However, the company is now using the Voltec platform to launch the Cadillac ELR. The ELR is marketed to a different audience who expects to pay a premium for their vehicles. The Cadillac is expected to be priced between $52,000 and $65,000, more comparable to luxury vehicles in its class.
These vehicles also perform an important task for GM by pulling up the average fuel economy of its fleet. This allows GM to sell more trucks and SUVs, its traditional high-margin bread and butter.
Technology upstarts
Tesla Motors Inc (NASDAQ:TSLA) came onto the stage in 2003, and showed that there is a market for selling stylish and efficient cars. Realistically, Tesla Motors Inc (NASDAQ:TSLA) is only going to be able to sell its current lineup to affluent Americans that can afford a $70,000 car and also want to help the environment. Anybody looking to buy the technology at Kia prices is not going to find what they’re looking for. However, Tesla demonstrated that it could become a viable competitor in the alternative-fuel vehicle market, and do so at a profit.
Tesla Motors Inc (NASDAQ:TSLA) just announced that it will have an equity offering now that its stock has soared over 150% this year. It will use this money to repay the federal government on a Department of Energy loan to avoid any comparison to Solyndra, and to give itself more financial flexibility. Tesla will realize better profitability as the price for batteries comes down and a more robust infrastructure comes online in the US. These sales will come right out of the pockets of established automakers, putting more pressure on companies to look at joint-ventures and mergers.
Foolish bottom line
There will always be a market for personal transportation. However, we are seeing more households reduce the frequency in which they purchase cars, as well as the number of cars households have.
The strong players will continue, but the “old guard” companies like General Motors Company (NYSE:GM) will have to keep watch for new threats that could shake up their industry. Embracing new technology and higher value will be a differentiator of which company will be the next top dog, and who will be the next Pontiac.
The article Does the Auto Industry Have Too Much Capacity originally appeared on Fool.com and is written by Wes Patoka.
Wes Patoka has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors . The Motley Fool owns shares of Ford and Tesla Motors. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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