Tesla's Biggest Competitor in the Electric Car Revolution? It Might Be Detroit

Several months ago, when Elon Musk touted a “handover party” for the Tesla Model 3’s first 30 buyers, the future of Tesla’s first mass market electric car seemed bright. Musk, Tesla’s CEO, estimated that production would grow “exponentially,” with the automaker producing at least 1,500 cars a month by September, and 20,000 by December.

But as of Monday, just 260 Tesla Model 3’s had been produced. And only 220 of those had been delivered.

That’s 84% below the target. And on the same day that Tesla revealed its “less than anticipated” production volume, General Motors, the largest automaker in the country, announced its plans to roll out 20 new all-electric models by 2023, including two that are set to arrive within 18 months. It’s all part of GM’s aim for an “all-electric future,” and the move follows a similar initiative from fellow Detroit-based automaker Ford, which is working on 13 new electrified models ranging from hybrid F-150s to a fully-electric SUV by 2020.

Musk doesn’t appear to be sweating the competition. He even retweeted a Wired story detailing GM’s bold new objective. And Tesla as a whole professes itself unbothered. “It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain,” the company said in a statement. “We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.”

But even if Tesla recovers—at least one industry analyst told Fortune there’s no cause for panic yet—and starts delivering high quantities of Model 3’s in the coming years, it will be tough for the company to make an impact on the market if larger, more established automakers like GM throw all their weight behind electric-powered cars. Tesla will likely continue to appeal to its trifecta of wealthy, environmentally-conscious, early tech-adopting crowds. But in terms of creating a a truly mass market electric car for the middle-class, industry analysts say, manufacturers like GM and Ford are in a much better position.

The Detroit automakers have “much deeper pockets” and significantly more capacity to crank out more units, said David Whiston, an equity strategist for U.S. automobiles at investment research and management firm Morningstar. Tesla would have to scale up its production—by a lot—and that would cost an enormous amount of money.

“I don’t see how it’s possible,” Whiston said. “Over 90 million cars are sold a year. Tesla’s going to sell 100,000 cars in maybe a decade?”

That number could be contingent on the options put forth by Tesla’s competitors. GM developed the hybrid Chevrolet Volt long before Tesla unveiled the Model 3. Then the all-electric Chevy Bolt arrived at the end of 2016. And while the Bolt and Model 3’s starting prices are nearly identical, the Model 3 has been criticized as a bait-and-switch since the true cost runs about $10,000 more than its advertised $35,000 with features like autopilot or a longer-lasting battery.

“I think when you look back at our history and where we’ve been in this space, when we started off with the first generation Chevy Volt, I would say we don’t try to play catchup to anybody else because we’ve been leading in this space,” Kevin Kelly, senior manager of advanced technology communications at GM, told Fortune. “We will continue to be at the forefront to develop EVs.”

But Tesla does have two things going for it that GM or Ford can’t boast at this moment: a generally well-liked celebrity CEO, and a scheme to pay back the same customers who purchase its vehicles.

Dubbed the “Tesla Network” by Musk, the idea is to create a “shared autonomy fleet” that allows Tesla owners to lend out their cars, Uber-style, once the automaker’s “full self-driving” update goes live. If successful, Whiston said, Tesla could come away as a winner in the electric market. But if Musk is “overestimating people’s willingness to part with their cars for a few hours,” people would be less willing to pay for Model 3’s, Whiston said. Not to mention competition from the likes of Ford, which is developing its own autonomous fleet.

“The Model 3 ramp represents an exciting opportunity for Tesla and its shareholders,” Morgan Stanley analyst Adam Jonas wrote in a note to clients Tuesday, “but we continue to believe that the next 6-12 months will see a steady and intensifying flow of competitive efforts from very large and well-capitalized firms that will be making increasingly conspicuous efforts to encroach on Tesla’s territory of highly safe, automated, electric transport.”

Even as a showdown of sorts seems to be brewing in the electric vehicle market, heavyweight GM says it is not looking to demolish competition like Tesla. “As we look to the strategy we’re moving forward with—zero emissions, zero crashes, zero congestion—anyone who is working on that reality, we welcome that,” Kelly said. That attitude was probably shared by Musk when he retweeted news about GM’s plans to compete in a market that he popularized.

But perhaps that will be Musk and Tesla’s ultimate legacy. While GM and Ford (not to mention the German and Japanese auto powerhouses) may have more clout to usher in the era of mainstream electric vehicles, Tesla made it cool.

Maybe it won’t lead the electric revolution when it’s all said in done. But it definitely started it.

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