1 Auto Company Tesla Motors Should Be Afraid Of

BMW i3 and connectivity app. Consumers will be able to monitor battery levels while their vehicle is charging. Image courtesy of BMW. 

Tesla Motors (NASDAQ: TSLA  ) has taken the auto world by storm by developing electric cars from the ground up, and in the process creating a new category of automobile that didn't exist just a few years ago. The success of the Model S, and anticipation for the Model X, have wowed the market and rewarded investors with a 486% gain in the last year alone.

Automakers like Nissan, General Motors (NYSE: GM  ) , and Ford (NYSE: F  ) have halfheartedly followed suit, creating short-range electric vehicles that are often augmented by a gasoline-hybrid power train as well. But Tesla has mastered the EV market so far.

Model S batteries are incorporated into the chassis, lowering the center of gravity of the vehicle.

Why Detroit can't compete with Tesla
While GM and Ford have demonstrated an interest to play in the EV market, they're not the players to contend with Tesla in the high-five-figure auto market. The problem is that neither of these automakers provides a performance product to match a Tesla vehicle, nor do they offer much appeal for the affluent buyers who can afford electric vehicles, which is where the market is right now.

Not only is a Tesla Model S an EV that can appeal to the most environmentally conscious consumer, it's a performance machine that stacks up against some of the best sports cars in the world -- that's the key to its success.

From a design standpoint, the big reason automakers aren't making headway against Tesla is that they aren't yet building EV chassis and drive trains from the ground up the way Tesla has done. Tesla built its batteries into the car's floor to lower the center of gravity to increase performance and save space in the cabin. Instead, competitors are jamming battery packs into the existing vehicle design. 

But one company is taking a ground-up approach to EVs and it could be a big competitor to Tesla.

The one company Tesla should worry about
One company that is starting its EV design from scratch and has the ability to meet or exceed the performance of Tesla's Model S is BMW (NASDAQOTH: BAMXF  ) . The BMW i3 has batteries integrated into the floor of the vehicle, opening up the cabin for passengers. It also incorporates carbon fiber that lowers the curb weight to just over 2,600 pounds. That's a ton less than the 4,600-pound Model S (although the i3 is a smaller vehicle).  

Where BMW will be able to compete long term is in performance. Below are highlighted the performance specifications of the Model S and three BMW models: the M5 (BMW's closest conventional competitor to the Model S), i3, and i8.

 

0-60 mph

Top Speed

Range

Base Cost

Tesla Model S

5.4 seconds

125 mph

265 miles

$81,070 

Tesla Model S Performance

4.2 seconds

130 mph

265 miles

$94,570

BMW M5

3.6 seconds

190 mph

422 miles 

$92,900

BMW i3

7.2 seconds 

93 mph

100 miles

$41,350

BMW i8

4.4 seconds

155 mph 

22 miles electric

310 miles total

$135,700 

Source: Tesla and BMW data sheets

You can see that the i8 stacks up well with the Model S in performance, although it isn't an all-electric vehicle. The i3 isn't quick, but it extends range further than either Ford, GM, or Nissan have done in an all-electric model. It's also priced at an attractive level for many buyers.

At the very least, BMW has created a small line of vehicles that are a viable alternative to Tesla's.  Orders seem to reflect this fact: There were 10,000 orders for the i3 in place by late 2013 and BMW expects to sell out of the model this year. The i8 will be a much smaller production run, but it's also showing well with customers.  

BMW i8, the high-performance EV hybrid. Image courtesy of BMW.

BMW is now Tesla's long-term rival
BMW probably isn't going to take a significant number of customers from Tesla this year or next, but what's important is that it's building a platform that will compete in the future. Look at this as the same stage of development that Tesla was at when it launched the Roadster. It's the next-generation i3 and i8 that will be the real competition because engineers will have the ability to add range and improve performance.

The reason this is important to Tesla is that BMW has the scale and balance sheet to build true competition much faster than Tesla is expanding. If the i-series sells well, and BMW makes a big bet on the future of EVs, then Tesla will have a formidable competitor on its hands -- one that could very well exceed Tesla when it comes to vehicle performance.

There's even an outside chance that BMW could produce more electrified vehicles in 2015 than Tesla, based on current projections. That has to be causing a little worry at Tesla's headquarters in Silicon Valley.

