Will General Motors' Chevrolet Bolt Outsell Tesla In January?

Will General Motors


General Motors sold 579 Chevrolet Bolt EV cars in California and Oregon in the last few short days in December.

Dealer availability check: Supplies of the Bolt EV are now plentiful among the California dealerships, with several having close to 100 units each, on hand.

Bolt EV discounts go up to $1,500 per car or 4%. That’s way below the close to 10% normal level for volume cars in plentiful supply.

Tesla averaged 2,500 Model S and 1,500 Model X cars per month in 2016 U.S. sales. 4,000 combined for January 2017?

General Motors may outsell Tesla Model S in the U.S. in January if Bolt EV sales can be extrapolated from late December and dealership availability trends.

General Motors (NYSE:GM) made the first deliveries of the Chevrolet Bolt EV all-electric car with 238 miles of range on December 13. However, based on feedback from articles and forums, it appears that it wasn't until December 29 that meaningful volume deliveries began.

All in all, GM managed to sell 579 Bolts in December. It appears that the vast majority of those sales - think around 500 out of the 579 - happened on or after December 29. In other words, basically during less than a week at the very end of the month.

Until right about now, GM has also not been delivering cars to states other than California and Oregon. This will change now, as more states are added, such as Maryland and very soon also others.

But what does this tell us about how many Bolts GM will deliver in its first full month of sales, January, even if this was in barely two states? Obviously, we cannot know with any scientific precision. There are numerous factors here, most of them very much unknown or otherwise nearly impossible to quantify.

However, there is one thing we can do in the interest of speculating about the future and that is extrapolate based on "some" things that we know.

So let's extrapolate and speculate!

Keeping it conservative, let's say that 500 Bolts delivered in one week is a baseline. That would make 2,000 in a month - January.

What could make that number even higher? One argument is that even inside California and Oregon, availability was limited in those last few days of December. It clearly has expanded in January.

When a new vehicle - ANY new vehicle - becomes available, there is naturally some scarcity. This may last for only weeks, or for a year or more depending on the car. The $400,000+ Ford (NYSE:F) GT has a different kind of scarcity than a mass-market car.

In those first days or weeks, the demand for the all-new car is greater than its supply. But then the supply catches up and cars no longer sell at or above MSRP. Depending on the brand and the nameplate, cars often sell for much or more than 10% below MSRP. Look in your local paper next Friday or Saturday and see the discounts offered on Fiat Chrysler (NYSE:FCAU) products - Dodge, Chrysler, Jeep, RAM and Fiat. A rule of thumb is that once a car starts to be advertised at 10% below MSRP, there is no longer any meaningful scarcity for that particular kind of car.

Let's take a look at the inventory situation among two of the largest Chevrolet dealers in California, especially as it concerns plug-in cars of all types:

- Rydell Chevrolet in the Los Angeles Area: here

As of the time of writing this article, this Southern California dealership had 82 Bolts in stock and was offering them $1,000 below MSRP.

- Fremont Chevrolet in the San Francisco Bay Area: here

As of the time of writing this article, this Northern California dealership had 102 Bolts in stock and was offering them $1,500 below MSRP.

According to this site, there are 152 Chevrolet dealerships in California: here

And 30 Chevrolet dealerships in Oregon: here

So that makes 182 dealerships in total between those two states that have been offering Bolts for the first month. Two of those had 184 Bolts combined, or 92 on average. Do all Chevrolet dealerships in California and Oregon have 92 Bolts on hand now? Hardly.

For example, Momentum Chevrolet has 62 Bolts in stock: here

And Boardwalk Chevrolet has 40 Bolts in stock: here

Putnam Chevrolet has only seven Bolts in stock: here

But Capitol Chevrolet has 70 in stock: here

Then again, Dublin Chevrolet has only eleven: here

As you can tell, the inventories are all over the place, but generally the Bolt is reasonably well-stocked at many California dealerships now (January 21). If you want one, you can go buy it today and you can probably get any Chevrolet dealer to match at least $1,500 below MSRP. At $37,495 base price, that means your discount is as much as 4%. Still a long way from the 10% level that would indicate something close to a supply-demand balance.

