Is This Tesla's Toughest Challenge Yet?

Tesla Motors (NASDAQ: TSLA  ) has achieved a record-breaking year so far in 2013. The electric vehicle maker's stock is up more than 400% year to date , and with production of its upcoming Model X on the horizon, Tesla's momentum looks set to continue.

But General Motors (NYSE: GM  ) has a very different plan for its upstart rival.

GM aims to challenge Tesla's lead in the long-range battery war by introducing an electric car that can travel 200 miles and costs as little as $30,000, according to the Wall Street Journal . Let's take a closer look at what's at stake for Tesla, and whether the EV start-up can continue its run despite increased competition.

The power problem
Battery technology today is far from ideal. Lithium-ion cells are currently the batteries of choice for many large companies, although they remain expensive and offer limited range. Tesla's Model S, GM's Chevrolet Spark EV, and Boeing's Dreamliner all incorporate lithium-ion technology .

That said, Tesla is slightly ahead of the curve when it comes to battery strategy. In fact, Tesla's chief technical officer claims, "the battery prices in the Model S are substantially lower than what everyone expects today ." On top of this, Tesla's Model S boasts the longest driving range of any EV on the road. Tesla's 85-kilowatt battery commands a range of 300 miles . However, it also costs a pretty penny at $70,000 . This is where GM hopes to undercut the EV maker.

GM's vice president of global product programs revealed yesterday that the company is developing a $30,000 option that would compete with Tesla's Model S. The only problem is there's no word yet on when the car would be available . Potential buyers could be waiting a while; just two months ago, GM enlisted a special team of employees to study Tesla's disruptive technology .

With no known timeline on the table, it could be years before GM gets a 200-mile range EV to market for $30,000. And at that point, it might be too late. As we know , Tesla plans to sell its mass-market Gen III model as soon as 2016 . Moreover, Tesla's CEO Elon Musk says the model would cost around $35,000 without the aid of government incentives, and would be capable of traveling at least 200 miles on a single charge. Depending on the timing, GM's more affordable EV might not be a Model S challenger at all.

Looking ahead, Tesla's toughest challenge isn't competitive threats from GM or other traditional automakers. Instead, the problem is battery technology. At a Tesla event in July, Musk explained that lithium-ion cell production is one of the company's biggest challenges going forward .

At this point, Panasonic is responsible for supplying the majority of battery cells for Tesla's Model  S. However, as Tesla continues to ramp up production, it may think about adding more suppliers. The company is currently considering a variety of options, including building out its own battery manufacturing plant .

As Musk recently said, "When our third-generation car is being produced and our factory is producing half a million cars a year, we will exceed the entire laptop industry by a decent margin, and new battery factories will need to be built ."

This could create some interesting manufacturing opportunities in the U.S. Nevertheless, the real challenge for Tesla going forward will be battery technology and supply, not competition. Ultimately, Tesla needs to continue innovating if it wants to remain ahead of rivals in the space. 

Read/Post Comments (28) | Recommend This Article (8)

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  • Report this Comment On September 17, 2013, at 10:05 PM, EdwardInFlorida wrote:

    As usual, the Motley Fool writers love to see the half empty glass instead of half full.

  • Report this Comment On September 17, 2013, at 10:28 PM, tsabatini wrote:

    Has it not occurred to anyone (especially those selling off Telsa today) that GM's announcement is one of intention, not of accomplishment.

    By the time GM can (IF they can) produce a 200 MPC (miles per charge) vehicle, doesn't it make some tiny amount of sense that Telsa will have introduced their intended lower-priced, upgraded vehicle?

    Just invest say 30 seconds thinking about all the new innovations large companies have announced that never came to fruition. Telsa talks less, and does more.

    .

  • Report this Comment On September 17, 2013, at 10:59 PM, Mkhost wrote:

    GM can't even compete with the Prius which a lot of people would consider to be an ugly car. How are they going to compete with a car company that is taking market share from Mercedes and Bmw?

  • Report this Comment On September 17, 2013, at 11:06 PM, Ustauber wrote:

    GM is just trying to slow down Tesla with everything

    They can make up.

