Tesla could end up like Ford: losing its pole position as dull corporate rivals take lead

Pretty much everyone has an Apple or an Android phone. A new firm would struggle to break into that duopoly. Nokia, Blackberry: they came and went. Apple and Alphabet would have to really mess up to be in trouble. Walmart will do its best to cut Amazon down to size, but economies of scale in online retail and delivery are real.

But Tesla is vulnerable. Not because some people hate Musk for supporting Trump; or because others hate him for attacking Trump. But because lots of good, rival electric cars mean Tesla has no market power. In 2013, Autocar magazine described the Tesla Model S as “a triumph”, its 300-mile range about three times that of any other electric car available. Add in the supercharger network – then exclusively restricted to Tesla – and Teslas were the only EV that worked like a normal car. That gave the firm market power.

Today, by contrast, while a £40,000 Tesla Model 3 can travel 320 miles, a 380-mile Kia EV3 costs a couple of thousands less. Tesla’s 430-mile longer-range Model 3 costs £45,000, but just £600 extra gets you a 480-mile Mercedes-Benz CLA. Tesla has a competitive offer, but it is not unique, and that hits pricing and margins.

Outside of the US, Tesla produces only two, relatively similar, cars. It has no rival to this year’s Car of the Year, the £23,000 electric Renault 5. As a contrast, Hyundai offers five EVs, ranging from the tiny Inster to the massive Ioniq 9. Whatever type of EV you want, Hyundai can help. Competitive pressure means Tesla’s net income was lower in 2024 than in any post-pandemic year.

Tesla has a second revenue stream: selling carbon credits to other car firms. The US requires car firms to lower their average CO2 emissions, while Europe requires them to sell a minimum proportion of EVs. Companies that fail can buy credits from firms, such as Tesla, that do better. Unfortunately for Tesla, President Trump has abolished this requirement in the US, destroying that revenue stream.

In Europe, the EU has weakened the standard a little, reducing the value of credits. In any case, there are no credits to sell if you don’t sell cars, and Tesla’s European sales have halved in the past year.

Tesla is a bet on Elon Musk. That is why he can successfully demand an additional $30bn with the threat that he will otherwise walk away. That $30bn is a straightforward reduction in returns to shareholders. Shares in a company where the CEO can take so much of the upside, even in bad times, should not trade at high valuations.

Capitalism can be cruel and merciless to companies that invent. All too often the second- and third-placed companies overtake the original innovator. Henry Ford’s production line cut the price of the Model T from $825 to $260 between 1908 and 1925, an 80% real-terms fall. Despite his genius, General Motors sold more cars than Ford by 1927. They copied Ford’s production line, and offered buyers a “car for every purse and purpose”.

The parallels between then and now are uncanny: an autocratic, rather odd, genius inventor (Ford, Musk) achieved something amazing, and yet the dull-as-ditchwater corporate follower (GM, Hyundai) wins out. Perhaps Hyundai bosses have been reading business history books, and realise Tesla is as vulnerable now as Ford was then. The future for Tesla is probably much like that of Ford after the 1920s – just another erratically profitable car firm, with a share price to match.

Photograph by Brandon Bell/Getty