The next frontier for automakers
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Read/Post Comments (33) | Recommend This Article (15)

Comments from our Foolish Readers

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  • Report this Comment On February 24, 2014, at 4:45 PM, speculawyer wrote:

    Pfft. BMW's i-models are a failure. A niche supercar (i8) and an ugly expensive EV (i3). BMW's upcoming plug-in hybrids may be much more interesting than their i-cars.

  • Report this Comment On February 24, 2014, at 5:14 PM, Capt601 wrote:

    comical. comparing a hybrid to an EV. people just don't get it, as well as auto manufacturers.

    and the Tesla superchargers are what take Tesla well above any other auto co. no one else has the motivation or desire to build out a charger network.

    and lastly, the dealer network is what will hold back BMW as well as every other auto co. dealers don't want EV's as they cannot scam the consumer on service as they do with ICE and hybrids.

  • Report this Comment On February 24, 2014, at 5:24 PM, ckgod wrote:

    Huh? BMW EV? Where is it?

  • Report this Comment On February 24, 2014, at 5:39 PM, Muskysmell wrote:

    Shoot I thought it was Charbroil BBQ grill company going after the Tesla's rolling BBQ status.

    Can BMW compete or want to compete for number of fires?

    Tesla's theme song -- Burning Down the House

    I smell something Musky, oh wait this is just another Tesla on fire.

    Tesla -- Thermal Energy Starts Lithium Ablaze

  • Report this Comment On February 24, 2014, at 5:40 PM, deeageaux wrote:

    A $90k Model S sedan does 0-60 in 4 seconds flat.

    Outgunning a $135k pseudo supercar i8.

    i3 has a theoretical range of 100 miles

    Much like Model S is 300 miles.

    EPA for Model S is 265 miles of range but i3 is not yet rated.

    Likely 80 miles.

    NO supercharger network. Package for couple of days rental of 3 Series ICE for several years optional when buying i3.

    Tesla should keep an eye on every auto company. Should not fear anyone because none has produced anything scary for Tesla investors.

  • Report this Comment On February 24, 2014, at 5:49 PM, deeageaux wrote:

    BTW Gasoline Auto Industry should have a jingle that can rhyme with

    "killing 30k Americans every year since 1946."

    BTW II Not one death, paralysis, 3rd degree burns, or amputation in a Tesla.

  • Report this Comment On February 24, 2014, at 6:20 PM, thegreentreefrog wrote:

    To all the Computer Geeks : You have all the answers and know all the specs but have never driven one or owned one. OH its FAST , So WHAT!

    These electric cars are BORING,BORING, BORING.

    People with good taste and money buy Classic cars, not this Techi GARBAGE!

  • Report this Comment On February 24, 2014, at 6:22 PM, pdmaher wrote:

    Hey guys, If there is any competition I suspect it will be from an automaker that has provided us with hybrid Graphene based batteries from someone like Maxwell Technologies. I'm a fan of LENR and several other Black Swan Technologies. Nicolas Chauvin still has his LENR car in the works, and this is no joke. There are at least 16 Black Swans on the lake right now that could power a vehicle nicely.

    Paul

  • Report this Comment On February 24, 2014, at 6:32 PM, pdmaher wrote:

    If you think electric cars are boring, what about the fellow that just did 0-60 in under 2.5 seconds in a midget sized car. An electric motor doesn't have all of the bravado of an internal combustion engine, but it can deliver what power it has in an instant. They wind up fast! We can't continue to slather ourselves in oil because a bunch of motor heads can't think of anything better to serve mankind than to pour oil all over it!! So don't cry about the death of the internal combustion engine, Say Hurrah!!! for it.

    Paul

  • Report this Comment On February 24, 2014, at 7:46 PM, BillMarshall995 wrote:

    There is no way that other manufacturers are not going to compete with Tesla within a very short window. These other manufacturers are most likely already in talks to come up with a common charger and will most likely split the network costs leaving tesla in the cold. Designing a Tesla like vehicle is not difficult.

    It uses no patented technology. in fact its shifter is an actual Mercedes part an I am sure their are others. It has air suspension that I am sure is the same as other cars. When Tesla is accused of price fixing on repairs the dealership monopoly will end very quickly.

