The largest car company in America has set an improbable goal. General Motors Co. (NYSE: GM) plans to produce a poor man’s Tesla. GM hopes to capitalize on the wild success of the much more expensive vehicle. And is it any wonder? Giant GM has a market cap of $50 billion. That of tiny Tesla Motors Inc. (NASDAQ: TSLA) stands at $20 billion, which says a great deal about Wall Street’s enthusiasm for the all-electric car.
Doug Parks, GM’s vice president of global product programs, said his company already had begun its pursuit. According to The Wall Street Journal:
General Motors Co. is developing an electric car that can go 200 miles on a charge for around $30,000.
That would puts its sticker price at less that half of the Tesla Model S. This far lower price hardly guarantees GM any success. The market for electric cars remains modest at best. Many analysts would be shocked if Tesla sells more than a few thousand cars a quarter over the next few years, particularly in the United States. Tesla’s high price point is only one of several barriers to a larger market share.
Consumers have shied away from all-electric cars for several reasons. Not the least among these is that hybrids, led by the Toyota Motor Corp. (NYSE: TM) Prius, are considered fuel efficient enough for many buyers. And the technology that hybrids use is several years old and well tested. Electric cars are more a novelty, a toy for people who have short commutes. While Tesla builds electric car changing stations across the United States, consumers still fret about whether they can drive from one place to another without their electric cars running out of charge. Real or imagined, the perception is a barrier.
Also, there is the fact that Americans have become used to $3 a gallon gas. According to the AAA, the average price of a gallon of regular across the nation has been above the $3 mark for 1,000 days. The price is likely to drop over time as the cost of a barrel of crude goes down, as it is bound to as new sources, particularly shale oil, begin to flood the market.
GM believes that if everyone can afford an electric car, then everyone will buy one. Not likely in a world in which the electric car is a product for eccentrics.