[wegs2]

My hypothesis is different.

Margins.

GM, Ford, Honda, Toyota, etc. are competing with a commodity product in a commodity market. There's no big difference between a Toyota Yaris, a Honda Fit, a Kia Rio, a Ford Fiesta, and similar cars from every other brand.

They're all within a few hundred bucks of $15k. They all cost do the same thing, cost the same to produce, and I imagine the margins are razor-thin. If any of the brand could lower prices by $500, they'd own the market.

Tesla sells a unique product, with unique technologies.

If Tesla has 5% of the market, but 10x the margins of its competitors, which doesn't seem an unlikely outcome:

1) Its profits will be roughly 1/3 of the total profits of the whole market

2) It will be much more stable. Razor-thin margins mean companies go bankrupt with even minor instability. If Ford's costs rise by 5%, it's dead. If Tesla's costs go up 5%, it's a almost a rounding error.

I think the key question is whether Tesla can execute, but right now, things look promising, although far from certain.

[DrJokepu]

That’s not really how it is though, these are very different companies with very different products. For example, Ford makes its money on trucks. An F-150 has very healthy profit margins. It’s believed that Ford’s truck business is in fact worth more than Ford as a whole [1]. The Fiesta hasn’t been sold in the US since 2019.

[1] https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-...

[stickfigure]

That is likely due to the Chicken Tax: https://en.wikipedia.org/wiki/Chicken_tax

With a little sanity, luck, and changing political winds, it could disappear in an instant.

[colinmhayes]

Ford's truck business is so important they recategorized every single car they sell as a truck in order to utilize a fuel efficiency regulatory loophole that lets them sell more pickups. https://www.reddit.com/r/badeconomics/comments/ep4wza/corpor...

[marticode]

Tesla has about 26% of the world's EV market share so their products aren't that unique. Making an EV isn't that hard - it's in fact a simpler product than an ICE vehicle.

[wegs2]

Making an EV is easy. I can buy a Power Wheels EV for $400.

Making a good EV is hard. The set of technologies required is still unknown -- bear with me for a little bit.

In the early days of the PC; anyone competent could make a perfectly competitive computer in their own garage in a few months, buying chips, etching PCBs, and coding up a basic operating system. Wozniak did that, as did a few others. It seemed like it'd be simple forever, but it wasn't. Today, the tech tree to make something like a MacBook is long, wide, and extensive. There's a massive engineering team for the mechanical design alone, let alone the OS or the CPU. I can still make a computer, but it won't be competitive.

Same thing happened with airplanes; shortly after the Wright Brothers, all sorts of amateurs made basic planes on their farms. It's still possible to do that, but you won't be competitive with an Airbus jetliner.

Early radios were a few vacuum tubes. Compare that to making a modern cell phone.

Part of the reason ICE vehicles are complex are the same process. The first mass-produced ICE vehicle, the Benz Patent-Motorwagen, was pretty simple. It cost under $5000 in today's dollars ($150 at the time), and looked like a glorified tricycle with an engine.

If you throw engineers at tech, it goes up in sophistication. People figure out how to do things better. Anyone can make an EV. I'm confident, though, that we'll see the same progression as we did in every other fields. If Tesla has enough of a head start making things cheaper and better -- and they seem to -- it's unlikely the established players will be able to compete.

[55555]

Makes sense. They could be the Apple of cars.

[0xy]

GM has higher operating margin than Tesla by a substantial number, and is expanding into electric cars.

[wegs2]

The question isn't about current margin; the question is about long-term margin.

Running at a loss to build out market share, technology, branding and economies-of-scale is a standard startup strategy. Tesla is still in that stage.

The key question is whether things like the Gigafactory provide Tesla with unique economics and competitive advantage. If they do, Tesla will be able to have lower costs or more expensive products than GM. If not, it's overvalued.

[0xy]

GM has more manufacturing prowess. Higher scale, over double the margins, more automation experience etc.

That's just GM. Ford and others are the same. The Ford F truck line is practically a money printing operation.

A fancy UI on a screen is not a defensible moat, not when you suck at manufacturing (QA is still bush league).