    GM should concentrate more dealing with their

    Own recalls that just started to build up.

    Also they should pay all the billions that we the

    Tax payers lend them to bail out from bankruptcy.

    Look at what they came out with " The Volt"

    That takes 9 hours to charge for 30 miles range.

    Very poor design fellows.

    GM is running out of countries to sell their flashy

    Cars!! The motor and cheaply made cars don't last

    More than 4 years....Lol

  • Report this Comment On September 17, 2013, at 11:36 PM, igwt88 wrote:

    I dont see what's so great about Tesla technology. Just lithium ion batteries and an electric motor. Nothing that other companies cant make use of.

    If Nissan or Ford or GM wanted to make an electric car go further, all they have to do is put in a bigger battery. The Leaf only has a range of 75 miles - but its battery is only 24 kw. Its mpg-e is actually higher than the Tesla. It gets more miles per kw than the Tesla does - 105 vs 88. All you have to do is put a bigger battery in the Leaf and you could go the same distance. Its not like Tesla had a patent on lithium ion batteries.

    Tsabatini talks about Chevy only has intent to build a new vehicle. That's the same as Tesla saying they are building a cheaper vehicle. Only intent. Neither Tesla or Chevy have produced the 30K 200 miler yet.

  • Report this Comment On September 18, 2013, at 12:02 AM, Ustauber wrote:

    Lets say the "Leaf" is the leaf and Tesla is the tree.

    Must be Chinese mentality . A 747 can carry 450 passengers with 2 wings , but if you add 2 more wings it would carry 900 and if you add 2 more more a total of 6 wings you would carry 2350 and if ...,,,and if......lol

  • Report this Comment On September 18, 2013, at 1:19 AM, btc909 wrote:

    The Leaf is equally the same size as a Model S of course.

  • Report this Comment On September 18, 2013, at 1:34 AM, s2dbaker wrote:

    GM has a problem. They make gasoline powered cars. That's what they do and they are good at it. They've tried to make electric cars and they've ended up putting larger batteries in their gasoline powered cars and making the wheels turn on electrical power. That's not an electric car!

    Tesla only makes electric cars. They are really good at it. So good in fact that the Model S is safer and just better than any other car gasoline or otherwise, ever made according to Consumer Reports.

    I don't think GM's heart is in this project enough to design an electric ONLY vehicle from scratch with little to no shared parts from one of their gasoline powered vehicles.

    If presented with the choice of buying a $35,000 Tesla Model E or a $30,000 Chevrolet Spark, which would you choose?

  • Report this Comment On September 18, 2013, at 2:16 AM, Connelky wrote:

    GM will probably do well with this car by getting their current fan base to switch to electric, but for everyone else, this car is going to miss the deadline.

    It takes about 6 years to production from starting to design a car from scratch. Assume GM can do it in 5 years, that's 2018, a whole two years after tesla is set to produce gen iii.

    They will likely have a hard time hitting that price mark too if they are going to continue to go through conventional car dealers. Consumers will be paying a solid 10% to 20% more for the GM because of the dealer.

    I honestly think and hope GM does well with their car. They designated a team to study the model s because they were humbled by the fact that this startups very first original design outperformed anything they had ever built. Humility is the correct reaction. From what I can tell the rest of the automakers haven't paid much attention I tesla, and that shows GM management is at least thinking critically.

    I think GM will do well with there existing pool of customers, but for charging infrastructure, performance, price, timing and cool factor, tesla's probably going to take the lead between these two cars.

  • Report this Comment On September 18, 2013, at 8:49 AM, HiWho wrote:

    Dumb article. Who is to say every other car maker is not thinking the same thing.

    Spoiler alert, they are.

    GM stock will get hammered by the costs or GM will have to create a bond to fund this. We all know how they bloat a program up with executives and their supermodel looking assistants drawing salaries 5x that of engineers. Tesla did not have that problem and hag a government loan.

    How will these be charged and how fast do they recharge. Yes 300 miles, but have to sleep over in each city while GM car charges?

  • Report this Comment On September 18, 2013, at 8:55 AM, comnt8r wrote:

    General Motors used to be a leader, now they are a follower. Over the years they let way too much of their talent go elsewhere. A good book on some of this is "Career Reflections" by Jim Sarafin.

