How Much Will Tesla Impact Huge Luxury Automakers Like BMW?

Tesla

FEB 20 2018 BY EVANNEX 45

Tesla

BMW 7 series and Tesla Model S face off (Source: Car Advice)

It’s a little early to predict that Tesla will drive the giant global automakers, one by one, into bankruptcy. However, there’s no question that some brands are already feeling the shockwaves from the electric automaker’s rise, especially in certain market segments.

Every automaker has its own mix of products, so the companies have varying degrees of exposure to the coming wave of disruption. As a recent article in Seeking Alpha argues, BMW could be in the most vulnerable position of all. Unlike the Big Three, BMW doesn’t sell pickup trucks, and unlike VW and the Asian giants, it doesn’t offer cheap entry-level runabouts (at least not in the US market). The Bavarian brand’s bread and butter consists of high-end sporty sedans and luxury SUVs – precisely the market segments in which Tesla is beginning to mop up the competition.

BMW’s troubles aren’t just theoretical – Seeking Alpha writer ValueAnalyst notes that sales of the company’s flagship sedan, the 7 Series (which BMW has produced since 1977), are in decline. As shown in tables from CarSalesBase.com, 7 Series sales jumped in 2016 after a redesign but fell significantly this year. If current trends continue, yearly sales in the US for 2017 will be less than 9,000 units – a 30% year-over-year drop, and the lowest sales since 1992.

Tesla’s Model S has dominated the large luxury segment for a couple of years now, as a table from Statista makes clear. Tesla’s gains have come at the expense of legacy brands such as BMW and Mercedes, which has seen a year-to-date 15% drop in sales of its S Class.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris.

Tesla

Large luxury car sales in the United States in 2016, by key model in units (Source: Statista)

The news could get worse for the German sedan-meisters. According to SA’s ValueAnalyst, there are several indications that Tesla may be planning another redesign of Model S, and the announced specs for the upcoming Semi and Roadster make it sound as if battery improvements may be on the way too. When Model 3 comes into its own, it’s expected to offer stiff competition for BMW’s best-selling 3 Series. Considering all these factors, ValueAnalyst believes that “BMW can very well face an existential risk as early as 2018.”

In fact, in an earlier article entitled BMW Will Be the First to GoValueAnalystcharacterized the company as “floundering in the face of severe competitive pressure and industry disruption.” BMW recently announced a $240-million investment in battery research, but that’s only a fraction of the billions that Tesla has invested over the last decade. “BMW may be years behind Tesla in battery technology.”

The company’s woes are not limited to competition from Tesla. Reuters recently reported that German prosecutors have begun an inquiry into allegations that BMW indulged in the same sort of diesel emissions shenanigans that have cost Volkswagen a few billion bucks. And BMW is in worse financial shape than VW was, with lots of debt and little cash on its balance sheet.

Tesla

As Tesla’s factory ramps production over the next few months, the Model 3 could give the folks at BMW a few headaches (Image: InsideEVs)

Taking it all into account, our Alpha Seeker expects BMW to be “the first traditional automaker to be significantly impacted by Tesla’s growth, as it has no segment that will not be under severe disruption by 2019.”

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Written by: Charles Morris; Source: Seeking Alpha

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

Categories: BMW, Tesla

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45 Comments on "How Much Will Tesla Impact Huge Luxury Automakers Like BMW?"

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ffbj

Consider that the source is Seeking-Alpha, a known TSLA shill.

pjwood1

Seeking Alpha is a patchwork of submissions, which are more frequently against Tesla. They aren’t like a newspaper (WSJ/Reuters), that tends an over-arching message (Yes-oil, No-batteries/Congo). More like analyst editorials, or downright pitches.

I read the above, and wondered how many 7-owners went for an SUV. And then, there’s the 5-series, yada, yada.

Like (indicted) Russian bot-man, Prigozhin, said: “The Americans are very impressionable people, they see what they want to see”.

-If that comment wasn’t a pearl coming out of Mueller’s probe, what is?

