Is Tesla Really Competing Against The Auto Industry – Or Oil And Gas?

Every new EV gets compared to Tesla. General Motors CEO Mary Barra has even said her company will sell more EVs than Tesla by the mid-2020s. Lucid and Rivian are “Tesla Killers”. And Henrik Fisker seems to have a particular bee in his bonnet about Elon Musk, quitting Twitter at the prospect of him owning it. But Tesla’s challenge isn’t to the auto industry. It’s much larger than that.

The most sensible EV companies (possibly Volkswagen Group) are deliberately avoiding being too directly competitive with Tesla. Sure, the Porsche Taycan has been outselling the Tesla Model S for a while and is quite closely directed at the same market. But most of the new EVs from Volkswagen Group’s VW, Audi, Skoda, and Cupra brands aren’t. They are right not to pick a direct fight with Tesla, because Musk’s company isn’t trying to eradicate them, just force them to change.

Journalists, myself included, are complicit in this narrative that Tesla is at war with the traditional auto industry. The company has been growing in sales volume while others suffer much more from supply shortages, which would imply a conflict that Tesla is winning. But while there will be casualties from the rise of EVs, with traditional companies being forced to hedge their bets as they run down their internal combustion business and ramp up their EV production, nobody wants a world where every car is a Tesla – including Elon Musk. What Musk is pushing for is a switch away from the internal combustion engine. Companies that successfully make that transition can continue to survive, alongside Tesla.

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

“When Tesla’s market cap, making sustainable energy products, exceeds that of Aramco, producing fossil fuels, you know the future will be good for Earth,” he said.

That dream is still some way off. In May 2022, Saudi Aramco had a market cap of $2.431 Trillion, whereas Tesla’s was $786.98 Billion – less than a third as much. It has been higher (over $1 Trillion in 2021), and Tesla is still currently the 6^th most valuable company in the world by market cap. It’s also interesting that all the companies between Tesla and Saudi Aramco are digital ones (Apple, Microsoft, Alphabet/Google and Amazon). But as Tesla’s shares have seen a bit of a drop of late, it’s likely to be a few years before Tesla hits the number one spot.

Musk’s statement shows how Tesla isn’t really a car company; it’s a sustainable energy company that happens to make a lot of cars as part of that strategy. How many other automakers also sell their own home chargers, domestic batteries, and solar panels? Tesla has even been rumored to be considering an entry into the energy supply business, which it kind of already is with its utility-scale batteries such as the storage facility in South Australia.

Tesla has been criticized for its interiors and innocuous exterior designs. They are definitely an acquired taste. However, because the cars aren’t the end in themselves but the means to the end, this isn’t such a deal-breaking criticism. Let traditional manufacturers continue to make great interiors and enticing exterior designs. Just put them on EVs 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 increase its market capitalization beyond Saudi Aramco, that truly will send a message to the world. It is perhaps the message Tesla has been pedaling all along, that while you can save the world from the climate crisis by restricting people and stopping them from having the things that are causing 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 aspirational and makes a lot of money too.