Just today, we reported on a Bloomberg piece claiming that BMW was the most vulnerable brand to Tesla’s current rise in customer popularity. To be honest, there seemed to be real concern for BMW, as it’s been losing 3 Series sales quite a bit in the past couple of years, as Tesla Model 3 sales have been rising. It also seemed as if BMW is the brand most customers are leaving to switch to a Tesla. However, this new piece from Business Insider actually argues the contrary.
According to BI, BMW has nothing to fear from Silicon Valley. Sure, Tesla Model 3 sales are up but there are a myriad of reasons why that means almost nothing for BMW. For starters, Model 3 sales aren’t really eating into 3 Series sales for the simple fact that Model 3 customers aren’t really cross shopping it. They want something electric and they want the Model 3. While 3 Series figures are down, that actually has more to do with BMW’s own cars, such as the X3 and X5, cannibalizing 3 Series sales.
There’s also the fact that Tesla just isn’t a profitable company. In fact, I’m not sure it’s gained any profit since it’s started. Investors and early adopters have shouldered the cost of Tesla’s business out of optimism that it will eventually be profitable. However, it’s yet to prove it can be a profitable company. All the while, BMW is one of the most profitable automakers in the world and consistently so, year after year.
On top of that, Tesla has had to cut prices on the Model 3 to get more customers into it. Simultaneously, Model S and Model X sales are down quite drastically, which means the brand can’t make up the lost profit from Model 3 price cuts on higher-profit models.
To tilt things further in BMW’s favor, the Bavarians have a massive portfolio, which cars in each and every possible segment. So if one model starts to slow down, it has several others to pick up the slack. Not to mention the fact that BMW has its own electric models coming in the future.
Now, some might argue that Tesla is ahead of the rest of the industry, in terms of battery and electric technology and maybe that’s true. However, the better Tesla does and the more popular EVs get, the better off the rest of the industry is. “All boats rise”, according to Business Insider.
And that’s true. As EVs become more popular and more profitable, mainstream automakers will be able to take advantage of the market quicker and more effectively than Tesla. Car companies like BMW, GM, Mercedes-Benz, Audi and Volkswagen all have resources, manufacturing capabilities and supply chains that dwarf Tesla’s operation. So once the market is there for those brands to profit on EVs, they can squash Tesla.
Now, maybe Tesla hangs in there. The Model 3 is a very good car and the automotive industry is better for it. But it’s now hard to see Tesla really frightening any other mainstream successful automaker until it sorts its business practices and profit margins out. At first glance, it really does seem like Tesla is bringing the house down on top of the rest of the industry. But on closer inspection, it might mostly be vaporware.
[Source: Business Insider]
BMW will be more than fine, they have a well balanced portfolio of vehicles in many segments and they are funded properly. Their modern ICE and Diesel platforms, along with their PHEVs, i3 and even Hydrogen. Not to mention, their second wave of EV at development. They seem to have done it properly, not like a rush job.
They also ensure their financials are in check, unlike Tesla, who opens their big mouth, with consistent trends of missing sales and profit expectations, along with credit downgrades.
Tesla can’t even deliver their vehicles to customers on time. Even customer support fell drastically short, with long delays in parts and inconsistent build quality due to more of a rush job than a good job. Tesla suppose to be head and shoulders above, because EV has no moving parts, yet they are not even reliable.
I think BMWs current bet on hybrids is actually the correct one for the next 10 maybe even 15 or 20 years. If Battery Technology gets a whole lot better and infrastructure is improved by a factor of 10, then EVs will be more practical.
EV will come out quite quickly from now on, especially from BMW, because it’s not only the future, it’s another cycle of battery tech improvement, but it will not solve the recharge time turnover as compared to ICE and PHEV, meaning the current platforms still has legs.
As for EV infrastructure, it’s going to be quite a while. I am looking forward to see Hydrogen roll out, it will be very interesting because pump electric will be easier to put the infrastructure in place.
Not so sure …
Most people in EU buy PHEV for tax reasons, not for its intended use case:
– you can charge at home ? go electric
– you have to travel long distance on the autobahn everyday and you cannot rely on an EV yet ? You go for a cheaper diesel.
I read once an article about PHEVs in UK, the vast majority of their users never charge them …
So BMW only offers PHEVs in order to save the diesel sales they are loosing at the moment (diesel-ban, CO2 based purchase tax), etc…), it is not a strategic move.
I actually like how BMW PHEV behave when you are not charging it – it basically becomes dead weight slowing you down. You *need* to charge a PHEV to get the most out of it: pre-conditioning does not work without battery charge, low speed acceleration is *much* better when battery is charged, top speed is also higher when battery is charged, so acceleration difference is actually noticeable at all speeds. So if you get a gearhead a BMW PHEV, they will very soon start seeking out power sockets to pump in some more “fun” into their cars :D
Reality is: 99% you drive between 0 and 100kmh to go to work, with no hard acceleration because there is always someone slower in front of you …
Let’s not even talk about the vast majority in the world that never reach the top speed of their vehicle because it is forbidden …
Yes, but you *really* feel the EV kick, even in the PHEV just accelerating from a red light. And that is addictive. And only works in a PHEV if you have gotten into a habit of charging it up.