    These other manufacturers will each come up with another car or two and they can even afford to sell them at a loss just to get traffic in their showrooms. Tesla's projections are based on no competition. There are only so many people who are so smug that they will only by a tesla. There are lots of people who are loyal to their current manufacturer and are smart enough to know a deal when they see one. These other manufacturers already buy billions of dollars worth of electronics from the big names (siemens, bosch, et al ) and will use their influence to get the latest and greatest at a great price. Do not think for a second that they will not wield their wallet in order to get their way.

    There will be at least 5 offerings within three years with more announced. There is no way these companies will allow Tesla to dominate the landscape for electric cars for any length of time.

    Besides... the only one defending these firetraps are people who bought them and cannot handle the humiliation of admitting that the bought a vehicle that burns up not in one design flaw but now from apparently THREE different sources.

    It is only a matter of time before the real world catches up with this car. They will be a niche market company forever unless they are consumed by another company and sell the car under different badges. They are however not even close to a takeover target by a carmaker as their sky high and unsustainable valuation makes them way too expensive for anyone who has ever actually been in the car business.

  • Report this Comment On February 24, 2014, at 7:54 PM, neamakri wrote:

    Hey, the M5 and the i8 are not the same all electric vehicles. Delete them.

    Why is the Leaf missing from the chart? Is it because it has the same range as the i3 but costs $14,000 less? That would put BMW in a not-so-good spotlight.

    I would be driving a Leaf today but my wife is not "on board" for all electric (not yet).

  • Report this Comment On February 24, 2014, at 8:02 PM, CarFanatic wrote:

    Other than 4 tires, Tesla has nothing in common with BMW.

    There will be no competition.

  • Report this Comment On February 24, 2014, at 8:32 PM, mscommgroup wrote:

    I agree. There will be no competition for Tesla. As a former BMW fanatic, I must say that BMW does not build good components and options. The more bells and whistles the car has, the more it is in the shop and the service bills are down right unfair - I was fleeced several times.

  • Report this Comment On February 24, 2014, at 9:14 PM, sabertoothtiger2 wrote:

    Some good points, but I don't think Tesla is worried about competition.

    Elon Musk says Tesla welcomes competition in the zero-emissions vehicle space, and I believe him. After all, the mission of the company is to electrify mobility, and they seem to do very well partnering with others.

    BMW's i3 is not comparable to Tesla's Roadster in the sense that it's not a do-or-die situation for BMW, it's a sideline to their main business. A few years ago I was in a BMW dealership talking about electric cars, and one of the salesmen was mocking them; you can be sure that would not have happened if I were talking to a Tesla rep.

    I look forward to the day BMW decides it MUST build a car as good as a Tesla.

  • Report this Comment On February 24, 2014, at 11:29 PM, Ustauber wrote:

    Tesla is already dominating the electric car industry.

    BMW is not a competition against Tesla because while BMW concentrates on this I3 car, Tesla has almost connected all the cities in the U.S and almost in the world.

    BMW has to concentrate on their 43 different models that they produce every year.

    Look at all the cars from last year models waiting to be bought at BMW dealers across the nation.

    The prices for this I3 does not reflect the service that as you know is very steep.

    Look at all the millions of dollars BMW is paying for advertising and then is Tesla with zero .

    Have you ever seen a waiting period for any of the BMW's models?

    Oh well

    .

    ThxTsla

  • Report this Comment On February 24, 2014, at 11:55 PM, JGC8888 wrote:

    BMW has a long way to go when it comes to EV. Tesla has the throne. BMW cannot be compared to Tesla. No competition at all!!!

  • Report this Comment On February 24, 2014, at 11:58 PM, wiserinvestor wrote:

    Plug that Tesla into a solar powered EV charger equipped with new Hyper X Solar modules and show the other automakers the true meaning of driving electric.

    Hyper X's small footprint, high efficiency and much lower pricing provides the perfect combination for a fast return on investment. Hyper X solar offers a better PTC to STC ratio "Real World" performance according to the California Energy Commission's performance rating listings than over 100 of SunPower's solar panel models. Hyper X solar also offers an incredible -0.27%/degree C temperature coefficient rating for awesome performance in hot/warm climates and best of all Hyper X solar systems are priced thousands less and even tens of thousands less on larger systems than a SunPower solar system.

