Tesla Challenges BMW on Home Turf as Germans Go Green
Tesla Motors Inc. (TSLA), the electric-vehicle maker led by billionaire Elon Musk, is pushing beyond the friendly confines of California to take on the world’s biggest luxury-car brands in their home market.
Tesla will have six stores in Germany after adding locations in the coming months in Berlin and Stuttgart, home to Mercedes-Benz parent Daimler AG. The start-up already has sales centers in Frankfurt, Dusseldorf, Hamburg and Munich, Bayerische Motoren Werke AG (BMW)’s hometown.
Tesla is hitting the autobahn just as the German Goliaths start selling their own electrics from dealer networks with hundreds of stores. Musk will also need to win over buyers who traditionally have been loyal to homegrown brands.
“The European home turf belongs to the likes of Daimler, BMW and Audi,” said Bryan Batista, Tesla’s European sales director. “We’re confident that we have a product that stacks up very well.”
At the International Auto Show in Frankfurt this week, BMW presented its i8 plug-in hybrid supercar and is featuring the battery-powered i3 city car. Volkswagen AG (VOW)’s Audi debuted a plug-in hybrid version of the A3 hatchback that can travel 50 kilometers (31 miles) on electric power and VW’s Porsche brand unveiled the $845,000 918 Spyder hybrid. Mercedes displayed an electric version of the SLS gull-wing sports car and plans to roll out an electric B-Class compact next year.
The German offerings will test the sustainability of Tesla’s buzz. The Palo Alto, California-based company’s share price has surged almost fivefold this year, giving it a market value of $20.1 billion -- more than a quarter that of BMW, which this year will manufacture almost 90 times as many cars. Tesla also trades at 267 times estimated earnings, compared with 10 times for BMW, according to data compiled by Bloomberg.
Tesla says its newcomer status is an advantage as it expands across Europe. The company plans to open 15 stores and service centers in the region by year end, bringing its total to more than 20.
At traditional carmakers, “there’s been a reluctance to change, to leave internal combustion engine technology, which has been and still is the bread and butter of these companies,” Batista said. “We don’t have that legacy.”
Tesla’s entrance has caught the Germans’ attention. Daimler, which owns a 4 percent stake in the company, according to data compiled by Bloomberg, will use Tesla’s batteries and motors for the electric B-Class.
“We like to call it Tesla inside - like Intel inside - because Tesla now is quite cool,” Daimler Chief Executive Officer Dieter Zetsche said today at the Frankfurt show. “We’re very happy that they are successful.”
VW bought three Tesla cars to examine how they worked. Axle positioning and battery- management systems impressed the carmaker’s engineers, Chief Executive Officer Martin Winterkorn said in interview at the Frankfurt auto show.
The Model S is “made intelligently,” Winterkorn said. The vehicles deserve respect “especially considering that they don’t have vast experience in building cars.”
Tesla’s store in Frankfurt, near the city’s famed opera house, is a small, low-ceilinged boutique displaying the chassis of a Model S in the window to show the battery frame. Color and trim options adorn the back wall, where a large screen shows the model. There’s no car in the showroom, a sharp contrast to the sprawling dealerships of BMW, Mercedes and Audi, where dozens of autos crowd the aisles and lots.
The Model S is a low-slung four-door sedan that seats as many as seven, including two fold-out rear-facing seats for children. It accelerates to 100 kilometers (62 miles) per hour in 6.2 seconds, matching the performance of the gasoline-powered base version of the BMW 5-Series sedan.
The Tesla costs 71,400 euros, versus 39,900 euros for the cheapest 5-Series. BMW’s smaller i3, which seats four and is about the size of the company’s Mini hatchback, will start just under 35,000 euros when it hits showrooms in November.
Electric-car makers must combat customer worries that their vehicles will run out of battery power before they reach their destination. To ease that, BMW is offering buyers of the i3 -- with a range of as much as 160 kilometers -- the option of a conventional-car loaner for longer trips. Tesla offers bigger power packs that can extend the range to as far as 480 kilometers per charge, enough to drive from Munich to Frankfurt.
Tesla is also trying to ensure its customers can always plug in. In Norway, the company opened a network of fast-charging stations, covering the main highways, where Tesla owners can recharge a Model S to 50 percent capacity in about 20 minutes for free.
Tesla and BMW have both teamed up with a Munich startup company called The Mobility House to install home and public charging stations.
Unlike its German rivals, Tesla is totally dependent on increased demand for electrics, a segment that has failed to live up to expectations. Carlos Ghosn -- the chief executive officer of Renault SA (RNO) and Nissan, the global leaders in electrics -- said in a Bloomberg interview last week that the two companies won’t reach a 2016 target of selling a cumulative total of 1.5 million electric vehicles.
“Tesla has a positive image but is an absolute niche player,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. The company “still has to prove itself.”
To contact the reporter on this story: Dorothee Tschampa in Frankfurt at email@example.com