Can The Rising Chevy Bolt Dent Tesla Motors Inc (TSLA) Stock In The Long-Term?

Does Tesla Motors Inc (NASDAQ:TSLA) need to take the homely Chevy Bolt seriously? Can it impact TSLA stock in the long run? Let’s take a look.

General Motors Company (NYSE:GM) mass-produced plug-in Electric Vehicle (EV), the Chevy Bolt, continues to win accolades from industry experts. The Bolt has won the Car of the Year Award, the third top honor for the breakthrough car. The Chevy Bolt had already won the Green Car of the Year and the Motor Trend Car awards in 2016.

Tesla Motors Inc (NASDAQ:TSLA) investors have been mostly dismissive of the homely Bolt, arguing that it can’t hold a candle to the sexy Model 3. But the fact that the Bolt is already being widely recognized as a leader in its category suggests that Tesla fans need to sit up and take notice.

Tesla shares have kicked off the year on a strong note, rising 18.17% higher YTD. A lot of those gains have come after Tesla managed to hit a rare home run by activating the Gigafactory within the stipulated deadline.

Tesla YTD Share Returns

Source: CNN Money

Aggressive Pricing Not Sustainable Over The Long-term

The Bolt lacks in hype and styling but it more than makes up for it in performance, pricing, and more crucially, availability. With a driving range of 238 miles, it comfortably pips the Model 3 which has a range of 215 miles. Further, at a price of 30K after tax breaks, it’s considerably cheaper than the Model 3, quite a strong selling point in a price-conscious market segment. Indeed JPMorgan has placed a Sell rating on TSLA with a $180 price target (26% below the current price) citing the risks posed by aggressive pricing by ICE (Internal Combustion Engine) manufacturers:

“We expect it will become increasingly more difficult for Tesla to profitably compete against an improving array of electric vehicles from automakers which are pricing such vehicles with the aim not to turn a profit but rather to sell in sufficient volume to subsidize the rest of their more lucrative portfolios of internal combustion engine vehicles from a regulatory compliance perspective.”

General Motors Company (NYSE:GM) says that it stands to lose $8-$9K on each Chevy Bolt it sells as it tries to pacify regulators in nine states who demand that auto manufacturers sell some non-polluting vehicles if they want to do business there. Although GM can easily take the loss at the expected sales levels, things could get dicey in the long-term, as state rules tighten and require more zero-emission vehicles on the roads. There are estimates that sales of zero-emission vehicles will increase five-fold to reach 15.4% of total vehicle sales by 2025.

A California law specifies that greenhouse gas emissions should be 40% below 1990 levels by 2030, a requirement that would see sales of plug-in hybrids, ZEVs, and fuel-cell cars shoot to 40% of overall auto sales mix, up from 3% currently. It is, therefore, going to become increasingly hard for companies like General Motors Company (NYSE:GM) to continue heavily subsidizing their EVs and pose a competitive risk to Tesla. Also, how far these Tesla fighters (1) can take the fight to Tesla needs to be seen.