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How Much EV Competition Does Tesla Have?

Monday - 8/12/2013, 4:40am  ET

It’s no secret that Tesla Motors has had quite a run since spring (and yet another run after earnings). Shares have more than quadrupled off their lows as production numbers beat expectations and the automaker’s Model S sedan remained popular. Much of this popularity stems from the sheer performance of the car, not necessarily the fact that it’s electric. Through this, Tesla has expanded the reach of its electric cars to include people who wouldn’t have even considered an electric vehicle (EV) before; people such as performance car fanatics and even global warming deniers. But there are other players in the EV market that are taking varying approaches to selling their electric merchandise.

The everyman’s EV

General Motors Chevrolet Volt was not a particularly radical departure from the conventional vehicle. It still had the ability to refuel at gas stations due to its internal combustion engine, had less than 40 miles of range on pure electricity, and could seat a family of four (five was not possible due to the vehicle’s battery pack). In fact, the Volt is actually better classified as a PHEV (plug-in hybrid electric vehicle) due to its anxiety-eliminating gas engine. And the Volt is sold like any other Chevy where customers go to a large inventory dealer lot, haggle prices, and eventually buy or lease a vehicle.

But GM wanted a picture of convention in its first production EV. Their view was that people, particularly in the American market, would be more receptive to an EV similar to their conventional cars. Now, I’m not saying the Volt is a bad car--I actually drive one and am quite pleased with it. However, the Volt is far from a cash cow for GM, instead serving as a combination of a research project, emissions credits provider, and environmentally friendly corporate image builder. I expect that sometime in the future GM will find other ways to use the improved Volt technology similar to how Toyota has moved its hybrid technology beyond the Prius model and into a large line of Prius and hybrid models. For the near term, GM investors are not likely to benefit from EV technology, but the long term is still up in the air.

Performance rival?

BMW (NASDAQOTH: BAMXF) is a perennial winner of automotive performance tests, and this has helped to make the BMW 3 Series a cornerstone of virtually any $30-$40k sports sedan comparison. With the dominance the automaker has enjoyed in producing internal combustion vehicles, many industry watchers have expected that BMW would enter the EV space with a performance vehicle to take on upstart Tesla Motors.

Although the Tesla Model S is a closer comparison to the BMW 5 Series (in both price and size) than the 3 Series, Tesla CEO Elon Musk has already declared war on the 3 Series, making it the target of Tesla’s Gen III sedan, a vehicle expected to be comparable in price to the 3 Series. With Tesla’s Gen III sedan still a few years off, BMW has launched the i3 into the sub-Model S price range.

But BMW has chosen efficiency and a lower sticker over high performance and a higher price. As a result, the range of the i3 is around half that of a Model S, and is still well below the expected range of the Gen III sedan. Furthermore, the i3 lacks the sleek sports sedan looks of the Model S, or even the BMW 3 Series. The current iteration of the i3 appears to be more proof of concept than a full challenger to Tesla’s Model S or Gen III. But this may be part of BMW’s development strategy. As seen with Toyota’s Prius, the development of new technologies is critical to the success of an automaker. With this in mind, even if the i3 cannot effectively compete with a Model S or the Gen III, development of the technology could help enable BMW to take on Tesla in the future or at least not be too far behind in EV innovation. For now, BMW is not an EV performance threat to Tesla, except with its electric i8 model. But even the i8 is a better comparison to the now out of production Tesla Roadster than the Model S. With this in mind, the Model S still faces virtually zero EV competition on a similar performance level and the competition for the Gen III sedan is not yet clearly visible, if indeed a performance competitor emerges.

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