Mercedes, BMW, Aston-Martin and many more; Tesla’s rivals are finally waking up

by / Wednesday, 09 September 2015 / Published in Smartgrid-CI Blog

By PATRICK LEVY

The luxury EV market should start heating up in 2017 with a glut of new models and heading to a major paradigm change.

A few weeks before the official launch of Tesla’s Model X, Mercedes-Benz was the last of Luxury car makers to announce last week the development of an electric car that will be competing with Tesla’s Model S, following a slew of anouncements that hit the market in the past few months. Very few details emerged from an interview with Thomas Weber, Development Chief of the company, published by a German auto Magazine. How much inspiration this new car will get from the stunning half a million dollar a piece SLS AMG launched at the end of last year is still unknown. One sure thing is that Mercedes will have to drastically cut the price of is new model to be competitive.
This announcement follows BMW’s own made in April of this year of an i5 model that is expanding the Bavarian company’s new electric car offer that started to hit the market with the i3. Last month also, Aston-Martin announced that it is working on a model that would compete with Tesla’s Model S. Called the Rapide, this model will come with an 800HP but will offer only 200 miles of autonomy, for a selling price between $200,000 and $250,000. Audi, part of the Volkswagen Group, is also planning to launch in 2018 an SUV that will be directly competing with Tesla’s Model X.

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Established car makers are not the only ones to chase for the market of luxury electric vehicles open by Tesla. Several startups are stating the same goal . Some like Fisker-Karma, recently revived by Chinese investors, seem to be close to offering products. Others are brand new ventures who have in common to be backed by significant partners. These companies very often come from China, where the switch to electric cars is strongly incentivized as one of the ways for the country to fight global warming and pollution that is becoming a very serious political and public health issue. Most of the vehicles announced have in common a battery range of over 300 miles, which is significantly better that what is available so far. And it is not a coincidence if these announcements come at a time when battery technology is making significant progress in terms of autonomy, charging time and cost. More and more players believe in a boom of this market and are investing accordingly. The emergence of more powerful battery technologies triggers the market entry of big battery and automotive equipment companies like Bosch, LG-chem that is according to reports poised to take the market lead from Panasonic.

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This new competition is also made possible in part because of Tesla’s choice last year to open some of its patents and to offer part of its IP for free in a very bold strategic move that Tesla’s founder initiated last year.
What Tesla was looking to do with this operation was to speed up the development of the market in alleviating technical barriers, in at the same time establishing de facto technical standards based on the technologies it developed. Tesla’s CEO has a good knowledge of the history of business and does not want his company to become another Betamax.

The opening of the market to new competitors will “legitimize it” the same way IBM’s adoption of standard components legitimized the PC market in the 1980’s. And what is expected from legitimization is of course a market boom that would be beneficial to all players. What can be expected by the customers from this exciting challenge is more competition on a broader and more open market, and more importantly much lower purchasing prices. It is a risky strategy for a company like Tesla that has burned a lot of cash and not made any profit so far because its ability to survive in the near future will rely on its capacity to drastically cut production cost while ramping up production to mass level. One of the levers Tesla has in order to achieve this goal is its mass production of batteries that could bring a significant cost advantage. Elon Musk knows he has not very much choice anyway because the entire electric vehicle market is going through the same fast developing trends and forecasts are very bullish across the board for the same reasons; lower cost and more performing batteries, fast development of charging station networks, and stronger environmental pressure and consumer awareness. No doubt the automotive industry is entering a new era.

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