Tesla’s Grabbing Headlines But It Won’t Be An Easy Ride From Here

by Trefis Team
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Last month General Motors (NYSE:GM) slashed the price of its Chevrolet Volt by up to $5,000. In doing so, GM follows the suit of Nissan which also cut the price of its Leaf EV by as much as 12% earlier in the year. The sales for Leaf had risen more than 300% in May to surpass those of the Volt. However, there is more to these price cuts, and the big automakers’ recent gains in making electric cars more appealing to the general public poses as a significant threat to the headline grabbing Tesla.

Tesla will introduce its high volume car, called the Gen III not before 2016 or 2017. To assume that the success of the Model S is a harbinger of the success of other upcoming Tesla models such as the Model X or the Gen III could be over optimistic.

See full analysis for Tesla Motors

Electrics Getting More Attractive

Besides the price cuts, the automakers are trying their best to make these vehicles attractive for the public. Due to a limited electric range, it’s almost impossible to use these cars for cross country travels. Therefore, Fiat is offering up to 12 days of free rental through Enterprise car rental company. Similarly, BMW offers users the choice of buying a range extender option for $4,000 in order to remove the long distance related range anxiety. [1]

The inconvenience caused in charging batteries is another issue. Generally, charging a battery can take several hours to charge. Chevrolet offers a DC charging in its new Spark EV which could reduce the charging time significantly. Up t0 80% of the battery can be charged in 20 minutes. Currently, most electric cars use AC chargers which take longer to charge. Automakers including GM and BMW are putting a good amount of money on making DC chargers more feasible. [2]

Although the auto companies are hardly making any money on the sale of electric vehicles (they probably are losing money at the moment), no major auto company can afford to ignore this segment due to the size of the opportunity that lies ahead. Some years back, few would have been bold enough as Toyota to invest in hybrid technology. But the results have paid off as the automaker has sold more than 3 million Prii since its inception. [3]

Consumer interest is higher than ever for electric and alternative fuel cars. Governments around the world are doing their bit by offering tax credits for every electric car purchased. States like California are offering an additional $1,500 tax incentive on top of the Federal tax credits. The technology is improving continuously and in a few years time, such cars can offer a formidable challenge to gasoline powered ones.

Not only are automakers debuting cars at the lower end of the spectrum, they’re now taking the mid level and the luxury segment pretty seriously as well. BMW’s i3 starts from about $50,000 while Cadillac will also launch the new ELR, an electric SUV, next year. The success of the Model S somewhat acts as a litmus test for the demand of the more expensive electric vehicles.

The electric and hybrid car vehicle market is also heating up due to the tough regulations placed upon the automakers by the State and Federal governments. For example, zero emission vehicles must account for at least 15% of the new vehicle sales by 2025 in California.

Tesla will have to fend off other automakers who are increasingly offering improved propositions at lower prices. And in another three to four years’ time (by the time the Gen III is launched), you will have a wider variety of electric cars with better electric ranges. It will be all the more difficult for the Gen III to be considered as ‘disruptive innovation’, something which the Model S is associated with.

We have a price estimate of $69 for Tesla, which is about 40% below the current market price.

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Notes:
  1. Creative Deals Key to Selling Spark EV, Fiat 500e, BMW i3, Honda Fit EV and Nissan LEAF, insideevs.com []
  2. G.M. and BMW Adopt D.C. Electric Car Charging, June 11, 2013, nytimes.com []
  3. Toyota Prius reaches 3 million sales milestone, July 9, 2013, thinkdigit.com []
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  • commented 1 years ago
  • tags: TSLA F GM TM
  • I have been reading these doom and gloom reports of tsla going down and down watching it closely ever since the stock price was 35.00, 45.00, 55.00, and so on per share all the way to it's present closing price of 123.45.
    I have learned that the people who are writing these blogs or reports are people who are shorting the stock looking to make money with their broker (Broker funny term) by taking a loan threw their agent or broker. However I don't believe they have made a dime with Tesla, and I don't believe they will. It may go down a little, but to drop in price like you are saying it won't happen because this company has built an automobile that will change the way we drive, the Model S is both beautiful, efficient, and at the same time will reduce carbon in our atmosphere drastically, and that has to be desirable to every human who breaths air. It will reduce the violent storms we have experienced in the last 25 to 30 years and that also has to be desirable to everyone on the planet, all because Tesla autos do not have a gasoline engine or a tailpipe and does have a rating of zero emissions. In the near future Tesla will introduce the Model X which will be less expensive and more efficient if that's possible, it will have two electric engines, one on each axle front and rear.
    There is much more to this company and the CEO who runs it, his name is Elon Musk who is determined to get the world off of fossil fuels, and if you think that is a bad thing you need to do more research on the company and this CEO. He is the builder of two other companies he runs, Space X which NASA has hired his company to launch resupply vehicles to the space station every three months, he also has a company called Solar City which will lease and install solar panels on your roof, and is a big plus for homeowners in reducing their electric bills.
    His companies and his goals are the same to help human kind, and I have learned to understand that his goals are not all about making money, (although he says he needs to pay the bills) his true goals are to get the planet in better shape than it is right now, and I believe in them, if you are human...so should you.