Tesla Motors Inc vs. BMW’s i-brand: Tech vs. Weight

Tesla Motors Inc vs. BMW’s i-brand: Tech vs. Weight
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Tesla Motors Inc (NASDAQ:TSLA) may be the supreme ruler in luxury electric vehicles, but will that standing last? Barclays analysts believe Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW) poses a major threat, particularly for Tesla’s planned mass market vehicle.

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Tesla leads in tech, BMW leads in weight

In a report dated May 22, 2014, analysts Kristina Church and Brian Johnson, along with their respective teams, weigh the positives and negatives of Tesla Motors Inc (NASDAQ:TSLA) and Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW). They note that currently, the two companies target similar audiences, although the “vehicle proposition” of each is quite different from the other.

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They like Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s concept because it is entirely different than other electric cars on the market. They say not only is the technology different, but the materials BMW uses are different as well. They also note that BMW is following a distribution strategy that is similar to that of Tesla Motors Inc (NASDAQ:TSLA). For these reasons, they think BMW will be able to “supersede peers.” Specifically, they name the lightweight material the company uses in its cars as being of significant importance.

The Barclays teams also explain what’s different about the two automaker’s technology. They think Tesla Motors Inc (NASDAQ:TSLA) currently has a leg up on Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW) but that this lead could be fading.

The analysts put together a chart detailing the differences between the Model S and Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s i-branded cars. They see weight as being a “key differential” for BMW.


Tesla versus BMW: the 3 P’s

The Barclays teams consider three big areas in which Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW) differs from Tesla Motors Inc (NASDAQ:TSLA). First, BMW already has two electric cars, compared to Tesla’s one. The i3 is more of a city car, while the i8 is a plug-in hybrid sports car. They think the i8 is more of a “showcase car” instead of Tesla’s direct rival. They also think note that the i-brand, which uses carbon-fiber reinforced plastic, compared to Tesla’s conventional car which features an electric powertrain.

In terms of positioning, they think Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s i3 will appeal to buyers of Tesla Motors Inc (NASDAQ:TSLA)’s Model S, even though it is smaller, has a lower range and is less flashy than the Model S. They especially see it appealing to drivers focused on sustainability because they believe BMW’s manufacturing process appears to be greener than Tesla’s.

In terms of powertrain, Tesla Motors Inc (NASDAQ:TSLA) uses small cell batteries, while Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW) uses large cell batteries.

Tesla’s brand versus BMW’s i-brand

At this point, Barclays analysts say Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s i-brand does not deserve the same multiple as Tesla Motors Inc (NASDAQ:TSLA), which is 92 times 2015 estimated earnings. However, they think BMW is “now more deserving of a true ‘luxury’ multiple.” They cite the “smoothing” of the automaker’s product cycles and also its “technological leadership in terms of premium-leading advancement to 2020 emissions targets.”

Currently Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW) has a luxury multiple of 18 times, but the analysts estimate that the i-brand could increase their current valuation of BMW by €3. Currently they value the German automaker at €116 per share and have an Overweight rating on it.

What will happen to Tesla?

The Barclays team thinks that Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s i-brand could erode some of Tesla Motors Inc (NASDAQ:TSLA)’s Model S buyers in the near term. Looking into the medium term, they think BMW’s focus on electric vehicles means that competition for Tesla’s Generation III vehicle will be increased. As a result, they say this against indicates that Tesla’s mass market vehicle isn’t guaranteed to be success, particularly when combining the “plateauing” of demand for the Model S in both the U.S. and Norway.

The Barclays teams have reiterated their Equal-Weight rating and $220 per share price target for Tesla Motors Inc (NASDAQ:TSLA).

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@wordpress-785388-2679526.cloudwaysapps.com.
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  1. I’m pretty sure if you can afford a Model S, you know about it. You are right that many, many people haven’t heard of Tesla. But there are many, many people that have. Tesla will probably have to advertise for the Model E to be wildly successful, but the Model S has outsold pretty much every other car in its price range without advertising.

