Tesla (TSLA 3.10%) has been the talk of the auto and electric-vehicle (EV) stocks for most of the last decade and for good reason. The company has come to define electric vehicles and has done more to disrupt the auto industry than any company in a century.
But this year, it's General Motors (GM -0.20%) that investors are pushing higher over Tesla. You can see below that GM stock is up 46% in 2021, while Tesla stock is down 13%.
Six months doesn't make a trend, but this is a notable performance from GM and may show the market starting to value the products GM has been developing for years. It could also be argued that Tesla stock had become overvalued, but valuation has never held Tesla back before. So, how could an old, Detroit-based company beat Elon Musk and Tesla if the world is moving toward EVs and autonomous vehicles? GM's shift to EVs and its investments in autonomy may be driving the stock performance in 2021 and given recent announcements from GM I think the outperformance could continue for years.
Tesla's EV lead is shrinking
A few years ago, Tesla had a huge lead over the competition in electric vehicles. Manufacturers were still making vehicles with ranges of 50 to 100 miles even as Tesla was passing 300 miles of range with some models. It seemed automakers would never catch up.
Today, the competition is much more compelling for EV buyers; depending on what you value, Tesla may not be the best EV option. You can see in the table below that multiple EV models are on the market at a similar price point and range as the Model 3, with competitors coming to every segment of the EV market.
|Tesla Model 3||$39,990||263 miles|
|Chevy Bolt||$31,995||259 miles|
|VW ID.4||$39,995||250 (estimated)|
|Ford Mustang Mach-E||$42,895||305 miles|
Tesla has been operating from a point of strength and differentiation in the EV market for years. But that differentiation has diminished, and companies like GM are coming into the market with compelling options. The Chevy Bolt was the first full EV from GM, but the Hummer EV, Cadillac LYRIQ, and the electric Silverado are on the way, and GM's shift into EVs is already eating into Tesla's lead.
Tesla is way behind in autonomous driving, and GM is taking the lead
Autonomy is the other reason investors may see a brighter future at GM than at Tesla. On the surface, it appears that Tesla is a leader in autonomous driving because it has released some self-driving features to its vehicles with Autopilot and has collected data from millions of miles of customers driving, most of which is video and intervention data when Autopilot is active. In reality, Tesla is likely years behind competitors, in part because it's using a vision system while most competitors are using LiDAR technology in combination with vision and other sensors. Competitors like Cruise and Waymo also haven't autonomous features to the public -- and may never do so in passenger vehicles.
Research from firms like Navigant Research suggests that Tesla is behind Ford, Alphabet's (GOOG 0.19%) (GOOGL 0.33%) Waymo, General Motors's Cruise subsidiary, and many other companies in both technology and strategy for autonomous driving. But we don't need to look any further than what competitors have submitted to regulators and are being approved for in the autonomous market to show how far behind Tesla is.
Earlier this month, GM's Cruise unit was the first company permitted by California regulators to operate self-driving, ride-sharing vehicles with customers and no backup driver. Seven other companies have also been given permits to test self-driving vehicles in California without a driver and with no passengers allowed. Tesla, which is based in the state, is NOT one of them. The company could be testing in states like Texas and Arizona, where it has operations, but Tesla has yet to report full self-driving data and it's unclear how technology that would enable driving without a driver is being tested.
The number of autonomous driving miles in California is also telling. After driving 12.2 autonomous miles with a safety driver in 2019, Tesla drove ZERO fully autonomous miles in 2020, according to California regulators. By comparison, Cruise and Waymo have driven more than 3.5 million combined autonomous miles in the last two years. Even Apple (NASDAQ: AAPL) has more autonomous miles than Tesla on California roads.
|Company||2019 Autonomous Miles||2020 Autonomous Miles|
Tesla has begun to admit publicly that its Autopilot feature is a driver-assist system not anywhere near a fully autonomous driving system. Car and Driver reported that Tesla's associate general counsel Eric C. Williams wrote the following in a letter to the California Division of Motor Vehicles (DMV): "Currently neither Autopilot nor FSD Capability is an autonomous system, and currently no comprising feature, whether singularly or collectively, is autonomous or makes our vehicles autonomous."
Williams even called Autopilot a Society of Automotive Engineers (SAE) Level 2 automation system, which is well below the Level 5 autonomy that Musk has been projecting for years (see fellow Motley Fool John Rosevear's article on the distinction between levels of autonomy here). Tesla is also far behind Cruise and Waymo, which are testing Level 4 autonomy.
The lack of fully autonomous testing on public roads in its home state shows that Tesla may not have the same ambitions in autonomous driving as GM (Cruise) and Alphabet (Waymo).
The market is betting on GM's future
Tesla is certainly growing revenue, and that will continue as it expands production. And we can't forget that the Tesla brand has a loyal following that may be willing to pay a premium for electric vehicles, even if features are similar to competitors. But as we look out five to ten years, it may be companies like General Motors that provide a bigger opportunity for investors, and that's what we're seeing the market react to.
In the next few years, GM's growing lineup of EVs will grow and fill parts of the market that Tesla can't with its limited lineup. The Bolt fills the budget need; the electric Silverado could do really well in the truck market; and the LYRIQ and Hummer are compelling in the luxury-vehicle market. And with ranges and costs that are competitive with Tesla, GM is catching and may potentially surpass Tesla in range and performance of EVs with some vehicles.
Long term, autonomous vehicles and autonomous ride-sharing could be the biggest growth segments in the auto industry, and it's clear that in the fully autonomous arena that Cruise has a lead over Tesla. And Cruise is already building a ride-sharing business with real customers. Tesla has been talking about robotaxis for years but isn't testing the technology in California, which doesn't appear to be anywhere near becoming a reality.
When you add in the fact that GM is more profitable than Tesla today, it makes sense that investors like the stock. In fact, GM's market cap of $88 billion is still less than 20% of Tesla's $583 billion market cap.
The tide seems to have turned for GM and against Tesla so far in 2021 as GM releases more EVs and autonomous features into the world. That's a relatively short-term move in the grand scheme of the auto business, but given their operating trends, I think GM's outperformance could continue. GM may not be the high-profile stock that Tesla is, but I think it's a great auto stock for the next decade, especially if Cruise comes to redefine personal transportation in metro areas.