What a joke of an article. BMW is having record sales. The 7 series is just one of many BMW models, and a small part of it’s portfolio.

http://f30.bimmerpost.com/forums/showthread.php?t=1466160

Also JD powers just announced BMW’s are tops in 3 out of 8 of their car segment reliabilty ratings. Would love to see where Tesla would rank on reliability.

http://f30.bimmerpost.com/forums/showthread.php?t=1467073

trackdaze

X2

mx

The 7 series is substandard once you’ve driven an EV.
There’s no way around that.

Dee

These numbers are from 2016, what does the picture look like from 2017 sales?

blabblubb

why are all the real comparable offers missing in the chart? The Tesla Model S is a great car, a pioneer in electric driving, and likely an offer to stay for the future. But please do not compare apples with oranges to draw conclusions

E Class ~50k units
5 series ~40k units
A6 ~16k units
x5 ~50k units
GLC ~50k units
GLE ~50k units
Q5 ~60k units

Derek Washington

It’s Like they’ve mastered being the master of their own domain while simultaneously Being able to type out Tesla soft porn.

Terawatt
This is some of the most biased nonsense I’ve seen labelled as “analysis”, and I’m left wondering what the point is of reporting it. SA is chock full of diametrically opposite low-quality “analysis” and nobody should waste their time in it IMO. The bit about the diesel shenanigans is especially suspect. It’s well known that VW in fact sold the least polluting Euro6-approved diesel vehicles in the EU. (Average real-world to lab limit ratios for Euro6 cars by manufacturer: lowest = VW 180%. Highest = Fiat-Chrysler: 1400%, then Renault-Nissan: 1200%, to name a few. Check out Transport & Environment for the full report, methodology and results.) But none of them have been smacked with big fines, because they are European manufactures and they provide lots of European jobs. Germany is similarly not about to break BMWs back – although it could punish individuals in top management, it will do its utmost to protect the company! It’s also worth reminding everyone that although VW got eighteen billion dollars or so of flack from the US, it’s got nothing more than an angry letter from the EU. I’m not saying BMW is necessarily in great health – I have no idea. All… Read more »
Pat Free

At least BMW announcing recently that its future BEVs will share same platforms as ICE cars in same form-factors (Hence not optimal BEVs) will not help them resist this. They have to become a little more serious, like Porsche for example with Mission E.

Get Real

Well, if Model 3 severely erodes sales of 3 series like the Model S has done to 7 and even 5 series then BMW is going to be in a world of hurt.

I predict that these Euro luxury OEMs are the most disrupted by Tesla and therefore the most motivated to go heavy into PEVs unlike the (mostly) laggard American OEMs.

BMW is coming off a record year where they delivered over 2 million cars.

ffbj

Not the U.S. they are getting hammered here.

R.S

The BMW 5 series actually had quite the increase last year, mostly because it’s a new model. The 7 series base price is much more expensive than the S, especially if you factor in tax credits. If those would continue forever, the Model 3 would surely also outsell the BMW 3 series.

Other than that, I think a big part of the lost sales actually went to SUVs. You can take a look at the luxury car and SUV sales charts and each year the SUVs are gaining, what the cars are loosing.

Nevertheless, I do think that a not negligible share of luxury car customers will go to Tesla. I do also think a lot of non luxury car buyers will go to Tesla as well. But it will be impossible to quantify the real cross shopping, just by looking at the number of sales.

Many forget to realize unlike some if it’s direct competitors, BMW’s high volume 3 series is due for it’s update next year, as is the X5. So they aren’t doing bad at all considering some of their biggest sellers are long in the tooth currently.

Sherpa

In my case I will never ever buy a BMW again. I felt cheated and not just about emissions with my 320d. I cant say the same about the other three automakers I had before or after

jakaracman

C’mon, stop comparing Model S to BMW 7, MB S and similar. It is not that class by any criteria. Model S in 5 series, MB E and so on. Look at wheelbase, lenght, equipment available … And when you compare apples to apples, the picture changes. Of course, Tesla sitll steals some customers form BMW and Mercedes and Audi and … but not as much as it seem form this biased article.
BTW: big luxury sedans (ie 7 series, S class) are losing their sales mainly to other cars – SUVs, smaller sedans that have grown to almost 5 m lenght (which includes Tesla Model S, of course, but also their own smaller brothers)

stimpacker

Analysts are paid to say whatever the money says they should.

