Amazon just might be making itself into a Tesla competitor, but Elon Musk doesn't seem worried about Jeff Bezos' plans

  • Tesla has become the most valuable automaker in the world, with a nearly $400-billion market cap.
  • Amazon, according to a Wall Street analyst, could be aiming to take Tesla on by investing in electric-vehicle and self-driving startups that might someday compete with Elon Musk's automaker.
  • Startups and established companies alike have studied Tesla's struggles and are trying to devise less risky and expensive ways to reinvent mobility.
  • Visit Business Insider's homepage for more stories.

Morgan Stanley analyst Adam Jonas tends to have some of the more interesting ideas about the future of transportation, and on a conference call with Tesla CEO Elon Musk after the carmaker reported a third-quarter profit, he was in good form.

"Amazon appears to be investing and building an autonomous or electric transport network of some ilk through some organic investments, but also … Aurora, Rivian, etc.," Jonas said.

Then he asked Musk, "What advice would you give Jeff Bezos in his endeavor?"

Musk brushed off the comment, acknowledging that Amazon is spending some serious money but otherwise not dwelling on the matter.

Still, Jonas had snuck in his thesis: that Amazon, through investments in other companies rather than starting something itself, is working on a Tesla-fighting strategy.

Amazon focuses on new opportunities, but Tesla defines them

Why is this important? Because Amazon is one of the most valuable companies on Earth, with a $1.5-trillion market cap. Ff you apply some rough math, that amounts to about 7% of annual US GDP, which is just over $20 trillion. 

Tesla is worth much less, but at nearly $400 billion, its market cap makes it the most valuable carmaker in the world. And while Amazon's share price has increased an impressive 200% in three years, Tesla's has increased by 570%. 

Amazon is obsessed with growth, and the retailing giant's history has been all about focusing on the next big opportunity. Tesla, meanwhile, has been about defining the next big opportunity before anyone else. And while there has been plenty of skepticism about the company and electric vehicles over the past decade, Tesla has vanquished the naysayers and encouraged the auto industry to embrace electrification in a major way.

Musk and Bezos are already rivals in the space business — Bezos with Blue Origin and Musk with SpaceX. But if Jonas is right, then Bezos could be paying attention to Tesla's success while he and Amazon devise a competitive approach.

Much of the discussion around how to beat Tesla has been focused on direct competition. These days, that prospect is coming mainly from established automakers, such as General Motors and Volkswagen, both of which have outlined ambitious electrification objectives. The expectation is that Teslas will go toe-to-toe with a spate of new vehicles in a battle for consumer dollars.

New business models, influenced by Tesla's struggles

But more recently, some new business models have emerged — business models influenced and informed by Tesla's considerable struggles. Tesla, after all, has been around for 17 years, but it's just since 2017 and the arrival of the mass-market Model 3 sedan that the company has begun to post notable annual sales numbers. In 2020, it could deliver half a million vehicles.

That path to this point has been, to put it mildly, arduous. Tesla has nearly run out of money at least twice, and in 2018 Musk engineered an ill-fated effort to take the company private that brought fraud charges from the SEC and ended up costing Tesla $20 million in fines and Musk another $20 million, along with his chairman title. The Model 3 infamously sent the company through what Musk called "production hell," as it figured out how to build the vehicle at scale.

This has cost billions, and many established companies and some startups have decided that they don't need to work that hard or walk such a difficult financial tightrope. 

If you think that way, then Amazon's $700-million stake in Rivian, an electric-truck startup, and a piece of a $530-million round in self-driving startup Aurora plus a subsequent Rivian round add up to around $1 billion committed in a relatively low-risk way to tomorrow's twin pillars of transportation: EVs and AVs. (Amazon has also agreed to buy self-driving car developer Zoox for a reported $1.2 billion.)

If Bezos likes what he sees, he can always invest more. 

Don't build the cars yourself

Meanwhile, Henrik Fisker — considered a Musk challenger in the 2000s and early 2010s when he was running Fisker Automotive, a startup that went bankrupt in 2013 — has returned with a new company in Fisker, Inc. and what he calls an "asset-light" business plan.

He, too, believes that Tesla has proven that the EV is here to stay, but he wants no part of the troubles that Tesla faced while it built an electric-car market from scratch. Two weeks ago, Fisker, Inc. started trading on the NYSE after being acquired by a "blank check" fund created by private-equity giant Apollo Global Management. It's valued at about $3 billion and has $1 billion to build its Ocean SUV. Or, more accurately, have Magna Steyr, the world's largest contract manufacturer of vehicles, build it. And take a 6% stake in Fisker, Inc. echoing Amazon's strategy.

The upshot here is that Bezos and Musk are two of the most wildly successful business people in history, but they have different styles. Musk is hands-on and focused on using companies such as Tesla and SpaceX to achieve a vision — a world freed from fossil-fuel dependence.

Bezos wants Amazon to be involved in, it seems, just about everything. Transportation is yet another opportunity, in his view, and he wants his company to dominate it.

But unlike Musk, who spent everything he made from selling PayPal to eBay in 2002 to buy into Tesla and SpaceX, Bezos appears to be taking a more cautious approach, spreading around Amazon bets, as any prudent investor might.

Neither needs to be 100% right for more EVs and AVs to take to the roads. And based on Musk's mild response to Jonas' provocative question, the Tesla CEO might be happy if Bezos's piecemeal strategy pays off.

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