Tesla has the greatest story in the history of cars — and that should terrify automakers

By Matthew DeBord, Business Insider

The auto industry is huge and touches the lives of almost everyone on the planet. But it's surprisingly devoid of truly gripping stories. 

In fact, you can almost draw a straight line from Henry Ford to Elon Musk, with perhaps a few detours toward Enzo Ferrari, Preston Tucker, and John DeLorean along the way. 

What Tesla's original founders and later Musk as CEO of the 13-year-old carmaker have achieved is simply astonishing — unprecedented, really.

The auto industry has chewed up and spit out plenty of adventurous entrepreneurs over the decades. But Musk and Tesla just thrived — thanks to a massive stock rally this year, the company's market cap has surpassed two of the biggest chewers and spitters: GM and Ford.

Tesla hasn't yet become a victim of its own success, but others have.  On Monday, Ford ousted its CEO of almost three years, Mark Fields — after two solid years of record profits. Numerous postgame analyses of Fields' departure pointed to Tesla's surge and Ford's lagging behind Silicon Valley's disruptive innovators.

That's wrong; Fields left because he had presided over a 40% stock slide. He's a big boy, and he knew that as CEO of a public company — and one still controlled by the Ford family — he had to keep the stock price up. So it goes. 

But the Tesla surge didn't help his cause. In fact, it isn't helping anybody's cause in the traditional industry, which has been riding high with record sales and earnings at a time when Tesla can barely move 80,000 vehicles per year and is burning through cash at an alarming, profitless rate. Old-school carmakers would like to express some self-confidence, but Tesla won't let them.

For example, General Motors probably has the best executive team in its history at the helm, making hard financial decisions under CEO Mary Barra that the Detroit giant never would have touched before its 2009 bankruptcy. But its stock price and market cap have also lagged Tesla and the wider market indices, and so Barra is currently facing down her second activist shareholder in as many years. 

Greenlight Capital's David Einhorn is conducting a heated proxy battle ahead of GM's annual shareholder's meeting in June; he wants to split the underperforming GM stock into two classes — one for dividend-seekers, one for growth investors — and get three seats on GM board.

It's a headache that Barra and her team wouldn't be having if Tesla weren't worth a speculative billion more than GM at this point.

The traditional automakers have been rewarding investors with share buybacks and healthy dividends, but GM's 4.5% yield pales in comparison to Tesla's 50% share-price appreciation over just the past six months — and it's 1,500% return since the 2010 IPO. GM, by contrast, has barely gotten back to its own 2010 IPO price of $33.

Over time, if Tesla doesn't fall back to Earth, this disparity is going to claim more victims in the industry. And that's completely disregarding the potential for Tesla to serve up a massive disruption to the entire mobility business and possibly going from $300 per share to $500 or more, as some analysts have suggested in their absolute best-case scenarios. 

If that comes to pass — let's say Tesla can profitably sell a million or more vehicles per year — entire automakers could be forced out of the US market, if not out of business. Silicon Valley might cheer that outcome, but nobody who works for, say, VW, designing, marketing, building, and selling cars wouldn't. 

It's also worth pointing out that the closer Tesla gets to being a million-or-more-vehicle-a-year carmaker, the closer its gets to advancing well beyond that and gobbling up more of the market. It already has a monopoly in the electric-car space, ironically only threatened by GM with the Bolt EV, which rolled out in 2016. 

Musk's vision relies on Tesla getting much bigger and pushing gas-powered vehicles off the road. But with a $50-billion market cap, the vision also now relies on Tesla extending its monopoly, ultimately reducing competition for car sales in the US and elsewhere. 

Silicon Valley hates good old-fashioned capitalist competition. From Microsoft to Apple, Amazon to Google, Facebook to ... well, Facebook, it prefers one-player market dominance to maximize profits and create huge concentrations of customers or users.

The government should be doing something about this, on antitrust grounds, but it isn't. If Musk's dreams for Tesla come to pass, Tesla will someday be dealing with its own antitrust issues (and they could be around driverless technology or big data, not just cars). But for now, the biggest check on Tesla is the legacy auto industry, which has grudgingly begun to rollout Tesla competitors in a market for electric cars that remains tiny.

Unfortunately, the lesson from Ford is that if you're running one of these companies and you can't tell a story as well as Musk, you could be in serious trouble.