Tesla Motors Inc (NASDAQ:TSLA) showed the world that there is demand for a high quality, low energy vehicle, and now it has to face the consequences of its actions. Bayerische Motoren Werke AG (FRA:BMW), the famed German auto maker, is setting up for the release of a new hybrid luxury vehicle. In many ways the vehicle offers something that the Tesla car simply does not, and that’s enough for some to project victory ahead for the Germans.
The fissure that Tesla Motors Inc (NASDAQ:TSLA) caused in the auto industry when it began selling the fully electric Model S is not being discounted, but BMW is building something different, and Tesla investors should be watching the German company closely.
Tesla Model S versus BMW i8
The chart above show the difference is specs between the Tesla Motors Inc (NASDAQ:TSLA) offering, and the upcoming car from Bayerische Motoren Werke AG (FRA:BMW). It’s clear that they’re very different, but that doesn’t mean they address different markets. Both cars appeal to premium buyers who are energy conscious. Neither of them is priced for most households, and both seek to demonstrate a unique image for the future of the industry.
Carlson Capital's Double Black Diamond Fund posted a return of 3.3% net of fees in August, according to a copy of the fund's letter, which ValueWalk has been able to review. Q3 2021 hedge fund letters, conferences and more Following this performance, for the year to the end of August, the fund has produced a Read More
The i3 serves a different market, and it’s been performing appreciably in its own right. Bayerische Motoren Werke AG (FRA:BMW) isn’t going to beat Tesla Motors Inc (NASDAQ:TSLA) with a compact, however. The i8 is the German company’s key to a future ahead of the Californian auto company, and analysts reckon it will push the firm ahead of Elon Musk’s brainchild.
It all comes down to business
According to Barclays, who released a report on the upcoming Bayerische Motoren Werke AG (FRA:BMW) i8, that car is going to lead the industry back toward the more traditional of the two companies, though that doesn’t necessarily bode poorly for Tesla Motors Inc (NASDAQ:TSLA). According to the analysts, “We think BMW have positioned themselves as tech leaders to out-rival premium peers such as Tesla, and investors will increasingly be willing to credit this leadership with higher multiples.”
BMW is building something different from what Tesla Motors Inc (NASDAQ:TSLA) is offering, and the changes its making to the manufacturing side of the business may be more revolutionary than the actual design of the i8. The use of lightweight materials in particular makes the future of the Tesla brand less than guaranteed.
The BMW i-series is being put together with carbon fiber and the factories used to manufacture the cars can be seen, in basic form, above. The process is likely to deliver a lighter weight car that is cost-effective to manufacture. That means that future vehicles in the series may be able to compete at a price advantage to Tesla Motors Inc (NASDAQ:TSLA) offerings. Barclays is looking at the long-term of the BMW i-series brand, and the analysts reckon it’s sound next to Tesla.
“BMW’s EV focus means increased competition for Tesla’s Gen III, reinforcing our view that Gen III success is not guaranteed. Combined with plateauing of Model S demand in the U.S. and Norway, we see incremental risk to the demand outlook for Tesla.” runs the bottom line of the report. It appears that though Tesla walked away with the first round Bayerische Motoren Werke AG (FRA:BMW) may be taking round 2.