Internal combustion could be having a “Kodak moment”

British investment firm Baillie Gifford fund manager Ian McCombie says conventional internal combustion carmakers could be having a “Kodak moment”.

McCombie tells Morningstar.co.uk that on the back of Tesla turning its first “incredibly historic” profit in the third quarter, manufacturers not ready to meet electric vehicle demand could be cradling a sinking legacy.

“They (manufacturers) spent hundreds of years building up their know-how in industrial combustion engines and they do a great job with that, but what happens if all of us are suddenly saying ‘oh, I want an electric car’?” he ask.

“Suddenly, that knowhow is useless.”

McCombie points to Daimler being overtaken by Tesla in the sales race as a warning to conventional carmakers.

“Daimler’s been in the market for 100-plus years and here’s this upstart and they’re outselling them in the US,” he continues.

“What happened with Kodak is they actually discovered the digital camera, but they buried it because it was too frightening for them. They thought it would kill their film business. But the fact that they didn’t innovate killed Kodak.”

Tesla, with shares up 35% and selling for $338 each, also partly owned by a number of high-profile Baillie Gifford investment trusts like gold-rated Scottish Mortgage and bronze-rated Monks, will help the EV market expand “dramatically” according to McCombie.

“Tesla is exciting, because they don’t have those legacy issues,” he tells Morningstar

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While acknowledging “we could be wrong”, McCombie says conventional ICE carmakers with “the bulk of their sales still coming from legacy products” should not be complacent about Tesla chief executive Elon Musk’s controversial public statements.

“That is often what a lot of entrepreneurs are like,” McCombie explains. “They’re eccentric, they’re not everyone’s cup of tea and they challenge conventional wisdom.”

The finance expert compares Musk to Henry Ford of his day as “pretty mild in comparison”.

“You might not like Musk – and I’m not condoning what he did – but you can’t deny the fact that he’s done some pretty remarkable things,” McCombie says.