Is GM worried about Tesla?

More than GM, I think Mercedes and BMW ought to get worried. One parent at my daughter's school here in New Jersey has a Tesla - that gets all the attention over the innumerable BMW/Lexus/Mercedes owners.

 

Hearing that GM has formed a committee to watch the competition is no surprise.

We already have confirmation that the huge price-slash on Volt resulted in a surge of sales, nothing to show sustainability was achieved. Looking at the online inventory, the purchase-rate has slowed to a crawl. GM clearly has reason to worry about high-efficiency sales.

On the traditional side, GM just announced the intent to significantly increase production & sales of their vehicles like Cruze & Sonic. There was also official word that the next-generation of Cruze would be delayed by a year to capitalize on recent strong consumer demand for it.

In other words, that question of knowing your audience is coming back to haunt GM now. They didn't understand who the consumers were and truly believed the "if you build it, they will buy it" approach would do the trick. That obviously didn't work.

This market isn't what they had anticipated. Turns out, some of the naysayers really were contributing good advice after all.

 

When I look at the latest hybridcars.com dashboard I see the Volt plugin sales share is 31% and calendar year sales are up 12% from last year at this time. Meanwhile, the Prius Plugin has a plugin sales share of 7% and calendar year sales are down 3% from last year at this time.

Toyota's overall hybrid sales appear to be slightly down from this time last year.

The Volt price cuts appear to be tracking the price cuts of the LEAF. I think I recall that Toyota has been offering incentives for the Prius Plugin recently but I don't keep close track of these things. Presumably the cost of batteries has been falling with higher volume production which probably helps enable some of these price cuts.

 

GM has an abysmal record of turning R&D into intellectual property that they monetize, especially in their own vehicles. Given the increase in the fleet MPG requirements, GM needs to focus on substantially better efficiency, in vehicles that people want to buy. I am not knocking the Volt, just every other vehicle made by GM and their track record. Additionally, the culture is broken and they may not be able to get out of their own way, in order to make the changes they must make to achieve efficiency requirements. I recently read that they would not survive their bankruptcy reorganization, as you can shed liabilities and loss making brands, but it is enormously difficult to change the culture and refocus an organization on new thinking and new products.

 

...it was interesting in the OP article Tesla stock approaching 30% the market cap value of GM already. Time to take a few profits if you have been successfully speculating in Tesla stock.

 

maybe they are watching to see if they can shed their dealerships.

 

Not surprising to see volt bashing haters get it completely backwards. If one reads the article its pretty clear

GM missed the ball when efficient imports happen then again on hybrids.
Akerson is just making sure they are not missing the mark on EV-based solutions. That "concern" about tesla and the EV space, was part of why they built the Volt (see Bob Lutz: The Man Who Revived the Electric Car - Newsweek and The Daily Beast).


An even better article can be found at
Akerson Demands GM Innovation to Blunt Tesla Threat - Bloomberg
Which makes it clear the Volt is part of GMs ongoing response to Tesla type innovation threats.

The Market may not be as large as GMs initial projections in 2008, before the market crash/resession, but then almost all projections from before then were wrong. Unfortunately the slowness from the unpredicted ression did allow others to catch up more quickly, but Volt sales are still leading the market. Tesla's success, and the Leaf/Volt going well, validate the concerns that GM/Lutz recognized in 2005.. The "committee" is not really new, just formalizing it from a one-off issue/response to an ongoing concern and making it clear the new CEO gets it too. Too bad Toyota did not recognize the issues in 2005, or we might have had a PiP in 2007 or 2008.

 

Do you have a link to that article?

 

Jeff
My sources for economics news and insight are Bloomberg Businessweek (BB) & The Economist (TE). I recommend a very thorough series of articles on the auto industry that were recently run in each publication; early April issue of BB and mid April issue of TE. Together, these several articles give insight into mega-trends of the industry.

In addition, bloomberg.com article today, Akerson Demands GM Innovation to Guard Against Musk Effect, is quite revealing.

The bankruptcy conclusion is mine, so no citation, per se. BTW, I'm not wishing this on anyone, it simply appears to me to be inevitable.
Jim

 

Thanks, I'll go and check those out.

I haven't read the articles yet and I'm not very knowledgeable about the intricacies of the auto industry but your conclusion isn't obvious to me yet.

GM unloaded a lot of debt, renegotiated lower labor rates, closed less efficient factories, and due to the worldwide economic downturn there is a historically large builtup demand for new cars. As soon as the economy finishes unwinding debt in the U.S. and Europe and GDP rebounds there will be a big upswing in the auto industry. It's hard to see how GM is likely to return to BK anytime soon. But, I'll go read those articles to see if they surprise me with new insight.

 

That lack of acknowledgement for the obvious is what has made Volt a topic which attracted so much attention.

Enthusiasts went to extremes to tell us Volt was not the same as the plug-in Prius, then contradicted that very claim with direct comparisons. So, you'd ask who Volt was intended for. They'd evade the question. Eventually, when sales faltering could no longer be denied, focus on audience changed. We were led to believe the purpose of this generation all along wasn't to reach the mainstream, it was to tap into a new "electrified" market. That sounded reasonable... until Tesla's success became apparent.

