This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

BMW Suffers Big Setback Against Tesla in California

NEW YORK (TheStreet) -- BMW's (Xetra:BMW) Tesla-challenger, the i3, was engineered to get special regulatory status in California to enable it to compete effectively against the Tesla (TSLA - Get Report) Model S. Just in time for BMW's customers to start placing their orders, this critical BMW selling point has been removed, resulting in a huge victory for Tesla as well as BMW's other competitors.

So what does this mean for investors and consumers?

Let's start with California's incentives for buying a plug-in electric car, and why it's so important for sales.

California is by far the largest market for plug-in electric cars in the world. It is estimated that some 40% of GM's (GM) electric car sales are to California, and 50% of Tesla's. The numbers are probably almost as high for GM's and Tesla's main electric car competitors -- Ford (F), Nissan NSANY and Toyota (TM).

While there are many reasons for this, including technology and culture, a major incentive for buying a plug-in car in California is the right to drive in the carpool lane solo during rush hour. Anecdotally, Chevrolet car dealers have told me that approximately half of Volt buyers come into the store asking for "the carpool lane car."

Must Read: CES 2014: Cases, Cars and Connected Homes

However, there are two kinds of carpool lane stickers in California. The first one is the "white sticker" for pure electric cars and natural gas cars. The second one is the "green sticker" for plug-in hybrid cars.

The crux of the matter is that the green-sticker category is limited to the first 40,000 cars that apply. The white-sticker category is unlimited in quantity. As of November 8, 2013, 24,452 green stickers had been issued. One can reasonably assume that the 40,000 limit may be reached by the middle of 2014. Here are the current numbers, directly from California government.

As I was the first to report in November 2012, BMW found a way to work with California's regulatory bureaucrats to create a new class of car that would be eligible for the coveted white sticker. This new class would have a gasoline engine, but a very limited one.

Unlike a Chevrolet Volt or equivalent, this new class would have a tiny engine (650cc, 35 HP two-cylinder in BMW's case) with a tiny gasoline tank (2.4 gallon) and the gasoline engine could only be used to keep the battery from going below the 5% level, not to charge it any higher than that. Furthermore, it could not have a range longer than the battery-powered range, and under no circumstances longer than 100 miles.

In BMW's case, it would work like this: You would drive the BMW i3 for the first 90 miles on electric power. Then the tiny motorcycle-style engine would kick in and propel the car for another 90 miles or less. You could of course refuel the gasoline at any time.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
TSLA $266.78 -0.00%
AAPL $121.36 -0.83%
FB $94.83 -0.40%
GOOG $629.00 -0.57%
YHOO $37.02 -1.10%

Markets

Chart of I:DJI
DOW 17,718.25 -27.73 -0.16%
S&P 500 2,110.44 +1.81 0.09%
NASDAQ 5,144.2660 +15.4810 0.30%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs