So far, Tesla Motors (NASDAQ: TSLA) has had the kind of success that most start-ups only dream of. Against huge odds, the upstart Silicon Valley automaker has established itself as the name brand in "premium electric vehicles."
Tesla's Model S sedan has won every auto award worth winning, and was just named one of the best cars that Consumer Reports had ever tested. Strong sales gave the company its first profit last quarter.
Tesla's stock has been absolutely flying thanks to a huge short squeeze. Many observers say that Tesla's future couldn't be brighter.
But there's one big truth in the auto business that Tesla hasn't yet had to confront: If you have a successful idea, sooner or later you will face fierce competition.
Right now, the Model S has no direct competition. But there are more and more signs that it's coming.
The one thing that could threaten Tesla's run
I've been saying all along that Tesla's biggest challenge will come when big-league competition emerges. Investors who have looked at Tesla as a high-tech darling often seem convinced that no competitor will emerge, that Tesla has a "disruptive" technology that will give it a long-term advantage.
I don't think so. I think, and have thought for a while, that if Tesla managed to execute on its plan and prove that there was a market for all-electric luxury cars, the huge global auto giants would move to take that market for themselves. Tesla might survive, it might even profit – but as a niche player, not a big growth story.
So far, no direct competitor to the Model S has emerged – or really, even been hinted at. But if you look closely, there are signs that some of the big automakers are heading in Tesla's direction.
One of those signs came from Germany on Tuesday. Luxury car giant BMW (NASDAQOTH: BAMXF) announced a new global push for its "BMW i" sub-brand, which will focus on "premium sustainable mobility".
Sound familiar? Yeah, I thought so too.
It may not look like much now, but look carefully
The first BMW i vehicle won't be a direct Tesla competitor. The BMW i3, shown above, will launch later this year. It's a lightweight small electric car that seems aimed more at Nissan's (NASDAQOTH: NSANY) LEAF and General Motors' (NYSE: GM) Chevy Volt hybrid than at Tesla.
But the i3 tells us a lot about what BMW is thinking, and some of that thinking is Tesla-like. Constructed with large carbon-fiber sections made using advanced techniques, the i3 is a lightweight electric "city car" that will be available with an optional "range extender", a small gas-powered engine that works as a generator like in the Chevy Volt.
It won't have the range of Tesla's big sedan. The i3's battery-powered range is expected to be comparable to the LEAF's 80-100 miles. And it won't be priced nearly as high: It's expected to cost around $40,000 before tax credits, about two-thirds the price of the cheapest current Tesla.
But the idea behind the extensive use of carbon fiber in the car's construction is to make it light in weight, to offset the weight of the batteries – and ensure that it drives like a BMW.
That's Tesla-like thinking – a cool electric car that is fun to drive. And it's just the beginning.
Still no direct Tesla competitors known to be coming, but a lot going on
BMW is known to be planning a whole range of cars under the BMW i sub-brand, including an expensive plug-in hybrid sports car called the i8.
It's far from alone. Volkswagen (NASDAQOTH: VLKAY) has been playing with electric-car ideas for a few years now, and all-electric Audi A3s have been spotted testing. The company is thought to be planning plug-in vehicles ranging from small city cars to a plug-in hybrid diesel super-sports car for Audi.
Nissan will up its electric-car game later this year with the Infiniti LE, a premium (there's that word again) all-electric sedan – but has so far been coy about the car's expected range. And the company is known to have its own plug-in hybrid sports car in the works.
GM is launching its own electric city car, the Chevy Spark EV. But like Ford (NYSE: F) and Toyota (NYSE: TM), GM seems to be putting most of its effort behind plug-in hybrids like the Chevy Volt and its upcoming Cadillac sibling, rather than premium EVs with Tesla-like range and performance.
The upshot: Tesla might have this market to itself for a while longer
Make no mistake, any of these major automakers could build and market a Tesla-like car. Ford already follows Tesla's example by using Panasonic (NASDAQOTH: PCRFY) lithium-ion battery packs in its plug-in hybrids. And Ford, like the others, is learning a lot as it goes.
Tesla's secret sauce is in its battery-management software (and its attention to detail), but I don't think any of the big automakers would have much trouble getting close to Tesla's neighborhood on either front.
So far, though, nobody has taken direct aim at the Model S. But if Tesla's sales keep growing, they will.