The Intelligent Investor

GM’s Long Range EV A Further Threat to Tesla

On Monday, September 19, GM announced their plan to develop an all-electric vehicle that could go 200 miles per charge, just like Tesla’s Model S. The catch? GM plans to sell their car for only $30,000, less than half of the $62,000 sticker price for the Model S.

When I put Tesla (TSLA) in the Danger Zone last month, I argued that TSLA was overvalued due to investors discounting the threat of competition from the major players in the auto industry like Ford (F), General Motors (GM), and Chrysler. This week, we got more proof that Big Auto is taking electric vehicles seriously and doesn’t plan on letting Tesla own that market, which is what TSLA’s valuation implies the company will do.

On Monday, September 19, GM announced their plan to develop an all-electric vehicle that could go 200 miles per charge, just like Tesla’s Model S. The catch? GM plans to sell their car for only $30,000, less than half of the $62,000 sticker price for the Model S.

To show just how serious they are about achieving this goal, GM revealed a 50,000 square foot expansion to its battery lab. The new addition nearly tripled the size of the lab. Those who believe Tesla has some great technological advantage should read this quote by GM Vice President Doug Parks: “There is nothing in the Tesla battery that we don’t know.” GM has taken apart and tested Tesla batteries. GM and all the other big auto players have the resources to copy Tesla now that the electric vehicle market is showing signs of profitability.

The market continues to be irrationally optimistic about TSLA. GM’s announcement barely moved the stock, but Thursday’s Deutsche Bank upgrade sent the stock up 7%. This market will latch on to any piece of good news as a reason to send the stock price higher. Warren Buffet famously said to be fearful when others are greedy. TSLA investors are getting very greedy, which means now is the time to be fearful. TSLA shareholders should get out before the competition bursts this bubble.

Sam McBride contributed to this article.

Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.

Discuss this Blog Entry 1

on Sep 20, 2013

Everyone is working on a 200 mile affordable electric car. The question is "when". Tesla plans to release the Gen III in 2016/207 which will cost 35k, they already started work on it and have been working on it for a while.

As far as GM goes, they are partnering with Envia systems to make their 200 mile affordable EV. They haven't even started work on it and are still perfecting the battery Envia systems battery will not be ready for at least a few years. To get a fully working car will take them till 2018-2020. Their electric plans so far is to focus on bringing down the price of the volt, and their 2016-2017 entry will be a cheaper volt.

If anyone is going to release a longer range EV to compete with Tesla it might be Nissan. Though overall Tesla will most likely be the first to market a 200 mile range affordable EV.

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Trainer brings insight and transparency to research on stocks, ETFs and mutual funds.
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