Detroit wisely gives up to Tesla this time


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Jan 19, 2024

Detroit wisely gives up to Tesla this time

NEW YORK, June 9 (Reuters Breakingviews) - Sometimes it makes sense to throw in

NEW YORK, June 9 (Reuters Breakingviews) - Sometimes it makes sense to throw in the towel. General Motors (GM.N) on Thursday said that it would adopt Tesla's (TSLA.O) electric charger design, joining rival automaker Ford Motor(F.N) and likely cementing the technology as the U.S. standard. The move smoothes the path for their burgeoning battery-powered divisions while ceding modest revenue to Elon Musk's company. But the risk is that other more lucrative parts of their vehicles like entertainment on the dashboard will similarly be up for grabs.

Three designs for electric-car charging plugs have been dueling it out in North America. That's a problem: Drivers need to be able to juice batteries reliably during long-distance trips. Rolling into a station with the wrong plug could sour a buyer on ditching gas guzzlers.

Rallying around Tesla's design will help. The company's supercharger network already accounts for 60% of U.S. and Canadian fast chargers, which quickly top up batteries. GM and Ford's customers will now have access to the most widely deployed infrastructure. The partnership will also likely kill off competing standards - Tesla, Ford and GM accounted for three-quarters of electric cars sold in 2022, according to Experian.

And while GM and Ford's customers will now be paying rival Tesla for charging, analysts at Wedbush and Piper Sandler put the revenue opportunity for Musk's firm at only around $3 billion by 2030. That's 4% of Tesla's total revenue last year.

But Detroit should be careful about giving too much away. There are many parts of their electric car beyond charging for which others are jostling. Apple (AAPL.O) and Alphabet's (GOOGL.O) Google offer software that replaces the infotainment system and Tesla wants others to adopt its self-driving technology. GM boss Mary Barra says her company will keep control of both, but Ford Chief Executive Jim Farley already says automakers have "lost" to Apple on in-car content. Holding on is crucial: GM's master plan envisions software and "new businesses" accounting for over a quarter of its revenue by 2030, with an operating profit margin double that of making cars. Barra and Farley have given the tech upstarts an inch; Tesla and Big Tech will try to take the next mile.

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General Motors announced on June 8 that it would adopt U.S. automaker Tesla's North American Charging Standard connector design in its electric vehicles, starting in 2025. The partnership follows a similar announcement from Ford Motor on May 25.

Tesla said in November that it would open its charging design for use by other companies.

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