Published on November 19th, 2017 | by Michael Barnard0
If GM Is Serious, It Will Still Take About 16 Years To Catch Up To Tesla
November 19th, 2017 by Michael Barnard
Chevy plans to put three more cars based on the Chevy Bolt platform on the road by 2021, and then introduce a new modular electric platform supporting at least 20 new vehicles by 2023. If it sticks to these plans, a reasonable question is how long it will take before the company has more fully electric cars on the roads of the world than Tesla, if ever. After all, it only has one model right now and it’s only shipped about 17,000 units.
Based on what Tesla and GM have said, and making a bunch of liberal assumptions, my best estimate is that GM might surpass Tesla around 2033. And Tesla would be just fine with that. This estimate is at best plus or minus 3 years.
As of Q4 2016, Tesla had sold about 187,000 cars. It is averaging 25,000 per quarter in 2017 with increases now that Model 3 is ramping up, so will likely see 100,000 easily this year. That would put about 287,000 Teslas on the road by end of December.
Its goal of hitting 500,000 Model 3s delivered by end of 2018 is obviously not going to occur, but it is ramping up rapidly after initial production hell and is likely to ship at least 300,000 of those cars next year as well as likely another 120,000 or so Models S and X. It’ll likely stabilize somewhat in 2019 and ship 500,000 total cars globally for a couple of years as it shifts focus somewhat to trucks. We’ll leave trucks out of the numbers. Tesla will undoubtedly continue to expand as it penetrates the Chinese and Indian growth markets, so we’ll ratchet up sales through 2025 by 100,000 a year.
Tesla will undoubtedly have the new Roadster in there somewhere as well as the Model Y. We’ll leave the likely pickup truck out of the equation. This puts its annual sales at about a million vehicles by 2025, which is bigger than Volvo but not nearly as big as the market leaders, which are running around 10 million vehicles annually.
Tesla is a strong growth play and it’s highly differentiated in every category it enters. The Model S and X sales are displacing other companies’ sales in those categories in a big way, and the Model 3 is obviously going to do the same thing.
GM only has one pure electric car right now, the Chevy Bolt. It started shipping in January of 2017 and GM has shipped about 17,000 of them. For the purposes of this piece, we’ll ignore the long-ago EV1 and the Chevy Volt PHEV. While demand for the Bolt has been reasonable, it’s nowhere near demand for the Model 3 at an equivalent price point. It has its fans, but everyone agrees it’s not nearly as desirable as the Model 3, including many of its biggest fans.
Let’s assume GM increases its sales of the Bolt year over year, but the urban hatchback category is an also ran in GM land. Its big sellers are pickup trucks — with 940,000 units sold annually, close to 10% of all sales. There isn’t a lot of indication that GM is focusing on electric pickups and I’m leaving them out of Tesla numbers regardless.
We’ll assume that GM is committed to electrics on this timeframe and will start ramping up production. We’ll assume that it doubles pure EV sales for the next couple of years and then assume a slower growth of 50% EV sales increase annually through 2025. GM’s statement is a million EV sales annually in 2026, so this is reasonable.
This is aggressive since GM currently has under 20,000 pure EV units shipped and a history of failing to lead in this space, but let’s make these assumptions. We’ll also assume that this will be a holding action and that its total vehicle sales won’t increase tremendously year over year. In other words, these EVs will be cannibalizing sales of GM’s existing vehicles and shutting down some internal combustion lines.
We’ll also assume that GM can find a way past one of their biggest problems, the dealership business model. Dealerships make the majority of their profit post sales on servicing. Electric cars need a lot less servicing and dealers aren’t incented to sell them in the near term. This is one of the elephants in the room for the legacy manufacturers.
Finally, while GM is claiming that some of its new cars will be hydrogen and will be included in the million, I’m going to assume that sanity will prevail, very few hydrogen cars will ever reach production prototype, and that the numbers will be a rounding error.
I’ve projected the model out to 2035 to see what it brings. I did some minor tweaking in terms of volume increases for GM on its purely electric vehicles for slower electric growth after 2025, but still with its manufacturing advantages, it should be able to see 20% year-over-year increases in sales.
As always, this is crystal ball stuff and could be off by a fair amount. But assuming GM actually stays committed to EVs and its roadmap, this could turn into reality.
There are no flies on Tesla in this projection. It would be reaching two million vehicles shipped faster than any car company in history and would be raking in cash. It’s just unrealistic to assume that it would be able to compete with the majors in global manufacturing capacity if the majors actually got serious.
This is all in line with Musk’s 2006 Master Plan. His goal wasn’t to have Tesla dominate all car sales, but to drive every car company to build and ship a lot of EVs. Seems to be working.
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