Tesla Motors Inc (TSLA) Stock: Model 3 Is CRUSHING GM’s Chevy Bolt … But So What?

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Tesla Motors Inc (TSLA) has been basking in glory recently. The TSLA stock price has enjoyed a 15% rally in the past month, with shares roaring from below $220 to above $250 in the wake of extremely strong initial demand for what will be Tesla’s flagship all-electric vehicle, the Model 3.

Tesla Motors Inc (TSLA) Stock: Model 3 Is CRUSHING GM’s Chevy Bolt ... But So What?Let’s take a look at why the Tesla Model 3 is, in many ways, crushing its largest competitor … and later, why that doesn’t really matter.

TSLA Has GM’s Number

Tesla Model 3 deliveries won’t start until late 2017, but already nearly 400,000 people have reserved one.

The closest mass-produced direct competitor to the Model 3 will be General Motors Company‘s (GM) Chevy Bolt, due out in 2016. In the five-plus years that GM’s most popular EV, the Chevy Volt, has been on the market, it has sold just over 100,000 units.

It doesn’t stop there. TSLA stock is sexier than GM stock; the Tesla brand is much sexier than Chevy’s; and Tesla’s CEO Elon Musk has 3.76 million Twitter Inc (TWTR) followers to GM CEO Mary Barra’s pitiable 19,500.

The Model 3 is priced at $35,000 before incentives, while the Chevy Bolt is priced at $37,000 without incentives, but also without the sexy factor.

Sounds like everything’s pretty gravy for TSLA, right?

Well, actually, there are some major caveats here. And from the point of view of an investor, they cannot be overlooked.

3 Problems With Tesla’s “Dominance”

There are at least three issues with the apparent runaway appeal of the Model 3 when compared to the Chevy Bolt.

The numbers are not comparable

Tesla Model 3 reservations are just that: reservations, not sales or preorders. All you have to do is plunk down $1,000 and boom, you’ve made your reservation. It’s fully refundable. College students can reserve one (or five) with their student loans to impress girls, and cancel it before the end of the semester. (Good luck with that strategy.)

Meanwhile, the 100,000 Chevy Volts that have been sold are Chevy Volts, not Bolts. The Volt is a plug-in hybrid, while the Chevy Bolt is a pure all-electric vehicle with a range upwards of 200 miles.

Bolt will be first to market — perhaps by years

GM’s VP of global propulsion systems boasts that the Chevy Bolt,

“… will be the first to market as a long-range affordable battery electric vehicle…it will have more than 200 miles of range and it will be in production by the end of 2016, so it’s not necessary to put down $1,000 and wait until 2018 or sometime after that.”

Shots fired! And mighty accurate shots, too. While TSLA says that Model 3 deliveries will begin in late 2017, it has almost zero credibility when it comes to following a timeline. The unbelievably delayed Model X was postponed by two years; I myself received emails from people who had preordered and cancelled out of frustration after years of waiting.

The fact that a leaked slide from a Tesla PowerPoint last year listed the Model 3 release date as 2018 also doesn’t help Tesla’s credibility here. My own theory is that the company is knowingly putting out a “late 2017” release date to appease investors in the short-term, then, sometime around mid- or late-2017 we’ll get the real 2018 date.

Right now, 2018 sounds too far away. Conceding a 2018 release date would almost certainly cause some people to cancel their Model 3 reservations; I think it would also spark a TSLA stock selloff.

Asymmetric Risk/Reward

If the Model 3 dramatically outsells the Chevy Bolt, taking an early and dominant lead in the EV industry, that’s great for TSLA. The stock will almost surely rocket higher. GM shares, though, will hardly be affected — the Bolt is one of dozens of models GM plans to release across the Buick, Chevrolet, Cadillac and GMC brands in coming years.

However, if the opposite happens and the Chevy Bolt soaks up EV demand before the Model 3 can even hit the market, TSLA stock is in major, major trouble. So much of Tesla’s current valuation assumes high demand and great execution in the future, a fact that Elon Musk himself has acknowledged in regards to the TSLA stock price.

The moral of the story here is don’t be too jubilant celebrating Tesla’s early “success.” It’s proving that demand is there, sure … for a $1,000 “cancel anytime” reservation fee.

And not only is Tesla’s perceived early lead against the Chevy Bolt illusory, the high number of early reservations actually raise three additional risks for TSLAspecifically, the disappearing tax incentives, additional fulfillment risk and the possibility of stock dilution to raise capital.

It ain’t over till the fat lady sings, folks. And she ain’t even warming up yet.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/tesla-motors-tsla-stock-gm-bolt/.

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