BMW i8 Threat Looms In Tesla’s Rearview Mirror

BMW i8 Threat Looms In Tesla Rearview Mirror

BMW’s latest electric car models – set to arrive in the US this summer – could pose a serious threat to Tesla’s Model S electric sedan

By Mohid Ahmed on May 13, 2014 at 1:03 pm EST

One of the primary reasons for the run-away success of Tesla Motors Inc. (TSLA) with the Model S has largely been the lack of competition from other automakers such as Ford Motor Company (F), General Motors Company (GM), and Toyota Motor Corporation (TM). Even premium automakers such as Daimler AG (DDAIY) and Bayerische Motoren Werke AG (BAMXY) have been slow to catch up in the battery-electric vehicle segment.

Tesla, the first and (for now) the only automaker to exclusively produce and market all-electric vehicles in the US, brought new auto-technology to the US auto industry through the development and launch of the fully-electric Model S sports sedan, which was readily accepted by the wealthier class. Other green vehicles like Toyota’s ubiquitous hybrid, the Prius, and all electric-cars like Nissan’s (NSANY) Leaf and GM’s Chevrolet Volt, have seen reasonable sales across the country. Model S sales are better though; 6,457 units were sold in the first quarter alone. All this time however, competition for Tesla has been brewing up in Germany.

BMW, one of the Big Three automakers in Germany, is looking to take on Tesla head on by releasing its new i8 plug-in hybrid sports car and the less expensive i3 city car. BMW’s i8 and i3 will carry lighter plastic bodies that are reinforced by carbon fiber, which marks the first ever use of the expensive material in mass-market vehicles. The novel composition will make it a thousand pounds lighter than Tesla’s Model S.

The i3 will retail for about $41,350, while the i8 will sell for about $135,000, a lot more than the Model S which starts at $71,000. However, the i8 will be packed with high-end features and better performance. The i8’s top speed of 155 mph and 4.4 second 0-60mph time exceeds the Model S’s top speed of 125 mph and 5.4 second sprint from 0-60mph.

Analysts at Barclays sense a sandwich strategy from BMW, with alternatives being offered above and below Tesla’s Model S on the price scale. The same groups of analysts believe that the i-series from BMW will likely take a bite out of Tesla’s clientele.

The lower priced i3, which is aimed at the mass market, has already been successfully launched in Europe last year, and will be available for delivery to US customers this year. Tesla’s mass-market Model E is still in the works, and is scheduled for delivery after two years.

BMW might expand production of the i-series to 300,000 units per year from current rate of 23,200, depending on how well it fares in the US.

Tesla held sway over a very lucrative market for years, and it was only a matter of time before real competition hit the industry. We think BMW will be leading the competition now.

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