Autos

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

She didn't unveil a nuke-proof truck. Nor did anyone call on her to become emperor. Yet I think Mary Barra, CEO of General Motors Co., actually had a good week, if slightly less flashy than that of her counterpart at Tesla Inc., Elon Musk.

A day before Musk's Thursday night electric-truck-and-nesting-sports-car reveal in an aircraft hangar in Los Angeles, Barra appeared in the slightly more mundane setting of a conference hosted by Barclays in Manhattan.

Barra mostly reiterated GM's strategy around electrification and autonomy. But her plan to launch a new electric-vehicle platform in 2021 was notable. GM means for this platform to support several vehicles, with a modular battery design that should provide economies of scale at manufacturing but also flexibility for different models. The resulting lower cost underpins GM's intent for the platform to be profitable

This isn't important because GM is guaranteed to pull this off. We are still talking about a mature industrial company trying to reinvent itself for the 21st century and which emerged from bankruptcy less than a decade ago.

Why it's important is that GM is taking a methodical approach to that reinvention. It's focusing on the big issue; namely, getting the cost of a mass-market electric vehicle down to a competitive level with traditional cars. And it's doing so by developing platforms that can be adapted to different markets, especially China and the U.S., and tailored to different brands and models, allowing for a relatively quick expansion of options for the consumer. This is what car companies did to build their industry in the first place.

And so far, at least, it is working reasonably well. Is the Chevy Bolt as striking as the Tesla Model 3? No. On the other hand, it's available. GM is churning out thousands of Chevy Bolts that you can actually buy. It sold almost 2,800 of them last month, according to InsideEVs, which was higher than sales of the Tesla Model S and X combined (these two Tesla models still lead the market for the year as a whole). The Model 3, meanwhile, is mired in production problems.

As Brian Johnson, the Barclays analyst who hosted the conference, points out, there is a raging debate about who will win the electric and autonomous future of vehicles. Tesla's sky-high valuation speaks to faith in the power of disruption, while GM's lowly multiple reflects doubts that the dinosaurs can truly evolve.

Faith And Doubt
Tesla's valuation multiple is almost 10 times as big as GM's
Source: Bloomberg
Note: Enterprise value as a multiple of consensus forecasts for Ebitda in 2018.

Investors wowed by Tesla's show bought more of its shares on Friday -- although, as I wrote here, anyone owning the stock before Thursday night had implicitly bought into the truck already.

In addition, the roughly 2 percent gain in Tesla's stock as of writing this isn't as big as might have been expected after a big unveiling of not one but two new models. The Model 3 issue may be undermining faith among at least some Tesla fans. As I wrote here, fixing it is crucial to Tesla's future.

GM, of course, knows a thing or two about getting mass production of vehicles humming. It also has the relative luxury of net cash on its balance sheet and annual free cash flow of $4.5-$5 billion over the next three years, underpinned by an existing range of profitable traditional vehicles.

Earlier this year, much digital ink was spilled -- including my own -- on the fact that Tesla's market capitalization had eclipsed that of GM, despite selling only 1 percent as many vehicles as Detroit's behemoth. Tesla's lead peaked in June at more than $11 billion, or 22 percent.

Things have flipped since then.

Edging Back
GM has regained its lead over Tesla in terms of market cap
Source: Bloomberg

To be clear, it is still amazing that less than $10 billion separates these two. Barra can draw some comfort from that recent uptick in valuation even as Tesla's has come off, though. It is Tesla's challenge that has galvanized GM and other traditional automakers to change. But there is still value to be found in taking measured strides rather than multiple moonshots.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net