With the launch of the new BMW i3, the Munich-based automaker has officially entered a new premium segment, this time the challenging one of electric vehicles. While the other premium automakers are working on their own mass production electric vehicles, BMW is finding itself in a position where it could crash course with the California-based Tesla Motors.

While the new BMW i3 electric car is not competing for the same customer as the Tesla Model S, future German-engineered models may create a BMW – Tesla rivalry. A BMW i5 electric model is said to be in works and other future i models could follow, as indicated by the BMW trademarks for the i1 through i9 naming conventions.

A future i7 sedan (or whichever badge will be sold under) is most likely on the drawing boards at BMW and with their extensive knowledge in CFRP and now hybrid and electric drivetrains, will eventually be used to build Tesla competitors.

One of those vehicle, even though in hybrid form, is the BMW i8, a vehicle that position itself at the high-end of the electric premium segment and one that will have similar customers to the Tesla Model S: early adopters, tech-driven 30+ old entrepreneurs and those that embrace the latest and greatest in non-conventional drivetrains. Both Model S and i8 come with a premium price and options, and both offer the performance of a sports car with the highest efficiency possible.

TEST DRIVE: Tesla Model S

Tesla Model S is already a star. Among other awards, the Model S won the 2013 “Motor Trend Car of the Year”, the 2013 “World Green Car”, Automobile Magazine’s 2013 “Car of the Year”, and Time Magazine Best 25 Inventions of the Year 2012 award. About 2,650 Model S cars were sold in the U.S. during 2012, and 4,900 units during the first quarter of 2013, allowing the Model S to become the top selling plug-in electric car in North America during the first quarter of 2013, ahead of the Chevrolet Volt with 4,421 units, and the Nissan Leaf with 3,695.

But despite all these accomplishments, BMW should actually feel happy with Tesla’s success. The California-based automaker is doing most of the marketing legwork for now and is proving that the electric vehicle market can and it will be successful. It also validates the fact that consumers are willing to trade the driving range anxiety for the enhanced and futuristic driving experience.

Now back to the BMW i3 topic. Without a doubt, the BMW i3 does not have a rival in the current Tesla lineup. The small EV caters to large metropolitan areas and it is BNW’s first serious attempt at a fully electric vehicle. But that hasn’t stopped Elon Musk, Tesla CEO, to giggle at the BMW i3 topic when asked by an analyst during the quarterly earnings conference call.

Musk was asked to give his opinion on the i3 and after a fairly long chuckle, Musk said the i3 has ways to go.

“I’m glad to see did BMW is bringing in electric car to market. That’s cool. There’s room to improve on the i3 and I hope that they will.”

According to Business Insider , Musk was followed by laughter inside his room which caused more giggling from the Tesla CEO. It lasted about 10 seconds. He then eventually finished his speech:

“I really do Encourage other manufacturers to bring electric cars to market. It’s a good thing, and they need to bring it to market and keep on iterating and Improving and make better and better electric cars, and that’s what going to result in Humanity Achieving a sustainable transportation future. I wish it was growing faster than it is. ”

So there you have it. Even Musk knows that one day, sooner or later, the two companies will compete for the same market so it remains to be seen which one can innovate faster and deliver on their promises.

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