  2. Yes, most people have no idea what Tesla Motors is. I drive a Model S; here’s a typical conversation:
    “Beautiful car. What is it?”
    “It’s a Tesla Model S.”
    “Oh. Who makes it?”
    “Tesla. It’s an American car company, in California.”
    “Huh, never heard of it.” (or) “Oh, right, the ones with the fires.”

  3. BMW does not have anything even remotely competitive with the tesla Model S.
    The i3 is a direct competitor to the Nissan Leaf — similar range, size, shape (but twice the cost for the name)
    The i8 is a direct competitor to the Fisker Karma and the cadillac ELR — fancy looking overpriced plugin hybrids with miniscule electric range.

  4. Are you joking? You really must be joking. Not only do the rich, famous, and educated know about Tesla, millions of people know about Tesla because they’ve been in the news pretty much every week. They don’t really need advertising! It’s a whole lot easier to go online and order an epic car than it is to go to a dealership and deal with all the hassle, misinformation, ignorance, and haggling to get a good deal on a good car. Pretty much if you don’t know about Tesla, you’ve been living under a rock for a while.

  5. It’s low volume, and as costs go down and prices decrease with the broadening market, the range will follow the pattern – upward.

  6. Is this a fight between Tesla and BMW? The fact that Nissan has sold 150,000 EV’s and Nissan/Renault even more, combined with BMW and Tesla having essentially nothing that competes with the other, may be more telling, though the actual truth is not reverberating with headline grabbing contests among future EV industry titans.

  7. “As a result, they say this against indicates that Tesla’s mass market vehicle isn’t guaranteed to be success, particularly when combining the “plateauing” of demand for the Model S in both the U.S. and Norway.”

    Is this even correct grammar?

  8. I think the demand for the Model S is slowing somewhat because Tesla hasn’t done a major refresh to it yet. Consumers are used to yearly refresh cycles. Tesla promises to constantly upgrade via wireless updates, with physical refresh cycles every 3 years. That means, the Model S is due for a major overhaul in 2015, after the Model X comes out. That’s probably when the AWD Model S will debut as well. Elon Musk said that better seats will be put in (racing seats for the Performance version). Also, it may get more power and range.

    If Tesla achieves the goals they’ve set for the Gen III, it will knock the socks off the i3 or any hybrid, PHEV, EREV, or EV priced near $40,000.

    Imagine a gorgeous car about the size of a Cadillac ATS that handles extremely well due to an uber-low CG and 48/52 weight distribution, accelerates like a jackrabbit, has a 200+ mile max range, can utilize Tesla’s worldwide Supercharger Network, seats 5, has the usual suite of high tech features, has class-leading cargo space, and class-leading safety. Because it’s electric, owners will experience the convenience of charging up at home and always waking up to a full charge. The cost of ownership as well as the ownership experience will be better since electricity is far cheaper than gas, can be sourced from the sun, and there’s little to no maintenance to inconvenience the Tesla owner. The Gen III will be an absolutely fantastic car at an affordable price. Once people learn about it, test drive it, and hear about others experience with it, sales will go through the roof.

  9. I agree as an about to be former Mercedes customer. We are waiting on AWD to trade in our Mercedes E550 for a Model S P85.

    We would not be looking at the i3 at all as it is a glorified golf cart with just about 100 miles of range and too slow. The i8 is not even an EV. It is another compromised hybrid that is neither a great gasoline car or a great electric car. The i8s EV range of 22 miles is a joke. The Model S P85 is a much better value and you can actually transport more than just 2 people in it, unlike the i8.

    Whatever “expect” who thinks the “i cars” are competitive with Tesla’s offerings has absolutely no idea what a premium EV is about.

  10. Many people planning on buying an all electric car want Range: because we drive alot every day, it is significantly cheaper to drive per mile in an electric car than a gas car, cheaper to maintain, and we constantly are calculating the break-even point between gas and electric. Those of us that drive over 30K miles per year, or 120 miles per day, have figured the break even point is around $65K with a payback of under 5 years. If Tesla were to produced a mid priced car with 200 mile range, I’d buy it for at any price under $65K. I’ll never buy the BMW, because the range is too low.

