GM, Ford, Audi, Mercedes Concede Defeat

Is it the end of these totems of the industrial West?

Legacy auto manufacturers have now had a decade to out-Tesla Tesla, and, so far, they’ve failed. It certainly says something about these companies that, despite their efforts, they can’t produce a Tesla.

Previously, I wrote:

One of the institutions that developed and hardened in the modern world is the corporation. After WWII, these corporations rose to become major institutions in the U.S. and most of the developed world (in fact, “developed world” could be defined as the nations whose corporations qualify as national institutions). And nothing defines ‘corporate institution’ as well as the Dow Jones Industrial Average. Of course, none of the original twelve 1896 components of the Dow still exist. But corporation-as-national-institution really took hold in the 1950s, and the Dow was revised in 1959 to reflect these titans of the new world order. Of the 30 components of the 1959 Dow, only 14 still exist and only three are still part of the Dow. So in barely a half a century, most of the largest companies in the largest economy (and, in many cases, these were the largest companies on earth), have significantly declined; more than half of these mid-century titans no longer even exist. While it is perhaps comprehensible that the largest company ever to exist — the Dutch East India Company, with a valuation of about $7 trillion in current USD and essentially responsible for building Amsterdam — evaporated into nothing a century after the height of its global domination, one should consider that it’s probable that most of today’s Dow components won’t be on the Dow in fifty years and about half won’t even exist.

It was a fairly axiomatic observation 5+ years ago that Tesla was succeeding because it had no real competition. The legacy car manufacturers were experimenting, playing around, waiting for the EV market to grow a bit, waiting for charging networks to mature a bit. Once these legacy manufacturers hit the market with their real efforts, Tesla was toast. No one would buy a Tesla compact SUV EV once they could get one manufactured by Mercedes or Audi.

Now that we’ve seen — and driven — the “serious” efforts by these legacy manufacturers, it’s increasingly apparent that none of them can build a Tesla. In head-to-head match-ups, Teslas win almost every objective category — acceleration, range, cargo space, price. Even in the category that’s been Tesla’s bête noire — build quality — there’s a noticeable lack of difference between a Tesla and some other new EVs.

Meanwhile, later this year, both Lucid Motors and Rivian will deliver their first EVs to market. Pre-production vehicles have been available for some auto reviewers/consultants/critics, and more than one has commented something to the effect that the Lucid EV is significantly better than the Mercedes S Class (that’s Mercedes’s brand-defining effort).

For the first time in over a century, America has three new, legitimate, well-capitalized car companies. Something has changed.

So with all their resources (and extra time), why can’t legacy auto manufacturers build a Tesla?

Forget about the personalities, the company, the tweets and, worth noting, I’m not exactly a fan of the company or the car, but there is some profundity in the observation that somehow the legacy car manufacturers cannot produce a Tesla. These manufacturers have every conceivable advantage, and yet none of them seem able to manufacture a car that’s generally viewed as better than a Tesla.

It seems that Tesla’s real advantage isn’t what it can do but rather what Ford (and Audi, and VW, and Mercedes) can’t do.

Specifically, the problem seems to be that legacy manufacturers view the problem-set as electrifying their legacy vehicles. New car companies start with a blank canvas. Therefore, legacy manufacturers simply don’t see the opportunities that new manufacturers see.

Generally, the problem is corporate culture. Anyone who’s done time in multi-national corporations (as I have) knows that corporate culture is extremely powerful; it shapes the words that one uses, the problems one sees, the possible solutions one considers. Culture conceals as much as reveals. Compounding the problem is that the most influential people in these multi-nationals tend to be the lawyers and accountants. (Bob Lutz confirmed that accountants tend to be in charge at GM.) You think Elon Musk permits Tesla’s accountants make core business decisions?

So even if the legacy manufacturers catch up with Tesla (and Lucid/Rivian), it’s noteworthy that thus far they’ve failed. And they’ve thus far failed in an industry that has massive barriers to entry — capital, logistics, regulatory … actually building a car. Of course, the legacy manufacturers also have brands they can leverage, deep industry relationships, well-oiled supply lines. And yet Tesla is still building a car that generally has better range, better acceleration, more cargo space, lower prices …

Of course, none of this is about Tesla — or Mercedes or Audi … or Blockbuster or Kodak or any corporate behemoth that was incapable of innovating even when required.

As institutions grow, they create their own cultures. Those cultures begin to define their realities. Then those corporate realities becomes untethered from the real world, and the result is a 2021 Mercedes EV that would have been outdated in 2015.

Multi-national manufacturers are the totems of post-WW2 industrialization. As these institutions are tested, one wonders what other major institutions — corporations, universities, governments — are going to be tested, challenged, and possibly replaced.