Is Tesla the New Ford?
Will Tesla Lose the Market it Built?
Tesla Motors could very well be the new Ford Motor Company — but that may not be a good thing.
Before you start defending either company, let me explain...
When Henry Ford started making his Model T cars, his goal was to build them quickly, efficiently, and cheaply enough that they could be widely used.
In an attempt to do this, Ford fathered the modern assembly line production method.
The Highland Park Plant and River Rouge Complex were built to facilitate this high-speed form of production, and in just a few short years, Ford Motor Company went from producing hundreds of cars per year to producing hundreds of thousands.
Not only did Ford establish the assembly line for cars, but he was willing to share his ideas with competitors. He wanted his legacy to spread.
And it did... very quickly.
So a new company decides it wants to make a new form of transportation in a new way, builds a number of giant factories to do so, shares its ideas, and lets them spread and grow...
At least in building a market, I think Henry Ford and Elon Musk may have gotten along all right.
But this all sounds great, right?
How could I possibly say this is a bad thing?
For every company using a new technology, there's one out there who can use it better.
In Ford's case, the company to play the biggest one-up card was Japanese Toyota. The company added a whole new level to the assembly line process: innovation.
Rather than specializing its mechanization like Ford had, Toyota allowed for changes and upgrades to be made on a constant basis.
Toyota got the double-whammy of increased production with the assembly line and increased product quality with ongoing innovations.
And it's still paying off today.
Toyota has been at the top of Forbes' list of "The World's Biggest Auto Companies" for several years running, achieving sales of 10.23 million vehicles worldwide in 2014.
And even when it wasn't the biggest in sales, as in 2013, when Volkswagen took that title, Forbes still ranked Toyota as the most valuable of all the companies on its list.
In contrast, Ford has been slipping slowly downward. From #4 in 2013 to #7 in 2014, the company is losing its hold on the market.
Clearly, being the first company to a new technology doesn't ensure a top spot forever.
We're seeing the same kinds of trends with Tesla as it brings the global electric vehicle market into the spotlight.
And if Tesla is the new Ford...
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The Next Toyota Motor Corp.
Toyota stole Ford's market share through innovation and by catering to the new needs of the market.
In today's vehicle market, consumers are looking for more and more advanced technologies to come standard in their cars. What's more, people are increasingly looking at cars as a service rather than a product.
And if there were any company looking to take advantage of both of those things, it would be up-and-coming Tesla competitor Faraday Future.
Much like Toyota did to Ford, Faraday is looking to build onto Tesla's innovations and take them a step further.
For instance, Faraday intends to make cars that are not only electric but also fully connected. Every aspect of the car will be part of the Internet of Things; it's like driving a large, shiny smartphone.
Only you won't necessarily have to drive. The cars will also be autonomous and will some day be able to drive themselves without any human assistance.
And the step forward in this case will be when Faraday starts sending these autonomous cars to people as a service. No longer will people own their own cars — they'll just order them on demand.
Now, is this service guaranteed to take off? Absolutely not.
As attractive as it may sound to just order a car when you need it rather than having to take care of your own, I don't think people will fall out of love with owning things. Especially things like shiny new EVs.
But the fact is Tesla isn't the only name in the EV game anymore, and it has the potential to go the way of Ford by losing market share to bigger, faster-innovating companies.
Not the Market You're Looking For
Good thing we're not looking to invest in any car companies today.
But we can't ignore that a similar market boom is taking off right now — in lithium.
Make no mistake; EVs are going to be taking the world by storm the same way the first cars did in Ford's time. There's no telling exactly how quickly that will happen.
But with that in mind, we can be sure that lithium demand is going to grow, no matter which company gets the best of the market.
In fact, it's already begun. Lithium prices are on the rise as Tesla — and just about every other major car company out there — works to make the best new EV at the best price.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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