Big Auto’s Traditional Business Earns Huge Profits. Why Does Wall Street Value It at Zero?

The steam age lasted decades after oil came into wide use. Photo: Courtesy Library of Congress

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The steam engine was invented in the seventeenth century, brought to industrial scale in the nineteenth, and powered railroads everywhere into the twentieth—until cheap and reliable diesel locomotives finally shunted it aside. Yet steam maintained a prominent role alongside diesel for a surprisingly long time, powering trains in New York, California and elsewhere until the late 1950s and in Japan until 1975, just 46 years ago.

When a splashy new technology is invented, the older one often seems—well, old. Most of the attention of investors and the public turns to the growth and anticipated ubiquity of its successor. The landline gave way to the flip phone, which gave way to the smartphone. The cassette player relinquished its central place in every home and automobile, supplanted by the iPod and then Spotify and Apple Music apps. Last week’s blockbuster initial public offering of Rivian, which closed Friday with a market capitalization of a whopping $127 billion, suggests that investors expect the electric pickup truck maker to follow such a path, too, supplanting what came before.

But much of technological history hasn’t obeyed that script, says David Edgerton, a professor of the history of science and technology at King’s College London, and author of The Shock of the Old: Technology and Global History Since 1900. Instead, new inventions have often only seemed to vanquish a legacy product while actually going on to coexist with the old. At the start of World War II, Edgerton says, Germany invaded the rest of Europe with the most technologically advanced mechanized force in history. But the Nazi army also featured one of the oldest technologies of all: the domesticated horse, 590,000 of them to be precise.

Today, the mania around electric vehicles is colliding with the more than century-old era of combustion. Across the globe, many people seem dead certain that EVs will rapidly emerge victorious. And they might. But as with past technology waves, combustion seems highly unlikely to outright vanish anytime soon. Rather, most automakers expect consumers to continue buying gasoline-fueled vehicles alongside EVs until the mid-2030s and perhaps beyond. And in parts of Africa, Asia and Latin America, new combustion vehicles seem all but certain to be big sellers through much of the century.