WHO IS THE MARKET FOR VOLT? That's the question Volt supporters have come to despise, since they truly don't know. The fear is that GM is completely reconfiguring the next-generation, sacrificing certain design aspects enthusiasts praised for the sake of it being able to appeal to middle-market. It's what should have happened originally. They just didn't want to admit the disconnect in priorities, hoping circumstances were change in the meantime.

Seeing Nissan, Toyota, Ford, and Honda all taking the need for high-volume profitable sales seriously while watching the success of Tesla is far more of an influence than any of our preventative advice prior to rollout. GM knows now. The uncertainty of who is costing them quite a penalty. Forming that committee to observe confirms the worry they should have had all along. Better late than never?

 

Its not better late, as its not late at all. As I already cited in this thread, GM was already tracking Tesla before which actually lead to the Volt. The new committee is just saying the new CEO's way of publicly showing they continue to do so and maybe making it a bit more formal.

But once again we see you pushing your anti-GM agenda, with no meaningful facts supporting your view while ignoring known facts against your view. That you continually resort to such arguments suggests you know, at least subconsciously , have facts to support your problem. That this is the best you can do speaks volumes.

That GM's CEO is being public about the committee is a testament to some changes at GM. The OLD GM would have been dismissive, wrongly so. Even if Tesla turns out not to be a threat, its only foolish CEO that does not worry about the threats of disruptive innovators. And the statement is also a social signal of the cultural change, and free advertising. All good things.

Your continuing to ask us, the PC chat readers, to answer about the intended market for a new product will, hopefully, continue to go unanswered. We enthusiasts don't "avoid it", we actively answer you and keep telling you that its juvenile to whine about not answering questions outside our knowledge base. That you keep asking someone other than GM to answer that question speaks volumes about the lack of real issues you can raise. Since GM has NOT published a statement about their intended market, anything we say about it would be pure speculation. That you continue to suggests our refusal to answer is from "Fear", show you are a fool. We have answered, multiple times, and gave very valid reasons. We simply understand the limitations of our knowledge and thus refuse to answer questions outside our expertise.

Unlike you I try to stick to facts and what I known and use citations. Your ramblings about the needs for aiming for middle market and high-volume sales shows a deep lack of understanding of how innovation processes work. Your arguments would have killed the Prius before it started. You really should read some books like the Innovators Dilemma, the Innovators Solution, so you understand such things.

 

The Volt and PPI are not the same. One is an EREV and the other a blended blended plug in. Making comparisons between the two in no way contradicts that they are different. The only way to not make comparisons would be to ignore and dismiss the other. Simply ignoring the competition would be foolish, and why it's important that GM isn't doing this with Tesla.

Forming the comittee now doesn't exclude GM from having watch Tesla before hand. With the Roadster, there was still risk that Tesla wouldn't make it to the S roll out. Official announcements from GM then on wathing them would make GM look foolish for paying too much attention on a start up.

None of Ford's, Honda's, or Toyota's first generation hybrids were smash hits that hit high volume sales out the gate. It took until the second generation, at least, for that to happen.

Nissan has bold plans with the Leaf. It is selling here better than the Volt, but the numbers are still low. Nissan realizes that it will take time for the market to grow, and are willing to ride it out until it does.

What has been Toyota's response to the new BEV market? To dismiss it. With releases on batteries not being ready, national grids not being clean enough, and the cars just being too costly. How different is that behavior from old GM's on hybrids? Instead, Toyota is pushing their FCV. How do they intend to reach high volume sales for that when the only refueling stations are in southern California?

As for the QUESTION. It is only despised coming from you, John. It has been repeatly pointed out that only GM itself can actually answer your question. But we tried anyway with our own opinions on the matter. You either brushed them off, or twisted them as proof of the Volt's failure. There is simply no point in trying to answer when an answer isn't actually being sought. The few that do respond do so in order to keep new lurkers from getting the wrong impression.

 

Prior to rollout, Toyota established direct relationships with those hoping to become owners. They'd provide detail about how the system operated, intended goals, and targeted audience. We'd become the well-educated contacts to assist with the rollout process. It was a win-win situation.

We had the opportunity to ask both the lead executive and top engineer of the Prius project questions. They worked surprisingly hard at being as forthcoming as possible. Concepts very new to the industry, like in-motion startup of an engine using a motor-generator and emission-cleansing to achieve the SULEV rating, were carefully explained. I was delighted by the level of information they were willing to share. It was fantastic... and a very different approach from what GM chose to take.

The relationship held strong throughout sales of the Classic model. When the Iconic model was introduced, we still had an open communication line to ask questions and get answers. By then, Toyota's own internal education program tapped into that owner relationship to ensure everyone knows and understands. That proved to be extremely effective too.

Who did GM include in the committee they just formed? Will there be an opportunity for consumer input? Or is this just another example of "only GM itself", leaving those who don't work for GM but have helpful insight without any way to provide input?

A post this week from a die-hard Volt owner who previously owned a Prius stated the situation this way: "We all know Volt's problem is price and profitability." That type of candid feedback is long overdue, something Toyota went to great efforts to avoid and successfully did. Cost was treated as a very high priority and continues to be. The design was configured to be enhanced overtime, as pricing would allow, rather than necessitating a new generation.

Pointing out the risk taken and the lack of flexibility doesn't achieve anything anymore, nor does identifying the product-gap. It always boils down to knowing and understanding customers. Just look at how "want" and "need" are defined to see the lack of clarity still. The struggle will continue until those mixed messages cease.