Is GM Cool Enough to Compete With Tesla?

Will Tesla Motors' (NASDAQ: TSLA  ) first serious competitor be... a Cadillac?

Generally speaking, automakers don't share details of products under development. But General Motors (NYSE: GM  ) CEO Dan Akerson dropped a big hint on Wednesday when he disclosed that GM was working on a couple of new all-electric cars, one of which will have a 200-mile range.

That's a higher range than anything the major automakers have so far produced: Such a car would be the first one that could compete seriously – on range, anyway -- with Tesla's vaunted Model S.

Are the electric car wars finally about to begin in earnest?

Want range? Bring money.
Of course, we should say this up front: A 200-mile range isn't really enough to compete with the top of the line Model S, which can be equipped with a battery pack that will give it a whopping 300-mile­ range – for a price.

A price that can break $100,000 if you check all of the option boxes.

That price is, of course, one of the two big challenges of making an electric car that has the range and usability of a conventional gas-powered car. The other is weight, or more properly speaking, bulk: Even the best electric car batteries out there right now, which are probably the Panasonic (NASDAQOTH: PCRFY  ) units favored by Tesla (and by Ford (NYSE: F  ) in its latest plug-in hybrid), are heavy and expensive.

And to get that kind of range, you need a lot of batteries (or a major technological breakthrough, but most experts don't see one coming in the near future.) Sophisticated battery-management software like Tesla's helps at the margins, but for the most part, building an electric car with decent range isn't rocket science: All you need is a lot of batteries.

That means that if you want your electric car to have range comparable to a gas-powered alternative, it's also going to be heavy and expensive. That's why Tesla's first mass-market product (the Model S) is a big, opulent luxury sedan: It's big enough to have ample room for the batteries it needs to get good range and offer strong performance, and its luxurious interior (and that performance) makes it competitive with other high-priced cars.

That's also why I suggested above that GM's 200-mile car might be offered as a Cadillac, a brand that is practically synonymous with big, opulent luxury sedans.

But a decision to build a big, expensive EV would be a significant departure – not just for GM, but for the major automakers as a group.

Is GM rethinking the small EV approach?
So far, the approach taken to electric cars by the mass-market automakers has been very different from Tesla's. Cars like Nissan's (NASDAQOTH: NSANY  ) LEAF and Ford's Focus Electric are smaller than the Model S, with much lower range (75-100 miles, give or take). They also have lower prices, though they're still far more expensive than their gas-powered counterparts. And they have less cargo space than those counterparts, because of the bulk of their battery packs.

And they mostly haven't sold very well, certainly not as well as many pundits expected. Nissan's LEAF has managed fewer than 10,000 sales in the U.S. in each of its first two years of existence, while sales of Ford's Focus Electric are still in the hundreds. GM's Chevy Volt fared better last year with over 23,000 sold in the U.S., but the Volt – with its on-board gas-powered generator that recharges its batteries on the fly – is more like a hybrid than a pure electric car, at least from a user's perspective.

Meanwhile, Tesla is on track to build 20,000 copies of the Model S this year – with a much smaller operation, and at a much higher price point.

Does Dan Akerson's comment mean that GM is looking at Tesla's example and rethinking its approach?

Is GM cool enough to compete with Tesla?
It's hard to know what GM, or any of the global automakers, will decide to do on the electric car front in coming years. The truth is, the near-term future of the electric car is a murky one – even, to some extent, for Tesla.

While high gas prices have been a big part of the consumer case for electric cars, they might not last. Many analysts believe that gas prices could fall significantly over the next couple of years, as new fields and new oil production technologies continue to come on line. That won't help the market for EVs, which are already having trouble finding enough buyers to justify continued investment.

Tesla's Silicon Valley "cool" factor has helped it become a favorite of the well-heeled techie early adopter crowd. GM, to say the least, doesn't have the same dynamic going for it. GM certainly has the resources and wherewithal to build a car – a big luxurious electric Cadillac -- comparable to the Model S in terms of range and luxury (and price), with today's technology. There's no doubt that it could happen.

But it never will happen – unless GM is convinced that it will sell. Would it? I'm skeptical.

It's true that decades of mismanagement of General Motors led to a painful bankruptcy in 2009, but it emerged a leaner, stronger company. GM's turnaround, however, is still a work in progress. Investors around the world are wondering if GM has what it takes to reclaim its former glory. To help you sort fact from fiction, I've put together a new premium research report telling you what you really need to know about GM and its turnaround. If you own or are thinking about owning GM, then you don't want to miss this report. Click here now to get started.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 08, 2013, at 9:40 AM, AdvanderMeer wrote:

    "Sophisticated battery-management software like Tesla's helps at the margins, but for the most part, building an electric car with decent range isn't rocket science: All you need is a lot of batteries."

    HA! We'll see what GM will present.

    If history provides any lessons...

  • Report this Comment On March 08, 2013, at 10:10 AM, ToddRLockwood wrote:

    Don't hold your breath for GM, or any other Detroit based manufacturer for that matter. They simply don't have the will to do it right. They will follow, while Tesla leads. They may feel that they have a margin of safety as long as Tesla stays in the luxury market. But the game will change entirely when Tesla builds its next-generation automated assembly line. Analysts are focused on the vehicles, but let's not forget the factory itself. Tesla has assembled some of the best and brightest minds in the industry and added the genius of Silicon Valley. This, combined with falling lithium cell prices, bodes well for a $30,000 Tesla within the next few years.

  • Report this Comment On March 08, 2013, at 11:33 AM, patjones79 wrote:

    California’s 1990 ZEV mandate forced GM and other auto makers to produce Battery Electric cars such as the GM EV1. GM purchased control of the patents from the inventor, Stan and the late Iris Ovshinsky, in 1994 forming “GM Ovonics” under the guise of going into production with the EV1. But GM’s Andy Card had been fighting Electric cars for years, and GM’s true intention became apparent when on Oct. 10, 2000, GM sold their control of the EV batteries to Texaco. Less than a week later, on Oct. 16, 2000, only days after Texaco acquired control of the batteries, Chevron agreed to purchase Texaco in a $100 billion merger

    http://fuel-efficient-vehicles.org/energy-news/?p=690

  • Report this Comment On March 11, 2013, at 2:33 AM, fernandave wrote:

    "is more like a hybrid than a pure electric car, at least from a user's perspective"

    Oh my Buddha!! Are you kidding me? It IS a hybrid! Fer cryin' out loud, the car is NOT an electric car, and it never has been. GM hid that fact right up until its release, because even they, who have no shame, dignity or self-respect, were embarrassed about the fact.

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