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BMW Competes with Tesla (NASDAQ: TSLA)

Brian Hicks

Written By Brian Hicks

Posted July 26, 2013

If you’re an electric vehicle investor, then watch out for the i3 by BMW.

The German luxury car maker is debuting a fully electric car that comes with a price tag of $42,225, which is $20,000 cheaper than a 60 kWh Tesla (NASDAQ: TSLA) Model S. Mass production is set for 2014, but a limited debut will make a showing in major cities, including Beijing, New York, and London.

But the i3 and the Model S cater to two different consumers, and there is room for both vehicles on the market.

For example, a consumer living in the suburbs, the breadwinner of the family, may have a little extra money to spend and be looking at the i3, but he or she may want to spend a little more on a 60 Kwh Model S, which goes for $62,400.

The Model S is roomier and sportier than the i3, carrying up to seven people in the car versus four in the i3. The i3’s compact nature is more suited to urban areas – perfect for parallel parking or traversing tight city streets with heavy crowds. You could easily imagine the i3 being driven down the narrow city streets of Rome or Paris.

i3 BMWBut the i3 will power only for 93 miles on a charge, with the option of a range-extending engine that can stretch road elasticity to 186 miles. The i3 is fully charged in 30 minutes, but this is not on par with Tesla’s 208-mile charge (EPA-certified) in one hour for the 60 kWh version. If you wanted a standard 85 kWh version, costing $72,400, then the range would go for an EPA-certified 265 miles.

That suburbanite would spend a little more on a Tesla because of roomier space to accommodate family members and longer driving range. But a single person – or someone with a small family – living in the city would go for an i3 because of its maneuverability, lower price, and the short driving range perfect for people who normally don’t drive long distances.

The i3 is very much in its concept stage, and the look and features of the car could change in the wake of commercial production.

For now, at least, the car has a two-door design, with two extra rear half-doors. The i3 makes full use of lightweight carbon fibers, leaving the vehicle with a weight of 2,634 lbs., which is considered lightweight compared to other EVs that can weigh over 3,000 pounds.

The Model S is made of made of lightweight aluminum with steel reinforcement, weighing approximately 4,647 lbs. The i3 may be light, but the electric motor and engine are fixed low and in the center, keeping the vehicle well-grounded and balanced.

The i3 has 168 horsepower and 184 lb-ft of torque. The 60 kWh Model S runs on 302 horsepower and 317 lb-ft torque. The i3 can go from 0 to 62 mph in 7.2 seconds, while the 60 kWh Model S can go to 60 miles in just 5.9 seconds.

As you can see, the Model S has the i3 beaten by a long-shot, but this does not mean BMW’s EV is dead on arrival. The price tag of the i3 will appeal to those who want an EV but do not have the extra funds to purchase a Tesla vehicle. And it draw consumers who live in the cities or people who generally prefer a more manageable vehicle.

On the downside for the i3, Tesla has been a trailblazer in making the electric car look and drive like other upscale vehicles that run on gasoline. The i3 is a sleeker-looking EV with a tall hatchback, but it still very much resembles previous-version electric cars, which could be a turn off to Tesla fans and other car consumers not keen on traditional EV appearances.

The i3 and Model S may be on different footing, but the companies can potentially share a common ground when it comes to sales.

BMW Direct Selling

That’s right.

Like Tesla, BMW is looking to sell its cars without relying on car dealerships in Germany. In this instance, BMW is getting blowback from its own dealers instead of competing dealerships, as is currently the case with Tesla. BMW also wants to add mobile sales brigades to visit potential clients in their homes.

Roland Krueger is head of sales for BMW and still believes dealerships have a prominent role to play going forward, and there is talk of BMW having temporarily forestalled the Internet-selling model to alleviate dealer concerns.

It will be a while before this new model is adopted in Germany, and it will take even longer for BMW to adopt this technique in the United States, if at all. Tesla is going through a state-by-state battle for the right to directly sell to online customers without outsourcing to dealerships. States like North Carolina have even taken drastic measures, such as trying to outlaw online purchases of Tesla vehicles, but the bill fell through.

Tesla will either have to make its case to the high courts or conform to state dealership guidelines in the future.

In this respect, Tesla may have found an ally in BMW, since the American company has always argued that Tesla vehicles require specialized attention and company salesmanship devotion, and it is a case that BMW could be making with the i3.

The growing market for EVs is undeniable, and not every salesman from a dealership could make the same impassioned sales pitch of an electric car to the consumer as the company itself or one of its representatives would.

EV Investor Perspective

Picture an EV-based engine with the appearance of a Jaguar or Mustang. That is where the EV market is headed.

I’m not talking about high-priced EVs, since those cars are out of the reaches of many car buyers. But there is a middle ground between affordability and higher-end electric cars like the Model S or the i3.

The look and driving range of cheaper EVs have not sold well with the public, but there is a market for upper-end/luxury EVs that have staying power on the road.

The companies that should feel the most nervous with the oncoming release of the i3 are all automakers who manufacture gasoline-based engines and have not entered the EV market.

Hybrids have been gaining traction over the years, but more car makers are skipping over hybrid engines and jumping ahead to 100% electric engines – dispelling the notion that EVs are reserved for the hardcore environmentally-conscious consumer.

And EVs will have a more pronounced role in the automobile market in the wake of looming environmental regulations and growing environmental awareness from the public.

This does not mean the EV will spell the death of Ford (NYSE: F) and GM (NYSE: GM) or even those companies have entered the hybrid/EV fray, with such progressive vehicles as the Ford Focus Electric and the hybrid Chevy Volt.

You can definitely expect more EVs coming from major auto dealers in future.


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