Tesla’s electric cars are leaving industry giants in the dust – a revolution is imminent

The speed of change has taken the legacy manufacturers by surprise, who, despite their expertise in other areas, know little about the technology it takes to transform the driving experience entirely, says Hamish McRae

Tesla’s Model 3 (AP/David Zalubowski)

It has been a wild ride for Tesla’s share price. Last week it opened below $700 (£543), shot to a peak of over $960 on Tuesday afternoon, was back below $700 by Thursday morning – and settled after hours on Friday at around $746.

These are heady valuations. At that peak, its market capitalisation was greater than BMW and VW combined, and even after the shading back of the share price, Tesla is worth far more than established manufacturers such as Ford or General Motors. Yet last year, it made fewer than 400,000 cars, while General Motors made 7.7 million. What’s going on?

There are at least three stories embedded here. One is that there is something of a bubble mentality sweeping over US stock markets and this is an example of that. A second is that the switch to electric vehicles is happening far faster and on a global scale than most people expected even three months ago. And the third is that Tesla has a huge lead over other car companies that will be hard to peg back. Let’s leave the first aside, for no one knows what will happen to US equities, and focus on the second and third.