While the new Ford GT and Acura NSX are obviously wicked cool, the biggest buzz (or perhaps hum) from this year’s Detroit Auto Show is the Chevy Bolt. Its unveiling marks the beginning of a showdown between David and Goliath as to who will define the next phase of automotive existence.
Opposing GM’s Bolt is Tesla’s Model 3. Now on the surface, it may seem that GM is ready to beat Tesla to a pulp in this fight. Not only is their car priced at $30,000 compared to Tesla’s $35,000, but GM has a lot more leverage in terms of economies of scale. GM can quickly mass produce the Chevy Bolt and it can share various parts with other GM vehicles to cut costs and widen profit margins. As an added bonus, GM has an exponentially larger bank account with which to fund such an endeavour.
Tesla’s Model 3, however, should not be considered a pushover. With the Roadster and Model S, the company has essentially written the book on how to properly design and manufacture an electric car. They represent the pinnacle of American innovation in the 21st century. Tesla easily represents the biggest leap in automotive design since Henry Ford began mass production.
Elon Musk’s promise of a $35,000 Model 3 also does not include the government tax credit for electric cars. That credit is included in GM’s claimed price of the Chevy Bolt, which means that without the $7,500 incentive, the Bolt will cost $2,500 more than the Model 3.
It’s also important to note that the build quality and amenities of Tesla’s super saloon Model S is on par and meant to compete with luxury cars like the Mercedes CLS, Audi A7, BMW 6 Series Gran Coupe, and Porsche Panamera. In comparison to it’s gasoline counterparts, the Tesla is slightly cheaper and considerably quicker while offering more storage and seating room in addition to greater safety. Not to mention that everything it competes with guzzles gas like there’s no tomorrow, while electricity is comparably cheap.
This is the same approach Tesla is taking with the Model 3. In this case Tesla is taking aim squarely at the BMW 3 Series, unarguably the car that sets the bar for the mass market sports sedan segment. This means that Tesla will build the Model 3 to the same level as the 3 Series. Tesla has proven it’s on par with these luxury car makers, but GM doesn’t even demonstrate this level of build quality or sales figures with their Cadillac brand. Gone are the days when a salesperson shows you a product and tells you it’s the Cadillac of its industry. So what makes anyone believe that the Chevy Bolt could possibly compete with the Model 3?
Furthermore, Tesla is a company that’s trying to be known for its commitment to doing things right. In November of last year, Tesla pushed back the release date of its much anticipated Model X to the 3rd quarter of 2015 because they wanted to get the production model right from day one. Elon Musk noted:
“This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.” – Elon Musk
By bold comparison, GM regularly puts out faulty or low quality products. They emphasize getting cars to market and lowering their production costs over time. This tactic leads to constant recalls, legal battles, government fines, deaths, and PR nightmares that the company can’t seem to shake.
In fairness, I have to applaud GM in being the first large company to make a good, practical electric car with a reasonable range per battery charge and an affordable price tag.
But at the end of the day, it’s obvious that Tesla will make the better car and orders will be sold out quickly. The real opportunity for GM is to sell the Bolt to people who can’t get their hands on the Model 3. Their production bottle neck will likely be LG Chem’s ability to meet GM’s battery demand while Tesla races to start production at its own Gigafactory battery plant. Regardless of which car is more successful, they are the first mass market electric cars that will be affordable while offering a reasonable range on a single charge. They mark the beginning of the age of the electric car.
*Note: The author of this blog is a shareholder of Tesla Motors Inc.