Tesla turning buzz into billions. The carmaker's entire future hinges on the passionate loyalty of its customers and significant growth in the number of customers in whom it can engender new levels of passionate loyalty.
Note that it isn't simply consumers with money to buy EVs whom Tesla is looking for; rather, it wants its owners to have an experience that drives beneficial buzz and continues a virtuous process of people loving their Teslas begetting more people who love their Teslas.
That buzz, not incidentally, extends to Wall Street, where investor enthusiasm is a vital type of currency — as demonstrated by the stock rally, which enabled the big capital raise.
GM, Ford, and Tesla are proof that there are multiple strategies available to attack business opportunities. Why does this matter? Simple: If your strategic choice is successful, the strategy itself becomes valuable.
Classic examples would include Ford's creation of River Rouge from 1917 through 1928, developing a model of so-called "vertical integration" in manufacturing — a model that would endure until the 1980s, when it was displaced by "just in time" systems; and GM's ladder of brands, starting customers out with Chevy and sending them off to their final rewards in Cadillacs, with Pontiacs and Buicks in between.
In the 21st century, Tesla has become the first new US car brand to make it since Chrysler in the 20th century by assiduously and skillfully courting popular support. That game plan got it from making almost no vehicles in 2010 to selling more than 360,000 in 2019.
It's entirely possible that all three could succeed, in one form or another. But what's clear is that electric carmakers now need a lot more than a dream — they need a deeper think about how they can use what they've got to define a market whose potential could be enormous, but whose shape remains uncertain.
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