GM’s Chevy Bolt
Just when Tesla Motors’ most anticipated event is drawing near, General Motors is also flexing its muscle with the pre-production of Chevrolet BoltThere is developing news related to a mass-market electric car and it is not related to Tesla Motors Inc. (NASDAQ:TSLA). It is hard for any non-Tesla related electric vehicle (EV) news to grab attention, as the electric car maker is enjoying the hype related to the Model 3 event. However, the game is not over for the other car makers who plan to lock horns with Tesla’s mass-market car ready to hit the stage on March 31 event in Hawthorne, Los Angeles.
General Motors Company (NYSE:GM) upcoming electric car Chevrolet Bolt is slowly speeding its production process, while Tesla Motors is busy in unveiling its most anticipated car. GM spokesman Michelle Malcho told Fortune that the first pre-production Chevy Bolt has reached assembly line at Orion plant, Michigan, north of Detroit. The process had started last week, which allows factory workers and engineers ensures of the manufacturing process prior to the final production process.
According to the publication citing Mr. Malcho, the retail version of the Chevy Bolt will be ready by the end of this year. Meanwhile, the pre-production version of the Chevy Bolt will be tested in the Orion plant, where other GM’s brands such as Chevy Sonic and Buick Verano are also produced. Chevrolet Bolt will share the assembly line with these two models, which is likely to take six to 12 months for the automaker to shift the vehicles from pre-production to final production phase, told Mr. Malcho.
With such a fast production process, it seems that GM is likely to win over Tesla Motors to launch the first mass market EV on roads. Both Tesla’s Model 3 and Chevy Bolt is scheduled to hit production somewhere by the end of 2017.
General Motors has Timeline Edge Over Tesla
We all know that GM has also got a head-start in the race to roll out cheaper EV first to the markets, as the Detroit giant has already done a year ago what Tesla plans to do by the end of this month.
GM showcased its EV concept back at North American International Auto Show in January 2015, a vehicle showcased in bright orange color. Since then, auto analysts have been calling it a Tesla rival and giving GM a huge task to take over the premium EV manufacturer. Continuing its lead, General Motors also displayed its upcoming electric car at Consumer Electronic Show this January. Showcase of the Chevy Bolt at several important media events means GM is serious related to its very own Tesla killer.
Though, Tesla Motors avoids these public events, as the automaker is already banned on most of the states to sell its cars directly to customers. However, Tesla Motors does word of mouth marketing and manage to capture enough hype due to its impressive brand image in the markets.
However, having a cult-like fan following and strong branding is one thing and actually deliver on its promises is another. Tesla Motors has a long habit of missing on its deadlines, which leads to many analysts thinking the launch of Model 3 might even get delayed to 2018.
Will Tesla Motors Fix its Production Issues For Model 3?
The problems in Tesla execution abilities were visible a few months back when the EV maker was not able to deliver satisfactory level of Model X units in the fourth quarter of last year. The electric crossover sport utility vehicle (SUV) was released after a delay of more than a year at the end of September 2015. Despite such a lengthy delay, the company was not able to meet analysts and its own delivery expectations and just sold 208 units of crossover last quarter.
As a result of Model X’s production lags, many analysts started to questions the company’s execution abilities of its future projects. As a result of slow production, Tesla Motors stock plummeted over 17% in January. It was only after February 10 when the investors were lured back to Tesla stock after the company ensured 80,000 to 90,000 annual car sales this year, a jump of over 70%, compared to 50,580 unit sales last year.
However, Tesla production concerns are not over yet. Recently, S&P Global Market Intelligence downgraded the electric car company due to the same concerns, doubting its execution abilities. The launch of Model 3 is the make or break situation for Tesla Motors, as the success of this car will fulfill the auto electrification dream for Tesla Motors.
Tesla Motors May Win Price War with Chevrolet Bolt, But There Is a Catch
Speaking of the prices of the mass market vehicles, which is the prime factor to determine who is likely to win the masses, it has to be said that Tesla Motors has got a pricing advantage. Model 3 is priced at $35,000; however, the prices will drop significantly after the federal tax incentives are implemented. Manufacturers of zero-emission vehicles enjoy governmental tax incentives of $7,500 across the country. However, these incentives further extend with respect to different states. According to a Bloomberg report, the price of Model 3 can drop as low as $25,000 in some states.
In contrast, GM has set a price tag of $37,500 before federal clean energy incentives. Even accounting for incentives, Chevy Bolt will cost $30,000, slightly above Tesla Model 3. Therefore, as the car gets cheaper, it will be affordable for greater target market.
To enjoy such lucrative tax incentives, Tesla needs to launch Model 3 as per its schedule. This is because the federal tax credits are available for Tesla on sale of first 200,000 vehicles. According to Bloomberg estimates, such a sales mark is expected to be met somewhere in 2018. If Tesla delays to bring the car to the markets by then, the incentives will be utilized on its high-end premium cars including Model S sedan and Model X. This is one of the reasons why Tesla Motors cannot miss on its Model 3 launch deadline.
Though Tesla has several advantages over the Chevrolet Bolt, including better-charging facilities, a wide network of charging stations, and advanced technology features available wirelessly through over the air software update. However, all of such things do not matter when competing with Chevy Bolt if Tesla is not able to meet its Model 3 deadline. This is because a huge market share will go the automaker that launches its cheaper EV first to the market. With all the hype build around Model 3, Tesla Motors would definitely not want to miss on the first-mover advantage.
Tesla Motors shares are currently trading at $227.62, up 2.26%. Meanwhile, General Motors is trading down 1.41% to stand at $30.87. Tesla stock is expected to surge further as the date of the Model 3 event draws near.
I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go. I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.