GM Knows How to Make Cars but Can It Master Software to Top Tesla?
In the horse race between Detroit and Silicon Valley to lead the future of advanced mobility, a key factor is whether General Motors (GM) - Get Report can master software before Tesla Motors (TSLA) - Get Report gains proficiency at manufacturing.
The latest master plan of Tesla's CEO Elon Musk maps out a strategy that includes broadening the automaker's product portfolio to pickup trucks, heavy-duty trucks and buses, while developing an app that lets Tesla owners lease their vehicles to others.
Tesla's Autopilot autonomous driving system so far has proven to be a work in progress, an unfinished piece of software whose safety for use by consumers has come under regulatory scrutiny following a fatal accident.
GM, meanwhile, has been investing heavily in Silicon Valley software expertise and artificial intelligence to accelerate development of autonomous systems and fully driverless models. GM's "supercruise" system for Cadillac was supposed to have been ready by now; the delay reflects GM's cautious approach to autonomous technology, in contrast to Tesla.
"We'll put it out there when it's ready," Mark Reuss, GM executive vice president, told the Detroit Free Press.
While GM lags behind Tesla and Alphabet's Google when it comes to bits, bytes and software expertise, the No. 1 U.S. automaker's ability to build multiple vehicle models in large number and high quality at numerous locations worldwide remains an advantage.
Tesla, despite its impressive first decade in business, has been beset by recalls and consumer complaints of poor quality. Vehicle output from the company's single, aged factory in Fremont, Calif., --owned decades ago by GM -- has repeatedly failed to meet production goals.
Last year, Tesla built slightly more than 50,000 of its two basic models, the Model S sedan and Model X crossover. That number is a bit less than the number of vehicles GM builds in two days around the world. Last year, GM sold a record 9.9 million vehicles worldwide.
Tesla's forecast that it will be manufacturing 500,000 vehicles annually by 2018 and a million a year by the end of the decade is viewed skeptically throughout the industry.
In May, Tesla lost two top manufacturing executives who decided to leave the company.
"Tesla is hell-bent on being the world's best manufacturer. We are trying to get as many EVs on the road as possible. What's the limiting factor? It's production of the car," Musk told equity analysts in a July conference call. "We've got to figure out: How do we get super-good at making large, complex objects?"
Investors backing Tesla are looking beyond the short term to a future that Musk and others believe will be dominated by electric vehicles that drive themselves. Private ownership may be replaced by fleets of vehicles that can be summoned at a moment's notice.
Owners of GM shares may be betting on a similar future, one in which the century-old company intends to participate, if not dominate.
Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.