Is Tesla really competing with the automotive industry – or oil and gas?

Every new electric vehicle is compared to Tesla. General Motors CEO Mary Barra even said her company will sell more electric vehicles than Tesla by the mid-2020s. Lucid and Rivian are “Tesla Killers.” And Henrik Fisker seems to have a particular bee in his hood about Elon Musk quitting Twitter at the prospect of owning him. But Tesla’s challenge is not for the auto industry. It’s much bigger than that.

The most sensible EV companies (perhaps the Volkswagen Group) deliberately avoid competing too directly with Tesla. Of course, the Porsche Taycan has been outselling the Tesla Model S for quite some time and is pretty narrowly aimed at the same market. But most new electric vehicles from VW, Audi, Skoda and the Volkswagen Group’s Cupra are not. They are right not to fight Tesla directly, because Musk’s company is not trying to eradicate them, but to force them to change.

Journalists, myself included, are complicit in this narrative that Tesla is at war with the mainstream auto industry. The company experienced growth in sales volume while others suffer much more from supply shortages, which would involve a conflict that Tesla is winning. But while there will be casualties from the rise of electric vehicles, with traditional companies forced to hedge their bets as they reduce internal combustion activity and increase production of electric vehicles, no one wants a world where every car is a Tesla – including Elon Musk. What Musk is asking is to move away from the internal combustion engine. Companies that make this transition can continue to survive, alongside Tesla.

The a really telling statement came from Elon Musk himself on Twitter (naturally):

“When the market capitalization of Tesla, which makes sustainable energy products, exceeds that of Aramco, which produces fossil fuels, you know the future will be good for the Earth,” he said.

This dream is still far away. In May 2022, Saudi Aramco had a market cap of $2.431 trillion, while Tesla’s was $786.98 billion, less than a third. It has been higher (over $1 trillion in 2021), and Tesla is still currently the 6e most valuable company in the world by market capitalization. It’s also worth noting that all of the companies between Tesla and Saudi Aramco are digital companies (Apple, Microsoft, Alphabet/Google, and Amazon). But since Tesla shares have seen a slight decline lately, it will likely take a few years before Tesla hits the top spot.

Musk’s statement shows how Tesla isn’t really a car company; it’s a sustainable energy company that makes a lot of cars under that strategy. How many other car manufacturers also sell their own home chargers, home batteries and solar panels? There were rumors that Tesla was even considering an entry into the energy supply business, which it already is to some extent with its utility-scale batteries such as the South Australian storage facility.

Tesla has been criticized for its innocuous interiors and exterior designs. They are definitely an acquired taste. However, because cars are not an end in themselves but the means to that end, this is not such a decisive criticism. Let traditional manufacturers continue to create stunning interiors and attractive exterior designs. Just put them on electric vehicles instead of internal combustion cars. But a Tesla or not – just make sure that if you don’t, you still get an EV.

If Tesla can continue to grow its market capitalization beyond Saudi Aramco, that will really send a message to the world. Perhaps that’s the message that Tesla has been pedaling all along, that while you can save the world from the climate crisis by restricting people and preventing them from having the things that cause the problem, there is another way. The alternative is to innovate in a way that makes something desirable and profitable to achieve the same goal. Being green doesn’t have to be a limitation. It can be a change that is both ambitious and very profitable.

About Leni Loberns

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