Forbes.com: General Motors this week unveiled the Chevrolet Bolt, a 200 mile-range electric vehicle that will reportedly go on sale sometime in 2017. The business press was quick to call the car a challenge to Tesla Motors’ Gen III electric vehicle, another high-range EV expected to go on the market also in 2017. Most electric vehicles currently available on the market, like Nissan’s Leaf and Fiat’s 500e, are low-range (around 70 miles) and sell at a price of a few thousand less than what the Chevy Bolt was unveiled for at the Detroit Auto Show by General Motors. It is clearly a concept car but it is also production ready. Its specifications are broad enough to meet the needs of a wide range of consumers. It comes with a hatchback making it spacier, a 10-inch diagonal screen, self-driving technology, and is fast charging. Usually, the looks of concept cars are worked upon and changed before they are released into the market but in the case of the Bolt, it seems like the car is following in the footsteps of BMW’s i3.
Before the release of the Chevrolet Bolt, however, the company will release its 2016 version of Chevrolet Volt into the market next year. The vehicle is said to have a range of around 50 miles and a hybrid mileage of around 41 miles per gallon (mpg). General Motors hasn’t done too well with its electric vehicles in the past. It targeted annual sales of 40,000 for the Volt when it was first launched. Sales peaked at 23,000 in 2012 and fell to 19,000 in 2013. However, customers are believed to be quite loyal to the brand and there is a cult following around the car the same way there is for Toyota’s Prius. The Chevy Volt is priced in the low-mid 30 thousands, which makes it slightly pricier than Toyota’s Prius, which is priced in the high 20′s. Sales of the Toyota Prius have stayed around the 140 thousand per year mark (except 2014 where sales may have fallen because of an anticipated model refresh). This means that Prius has added to the sales volumes for the company alongside the Toyota Camry. In contrast, GM’s electric vehicle hasn’t done nearly as well as its comparable car to the Camry, the Chevrolet Malibu.
Does Tesla Have To Fear A Bolt From The Blue?
A widely misunderstood thing about Tesla is the markets it deals in. Every time an established automotive company announces the launch of an electric vehicle, the business press is quick to announce it as a threat to Tesla Motors. This is a fundamental misunderstanding of two key aspects of Tesla’s business model. Firstly, Tesla is the only company selling production volumes of a high-end, high-range, electric vehicle. Every other car company merely experiments with its EVs. The reason behind this is simple: almost all car companies get their cash profits from their high-end ICE (Internal Combustion Engine) cars. If they started releasing production volumes of cars about which customers are still circumspect, they could end up cannibalizing the sales of their high-end ICE cars, and possibly jeopardizing their market position by ruining their reputation and losing a lot of money in the process. So far, car companies have erred on the side of safety and let Tesla lead the push for enlarging the share of alternative vehicles in the overall car market. Secondly, Tesla’s competition is not other EVs (at least not yet), but high-end ICE cars. So when Tesla releases its Gen III, its competition will be neither Nissan Leaf, Chevy Bolt, nor Chevrolet Malibu and Toyota Camry; but rather the Audi A4, A5, and A6, BMW’s X1, X3, and X4, and Buick’s Enclave, La Crosse, and Regal. So, no, Chevrolet Bolt is not Tesla’s competitor. Tesla’s modus operandi is to sell high-end cars in different car segments, and use the profits to realize greater efficiencies in the production and distribution process in order to bring down the unit price and expand its market share.
Another point needs to be made here: Tesla sells cars directly to the consumer. This is important because this means that people buying from Tesla are not being persuaded by local car dealers to try out a new technology. They are aware of Tesla’s brand in the first place. In contrast, all other car companies sell EVs through the same dealership and retail channels, which is also partly to blame for their inability to shift large volumes of these cars. Mass market acceptance for alternative technologies will require a major push from auto makers but their current strategies cannot achieve this.
What Can One Expect From Bolt?
At the moment, gas prices are extremely low. This is not good news for companies aiming to sell alternative vehicles to the mass market. Their sales pitch is based on two things: economics and ethics. The economics side of the argument runs as follows: the cost of ownership of an electric vehicle is usually lower than that for a petrol/gasoline run car so consumers are better off spending a bit more in buying EVs/HEVs because they’ll save in the long term. However, consumers will base this decision on their future expectations of gas prices. At a time when gas prices are as low as $2, their future expectations of gas prices will also be lower. Additionally, EV/HEV sellers argue that replacing ICE cars with electric cars allows consumers to lower their carbon footprint. But replacing a diesel car with an EV car merely means that you are shifting your contribution to environmental waste from your exhaust pipes to the power stations using coal powered electricity to keep your cars running. Given the presence of both of these things, it is highly unlikely that a mass market push for EVs is possible in the near future. It may be more likely if gas prices rise again in the near future. So considering these things, it is highly unlikely that Chevrolet’s Bolt will add to GM’s unit sales by a significant amount. It may even be that they cannibalize sales for the Chevrolet Volt in the near future. The best case scenario for GM would be that the two models together bring in about as many unit sales for the company as Prius does for Toyota.
