Tesla Motors’ market value, currently $34 billion, often seems ahead of itself. After all, the technology-heavy maker of desirable electric sedans, which posted an adjusted second-quarter loss of $61 million on Wednesday, is already worth about half as much as Ford Motor and BMW. Yet these two sold more than 6 million and 2 million vehicles, respectively, in 2014, compared with Tesla’s production of 35,000.
The upstart company run by founder Elon Musk is also worth more than Fiat Chrysler Automobiles, the Italian-American giant that sold nearly 5 million vehicles last year. One reason is the increasing importance of technology in cars. Fiat just took a blow on that front, recalling 1.4 million cars after a widely publicized remote hack of a Jeep Cherokee shut down its engine and brakes, among other functions.
Tesla, by contrast, is in the vanguard of technological change, from batteries to navigation and driver assistance. But its cars aren’t immune from threats. In some ways they are more vulnerable than less sophisticated vehicles since pretty much everything is controlled by software. A Tesla has been hacked, but tellingly Musk has invited computer whizzes to try to break into its vehicle systems however they can. Any patches and updates can be provided over the airwaves overnight.
The owners of the Jeeps and other affected Chrysler models are getting USB drives in the mail, unless they want to download software onto their own sticks or go to dealerships. This process, ironically, presents hackers with another opportunity, a hardware-oriented version of phishing emails convincing enough to persuade victims to click on a dodgy link. Now they can try mass mailings of official-looking letters enclosing USB drives loaded with malware.
Other carmakers aren’t quite so antediluvian. BMW earlier this year fixed a flaw – one that could have exposed 2.2 million cars including Rolls Royce models – automatically when the cars connected to BMW’s servers. The potential hack involved a pretty simple process, long since identified and blocked in other contexts.
All carmakers need to catch up and move ahead. Roads packed with fully autonomous vehicles may still be on the distant horizon. But connected technological driver assistance is growing fast, and the days when cars store payment information are surely close at hand. Tesla is a lot further along than, say, Fiat. That alone doesn’t explain the valuation difference, but it’s one reason the Silicon Valley manufacturer has the edge.