For the fans of Tesla Motors (NASDAQ:TSLA) who have derided Audi's electric SUV as "vaporware," I've got some news that may disappoint you:
It's starting to look like it's for real.
Despite (or maybe because of) parent Volkwagen's (NASDAQOTH:VLKAY) costly emissions scandal, it appears that the German automaking giant is moving ahead with plans to mass-produce the electric luxury SUV it unveiled in Frankfurt last month.
VW is probably planning to build it in Belgium
It's not official yet, but a new report suggests that VW is gearing up to make an official announcement later this month.
Belgian newspaper De Morgan reported on Wednesday that Volkswagen is holding talks with government officials in Brussels. (The report is in Dutch, but online translators will give you the gist.) According to the report, which quotes a union leader, VW told the Belgian officials that the new electric Audi will be manufactured at a factory in Brussels starting in 2018. VW hasn't denied the report.
VW's factory in Brussels currently makes the subcompact Audi A1. But the A1's profit margins are thin, and the Belgian workers' wages are high. It has been known for a while that Audi would likely move production of the next-generation A1 to a different factory in a region with lower labor costs.
That leaves the Belgian factory needing a new product, preferably (from Audi's perspective) a more profitable one. According to the union official interviewed by De Morgan, Audi's electric SUV will be it.
It's not "ludicrous" -- but it is an Audi
On Tuesday, VW revealed an outline of its strategic plan for the mass-market Volkswagen brand. The plan included the budget cuts expected as VW girds for the expected financial consequences of its scandal. But it also includes -- despite the budget cuts -- a far greater emphasis on hybrids and battery-electric cars than VW had made in the past.
Wednesday's news from Belgium suggests strongly that VW intends to go ahead with production of the electric Audi. It's another sign that Volkswagen is looking to move past its emissions cheating scandal by boosting its development of electrified vehicles.
The new SUV is clearly aimed directly at Tesla's new Model X. It will probably be called the "Audi Q6 e-tron" when it arrives. The concept version, called the "e-tron quattro concept," has a claimed range of "over 500 kilometers," or 311 miles -- in line with VW's stated expectations for its first generation of premium electric vehicles. The concept's interior suggests that the Q6 e-tron's cockpit is likely to be a plush, well-designed, high-tech space -- something that Audi does extremely well in its current higher-end models. But performance wasn't neglected: Audi said it will do zero to 100 kilometers per hour (62 mph) in 4.6 seconds.
That's not quite "ludicrous mode," but it's probably fast enough for most buyers.
What does this mean for Tesla?
Unless another automaker surprises us between now and 2018, the new Audi will almost certainly be the first direct competitor to Tesla's "premium electric vehicles." I expect that it will compare pretty well to the Model X: Tesla will have it beat in some ways, but Audi may well out-do Tesla in some areas too.
The Audi will probably steal some sales from Tesla. But on balance, the arrival of serious competition might turn out to be good news for the upstart Silicon Valley automaker.
Simply put, Audi's decision to enter the battery-electric arena could give battery-electric cars more legitimacy with mainstream (read: non-techie) buyers. That could in turn increase the number of car-buyers willing to consider an electric vehicle.
As long as Tesla manages to remain competitive with its much bigger rival, a booming market for luxury electric vehicles would be excellent news for both.
John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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