Before the release of the Chevrolet Bolt, however, the company will release its 2016 version of Chevrolet Volt into the market next year. The vehicle is said to have a range of around 50 miles and a hybrid mileage of around 41 miles per gallon (mpg). General Motors hasn’t done too well with its electric vehicles in the past. It targeted annual sales of 40,000 for the Volt when it was first launched. Sales peaked at 23,000 in 2012 and fell to 19,000 in 2013. However, customers are believed to be quite loyal to the brand and there is a cult following around the car the same way there is for Toyota’s Prius. The Chevy Volt is priced in the low-mid 30 thousands, which makes it slightly pricier than Toyota’s Prius, which is priced in the high 20′s. Sales of the Toyota Prius have stayed around the 140 thousand per year mark (except 2014 where sales may have fallen because of an anticipated model refresh). This means that Prius has added to the sales volumes for the company alongside the Toyota Camry. In contrast, GM’s electric vehicle hasn’t done nearly as well as its comparable car to the Camry, the Chevrolet Malibu.
Does Tesla Have To Fear A Bolt From The Blue?
A widely misunderstood thing about Tesla is the markets it deals in. Every time an established automotive company announces the launch of an electric vehicle, the business press is quick to announce it as a threat to Tesla Motors. This is a fundamental misunderstanding of two key aspects of Tesla’s business model. Firstly, Tesla is the only company selling production volumes of a high-end, high-range, electric vehicle. Every other car company merely experiments with its EVs. The reason behind this is simple: almost all car companies get their cash profits from their high-end ICE (Internal Combustion Engine) cars. If they started releasing production volumes of cars about which customers are still circumspect, they could end up cannibalizing the sales of their high-end ICE cars, and possibly jeopardizing their market position by ruining their reputation and losing a lot of money in the process. So far, car companies have erred on the side of safety and let Tesla lead the push for enlarging the share of alternative vehicles in the overall car market. Secondly, Tesla’s competition is not other EVs (at least not yet), but high-end ICE cars. So when Tesla releases its Gen III, its competition will be neither Nissan Leaf, Chevy Bolt, nor Chevrolet Malibu and Toyota Camry; but rather the Audi A4, A5, and A6, BMW’s X1, X3, and X4, and Buick’s Enclave, La Crosse, and Regal. So, no, Chevrolet Bolt is not Tesla’s competitor. Tesla’s modus operandi is to sell high-end cars in different car segments, and use the profits to realize greater efficiencies in the production and distribution process in order to bring down the unit price and expand its market share.
Another point needs to be made here: Tesla sells cars directly to the consumer. This is important because this means that people buying from Tesla are not being persuaded by local car dealers to try out a new technology. They are aware of Tesla’s brand in the first place. In contrast, all other car companies sell EVs through the same dealership and retail channels, which is also partly to blame for their inability to shift large volumes of these cars. Mass market acceptance for alternative technologies will require a major push from auto makers but their current strategies cannot achieve this.
What Can One Expect From Bolt?
At the moment, gas prices are extremely low. This is not good news for companies aiming to sell alternative vehicles to the mass market. Their sales pitch is based on two things: economics and ethics. The economics side of the argument runs as follows: the cost of ownership of an electric vehicle is usually lower than that for a petrol/gasoline run car so consumers are better off spending a bit more in buying EVs/HEVs because they’ll save in the long term. However, consumers will base this decision on their future expectations of gas prices. At a time when gas prices are as low as $2, their future expectations of gas prices will also be lower. Additionally, EV/HEV sellers argue that replacing ICE cars with electric cars allows consumers to lower their carbon footprint. But replacing a diesel car with an EV car merely means that you are shifting your contribution to environmental waste from your exhaust pipes to the power stations using coal powered electricity to keep your cars running. Given the presence of both of these things, it is highly unlikely that a mass market push for EVs is possible in the near future. It may be more likely if gas prices rise again in the near future. So considering these things, it is highly unlikely that Chevrolet’s Bolt will add to GM’s unit sales by a significant amount. It may even be that they cannibalize sales for the Chevrolet Volt in the near future. The best case scenario for GM would be that the two models together bring in about as many unit sales for the company as Prius does for Toyota.
