So far, Tesla Motors Inc (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.
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 Motors Inc (NASDAQ:TSLA)’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 Motors Inc (NASDAQ:TSLA)’s direction.
One of those signs came from Germany on Tuesday. Luxury car giant BMW 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 Motors Inc (NASDAQ:TSLA) competitor. The BMW i3, shown above, will launch later this year. It’s a lightweight small electric car that seems aimed more at Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY)‘s LEAF and General Motors Company (NYSE:GM)‘s 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 Motors Inc (NASDAQ:TSLA)’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.