GM vs. Tesla Heats Up

GM vs. Tesla Heats Up

January 11, 2015 — The auto show in Detroit hasn’t yet officially begun, but we already have what likely will be the event’s biggest story — the suddenly heated battle between General Motors and Tesla for dominance over the electric vehicle segment. Tomorrow morning’s unveiling of GM’s concept of its new electric vehicle, dubbed the Bolt — is a direct shot into the heart of Tesla’s future strategy. The Chevrolet Bolt is being set up to compete directly with Tesla’s yet to be seen Model 3. (The photo is courtesy of General Motors and is a sneak peak of it’s 2016 Volt — scheduled to be unveiled Monday morning at the NAIAS).

Meanwhile, Elon Musk, Tesla’s founder and CEO, is scheduled to speak at the Automotive News World Congress Tuesday afternoon, and if history is any guide, his remarks will create more controversy. He’ll have plenty to speak about — responding to GM’s Bolt announcement along with what probably will be a strongly worded message to Michigan’s car dealers and politicians. (Governor Rick Snyder signed legislation in October banning Tesla from selling vehicles directly to consumers. Yet, in a twist of irony, the Detroit Auto Dealers Association, which puts on the North American International Auto Show each year, is willing to take Tesla’s money to allow it to display vehicles at the event. Not necessarily a bad thing from our perspective because we believe dealers will be selling Tesla vehicles at some point in the near future.) 

Initial reports about the Bolt indicate the concept version will have a hatchback and be similar to a small cross utility vehicle. (John Stoll, a former colleague, broke the story about the Bolt in The Wall Street Journal Friday evening.) The Bolt will have a range of 200 miles — the magic line at which which range anxiety seems to disappear for consumers. Evidence that GM intends for the Bolt to go directly after the Model 3 is found in the pricing — $30,000 as compared with $35,000 for the 4-door sedan Model 3. It seems a little early to talk about pricing since both vehicles aren’t scheduled to hit showrooms till late 2016 as 2017 models, but it’s all part of the long term jockeying for position.

For those of us living in Detroit and who are in the auto industry, it’s a well-known secret that folks at GM aren’t happy that Tesla has become darlings of the media and Wall Street for its electric vehicle efforts. When GM first showed its concept of the hybrid EV Volt eight years ago, it had visions of being a technological leader in the EV segment. The recession hit, delaying the launch of the Volt till 2010 and by then, it was old news as other more advanced entries hit the market.

GM’s EV strategy in the last five years has been marked by moderate success at best of the Volt and the abysmal failure of the Cadillac ELR. GM has only sold 90,000 of the Volt — far fewer than the 300,00 it originally projected. It took the wraps of the newest version of the Volt — slated for dealerships later this year — during a private showing at the recent Consumer Electronics Show in Vegas. Leaked photos from Twitter show a slightly larger and aggressive looking version. The official unveiling will be Monday during the auto show.

There is still no word on whether Tesla will unveil the Model 3 at the show. Tesla does have a display on the show floor but no press conferences scheduled. But what happens during Musk’s presentation is anybody’s guess.

Given GM’s recent lack of success in the EV market, how realistic are its plans for the Bolt?

It’s a question that requires some context. Despite all of the media attention given to the EV segment, automakers only sold 119,700 electric vehicles in the U.S. in 2014 — a 23% increase over 2013 according to  Although a record number, it’s miniscule when compared with the 16.5 million overall sales the U.S. market generated in 2014.

GM’s CEO Mary Barra has said GM will have approximately half a million electric — including electric hybrid — vehicles on the road globally by 2017 — only two years from now. Meanwhile, Tesla says it will have the same number of electric-only vehicles by 2020. Add in projections from Nissan — whose electric vehicle, the Leaf, sold more than 30,000 in 2014 — along with projections from numerous other automakers, and the the global number of cumulative sales is about 7.5 million.

That number is a stretch. Overall, the industry has just started producing just under 300,000 EVs a year. There is no doubt, the objectives are wildly ambitious — especially in light of plunging gas prices that should continue for several months.

Still, GM is well-positioned to compete with Tesla in coming years. The low gas prices are an advantage for GM as it’s able to sell vehicles that are highly profitable — SUVs and trucks. That profitability will provide it with pricing flexibility to subsidize sales of the Bolt — a luxury Tesla does not have.

Despite all of the favorable attention Tesla is getting from its “consumer-friendly” retail process — as in, no dealers — its retail strategy will end up being a huge obstacle if it doesn’t evolve fairly quickly. Tesla will have to develop processes to handle trade ins along with financing — including subprime loans, a skill set dealers have mastered. Musk and company will learn the hard way that retailing large volumes of vehicles is an art best left to dealers — love car dealers or hate them, one of the realities of the automotive space is that it is a proven system that works.

Meanwhile, GM and Tesla would do well not to ignore Nissan, whose Leaf has performed well — albeit, with the help of heavy incentives.

One other note — on the surface, it might be perplexing why the auto industry is so focused on investing billions of dollars into a segment that is far from profitable. EVs are a key part of auto manufacturers’ strategy to meet the 2025 54.5 mpg CAFE mandates established by the Obama administration a couple of years ago. The low gas prices have actually set the industry back as truck and SUV sales continue to dominate pushing down overall average to 24.8 mpg last November according to

Some analysts have speculated that the plunging oil prices coupled with a Republican-controlled Congress could lead to a roll back of the Obama CAFE mandates during a review scheduled for 2017.

That’s not going to happen. Automakers have invested too much money and research into meeting those objectives. Many of those efforts include joint and shared research among manufacturers. Too much work has been done to back away from the mandates now. The industry will continue to see a push toward aluminum (provided Ford’s F-150 doesn’t have issues) along with more efficient engines with 8- and 9-speed transmissions — all initiatives that will help automakers meet the ambitious mandate.

But in the EV segment, for GM and Tesla, it’s game on.

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