The automobile industry is witnessing fierce competition. With the success of electronic vehicles, the war between General Motors (NYSE:GM) and Tesla Motors (NASDAQ:TSLA) is intensifying. Though General Motors is a stronger player than Tesla, the launch of the Model S Sedan by the latter has been a great success.
Model S has become very popular and is the best electric vehicle which can travel more than 200 miles once it is fully charged. This model helped Tesla attract investors, leading to a huge increase in its stock price. On the other hand, General Motors’ Chevy Volt EV is a lower range car which can travel about 40 miles and comes for half the price.
Return to investors…
A comparison of stock price appreciation in the last one year highlights Tesla’s emergence as a prominent player in the electric vehicle market.
General Motors provided a decent return of 17% to its investors during the period. However, Tesla Motors’ stock price increased by a stunning 300%. The credit goes to the luxury segment car.
Plans to combat competition
General Motor’s market share shrunk marginally to 11.5% from 11.6% last year. Hence, it announced its plans to launch a cheaper electric car which will compete with the Model S. The new car will be able to travel for 200 miles once it is charged. This might help the car maker give competition to Tesla, but the car hasn’t been launched yet and it might take a lot of time to build such a car.
In fact, Tesla is on the move with new things to offer with each passing day. The automobile manufacturer has plans to introduce the Gen III by 2016. This car is based on a similar notion as planned by General Motors. It would cater to the mass market, would be capable of running for 200 miles per charge, and will be in the lower price range.
Tesla Motors is also set to sell Model X in the coming months, which might again grab customer attention. Moreover, the company also announced that it has been working to make a driverless car in the next three years.
A point of concern for Tesla’s investors might be its plans to expand in the European market. Given the softness in Europe, Tesla might face problems in selling its cars in the region. Moreover, the lacklustre performance of other carmakers in Europe makes Tesla’s decision doubtful. For example, General Motors witnessed a 6.8% decline in its second-quarter revenue from the European region. However, the company claims that losses are getting narrower.
Even Ford (NYSE:F) reported losses in Europe and has also been closing plants in the region. Despite losses from Europe, Ford posted a great quarter which surpassed estimates. Its revenue for the period surged 14% to $38.1 billion as demand for U.S. pickup trucks increased by 26%. Also, sales in China grew remarkably, especially because of its new launches such as EcoSport and Kuga SUVs. The success of its new introductions and Ford’s plan to innovate further enabled the company to boost its guidance for the year.
Though there are concerns over Europe’s demand for automobiles, automakers’ performance is getting better in the region. Moreover, Tesla has been an exceptional performer and has been making the right moves to attract customers’ attention. Its continuous innovation and great products are the strengths of the company. I believe investing in this company is the right thing to do.