  • Report this Comment On September 18, 2013, at 9:44 AM, kca124cain wrote:

    Interesting. The battery costs $70,000 and the car sells for $80,000.

  • Report this Comment On September 18, 2013, at 9:45 AM, igwt88 wrote:

    The Tesla has 85 kw battery vs Leaf 24 kw. >3x as much power. The Tesla is only about 30% heavier.

    If the Leaf were a leaf, and the Tesla were a tree, then that would be an awful small tree.

    My point is not to compare the an economy car to a luxury car. My point is that if other car companies wanted to, they could also sell a luxury car with the same range as Tesla. The other car companies chose not to because they dont see the market is there.

    The Tesla is a great car, but there is no secret patent or tech that the other companies cant use to do the same.

  • Report this Comment On September 18, 2013, at 9:45 AM, caarecengi wrote:

    Ustauber wrote - the Leaf is the same size as the Model-S

    ==============================

    Wrong - the Leaf is a compact car plus it's a tad ugly

    The Smart is a joke - looks like a roller skate

    Tesla's Model-S looks sleek, has outstanding performance and outstanding safety

    PLUS the company provides the free Supercharger stations.

    Now, do you really see GM doing anything comparable in the next 3 yrs?

  • Report this Comment On September 18, 2013, at 9:48 AM, Rerednaweht wrote:

    While it's possible this plan by GM is in earnest, they have to overcome the inertia of their own past practices. Not to mention the very mentality that they themselves have fostered in the auto consumer market. "EVs=slow, tiny, no range, unsafe, no features, and look like golf carts. And no one wants them." Pull the ad campaigns and you'll see. The average American still says and believes things about EVs that are not true. But spend a few minutes doing research and you'll find out a great deal more.

    My concern is that Tesla may be overvalued at the moment. But then I bought stock years ago :)

  • Report this Comment On September 18, 2013, at 9:50 AM, kca124cain wrote:

    All of the major players (GM, Ford Chrysler, Nissan, Toyota, and Honda) build great cars. and they usually make profits.

    Tesla is selling a car for $80,000, in which the battery alone COSTS $70,000. Tesla has never made a real profit on car sales. The "profit" they showed last quarter was based on stock sales, used both GAAP and non-GAAP numbers and did not meet the standards for reporting.

  • Report this Comment On September 18, 2013, at 10:22 AM, Connelky wrote:

    The battery does not cost $70,000, that is an unclear sentence in the article. It probably costs about $10,000.

  • Report this Comment On September 18, 2013, at 10:57 AM, drax7 wrote:

    Maybe GM should consider concentrating making an ice car that matches Mercedes or BMW. Their cars and dealers are not really attractive.

    When will GM make am announcement that they will make a car that matches BMW or Mercedes .

    Now they want to compete with be best rated and safest without having the battery pack technology. Their credibility is zilch.

  • Report this Comment On September 18, 2013, at 11:04 AM, TMFMarlowe wrote:

    @drax7: The answer to your question is... last year. Cadillac ATS. Like a 3 Series, only with a nicer interior (yes, really). Go drive one. The new CTS is even better. Go check out Consumer Reports' video review, posted earlier this week.

    John Rosevear

  • Report this Comment On September 18, 2013, at 11:32 AM, AcuraT wrote:

    Agreed. The Cadillac ATS is as good as a BMW 3 series even though BMW owners hate hearing that. If the CTS is as good as that, GM will have a real competitor for the 5 series finally. The XTS in comparison is a stop-gap pretender which is NOT as good as a BMW 7 series. GM has a lot of work to do... but they seem to be learning finally.

    Also... Ustauber, thanks for hating. I doubt very much you have owned a GM product for four years. I have a 6.5 year old Saab with 110,000 miles and so far I replaced a faulty alternator (70,000 - it did not fail completely), and repaired the horn (100,000), and fixed a rip in the driver's seat (109,000). Total cost of repairs - less than $1000 for the first 110,000. Their cars last now. The problem is, do you want to drive them for that long? Not all their designs are very good - only some of them. You have to pick and choose which cars they sell and although their lineup overall is improving, the 2013 Impala is an example of a bad car while the 2014 Impala is an excellent car.

