For decades the auto industry has centered around Detroit. General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler are located there and the innovation and design that drivers love was developed there.

Today, it's an upstart in California that has the auto industry rethinking everything it's doing. Maybe the internal combustion engine isn't the future? Maybe you can own your distribution network? And maybe if you make a product that people love, they'll pay enough to make you a handsome profit?

Maybe Tesla Motors (NASDAQ:TSLA) is the next standard in the auto industry?

Turning Detroit on its head
The first big impact Tesla is having on Detroit is proving you can make money selling electric vehicles. We know that the Nissan LEAF and Chevy Volt weren't financial successes, and upstarts like Fisker are in serious financial trouble. Tesla has shown the auto industry that consumers are willing to buy electric vehicles in droves if you include the right features.

What Tesla has done better than any other company was focus on performance and range. The Model S can go up to 265 miles on a single charge, about five times the distance of the Volt and LEAF. Ford's Focus Electric is improving range but still only goes about 80 miles. This gives Tesla a huge lead on the competition.

If you doubted the quality or performance of the Model S then you may want to reconsider after it was names Motor Trend's "Car of the Year" for 2013.

Performance on the bottom line
Tesla's surprise $11.2 million profit in the first quarter is the major reason the stock has skyrocketed in the past few weeks. This incredible performance, despite making just 20,000 vehicles per year, is what makes Tesla a standard in the auto industry. CEO Elon Musk is expecting a 25% gross margin once production ramps up, and that would be almost unheard of in the auto industry.

Below I've compiled the gross and net margins of some of Tesla's biggest competitors and none get close to 25%.


Revenue Growth

Gross Margin

Net Margin

Tesla Motors 

83.0% (q/q)



Ford Auto 




General Motors Auto 




BMW Group Auto 


9.0% (EBIT)


Source: Company earnings releases. Note: Net margin is for full company, which includes finance units.

Fueling the future of the auto industry
Tesla isn't just powering its own line of EVs, it's powering a new line of EVs from Toyota (NYSE:TM) and Mercedes Benz as well. The Rav4 EV is in production and the Mercedes Benz B-Class EV is in development. If these two companies need to rely on an upstart like Tesla for electric power trains it shows just how far it is ahead of the competition.

Tesla is the new standard of the auto industry because of its technology, performance, and superior financials. The question is: Can Detroit catch up?