Prior to Tesla, the last serious effort to launch a new car company in The US was Kaiser-Frazer. That didn’t work out so well, despite the seemingly endless optimism, energy, enthusiasm and ego of its founder, Henry Kaiser (on right, with Joe Frazer). Those qualities certainly apply to Tesla’s Elon Musk. Tesla currently has a market capitalization of some $20 billion, more than double what Chrysler is likely worth. There are similarities, as well as major differences; Tesla is building only electric cars, while Kaiser-Frazer’s were fairly conventional. Is that enough to make a difference? Or is the comparison with the wrong company?
K-F was a bold attack on Detroit, the last time a new company took on the Big Three. Initially, Kaiser cars were to be quite radical too; revolutionary, even. Some of the earliest designs were tiny fiberglass open two-seaters. That evolved to a compact, with front wheel drive, like this fiberglass-bodied prototype from 1945. Compact, fiberglass, FWD; practically the technical equivalent of an EV today.
Once Joe Frazer came on board, the cars became more conventional. It was still going to be FWD, as the prototype show above. But even that had to be tossed for the practical reality of a mass-produced car at competitive prices. But of course, it didn’t pan out: costs were too high, and sales just never solidified at the level necessary to make K-F a profitable venture. And in 1953, Ford launched a sales blitz to buy market share that had a devastating effect on all the independents.
Tesla is taking a very different tack. Instead of attacking the Big Three, it has charted a truly independent course, but one that is clearly based on a key strategy: to become the object of four-wheel desire among the the influential affluent. And that seems to be working, what started out as the hot new thing among Silicon Valley million/billionaires, is spreading to many affluent regions of the country, as hot new status symbols have a way of doing.
According to a report released by Edmunds.com today, the Tesla S is the best-selling vehicle in 8 of 25 of the wealthiest zip codes in the US. Those eight are all in California, and in the top two, Atherton and Los Altos Hills, the Model S has a double-digit market share. And it takes the #1 spot in those 25 wealthy enclaves more than any other vehicle. Turn the clock back thirty-five years or so, it would have been Mercedes making inroads against Cadillac and Lincoln. Neither of which are even on this list.
While the effect is most pronounced in California, it is spreading to other wealthy regions of the country. Until the recent rise of Silicon Valley as America’s El Dorado, it was Hollywood. And the early embrace of Mercedes by the glitterati was a key step to that brand’s rise.
Mercedes was the car to be seen in, for way too long. Can Tesla repeat that? It’s certainly off to an electrifying start.
Undoubtedly, Tesla’s current market valuation is optimistic, if not absurd. And the naysayers will point out that Detroit and Japan can build EVs too. But that’s not really what it’s about. Tesla may not quite be a disruptive technology, but was it really superior technology that powered Apple to the top?
That may also not be a totally valid comparison, since the high tech market is madly competitive, and products change almost weekly. With cars, that’s not quite the case, and Tesla has staked out an image along with the technology. Whether it can satisfy the lofty expectations of its investors is a big question, but it’s already proven a lot of nay-sayers wrong so far. I seem to remember my son telling me that there was no way Tesla could ever afford to develop its own platform for the Model S.
So what’s the verdict? Is Tesla the next Kaiser-Frazer or Mercedes?