The three lessons from Tesla’s rise to the top of the car industry

It might be next week. Or next month. We might even have to wait until the end of the year. But one day soon Tesla is going to be the biggest auto company in the world, at least as measured by market value.

With its shares soaring, it is now by far the biggest in the US, and it is very close to overtaking the giants of Germany as well. Even the Japanese will be overtaken before too long.

That is a remarkable achievement by any standards. The automobile industry is one of the biggest and toughest in the world and one of the most crowded.

Tesla CEO Elon Musk with Tesla owners at the carmaker's Shanghai factory. His leadership may be eccentric, but investors have decided to back Tesla anyway.
Tesla CEO Elon Musk with Tesla owners at the carmaker’s Shanghai factory. His leadership may be eccentric, but investors have decided to back Tesla anyway.Credit:AP

And it’s an achievement with wider lessons for every business. Such as? No one is safe, whether they are in technology or not; the environment is driving disruption of whole industries; and you should buy the competition before it is too late. The auto giants ignored those trends, and are paying the price for their shortsightedness.


Elon Musk’s leadership may, to put it mildly, be eccentric. And the company’s ability to capture the mass market may still be unproven. But investors have decided to ignore all that and back Tesla anyway.

It reported an unexpected profit in the last quarter, and managed to deliver more than 350,000 cars last year. From the lows of 2019, when Musk threatened to take it private, the shares have risen from $US180 to more than $500. It is now worth more than Ford and General Motors combined, and has beaten their highs to become the most valuable American car company of all time.

One day soon Tesla is going to be the biggest auto company in the world, at least as measured by market value.

It has overtaken both BMW and Daimler and it is less than ten billion behind VW to overtake all its rivals in Europe as well. It is still a little way behind the mighty Toyota, but on its current trajectory may well overtake it soon. True, it is nowhere close in the number of cars sold.

VW sells 11 million vehicles a year, 30 times the Tesla total. But investors have, quite rightly, decided electric cars are now the future – and they are backing the company that got there first, not the old giants still desperately trying to find a way to catch up.

That is a major transformation in an industry which, in many ways, defined 20th-century capitalism (it may not be long before a President quips that what’s good for Tesla is good for America). Other technology giants have created corporate empires out of new industries such as social media, or web search. But Tesla has taken an old one and used pioneering technology to turn it upside down.

What are the wider lessons from that for every other business? Here are three to be starting with.

First, no one is safe. Cars were a high tech industry a hundred years ago but they aren’t anymore and haven’t been for a long time. Some changes in style and some extra electronics aside there isn’t much difference between the vehicles on the road today and those of 50 years ago. But Tesla has taken a traditional industry, and used a single innovation – a powerful battery – to reinvent it.

If that can be done in cars, then it can be done in aviation, or healthcare, or law, or any industry you care to think of. Any major company that thinks it is secure from a competitor coming out if nowhere just because it is big is kidding itself.

Next… the environment matters more than anything else right now. It was worries over climate change, and rising consumer concern over the damage their car was doing to the planet, that gave Tesla its opening. There wasn’t any other reason for buying one. That started in wealthy, liberal California but it has now gone global.

Companies shouldn’t just think about making their own products and processes greener – they should be thinking about the way start-ups might use that issue to completely overwhelm them. From consumer goods, to agriculture to electronics, plenty of other existing giants might soon find themselves in the same kind of trouble. Fixing the planet is driving as much disruption as the internet, and that is going to increase dramatically over the next ten years.

Ironically, even the web giants might be disrupted by greener rivals one day – Google, Facebook and Netflix all use a scary amount of energy.

Finally, buy quickly. Rewind five years and GM, Renault or VW could have bought Tesla for hardly anything. It’s a quoted business, and Wall Street has long since regarded Musk as a very, very loose cannon. It would have fallen to a knockout bid if one of the auto giants had been brave enough to launch one. Even a year ago that would have been true.

But it is too late now. Tesla is more likely to buy one of the traditional giants than the other way around (the financing expertise and servicing and dealer networks might be interesting even if the factories are irrelevant).

True, it remains to be seen whether Tesla can dominate the auto industry the way GM and Toyota once did.

The traditional players have plenty of money to spend, and they may win the battle for the mass market. Tesla may not be able to cope with making a million or more vehicles a year.

And it may well get disrupted itself as the tech companies develop driverless pods as a more efficient alternative to the old-style car. We will see over the next few years. But its sleek electric cars have already turned the auto industry upside down.

And every company in the world should be learning the lessons from the revolution.

The Sunday Telegraph, London

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