Tesla’s Battery Day is slated for Tuesday, September 22, so it was not entirely surprising to see Detroit’s last two domestic automakers (General Motors and Ford Motor) roll out a series of EV (electric vehicle) announcements. Call it counter-programming.
Not that I think any of it will work to any great effect, as I’ll explain. GM and Ford have been teasing out EV promises for years and years, with almost nothing to show for the effort. Meantime, Tesla has become the world’s No. 1 EV maker and a darling of investment houses that profit from buying, shorting and issuing an endless stream of Tesla’s financial instruments.
While GM and Ford fiddled with EVs, and despite the head start that Chevrolet’s Volt offered GM a decade ago, Tesla and its irrepressible CEO, Elon Musk, have been building a loyal and rabid following though social media and friendly traditional media outlets such as Bloomberg.
It’s early in the EV game, still, but there’s no question that traditional automakers have ceded the first round to Tesla. On this continent, GM and Ford’s halting EV work has put both companies in catch-up mode. We’ll get to the latest news from the old-world automakers, but first a bit more about Tesla.
As I write this, Tesla is worth (market cap) more than $300 billion (US), with shares trading at about $435/each (all figures in US dollars). And despite the GM and Ford news, heading into Battery Day and Tesla’s annual shareholder meeting, two Wall Street analysts have put Tesla in an even deeper embrace. Both have raised target share prices in anticipation of a presentation expected to offer some detail on a Tesla shift in battery technology, including a move towards more vertical integration. Musk apparently wants to steer Tesla away from its current dependence on external suppliers.
Allow me to step back a moment and paint the big picture. If you’re an investor or simply an interested spectator, it’s pretty amazing to see Wedbush analyst Daniel Ives raise his target for Tesla shares to US$475 and Piper Sandler analyst Alex Potter raise his target to $515. Just to be clear, the average on the Street is $311.70. This remains a low-volume car company with a history of painting an exaggerated picture of its successes.
Nonetheless, Tesla reports that Model 3 sales in China are exceeding expectations, though it’s Tesla Energy that’s generating even more buzz. Potter has noted the battery business could be worth more than $200-billion per year in revenue, with TSLA controlling more than a third of the market for stationary batteries. The renewable energy business is growing fast, he added, heading to 40 per cent of electricity generation. Most still think of Tesla as a car company, but many are starting to recognize that Tesla aims to also be a world-class energy storage enterprise.
At Battery Day, a Canadian will be at the heart a Tesla extravaganza worth watching. He’s Jeff Dahn, Tesla’s head of battery research, and he first started working with Tesla out of Dalhousie University. He’s a pioneer in lithium-ion battery research and development.
Musk may, in fact, also use Battery Day to flesh out more details about reported talks to secure a nickel supply for batteries produced in a carbon-neutral way from Canadian mining company Giga Metals. More efficient, less damaging mining practices have emerged as “thing” with Musk. In a July earning call, Musk emphasized that “Tesla will give you a giant contract for a long period of time, if you mine nickel efficiently and in an environmentally sensitive way. So hopefully this message goes out to all mining companies.”
As Electrik.co reports, Giga Metals “has an early-stage mining project in development in north-central British Columbia with measured resources of 5.2 billion pounds of nickel and 312 million pounds of cobalt.” And the miner is “developing the project to extract the mineral in a way that is sustainable and carbon-neutral with hydropower.
Where am I going with this? The rumour mill suggests that among other things, Tesla will discuss its vision for a cobalt-free battery that will go a long way to reducing the cost of EV battery packs, thus making EVs more affordable. There is talk that Tesla plans to reduce cobalt and replace it with nickel and manganese. Cobalt is two to three times more expensive than nickel and most of the world’s cobalt comes out of the Congo. Both of the latter are problems for EVs as currently equipped.
I’m no chemical engineer and needn’t be to see what’s happening here. Tesla and Musk have a history of exaggerating claims, of over-promising and under-delivering to juice interest and excitement – though over time, Tesla delivers vehicles and technology that generally are ahead of anything the legacy automakers have bothered to offer.
But what Musk has grasped more thoroughly than anyone in Detroit, or elsewhere for that matters, is the EV race at present is as much about producing and delivering real advancements as it is about creating the perception of eye-popping progress with an environmental commitment.
Tesla is at the moment pushing its energy storage story rather than vehicle performance. What Musk and Tesla are doing will in fact generate huge buzz. Musk alone has some 39 million Twitter followers. When The Elon makes a pronouncement, his followers believe it, usually without question.
Which brings us to GM and Ford. The latter’s big EV announcement centered on the future of the best-selling vehicle in North America, Ford’s F-series pickup (alone worth an estimated $42 billion in Ford revenue). Ford has started production of an all-new F-series, and the lineup will include hybrid and pure EV pickups. The latter two, says Ford, will not only reduce emissions, but also slash running costs dramatically. We’ve also heard about the Mustang Mach-E.
GM, for its part, has been juggling multiple EV-related stories, from Cadillac to Hummer, from a partnership with Nikola to details of the company’s Ultium family of drive units and motors at the core of future electrified models across all brands. GM has also touted a completely wireless battery management system.
GM and Ford are making not insignificant moves on the electrification front, but neither seems capable – for now – of generating the kind of buzz regularly associated with Tesla and its flamboyant CEO, Musk. That’s a very big problem.
Car buyers and investors make bets at least as much on emotional response as rational assessment. GM and Ford are certainly laying the groundwork for a rational electrified future, but Tesla continues to generate the most excitement. Detroit’s remaining two automakers need to rev up consumers and investors in modern ways that match Musk’s magic, or risk being completely run over by Tesla and its $300 billion market cap.
The recent spate of steady-as-she-goes announcements from Detroit simply are not enough to blunt Tesla’s onslaught. Detroit needs to change the narrative or risk irrelevancy. The clock is ticking.