Tesla Motors Inc (TSLA): As Detroit Struggles, a New Auto Emerges

After a 70-year hibernation, Detroit Electric lumbered from its cave on Tuesday and tossed its Stratoliner hat into the electric-vehicle ring. What was old is new again, and Detroit Electric might just breathe new life into an ailing city and an uncertain industry.

A rose by any other name …
It’s hard not to glance at Tesla Motors Inc (NASDAQ:TSLA) to see her reaction, considering that Detroit Electric showed up to the party wearing basically the same dress. Detroit Electric’s first product to market will be a limited-edition, two-seater sports car that will cost “in the neighborhood” of $135,000. That sounds a lot like Tesla’s now-discontinued Roadster!

But the similarities don’t end there. Detroit Electric will use Lotus platforms for at least its first two vehicles. What other car was based on Lotus’ Elise platform? That’s right: Tesla Motors Inc (NASDAQ:TSLA)s Roadster. 

So on the face of things, it looks as though Tesla’s dominance of the high-end EV market may have just come under serious threat. Interestingly, though, Tesla’s shares are trading noticeably up since Detroit Electric’s announcement. Investors seem encouraged, not panicked. Why might that be?

While Detroit Electric is starting with a sexy new sports car, it plans to offer a “diverse family of all-electric production cars,” which seems to suggest that the company won’t confine itself to the expensive top of the pyramid. EVs’ success will live and die on the development of a battery-charging infrastructure to support them, and such development will be spurred only by broad adoption of EVs. Investors may be betting that high-end purveyors like Tesla Motors Inc (NASDAQ:TSLA) will be buoyed by Detroit Electric’s potential offering of more affordable vehicles.

Pistols or swords?