If the Bolt EV was not nearly as well-stocked in late December and maybe not even available at all Chevrolet dealerships in California and Oregon to begin with, it seems like a reasonable assumption that if the demand continues to be there at the same level in January as it was in late December, we should be looking at a January sales level higher than 4 x 500 units. How much more?

There is of course no remotely objective interpretation to this question. It's a stab in the dark with no other information. But it seems clear that there is a reasonable case to be made for the number to easily climb to well north of 2,000 units for the month of January.

At 182 dealerships in CA and OR combined, that would entail selling 11 units per dealership for the month. That would be up from three per dealership - on average - in those last few days of December. Stocking the dealerships with in some cases around 100 cars each would easily enable them to sell at least 11 per month, assuming the demand is there.

It seems most reasonable, therefore, to estimate January month sales for the Chevrolet Bolt EV in California and Oregon combined, at 2,000 or more (182 dealerships x at least 11 units each).

So how significant is this, compared to Tesla (NASDAQ:TSLA)? Before answering that question, we have to tie up one loose end on the General Motors side: The Chevrolet Volt. Yes, the Volt with a V - not the Bolt with a B. It has been selling since December 2010 and closed out 2016 with 24,739 sales in the U.S. In other words - you guessed it - 2,000 units per month. What did we say about the Bolt? 2,000 units per month is the likely baseline from just two states - admittedly including the one state that alone could account for almost half of long-term U.S. demand for the Bolt EV.

Will sales of the Bolt EV come at the expense of the Volt? Will it be in addition to it? We obviously don't know. My sense is that it will come largely, but not completely, at the expense of the Volt. If GM manages to sell 5,000 units combined (Volt + Bolt EV) per month, the Volt is unlikely to be 2,000 of those. It's likely to be a lower number. Perhaps 3,500 Bolt EV and 1,500 Volt.

The Volt vs. Bolt EV discussion is important from another perspective as well: When comparing with Tesla, how do we view Volt vs. Bolt EV in relation to Tesla's Model S vs. Model X? Should we count all of them? Or should we compare the Bolt EV vs. the Model S only? Or should the Model S be compared against the combined Volt plus Bolt EV?

One could make the argument that the Model X is an entirely different animal, with a price starting at $90,000. The Model S is so much more expensive than the Volt and Bolt EV to begin with, and the Model X is a 3-row vehicle with passenger space for up to 7 adults. The Chevrolet models are no such thing. And their prices are also below $37,500 (below $36,000 after discounts) - approximately $30,000 below a Model S, let alone the $90,000 (and up) Model X.

In Tesla's case, it sold 29,421 Model S and 18,223 Model X in the U.S. in 2016, according to InsideEVs. Using round numbers, that's 2,500 Model S and 1,500 Model X per month - 4,000 in total.

If these numbers hold for the near future as well - and remember, Tesla is supposed to grow 50% per year - it would mean that the Chevrolet Bolt EV has a decent shot at beating the Tesla Model S in January. If we combine the Bolt EV and Volt, it's all but certain that GM will beat Tesla's Model S. Even if we add the out-of-the-world expensive Model X, combined GM Volt + Bolt EV sales could have a shot at beating Tesla's 4,000 units (assuming zero growth over the 2016 average, for Tesla in January 2017).

Based on these extrapolations and what I think are reasonable assumptions, GM is more likely than not to outsell Tesla in most fair comparisons. And in the comparison I think is most relevant - Volt+Bolt vs. Model S - it seems all but certain that GM will clean the Model S' clock for the month of January.

Yes, I am aware that Tesla reported on January 3 that it had 6,450 cars in transit to customers as of year-end, and for a normal car company one would therefore draw the conclusion that those would be delivered in January. We'll see if Tesla does that or not. I suspect some of those 6,450 deliveries will happen later in the quarter, after January. Either way, not all of those 6,450 cars were in transit to U.S. customers.

