U.S. Markets closed

Why Tesla has a huge productivity advantage over Detroit's big three

Kenneth Underwood
Senior Producer

Tesla’s (TSLA) stellar 2020 continued Tuesday, with shares surging another 13%+. Elon Musk’s car company has now seen shares increase almost 40% this week and a nearly a staggering 115% this year. 

But why? What gives this electric car company the edge that has it on track to become the most valuable automaker in the world? 

“The thing to realize about Tesla is that making an electric car is a lot less complicated than making a one with the traditional engine,” Clockwise Capital co-founder, Ryan Guttridge, told Yahoo Finance’s On the Move. “They've got a huge productivity advantage. And now whether or not the legacy auto players will adapt to that, I grew up in Detroit, and I've seen them fail to adapt or be really slow to adapt for a long time. That doesn't appear to be the case now. But you know, who knows?”

A combination picture shows SpaceX owner and Tesla CEO Elon Musk speaking during a conversation with legendary game designer Todd Howard (not pictured) at the E3 gaming convention in Los Angeles, California, U.S., June 13, 2019. REUTERS/Mike Blake

Tesla’s rise may be overblown to some, but could it be just the right point in history for an electric carmaker to disrupt the auto industry?

Guttridge explained that where things stand right now reminds him of another point in history. “We think the right historical analog for this time period is actually 1910, where the infrastructure, the railroads, had led to or begun to enable the concentration of manufacturing. And that then gave birth to economies of scale that then gave birth to the assembly line.”

He continued: “And the assembly line actually grew productivity by 600% took the time to make a car from 12 hours down to two. So that sort of productivity explosion could be right around the corner, because in our view, the infrastructure that has been built over the last 10 years is very, very analogous to the assembly line. And you need to look no farther than things such as AI, 3d printing. And the cloud has been this incredible productivity enhancements in everyone's life.”

Kenneth Underwood is a senior producer for Yahoo Finance. Follow him on Twitter@TheKennyU.

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on TwitterFacebook,Instagram,Flipboard,SmartNews,LinkedInYouTube, and reddit.