Elon Musk and Henry Ford Made the Same Mistake. They Waited Too Long.Published: May 15, 2024 at 1:00 a.m. ET
By
Kenneth G. Pringle
comments
0
Henry Ford made cars affordable for everyday people with his Model T. GETTY IMAGES
- Email icon
- Facebook icon
- Twitter icon
- Linkedin icon
- Flipboard icon
- Reprint
- Print icon
- Resize icon
Referenced Symbols
Listen to article
Length6 minutes
Even as he dabbles with driverless cars and sentient robots, the pressure is on Elon Musk to develop his long-promised “ low-cost family” Tesla.
Investors worry Tesla’s car line with its four-year-old Model Y is becoming stale, that the world’s leader in electric vehicles is losing its first-mover advantage. Car makers from Detroit to Shanghai are catching up. Tesla’s stock price has tumbled by more than half since late 2021, including a 32% drop this year.
Henry Ford would have commiserated with his spiritual successor.
In 1924, Ford faced a similar dilemma. Sales of the Model T, America’s top-seller since 1909, were dropping. Rivals were gaining market share. Company executives believed it was time to produce a new, modern motorcar.
Henry Ford disagreed. He was sticking by his Tin Lizzie—and his opinion was the only one that mattered.
“The fight was long and bloody,” the historian Steven Watts writes in The People’s Tycoon: Henry Ford and the American Century. [A] battle for the heart and soul of the company.”
Like the EV market before Musk, the automobile market before Ford barely existed. In 1902, the year before Ford’s entry, the best-seller was the Locomobile, a steam-powered buggy. It sold 2,750 units.
Tesla CEO Elon Musk speaks at the Gigafactory Berlin-Brandenburg with a Model Y. CHRISTIAN MARQUARDT/GETTY IMAGES
Cars were playthings of the wealthy, luxuries, too expensive for most people. Ford meant to change that.
“I will build a motor car for the great multitude,” Ford wrote in his autobiography, My Life and Work. “It will be large enough for the family, but small enough for the individual to run and care for…[and] so low in price that no man making a good salary will be unable to own one.”
Production of the Model T began in 1908. More than 10,000 rolled out in 1909, 170,000 in 1913, 500,000 in 1916, and two million in 1923.
What made the Model T so popular? “Not a thing of art and beauty, but of utility and strength,” as Barron’s wrote, the Tin Lizzie was reliable and cheap.
But there were signs of trouble. In 1924, The Wall Street Journal noted that Chevys were selling for $495, for the first time bringing a rival within “striking distance” of Ford’s industry low $380.
In 1925, GM matched Ford’s profit—around $100 million—despite selling half as many cars. GM’s higher margins and better business practices were paying off.
It got worse. Ford’s market share dropped from 51% in 1924 to 32% in 1926.
Clarence Barron, this magazine’s founder, knew all about Henry Ford’s resistance to a new model.
“He will not listen to popular clamor or the pleadings of his associates,” Barron wrote on July 26, 1926. “‘Won’t you give the people what they want?’ he was asked, and the emphatic reply was ‘No, I will give them what I know they ought to have.’”
A story is told, dated as early as 1912, that while Henry Ford was away, executives secretly built a prototype of “an improved Ford,” as Barron’s wrote. They showed it to the boss upon his return.
“Mr. Ford called for a hammer,” the story goes, and he proceeded to destroy the thing. “With every blow he cried out: ‘This is what I think of your ——- new car.’”
Despite this, company leaders maintained pressure to replace the Model T and, in late summer ‘26, the old man relented. Then he threw himself into work on the new car, dubbed Model A to symbolize a new beginning.
Model T production shut down on June 1, 1927, and deliveries of the new car were promised for Aug. 1. That date came and went. Like Musk, Ford was bad with deadlines.
Though retooling took longer than expected, and cost $250 million (about $4.3 billion today), cars were rolling off the line by November.
Mob scenes were reported at Ford dealers around the country. The Model A was a popular and critical success, called a “baby Lincoln” for its looks, while costing the same $385 as the Model T.
Yet, it failed to restore Ford’s former pre-eminence. Ford instead would vie with Chevy in the starter-car segment, while GM—with brands at every price point—became No. 1.
Ford lost its dominance through Henry Ford’s refusal to change with the times, and the new Model A simply arrived too late. Or so goes one argument.
Another is that Ford made his choice back in the early 1900s, focusing on one model while William C. Durant—maker of America’s favorite horse-drawn vehicles—started collecting automobile companies. Buick, Cadillac, Olds, Chevy and more he fused into GM, a company of companies.
Durant was forced out of GM in 1920 and, after years of get-rich-quick scheming, died bankrupt and forgotten in March 1947. Ford outlasted him by a month, mourned by a nation.
Returning to 2024, Musk seems more interested in moonshots—literally, in the case of his SpaceX rocket venture—than sure shots.
With his focus on autonomous driving, Musk is taking another moonshot. In a few years, perhaps, the sight of driverless cars will be commonplace. In a generation, children may marvel that their elders once actually drove cars—the way kids in Model Ts were amazed to hear their parents once traveled in horse-drawn buggies.
“Not quite betting the company, but going balls to the wall for autonomy is a blindingly obvious move,” Musk tweeted recently. “Everything else is like variations on a horse carriage.”
Henry Ford lost market dominance by sticking too long with an inexpensive car. Elon Musk may lose it by waiting too long to build one.
Write to editors@barrons.com |
