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Who Will Challenge Tesla and Who Won't

NEW YORK (TheStreet) -- Investors in Tesla (TSLA) need to understand what and when the other car companies intend to do to compete with Tesla, if anything at all. This article is an attempt at a tutorial.

There are at least three attributes that make Tesla into a new kind of automobile experience: an all-electric car that is EPA-rated at 265 miles, almost three times its nearest all-electric competitor; a superior infotainment system fitted in two screens, including one 17-inch touchscreen; a direct sales model, essentially copying the Apple (AAPL) and Microsoft (MSFT) Store models.

This article focuses exclusively on the first of those three attributes. (I will deal with the other two in separate articles.)

It is fair to say that Tesla is enjoying a scarcity premium to its stock market valuation resulting from selling an all-electric car with by far the highest performance and longest range. As real or potential investors, we need to have a view on how long this scarcity premium will prevail -- and for that matter how long it will even be important, even if it prevails.

Competition from pure electric cars: These cars have been priced mostly between $30,000 and $40,000, before tax adjustments, and their EPA-certified electric ranges are mostly between 75 and 90 miles. By a wide margin, the sales leader here has been the Nissan Leaf, with approximately 100,000 sold globally in three years of production -- half of which in the U.S.

Competition from plug-in hybrids: These cars have also been priced mostly between $30,000 and $40,000 before tax adjustments. To a far wider degree than pure electrics, these cars differ between each other in architecture and capability. The size of battery, and the way the electric motors interact with a gasoline or diesel engine, differ materially from car to car.

The sales leader in this category has been General Motors' (GM) Chevrolet Volt, which has sold a bit over 50,000 units since inception three years ago, mostly in the U.S., followed by the plug-in version of the Toyota (TM) Prius and two Ford (F) models (C-Max and Fusion).

Alternative energy storage systems: Hyundai, Toyota and Honda (HMC) have announced fuel-cell cars for commercial availability in 2014-15. These cars have electric motor drivetrains just like pure electric cars but instead of storing most of the energy in a battery it is stored in a hydrogen tank, which can be refilled within a few minutes, almost like in a gasoline/diesel car. Initial cars are said to have a range of 300 miles.

The most fundamental problem with fuel cell cars is that relative lack of infrastructure. There are approximately 10 stations in the U.S. now, and most of them in the Los Angeles area.

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