  • Report this Comment On February 25, 2014, at 2:38 AM, Pixma25 wrote:

    A LOT of people drive like maniacs. You'd think they'd been bitten by a snake and had 5 minutes to get to the hospital before they died. But they're not even in a hurry. How many times have you seen someone get out of their car and Run to the store, run into their house, run into work... They don't! People Hate driving. Stuck in a box in a lane is soul crushing. I used to be one of those people. I'd drive as fast as I could go and still get away with it. But now I drive a Tesla. I set the cruise for the speed limit everywhere I go, sometimes less. I'm so happy to be in my car. Sometimes I get where I'm going and I just sit there for a few minutes, listening to music, surfing the web, happy. Sometimes I go for a drive just for fun. Ever heard of going for a 'Sunday drive' through the country? I'd heard of it, never used to do it, but I do now. Driving has become a pleasure.

    I hope lots of people buy and enjoy the I3. The limited range wouldn't work for me, but it'll be just fine for a lot of folks.

    As far as business competition is concerned, BMW's efforts don't hurt Tesla, they help Tesla. It's cross marketing. Tesla doesn't advertise, lots of people still haven't even given a thought to electric vehicles or have lots of misgivings about them. The I3 will generate interest in EV's in general and help them gain legitimacy. Some of the people who look at the I3 will say, "That's not for me, it doesn't have enough range," or whatever. But then they'll shop around, discover Tesla, and make a purchase.

  • Report this Comment On February 25, 2014, at 10:38 AM, Jason87467 wrote:

    When Tesla has real competition and it will happen, I wouldn't want to own Tesla stocks.

  • Report this Comment On February 25, 2014, at 11:52 AM, DrDauger wrote:

    BMW's dealerships are confused how to sell their i3:

    http://jalopnik.com/will-dealers-be-ready-to-sell-the-2014-b...

    That does not bode well for that line or the i8 either.

    Besides, the i3's competition is really the Nissan Leaf or the Chevy Volt, shown by comparable range, performance, and price. The i8's competition is the defunct Fisker Karma (the other $100k+ hybrid) just sold to the Chinese.

    The market is wide open to Tesla while BMW shoots itself in the foot.

    Disclosure: I am a one-year P85 Model S owner at 15k miles, and it is phenomenal. I am also long TSLA at $35. Today it broke $255/sh. "Everything is awesome!"

  • Report this Comment On February 25, 2014, at 12:26 PM, ifool100 wrote:

    "You can see that the i8 stacks up well with the Model S in performance, although it isn't an all-electric vehicle". This says it all Travis. It is NOT all electric. To understand Tesla, we have to understand that this is not just about comparing price, speed, looks, etc. Equally important to Tesla buyers is to be gas free. None. No dependency on gasoline at all. Zero emissions. It's not just a "tree hugger" thing. It's a status symbol. We have been forever at the mercy of Big Oil -with their price fixing (they like to call it supply and demand) outrageous oil spills and astonishing arrogance. Tesla is an elegant way to tell Big Oil to go fly a kite.

  • Report this Comment On February 25, 2014, at 1:50 PM, sudhirpv wrote:

    BMW & Quality? I am sick and tired of the problems in my 2005 530i with just 70k miles. It performs well, no doubt. But they break down so often that the fun is gone now.

  • Report this Comment On February 25, 2014, at 10:33 PM, StellarNews wrote:

    This article has several half truths. First of all, NOTHING BMW is building is comparable to the Tesla S. The S outclasses everything they've got in some way. It was also rated the Best All Around vehicle by Consumer Reports recently. That includes gasoline powered cars. Second, Nissan hasn't made a "half hearted attempt" to produce electric cars. The Leaf is the largest selling electric car worldwide and probably the best and most practical car out there as far as an electric the middle class buyer can afford. It will actually pay for it's higher price in fuel savings if the owner keeps it for five to seven years. Nissan will be introducing a much longer range Leaf in a couple years and Tesla will be introducing the G3 that will have a 200 mile range and cost less than 1/2 of the price of an S. Between the two companies they've got the entire market range low to high rounded up for at least the next five years.

  • Report this Comment On February 26, 2014, at 12:53 PM, weaponz wrote:

    Unfortunately for BMW, they missed the boat. Tesla has nothing to worry about in the bmw i3 or i8. The i3 and i8 platforms are useless for creating a Tesla competitor. It takes a manufacturer 5 years to create a new platform

  • Report this Comment On February 27, 2014, at 5:53 PM, theredtomato wrote:

    Shouldn't the word be "has," and not "have," in the second line below. If it were Ford, GM, "and" Nissan, then the word "have would work. At least I think that is correct.

