Over the past days I have been contemplating the US - and to some extent the world - automotive industry. Henry Ford's great accomplishment was in emplacing the concept of production line manufacturing in a large-scale industry; the result was that the automobile could be priced at a level affordable to more than the top 1% of American consumers (is there something in that that sounds familiar, people?)/ William Durant's great accomplishment was in establishing a vast nationwide, then worldwide, network of sales platforms, and combined with innovations in automotive financing, led General Motors to surpass Ford by the end of the 1920s. Walter Chrysler's great accomplishment was to take an implacable drive for engineering excellence and combine that with a spectrum of low- to high-priced cars. Chrysler overtook Ford in the mid-30s and held the #2 slot until about 1950. So - for those of you with access to really long-term financial data - it's hard for me to snag that stuff out here in the middle of nowhere - I think it would be a fun, and potentially useful, exercise to see where these three giants have stood at their respective peaks. Some criteria could be: 1. largest market capitalization, gross 2. peak capitalization wrt overall market (S&P 500 capitalization would be the most tractable long-term data, I should think) 3. presence - possibly with market cap as the datum, possibly with sales as % of GDP as the metric - within the overall US economy and, (you knew this was coming) where Tesla would have to stand in order to reach the marks above. Ford's data will be a little difficult to come by, as the company remained closely held until the late 50s and early 60s, when, through a series of then-innovative steps, stock was slowly released from both Ford Foundation and Ford family members, automatically shifting from Class A to B as it became publicly traded. So I'm not sure how one appropriately could place a market cap on F stock in earlier decades. Anyone interested in the exercise? It's the sort of stuff that would entrance me in prior times, but I've still got lots of snow to shovel and roofs to clear and plumbing to de-thaw....this has been the most fearsome winter in Alaska's history, and it just won't quit.
GM’s Long Decline May Make Bankruptcy ‘Irrelevant’ to Economy - Bloomberg Thats not an authoritative source, but its common knowledge that GM was the largest company in the world for awhile, with the largest workforce, largest sales as a fraction of GDP, etc. Tesla will never match the employment figures, but electrification of the automotive fleet could result in a rapid buildout of EV's once the tipping point is reached. There is no reason that Tesla couldn't become the #1 auto manufacturer in the world under that scenario. Tesla is just 3-4 years away from a potential blockbuster in the GenIII. Folks like to point to the vast resources that the traditional automakers can bring to bear, but as of now the EV's they have in development look pretty pathetic compared to the standard established by Tesla. Considering the automotive development cycle they need to be making huge investments right now if they want a competitive product in 2017, and I just don't see evidence of that yet.
Two comments regarding that. First, as I'd posted in #1, it was Durant's innovations with customer financing that made General Motors. Now 90 years ago, but it certainly would be a terrible irony if that financing arm is what finally spells an end to the one-time behemoth. Second, it is possible that some of this forum's members aren't familiar with a catchphrase of the 1950s and 60s, evocative of GM's utter dominance throughout so many sectors of our economy: "What's good for General Motors is good for the nation" (also known as "As GM goes, so goes the nation").
And, furthermore, moving closer to present (to 1983), Bloomberg makes the Chrysler to Tesla comparison through the Lee Iacocca "lens" in this piece: Tesla’s Musk Channels Iacocca With Early U.S. Repayment - Businessweek
Great letter to Detroit by Adam Jonas of Morgan Stanley Research covering the BIG issues for autos: Yen devaluation, Used cars and TESLA! May 21, 2013 Autos & Auto-Related A Letter to Detroit Dear key stakeholders of US auto companies: In my 17 years covering the global auto industry, I have rarely felt as excited and anxious about the state of play. There is good news out there. We continue to see a rebound in auto sales and balance sheets are brimming with cash. However, we’d highlight four important developments that would keep us up at night: 1. The Japanese Yen. Hope and pray that the Yen’s slide is over because, even at 103, Shinzo Abe may go down as the greatest car salesman in Japanese history. The Japanese aren’t foolish enough to start a price war, but they’re already planning a product offensive. You’ve got about 1 year. $3,000 per unit adds a load of tech, equipment, service and quality to the value proposition. Stay ahead of them or you’ll have flashbacks from ‘06. 2. N. American capacity. We count >3m units coming on stream bw 2011 to 2015; more capacity growth than any other 4-year period in NA history. When it comes to capacity, this industry has a history of: “If you build it, let’s hope they come. And if they don’t come, we’ll make them come.” The capacity added this time is cheaper and more flexible (US tier 2, Mexico) but doesn’t bode well for pricing. Use your newfound flexibility to prioritize product excellence and wallet share over market share. 3. Used prices. It’s been a good run from the depths of 2009. But it’s over. Used supply will rebound on rising trade-ins and a 70% increase in off-lease volume by 2015. At the same time, the falling Yen and rising NA capacity will deflate new car pricing. The result is a pincer-like action on used prices. As used falls, new must fall. And as new falls, used must fall, and so on. A typical decline in used prices is 15% peak to trough. 4. Tesla Motors. Don’t ignore these guys. Few of you thought they’d make it this far. And none of you ever had a car score 99 out of 100 in Consumer Reports either. Elon Musk wants to usher in a new era of transportation that could potentially put you all out of business. You have time here. But watch their roll-out of supercharging stations and their legal progress vs. franchise distribution and let’s chat again in 2 years.
@PilotSteve, Where did this come from. I've started to follow Adam Jonas and he is the most bullish on Tesla. He seems to understand exactly what they are trying to execute. If Tesla succeeds, then the Big Boys could be fracked.
@callmesam - its from the "Research" tab on my Merrill Edge trading account. I couldn't find a link to post so I copied but credited the author. Very well thought out IMO and adds valid investing insight.
Well, hello 2020! As I mentioned elsewhere, I've been looking through old "Investor" posts. So here's a fun one I dredged up from the bowels of the interwebs. Hey - lookee there! Someone named "Adam Jonas"! Anyone ever hear of him?