Ford v. Ferrari is yesterday’s story. Today, it’s Volkswagen v. Tesla. The two battles are not entirely uncommon. As it was in the 1960’s confrontation, the current competition wants to seize superior engineering to capture a market. But the next winner won’t be decided at the finish line in a race at Le Mans. Today’s race combines automotive excellence, ride-sharing algorithms, artificial intelligence, and the internet-of-things to deliver driverless electric vehicles.
It was Volkswagen CEO Herbert Diess who recently said, “If we continue at the same pace as now, it will be very tough. The era for the classic carmakers is over.”
It might as well have been Lee Iacocca talking to 1960’s Ford executives. Regardless, the times, they are changing–again.
Volkswagen is profitable, making 6 million cars annually—and 11 million if you include subsidiaries. Tesla makes less than 400,000 vehicles per year and is not yet profitable. Yet Tesla is now worth more, and even Diess knows why.
“The stock exchange is about the future, about expectations. Tesla has a product that describes the future of the automotive industry. Tesla leads the way,” Diess told Reuters. “But we are optimistic that we can keep the same pace and hopefully take the lead in the future.”
General Motors could have seized that future, but it gave up the pole position long ago. GM co-sponsored the winning autonomous vehicle in DARPA’s Grand Challenge of 2004, but had no interest in taking the long road of product development.
In 2008-09, Tesla developed an electric Roadster, Google started its self-driving project (now called Waymo), and Uber also launched.
It was innovators, not major car companies, who embraced electric vehicles, self-driving vehicles, and ride-sharing. By now, Tesla has the lead in two of those categories, and could overtake Uber in the third. That’s why Warp Institute author Mathias Sundin wrote, Tesla’s unique position beyond the hype.
Every one of the 367,820 vehicles Tesla made in 2019 were electric. This far outpaces all electric vehicle manufacturers, including second-place BYD (229,506), sixth-place Volkswagen (84,199), and tenth place Toyota (55,155). Its six vehicle models outpace all others in the efficiency of their electric cells.
When it comes to self-driving vehicles, Tesla is very far ahead. (Think of Ken Miles in a GT40 driving past go-karts.) These vehicles require processing power to analyze images as they navigate their environment. Tesla’s self-produced computer chip is 21 times faster than the second-best option. Tesla has sold roughly half a million vehicles that can self-navigate, which so far have driven more than two billion miles. The data is uploaded to Tesla to guide continual improvements. Google’s Waymo is probably in second place with just 20 million miles driven.
Uber’s lead in the ride-sharing service might not last long. Tesla intends to launch its self-driving taxi service at the end of 2020. Tesla will have company-owned vehicles on this network, but will also let Tesla vehicle owners to offer their wheels for the service. They can make money effortlessly sitting at home and turn a $40,000 U.S. investment in a Tesla 3 into a sure profit.
In American dollars, the cost for Tesla to offer the service would be a dime per mile, while passengers pay sixty cents per mile. In Canadian currency per kilometre, that’s an 8.3 cent cost to run the vehicle and fifty cents cost to the customer. Either way, it’s a five-fold profit. By comparison, the cost of a taxi begins at $2 USD per mile ($1.66 CDN per km).
In Canada, federal and provincial governments have made that even easier. They’ve given more than $4 million to install electric car-charging stations across the country. Taxpayer advocates are upset at the market distortion, while Tesla is all the happier.
Thanks to upgrades, Teslas actually get better after they’re bought. A software upgrade last August increased the range of the vehicle, improved the windscreen wipers, and added a “dog mode” that keeps the car cool on hot days. The upgrade also added Netflix, YouTube, Spotify, several games, and a karaoke feature (cutely termed “caraoke”). That’s even more important for a driverless vehicle, given that even the would-be driver becomes a potentially idle passenger.
Sundin summed up the situation this way, “The value of understanding how technology progresses, how technologies converge, what opportunities that creates and how society changes, is hard to overstate.” Tesla has begun to offer that value. And the best is yet to come.
Lee Harding writes for the Frontier Centre for Public Policy.