One thing to think about here: GM is competing in two states now, with other states starting imminently. Tesla, for all of its limitations, has already been delivering cars to all or almost all 50 states (even though it's not allowed to sell them in stores in a small handful of them). Obviously, California is disproportionately important for Tesla just as it is for GM and all the other makers of any form of plug-in car, but still GM has plenty of dry powder as it expands U.S. geographic availability throughout the year. As such, GM should see its Bolt EV sales increase almost every month this year.

So, will this matter to Tesla's stock?

If the Bolt outsells the Model S, or if Volt+Bolt outsell either just the Model S or a combined Models S+X in January, does it matter for Tesla stock? Well, that's hard to say, but it could. It would be a sign of the obvious: Tesla has done very well in the part of the market where the average price is somewhere north of $80,000, but GM is winning in the part of the market where the average selling price is below $40,000.

I suspect that most of the people who are harping on the Chevrolet Bolt EV have not even seen one "in real life" (as opposed to a picture or perhaps indoors on a podium at a car show). Once Chevrolet Bolt EVs start showing up on regular streets - just about now - the perception of the Bolt EV from something between a complete unknown and a rumored ugly duckling may start to change.

Impact on perception of Tesla's Model 3

Tesla was unable to generate anything other than massive losses on its first three models - the Roadster, the Model S and Model X. All the hopes for the company now rest on the success of the Model 3, which is promised for the second half of 2017. On the May 2016 conference call, Elon Musk promised 100,000 - 200,000 units before the end of this year.

What would the Chevrolet Bolt EV outselling the Tesla Model S (and Model X?) tell investors about the prospects for the Tesla Model 3? Well, nothing for certain. People will interpret this in very different ways. Let me give you two examples of pro and con:

Interpretation number one: The Chevrolet Bolt keeps increasing sales between January and September from 2,000 per month to 4,000 per month in the U.S. Then, in the middle of 2017 it layers on top of it sales in Europe and perhaps other international markets, for a total of 7,000 units per month by the end of September. That would be an annualized rate of 84,000 units per year by the end of September (12 months x 7,000).

Someone might say that this would be the ceiling of Tesla Model 3 demand, assuming Tesla's average selling price will be at least $42,000 and Tesla perhaps being forced to increase prices because it cannot sell the Model 3 above break-even at those kinds of prices. In that scenario - Tesla selling in the ballpark of 100,000 Model 3 cars per year as a ceiling - it would be a most bearish interpretation for Tesla's valuation.

Interpretation number two: If the Bolt reaches an annualized global sales rate of 84,000 units by September 2017, Tesla would sell a lot more Model 3 cars some time down the road - whether in 2018 or 2019. Maybe that would be interpreted as a positive for Tesla's valuation.

Meanwhile, we have precious few direct comparison tests between Tesla's current Model S 60 (the lowest-end they sell) and the approximately $30,000 less expensive Chevrolet Bolt EV. This is the only meaningful one I have seen, conducted by MotorTrend: here

Conclusion: January will be the first test for Tesla vs. GM

January 2017 will be the first full month General Motors' Chevrolet Bolt EV will have been available for sale, even if only in two states. As of January 21, it seems to be in reasonably good stock at many of the California Chevrolet dealerships, and discounts are up to $1,500 per car (subtract from the $37,495 base price).

Based on extrapolating from the Bolt EVs' first tiny amount of sales in late December 2016 and considering the current inventory levels at the Chevrolet dealerships in California, it would appear that General Motors could print a Bolt EV sales number for January of at least 2,000 units, with plenty of upside. Combined with the ongoing sales of the Chevrolet Volt, that has a greater than 50% probability of exceeding Tesla's U.S. Model S sales number for January, in my estimation.

And that may or may not impact Tesla stock, up or down.

Disclosure: I am/we are long F, GM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was long GM and F. However, positions may change at any time. The author regularly attends new vehicle introductions, press conferences and equivalent, hosted by most major automakers, including General Motors.

Original Article seekingalpha.com

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