General Motors (NYSE:GM) dropped a bombshell on Monday morning at the International Auto Show in Detroit: Along with the all-new 2016 Chevy Volt, the General showed off a concept car called the Chevy Bolt (with a "b"). The Bolt is a compact battery-electric crossover with a big twist: 200 miles of range -- at a mass-market price.
I was there when the Bolt was unveiled, and GM CEO Mary Barra told us that a version of the Bolt-with-a-b will come to market with a range of more than 200 miles and a price under $30,000 (after federal incentives).
The production version of the Bolt is likely to arrive in 2017. That's right around the time that Tesla Motors (NASDAQ:TSLA) hopes to launch its long-promised "mass market" Model 3, which is expected to have a similar 200-mile range.
How big a wrench does the new Chevy throw into Tesla's plans?
The Bolt isn't coming right away, but GM says it's coming
To be clear, the Bolt that we saw today isn't exactly a production-ready car. Sometimes, a "concept car" is a thinly veiled near-final draft of a car the automaker plans to produce -- and sometimes it's a pure flight of fancy.
Right now, the Bolt is somewhere in between. There wasn't much about it that was fanciful-looking in terms of features and styling, but it's clearly not a car that GM is close to putting into production.
But here's the thing: Barra said clearly that this (or something very much like it) is a car that GM plans to build. In fact, I suspect that GM would very much like to be building it now, but apparently the Bolt is designed around new batteries from LG Chem that won't be available for a couple of years yet.
The Bolt is no competition for Tesla's current Model S. The Model S is a big, expensive, fast luxury car, while the Bolt is more like Chevy's take on the BMW i3: a fun, high-tech daily driver for mainstream folks that happens to be electric.
But here's the thing: GM's new Bolt could land smack in the middle of the market Tesla has been hoping to win with its upcoming Model 3, and that could be a problem.
Why the Bolt (and LG's new batteries) could be a big problem for Tesla
Tesla's plans (and much of its lofty stock price) hinge on two big assumptions: First, that Tesla will be able to launch the Model 3 more or less on schedule, and second, that it will find a big audience -- enough to propel Tesla to about 500,000 sales a year by the end of the decade.
The Bolt does nothing to disrupt the first assumption, except that it might beat the Model 3 to market. (We haven't even seen the Model 3 yet, and Tesla's relatively small R&D team is thought to be focused on getting the Model X SUV to market right now.) But the second assumption now looks iffy: How big a market is there for electric cars in a world where gas is $2 a gallon?
There's some market, even now. And with the Bolt, GM is making a substantial bet that there will be a market in years to come. As is Nissan with its next-generation Leaf, due at about the same time as the Bolt.
As are, probably, other big automakers -- all of whom have the ability to undercut the price of Tesla's Model 3.
Now, if Tesla can hold on to its geek-chic factor, it'll sell some Model 3s. But how many and at what price?
I think those questions just got a lot more uncomfortable for Tesla.
This is where it gets complicated for Tesla
Your humble Fool has been saying all along -- like, for almost five years now -- that Tesla's plan to dominate EV sales with high-margin products could go awry once one or more of the big global automakers decided to enter the fray.
It's true that Tesla's battery-management software -- a key to the Model S's impressive range -- is really good. But it's also true that Tesla's hardware, while also good, is nothing special -- at least when viewed from the vantage point of a giant global automaker like GM.
Tesla's terrific customer service is a definite competitive advantage. But when it comes to the hardware itself, Tesla has no real "moat," no unassailable technological advantage that protects it from competition. And the problem, as I've been saying all along, is that Tesla is surrounded by much bigger, much better-funded competitors with economy-of-scale advantages that Tesla can't come close to matching, at least not yet.
All that was needed was for one of those giant global automakers to decide to eat Tesla's lunch, and the company's margin and volume assumptions -- in other words, its profit potential -- would be cast into doubt.
Well, folks, the chow wagon is visible in the distance, and it just might have a gold Chevy bow tie on the nose.