    "The i3 isn't quick, but it extends range further than either Ford, GM, or Nissan have done in an all-electric model. It's also priced at an attractive level for many buyers."

  • Report this Comment On February 27, 2014, at 6:07 PM, ffbj wrote:

    Yes, Tesla has a pretty much open field. Even as others point out Tesla welcomes competition.

    It may not be the greatest car ever made but plenty of those within the automotive field think it is.

    Numerous accolades and awards and a car that is simply awesome. When enough people have gone electric a tipping point will be reached, since they never go back.

    The only reason to get an i3 is you can't afford a Tesla.

    The story continues.

  • Report this Comment On February 27, 2014, at 6:55 PM, Ustauber wrote:

    Where are you going to charge your car on a long trip.

    The I3 would be seating on the BMW lot until The End of The Year Sell.

    Lol

    ThxTsla

  • Report this Comment On February 27, 2014, at 7:42 PM, comissar wrote:

    When Tesla gets 'real competition", they will be making money by selling batteries from that new plant and other components to other car companies - none of which have a battery source of their own. Don't get me wrong, the other companies aren't going out of business, but I believe that 5-10 years out, Tesla will be in the top five globally if they keep on their current path.

    They are already selling batteries and driveline components to Daimler/Mercedes and Toyota.

    BTW, don't forget that Daimler owns 4.3% of Telsa's stock (last I heard, back in December), a deal apparently done to encourage technology sharing between the two companies. And yes, Tesla gets some components from Mercedes, although I believe they are interior items.

  • Report this Comment On February 28, 2014, at 2:34 AM, KongPL wrote:

    don't forget that the winner will be the company that will manufacture e-cars at a significant volume. Therefore, don't forget China. BYD, BAIC, Mercedes jointly will build the cars, ABB will provide home chargers to Beijing e-car buyers. It has a huge potential: Most car owners in Beijing use their cars for commuting - 40-80 km maybe. The government is keen on supporting environmentally friendly cars. Tesla is aware of that, have opened an office in Beijing, but their cars will be about USD150,00 - 200,000 - no way to compete with a USD50-60,000 (or less) car from a Chinese manufacturer.

    Watch this space!

  • Report this Comment On February 28, 2014, at 9:53 PM, ProtonMD wrote:

    Interesting comments. Particularly the individuals trying to incite ( ignite? ) fear by referencing the fire stories of the past year. Ignorance or conflict of interest? since simple analysis of the facts reveals the Model S to be remarkably fire resistant compared to BMW's or any other ICE. Having actually extensively driven both the Model S and the I3, and having owned no less than 7 BMW's in the past, I can tell you

    the I3 is far from "the ultimate driving machine." It is much, much closer to driving a Leaf than a Model S. And the interior and exterior design are Mini level, not luxury vehicle. The article is also pretty far off the mark. Why is the M5 even mentioned? The I3 is a dog ( they would know if they had driven it) and the I8 gets 22 miles on a charge. Are you kidding me? The I8 is not even a reasonable plug in hybrid! BMW doesn't get it. Sorry!

  • Report this Comment On March 01, 2014, at 11:18 PM, Anurajmg wrote:

    BMW cars traditionally performs well for first couple of years. They breakdowns more often and costs a lot; VANOS, cam shaft sensor, vacuum pump, axles, drive shafts, etc. you name it. (I own BMW-X3). BMWs are like an injury prone athletes, often side lined. I fell BMW make ultimate driving [you crazy] machines

  • Report this Comment On March 07, 2014, at 5:37 PM, mythshakr wrote:

    All winning and losing is temporal. How big a deal is it that statement " past performance is no guarantee of future blah" on all prospectus? Tesla is doing great now and for the foreseeable future. Someday that might change. I'm not doing my investing (or car buying) based upon someday. The fact that that BMW is doing EV anything is a great step forward towards the day of ending fossil fuel consumption for ground transportation.

    Today, I can sell my $3K initial investment in Tesla and trade in my Volt and buy a new Tesla S. Will I be in the same situation next year or 5 years from now? NO ONE KNOWS! But today, and for the next couple of years, Tesla has no viable competition.

    As J.K. Galbraith said, "in the long term we are all dead".

  • Report this Comment On March 08, 2014, at 8:35 PM, jalalaram333 wrote:

    The technology is not there yet.

    I would not invest yet in any electric car yet.

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