  11. The i3 is not even within striking distance to the Model S in terms of performance, not to mention it looks like a smart car… Or maybe a Nissan Leaf. I can’t decide, and it’s apparent BMW couldn’t either. The i8 is a hybrid at an entry price that is double that of the Model S. We’re comparing apples, oranges and bananas here….

  12. I have owned nothing but BMW since 2008 and currently own a M3, but recently test drove a Tesla. The car was incredible. I didn’t even jump to the P85 for the test drive because I knew if I purchased one, it would be the base model 85kw car. BMW’s entrance into the electric vehicle age is a poor one at best. The i3 looks horrible. The i8 is nothing but an attention getter for car shows. They won’t sell well at $126k starting point and in all reality neither car will get you on the highway without using the gas engine.

  13. You all understand that the BMW’s will cost you a lot more in maintenance because you still have the combustion engine to maintain.

  14. This article is a joke. No competition here. Maybe in the future, but that’s years off. Meanwhile Tesla keeps moving forward.
    Actually, the Model S P85 goes 130 mph and Tesla is making a modified version for Germany that will go 150 mph. The P85 also has a longer range than listed above. Over 90% of buyers option up their Model S to over $100,000, so the comparison above is for a lower level model which most Model S owners don’t buy.
    The Model S is a much more practical car. It seats 5 comfortably. It also has 32 cubic feet cargo volume (63 with the rear seats down). Compare that to the measly 6 cubic feet of the i8 – depending on the configuration that might not be enough to hold a large suitcase.
    Definitely no serious competition for Tesla here. I’m sure the i8 and i3 will sell well, but they don’t appeal to the same buyers.

  15. Tesla Model S: $69,900-$133,670 0-60 mph 4.2 sec; 209 or 265-mile range; 45 min Supercharge; 5-hrs Home Charger

    BMW i8: $135,700-$? 0-60 mph 4.4 sec; 22-mile electric range; 1.5 hour iCharger

    BMW i3: $41,350-$57,105 0-62 mph 7.2 or 7.9 sec; 93 or 83-mile electric range 30 min. fast-charge; 3.5-hrs iCharger

    Cadillac ELR: $75,000-$83,310 0-60 mph 7.8 sec hybrid, 8.8 sec electric; 37-mile electric range; 5 hrs at 240V

    So far, the competition can’t touch the Model S in the 2 most important areas for an EV, range and fast charging. They also can’t beat the performance, safety, and practicality (tons of cargo space). The only thing the competition has over the Tesla Model S right now is the abundance of features. That will change soon, meaning the competition will have NOTHING on Tesla. If you’re buying an EV and have money, the Tesla Model S is the best option, by far.

  16. The BMW i series, while innovative, are not a match for Tesla in many respects. Let’s talk about the i3 which is really the only contender from BMW right now. Just because it weights less, uses carbon fibre and costs less doesn’t make for a really attractive main vehicle. Tesla has all the right components in their business plan to succeed, mainly: range, high-speed charging capabilities and a fully trained sales staff along with impecable customer support. Lots of stories of BMW dealerships getting i3s and the salespeople have no clue about the car. It they want to succeed they need to start there. Then deal with the range and charging infrastructure. By the time they get around to dealing with the last 2 items (if ever) Tesla should have their third gen car ready to go for a price close if not less than the i3 and there won’t be many sales of BMW let alone other EVs. They are so far ahead of everyone else in this business….

  17. “In terms of positioning, they think Bayerische Motoren Werke AG (ETR:BMW) (FRA:BMW)’s i3 will appeal to buyers of Tesla Motors Inc (NASDAQ:TSLA)’s Model S, even though it is smaller, has a lower range and is less flashy than the Model S. ” not to mention it is slower and less spacious and more expensive.

    hahaha, Laughing out loud LOL. nuff said.

  18. The BMW i-brand does not currently compete with Tesla at all. No one in their right mind who is in a market for a Tesla would pick any of the current i-brand cars.

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