I struck a chord earlier this week, and it appears to be a B-flat.
I stated that General Motors' (GM 1.33%) move to slash prices on its Chevy Volt on Monday by $5,000 -- hot on the heels of at least three other major manufacturers' decisions to make their own plug-in electric vehicles cheaper -- could make things more challenging for Tesla Motors (TSLA 3.33%).
That opinion was roundly dismissed. Readers let me have it, and here's just a sampling of their perspectives.
- "Why on earth would you compare a $70k car with a $30k car?"
- "It's like cross-shopping a Toyota Camry and a BMW 5-series."
- "A potential Telsa buyer has next to zero interest in the Leaf or the Volt or any EV from Ford, Honda, Fiat, etc. They are not buying the Model S because it is an EV. They are buying it because it is a fabulous sport sedan."
There was one comment in particular that caught my attention.
"Tesla is the iPhone and IPad of the EV space," writes njdave52. "Overpriced but cool, slick, and high-tech. Early adopters will always pay a premium."
That's an argument that got me thinking. Is Tesla the Apple (AAPL 0.38%) of battery-powered cars?
Mobile technology means entirely different things to each company, naturally, but they're respected tastemakers with the leading premium product on the market.
Being compared to Apple was the utmost compliment until the stock peaked late last year. Cheaper Android smartphones and tablets started to flood the marketplace, shrinking Apple's share of both markets. Apple has had to sacrifice margins by putting out a cheaper iPad and keeping older iPhone models around at lower price points.
Right now, Tesla's doing just fine serving the early adopters. It's cranking out only 500 cars a week, and it isn't having a problem attracting orders at an even higher clip. However, just as Apple quickly exhausted the first wave of folks willing to pay $599 for the original iPhone, Tesla's going to have to decide whether it wants to be more than a niche player.
The market applauds that Tesla delivered 5,150 cars this past quarter -- or an average of 1,716 Model S sedans a month -- and it boos the 1,788 Chevy Volts that were sold last month.
That's not a fair comparison, of course. Tesla's cars generate far more revenue, and we know that it's now doing so profitably. However, a once popular argument for Apple bulls as Android began taking market share is that it was the one making the lion's share of the profits in this space. It's not a very commonly voiced rallying cry these days, as Apple's year-over-year profitability is declining.
Sure, the difference between an iPhone and a cheaper Android smartphone isn't as great as we would see if we were to test-drive a Camry alongside a BMW. However, that doesn't address the real meat of the price-cut matter. The reason the Volt is $5,000 less than it was a week ago -- and the Leaf is $6,400 cheaper than it was a year ago -- is that consumers aren't valuing the premium associated with electric vehicles the way carmakers were originally hoping.
If the Camry got a $5,000 price cut, a BMW 5 Series Gran Turismo wouldn't have to follow suit. However, if just about every leading gas-powered car shaved thousands off the sticker price because folks weren't buying cars with internal-combustion engines, do you really think the Bimmer would be immune here?
That's the problem. Range anxiety is real, and there still aren't enough drivers on the road who log enough miles to make the switch to electric solely as an economic decision. There are naturally plenty of other good reasons to go electric, but then we circle back to range anxiety.
I'll close with a concession. My wife drives a Volt. She loves it. She's had to go to the gas station just three times in 17 months. I am seriously considering a Tesla Model X as my next vehicle, and not just to let my wife know that I won't have to stop by the gas station at all.
However, after seeing Apple prove mortal last year, I'm seeing the same undertones of Tesla fervor where fans summarily dismiss weakness elsewhere as something that could be a contagion because the financials and the share price look great now.
As innovative as Apple and Tesla have been, no company operates in a vacuum. It's a lesson that Apple investors have painfully learned over the past year, and Tesla shareholders had better hope they're not too cool for school.
