Should GM Lose Sleep Over Tesla?

Should GM fret at the thought of Tesla? The Big 3 automakers had sneered at electric vehicles (EVs) for years, but a slow shift is underway. Ford has its plug-ins with the Fusion Energi and C-MAX Energi; Chrysler, thanks to Fiat, has a little toe in the EV waters with the 500e on California roads; and GM touts the Volt and Spark EV.

Speaking of GM, the stodgy automaker may be slowly changing its ways: CEO Dan Akerson told Bloomberg in an interview last week the company is taking a close look at Tesla Motors to gauge how the Silicon Valley upstart could eventually threaten GM’s business.

Considering GM still draws the ire of electric car advocates years after the EV1 saga, Ackerson’s comments might induce eye-rolling. But the road to electrification, while full of potholes, is underway; and speaking of Tesla, the company scored its first profitable quarter this year and has a market capitalization now slightly higher than Fiat. Meanwhile, Ackerson has succeeded in changing GM’s sclerotic and inward-looking company culture. With a new focus on innovation and design, electrification has got to be part of any automaker’s strategy. A close examination of Tesla and its success would only be logical on GM’s behalf.

While the Big 3’s new electric and plug-in hybrid (PHEVs) are exciting, they are still rather pedestrian compared to the Tesla. Having driven the C-MAX, Fusion, Volt and Spark EV, they indeed demonstrate impressive advances in EV technology. But they are all modeled after cars with a conventional internal combustion engine—logical for a PHEV, but not necessary for a full electric car. And while it is true these cars’ range on a full electric drive is plenty sufficient for most commuters, “range anxiety” is still the bugaboo the automakers have got to overcome. Tesla’s Model S, meanwhile, boasts a stunningly superior design and a range of up to 265 miles. Of course, the Model S has one huge drawback: its price, which ranges from $62,400 to $87,400 - way out of reach for most drivers.

But of course, Tesla is not just an electric car company, but a technology company. Tesla sells powertrain components to other automakers, including Daimler and Toyota. More models will hit the market in the coming decade as CEO Elon Musk has insisted the company’s long-term goal is to manufacture electric cars that are affordable for more consumers. And assuming battery technology continues to progress, watch for these pesky lithium ion battery packs—assuming no other disruptive technology takes hold—to become lighter and more cost-effective.

Of course, EVs still pose several challenges: consumers accustomed to the range and ease of driving an ICE engine; the lack of battery charging infrastructure in many cities; and the cost and environmental impact of the batteries themselves. Nevertheless, fossil fuels will continue their upward trajectory in price, and as more drivers realize the benefits of zero gas bills and almost no maintenance, electric cars will continue to catch on. So, of course GM needs to keep an eye on Tesla—because even though the onetime world’s largest automaker has recovered after a near collapse, GM still has not shown it is nimble enough to keep pace with the technologies Tesla and other automotive startups now bring to the market.

Based in Fresno, California, Leon Kaye is the editor of GreenGoPost.com and frequently writes about business sustainability strategy. Leon also contributes to Guardian Sustainable Business; his work has also appeared on Sustainable Brands, Inhabitat and Earth911. You can follow Leon and ask him questions on Twitter or Instagram (greengopost).

[Image credit: Tesla Motors]