Well all I can say is I’ve only bought BMW’s for last 20 years, 2 euro deliveries, CCA member for 10 of those years, but after trading e93 M3 for a Model 3, there’s no looking back. This Tesla is amazing. When BMW decides to make a proper competitor, I’ll certainly take a look but they better hurry to catch this “unprofitable company”.
Yes, Elon’s autonomous cab wannabe is taking out the benchmark after 7 generations. This Tesla is far from amazing, appearance alone, resembles a generic Mazda Model 3 fleet vehicle.
Tell us, how does that touch screen work when you’re actually moving down the highway? Also do you feel secure that Tesla can turn off your car or update it without your knowledge or decontent at any time over the air?
Do not go out and look at your paint AR build quality too closely either. Are there a how are insurance rates? Hope you never never get a fender bender because you’ll be waiting forever for parts and it will cost a lot of money.
I’d be glad to let you test drive if you’re in the Atlanta area so you can see for yourself ;). Insurance is $50 year cheaper than our F25 X3 35i, paint is great, but frunk did have wider panel gap on one side upon delivery so they adjusted it. Make no doubt about it, the Tesla is a car you hear so many negatives about from Forbes, MSNBC, or Business Insider. But then go drive one, find an owner with one. I wouldn’t trade this now for anything and I’ve had everything. I’m still looking forward to a BMW electric though as I know when they finally deliver one, it should be a great car.
In US the charging networks are very bad limiting any EV deployment. In EU charging is much better. iX3 and then i4 should be very competitive in their segments. If i4 drives as well as G20 3 series, then it is going to be awesome with a decent EV drivetrain.
Entry level Porsche Taycan for the price of a model S……. Need I say more. Tesla has done wonders for the shift of thinking in the auto industry but in my honest opinion they will be the surpassed by all the big brands in the coming 2 to 3 years. New Volkswagen ID3 is a huge succes here in Europe. Pre-orders are staggering high! And even in the heavy taxed car country where I am living (the Netherlands. I bought a new BMW X5 in january. Costs 150.000$ over here because of taxes) it is offered at a very very very competitive price. Mazda now offers their MX 30 over here. MG is back on the market with full electric (China made) and Renault will come with a below 10.000 euro’s city car on a short notice. More and more Audi e-trons on the road here. So if there is anything to fear for BMW… they have to fear their own pace of releasing electric cars.
One thing I forgot to mention. Do not know how it is in the USA: over here in the Netherlands car-sales are going down each year. Mainly because of two reasons: the new generation care less about owning a car. Secondly: people start to share cars via various providers of such services.
Tesla did have a profitable quarter when they paused their investments for a short while. If you deduct the costs of building new factories, they are quite profitable and stable financially. As a Silicon Valley startup they are focusing more on re-investing all revenue instead of showing profits on the financial sheet. Just like Amazon. They have lots of room to grow still before having to look at stabilisation and pure profit.
Very true, buy the product not the stock. Like amazon, you’re going to bleed cash for years as you grow and build. What other company built not only the car but the gas stations. It’s an amazing achievement for an American company that just announced another massive Gigafactory in Berlin.
I wouldn’t really trust anything BI says, widely known to be super anti Tesla. Am convinced they are getting paid off by short sellers. Always negative.
Its not about trust or not trust. Its about taking on board different angles in argumentation and evaluation on your own what passes detailed examination and what does not. Like Bloomberg spun the fact that some new Tesla buyers used to have a BMW as somehow a threat to BMW, as lost sales. That is not a proven fact that these are lost sales or that they are statistically significant.
The fact is that BMW sales in the USA are only rising and BMW sales overall are highest they have ever been. If Tesla *would have* stolen like 30k sales from BMW in USA in the last couple years when Model 3 hit the market in large volumes, then this should have been very noticeable as a ~30k sales dip in BMW USA sales. But the dip is not there. On the contrary – BMW sales rose. So something in that premise (that Tesla stole a lot of sales from BMW) is not true. Those are simple facts.
What specifically is not true in that statement and what could be the alternative explanations is then a matter of opinion and discussion.
Yesterday Tesla downloaded software which decreased my 0-60 to sub 3 seconds. For BMW to do that would have required me to visit a dealership to trade in my car, wait BMW doesn’t have a performance car which will do sub 3s. Nevermind.
If sub 3 second suits you, that’s cool. Rather have build and paint quality over 0-60 and FSD any day.
As good as Tesla’s cars are from a tech point of view, BMW does not have to be scared or worried about Tesla. They just need to do their own thing the best way they can based on their own EV experience ging back to the electric 2002 in 1972 and the start of EV development in the mid-1960s.
There is a bigger world than the US. The global market for cars is huge, so there is plenty of room for the likes of BMW, VW, Mercedes and Tesla to grow.