Tuesday, May 24, 2016

Is Tesla Stealing Sales From German Automakers?

According to Edmunds.com, almost 30% of people who purchase a Tesla automobile look at a BMW model before making their buying decision. The Edmunds data is cited in a report by Bloomberg News. Other German luxury brands also are considered by Tesla buyers. 20% cross shop an Audi product, 19% consider a Mercedes, and nearly 12% think about getting a Porsche instead.
Tesla Model 3
Is there a linkage between the upcoming Tesla Model and the iconic BMW 3 Series? You bet their is. Both cars are about the same size. Both start at $35,000 and can cost as much as $60,000 when fully equipped with all available options. Right now, BMW sells nearly 200,000 3 Series cars a year in the US. How might those numbers change once the Model 3 arrives on the scene in 18 months? Meanwhile, the Tesla Model S is outselling the Mercedes S Class, the Audi A8, and the BMW 7 Series in the German marketplace.
What’s going on here? “The decisive factor is what’s happening inside people’s heads,” commented J├╝rgen Pieper, an analyst at Bankhaus Metzler. “Many see in Tesla the innovation they’re missing from the Germans.”
Bloomberg notes that “Executives at rival car makers privately squawk about Tesla’s poor track record of manufacturing delays and persistent financial losses. Yet they can’t ignore that Musk’s products are exciting consumer passions in a way that incumbent automakers haven’t for decades.”
The German car makers are all quick to point out that they are working on exciting electric cars of their own, but almost all of them are still 5 years or more away from being available in showrooms. In the meantime, Tesla will have the premium electric car market all to itself. If it can get the Model 3 into production on time and if its build quality and after sale customer care meet buyers’ expectations, the Germans may have no one left to sell their expensive wares to.
“Competition from the Model 3 might prompt German carmakers to drop some prices as much as 10% to defend their US market share,:says Stuart Pearson, an analyst at Exane BNP Paribas. Tesla is aiming the Model 3 at “those looking to spend roughly $40,000 on a car, and that’s the core target market for BMW and Mercedes basically,” he says. “The fact is they don’t really have an answer to the Model 3 until the next decade.”
By the time the competitors from Germany get here, it may be a case of too little, too late.

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