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New Details on GM's Coming War With Tesla

Stocks in this article: GM TSLA F TM HMC

Let's leave aside the speculation as to whether Tesla can deliver this car in time, say some time in 2017 after the delays already under the belt. The Bloomberg GM article says that GM will deliver a car of the same capability as Tesla, at the low end of the Tesla price range -- $30,000 -- but notably with a generator -- by 2016.


If this is true, then Tesla's market value would likely collapse. The Bloomberg article basically says that by 2016, GM will be ahead of Tesla with a car in showrooms.

I had always assumed that Tesla's cost/performance advantage in batteries and electric motors would diminish in the next few years. However, for this advantage to be eliminated and indeed turned around, would be a huge blow to Tesla.

I find this scenario to be extremely unlikely. If GM does indeed have a 200 mile electric car for 2016, it wouldn't come with a generator. And for the price to be $30,000, even without a generator, the cost of batteries would have to decline by 90% in one generation.

In other words, short of a "nuclear power" type of moon-shot that is actually field-proven by now, none of this stuff will happen by 2016. Not 2017, either. There is an extreme outside chance it could happen by 2018, though. Unlikely, but not impossible.

Given that at least one of the ingredients in the Bloomberg article on GM must be wrong -- price, timeline or range, for starters -- what might the real story be here?

First of all, we are most likely talking about multiple cars, different cars. GM does not have only one electrified car in the works; it has several. Some are all-electric; others include a generator, such as the Volt. Price ranges could indeed be from $30,000 up to $75,000 and above.

I have written before about the Volt 2.0, which could ship in 2015 as a 2016 model. One could easily see how this car could be cost-reduced so as to fetch a price close to $30,000, while improving the car all-around. The battery would remain at near 16 kWh, which is where tax benefits maximize. Electric range would improve above the current 38 miles, but probably not drastically.

In other words, the Volt formula is working quite well. What's missing in the Volt is a back seat that fits five people. All you need is a lower price, and the ability to make it profitably. These are easy things to accomplish in the Volt 2.0.

After the Volt 2.0, we could see all sorts of more daring all-EV designs from GM. They could have 200 miles range, perhaps 300 miles, be combined with a new charging infrastructure, and/or much more.

So this is likely the better explanation: The Bloomberg article likely confused several different cars GM has in the pipeline for the next five years. Perhaps this confusion originated at GM. You just can't get to 200 miles EV range for $30,000 by 2016 -- and a Volt-style generator in that car wouldn't make sense.

Even if GM doesn't deliver this magic 200 mile range car as described by Bloomberg -- for $30,000 in 2016 -- the question will still remain: What will be Tesla's remaining advantages? That will be the subject of a separate article, but it's clear that Tesla has a huge and growing advantage in its charging network, as well as in its direct sales model and the software/infotainment upgrades and services.

Tesla will have remaining advantages, even if the battery advantage goes away in the 2016-2019 timeframe. In the meantime, if the Bloomberg article magically has it right regarding that 2016 GM car, everyone in the industry -- Tesla as well as all the others -- would be toast.

Folks, it's not going to happen this way.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.


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