  • Report this Comment On September 18, 2013, at 12:11 PM, ckgod wrote:

    It's a really stupid article. Any companies can produce any cars on Powerpoint at any performance and price level but this is not the same as real product they can make and people will buy. GM is NOT a company that produces a competitive EV and that's what is all counts.

  • Report this Comment On September 18, 2013, at 1:38 PM, Gadguy2 wrote:

    The problem with all electric cars is there no source for heat except using your batteries. So your battery charge will drop like a rock.

  • Report this Comment On September 18, 2013, at 1:47 PM, nextseason wrote:

    GM is not going to develop a $30k car that can compete with the Model S. More likely they will be aiming to compete with Tesla's forthcoming, unannounced 'economical' model.

  • Report this Comment On September 18, 2013, at 4:05 PM, hawkrider wrote:

    An open note to GM & Honda:

    GM: Wake up and smell the ions. The Volt was a great concept...an electric car platform with a gas generator.

    However, as usual, you made it so anemic that it's a market dud. Get a clue: Put a high-energy, turbo driven diesel (or natural gas) generator in there to charge/drive a significantly more robust electrical drive system. License the Tesla SuperCharger specs so they are compatible.

    You have more clout than Tesla...YOU make the deal and lobby for a consistent CHARGING infrastructure in the US, EU and Japan.

    Hire people to collaborate across continents and cultures to design new tech battery systems.

    Honda: You make the best, most reliable transportation products on the planet. (IMHO) Make the deal to provide a high-energy version of your Honda Generators to GM. Keep the best designs for yourself and flip the paradigm on your line of hybrids. (Electric platform drive system, with high-energy generators for in-flight charging & drive power.

    Make a deal with GM to license the onboard-generator-powered-electric platform.

    Hire people to collaborate across continents and cultures to design new tech battery systems.

    Tesla has done the best job of all, with the available intellectual, design and manufacturing resources for right now.

    Collaboration is the key, not the enemy. Welcome to the planet.

  • Report this Comment On September 18, 2013, at 5:11 PM, Jason87467 wrote:

    Elon Musk sure has people buffaloed. This supposedly high tech battery is nothing more but thousands of laptop batteries soldered together. You call that high tech. Wake up folks.

  • Report this Comment On September 18, 2013, at 5:31 PM, JRUwing wrote:

    The article is a little misleading and ill informed. "GM's vice president of global product programs revealed yesterday that the company is developing a $30,000 option that would compete with Tesla's Model S" That is not what he said. The 30k GM offering might, a strong "might," compete with Tesla's 3rd Gen mid market car. It will not compete with the Model S. Cadillac does not make a car that competes in the higher end luxury category, they make mid level luxury cars.

  • Report this Comment On September 18, 2013, at 5:32 PM, Threemagisteria wrote:

    @gadguy2

    I hear that one over and over again. "What do you do when it gets cold?" "What do you do when it gets hot?" People keep smugly declaring that outside of Southern California, the need to run the heater/air conditioner will kill the battery of an EV. For the record, the heater uses less juice than the AC, and running the AC full blast last summer increased battery drain negligibly. So, yeah, in the depths of winter my effective range will drop - from roughly 280 miles to about 275. Not really a crushing drawback. It's almost as if the people who designed the climate control realized that it would be going into an EV and used high-efficiency systems instead of prioritizing low cost.

  • Report this Comment On September 20, 2013, at 11:42 AM, dexter80 wrote:

    @Jason87467. Interesting point that Tesla is "nothing more" than some commodity products (laptop batteries).

    Well, Apple's Mac OS X is highly successful and popular and it's "nothing more" than 1s and 0s. Call me "buffaloed" I guess.

    Southwest airlines is using "nothing more" than commodity metals, a standard shape of the metal, (wing) standard air and yet they succeed where many, many others have failed. I am happily "buffaloed" by Southwest every chance I get.

    Telsa using "nothing more" than laptop batteries is irrelevant. It's what companies DO with "nothing more" than raw materials that matters.

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