Tesla Motors Inc (TSLA) Gen III Vehicle Could Be Threatened By BMW

Tesla Motors Inc (TSLA) Gen III Vehicle Could Be Threatened By BMW
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Tesla Motors Inc (NASDAQ:TSLA) may not be threatened by BMW’s i3 electric vehicle, but analysts at Barclays say the vehicle highlights some challenges for Tesla’s future mass market vehicle. Shares of Tesla rose 2 percent in early trading on Tuesday after a rough day on Monday.

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Tesla Motors Inc (TSLA) Gen III Vehicle Could Be Threatened By BMW

BMW not a threat to Tesla

Barclays analyst Brian White reiterates others’ views that the i3 isn’t a threat to Tesla’s Model S. He wrote his note after bearing back from his London colleague Mike Tyndall, who attended BMW’s analyst day on Friday. White says it’s true that the Model S and the i3 both target “an upscale demographic” and that owners probably have other vehicles if they need further range.

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However, I would say that since the range of the Model S is much longer than that of the i3, the need for a vehicle with a longer range is virtually eliminated for many drivers, especially with Tesla’s Supercharger network expanding so rapidly.

The difference between BMW’s i3 and the Model S

White does believe, however, that there is “an attitudinal” difference in the buyers of both vehicles. He says Tesla Motors Inc (NASDAQ:TSLA)’s Model S is more attractive to a buyer concerned with prestige and / or performance. Its nearest comparisons are Aston Martins and Porsches.

He also notes that the specs of the Model S certainly set it apart from the i3. The 85 kWh Model S is able to go from zero to 60 in 5.4 seconds, and that time shrinks to 4.2 seconds for vehicles with the Performance package option. The i3 is able to hit 60 miles per hour in 7.2 seconds. The vehicle also has 317 pounds of torque, compared to the i3’s 184 pounds of torque. The Model S also has almost twice the length as the i3 and is almost 200 pounds heavier.

And the biggest difference of all: Tesla Motors Inc (NASDAQ:TSLA)’s Model S has a range of 230 miles on pure electric. The i3’s range is just 80 to 100 miles on electric. The addition of a gas generator can bring the range up to 186, but you might as well have a gas vehicle then.

Will the i3 compete with Tesla’s Gen III vehicle?

White suggests that the one area where BMW could give Tesla a run for its money is in its Generation III mass market vehicle. It won’t be out until the end of 2016, but it is expected to have a 200 mile range—still much longer than the i3. He believes that the vehicle will be in the $35,000 to $45,000 price range, putting it up more directly head to head with the i3.

He also says that BMW and Tesla Motors Inc (NASDAQ:TSLA) are both innovating rapidly, with Tesla working on small-cell format battery tech and BMW working on light weight carbon fiber. He notes that Tesla’s battery might be difficult to fit in a smaller vehicle.

But not everyone who wants a vehicle in the price range he gives will be happy with a small vehicle. Continuing with the plan for a roomy Generation III vehicle would probably be a good thing for Tesla because it may continue to keep its vehicles different than other EVs, which tend to be quite tiny. It will be interesting to see what future iterations of BMW’s EVs look like in comparison to Tesla’s Gen III vehicle.

White says he remains Equal Weight on Tesla Motors Inc (NASDAQ:TSLA) with a $141 per share price target because he is assuming just a 70% likelihood that the company will find success after the Model S. He said even if he would assume 100% certainty that Tesla would sell 350,000 Gen III vehicles by 2020, he only arrives at a price target of $175 a share.

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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@valuewalk.com.
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