Other analysts have said BMW can easily beat Tesla:

1) They have billions to spend.
2) They KNOW how to make great cars in volume.
3) Batteries are a commodity. They can simply buy tons whenever they really want to go electric.

Not saying I agree with the above, but just saying it’s easy to say whatever crap you’re paid to say. Just look at Lux Research….

Roy_H

+1

menorman

+2

Teslol

Word.

mx

They have debt problems.

arne-nl

“Batteries are a commodity. They can simply buy tons whenever they really want to go electric”

I wouldn’t be so sure about that. Why can’t Hyundai meet demand for the Ionic EV? http://www.hybridcars.com/hyundai-ioniq-ev-suffering-from-battery-shortage/

Especially if all start to rush towards EV’s, where is the production capacity to come from? We all know that supply shortage drives up prices, so BMW may be in a world of hurt if they have to pay market prices for those batteries. As opposed to those that have already locked in their supply in advance. Either by contract or own production capacity.

David Cary

+ 1000

Anyone who has followed this industry for sometime has to acknowledge that batteries are not simply a commodity that a company can just go buy for 300,000 cars tomorrow or next year. It is the single defining limiting factor for some time to come.

The forward looking stock market knows this (even as irrational as it seems).

theflew

Commodity doesn’t imply availability. Batteries are becoming a commodity because you can buy cells from many vendors and their performance is similar.

Availability is another issue until battery suppliers build out. In these early days they are building out to meet current demand which is pretty low.

Lamata

I think Battery Availability will be the Key to the mass production of electric car …The one with the most Batteries wins!

dan

Hoarding Olympics?

will

All full size sedans are down. CUV and Suv is where thier sales are at. Look at the x3 and x5 sales.

menorman

+1

And BMW is already prepared with the X5e, now they need to hurry up with the X3-based PHEV and BEV. If they can get those done by 2020, they’ll maintain market share.

James

WOW, a garage compay sells few thousand overpriced cars with the help of the taxpayer and suddenly all other automakers will disappear. Fanboys dont understand that Tesla soon will be disrupted in the segement overpriced EVs

ffbj

Not a single point you made has any validity whatsoever.

Pushmi-Pullyu

😆 😆 😆

WOW! What can you say about someone who is an utter failure even at trolling!

Please do keep posting, “James”. You’re hilarious!

Nix
Tesla first publicly displayed their working demo Model S nearly a decade ago in 2009. We’ve been hearing about Tesla killers ever since then, and yet there is still no direct competitor to that prototype Model S. So history is not on your side. Besides, EV’s don’t cut into other EV sales as much as they cut into ICE sales. The vast majority of EV buyers are replacing an ICE vehicle with an EV, not replacing an EV with another EV. Tesla has done something dastardly. They have built EV’s that are simply better than their ICE competitors in the same class/price range. Now the only way ICE car makers can compete with Tesla is to build EV’s that also are better than their own ICE cars. That will cannibalize their own ICE sales MORE than it will cut into Tesla sales. In fact, the more ICE car makers validate EV’s by making them superior to ICE cars, the more it validates EV’s in general and removes the oddity of EV ownership. As EV’s become more and more mainstream, Tesla actually benefits and more people will consider them for their next car purchase. Tesla wins either way
Gazz

World wide BMW and Mercedes have enjoyed increased sales. Yes the 7 series is selling badly but it also competes badly agents the S Class as well as Model S.

trackdaze

Seems to Ignore the fact BMW sold 100,000 plug ins last year and will likely sell 150k this year.

7 series sales are being lost to SUVs half of which are their own.

God/Bacardi

Article would have been better if it stated: “Is Tesla or the SUV craze killing 7 Series sales?”

Will

buts its Evannex ( Tesla mouthpiece)

cBeam

Seeking Alpha is not worth reading.

BMW is still in good shape.

However, even if they (and MB) don’t lose to the competition yet (they sell many many more cars in the US and globally than Tesla), they are on the verge losing mind share and being cool. There is definitely a change going on in some corners of this world. Tesla is the car of choice in Palo Alto – everyone drives one, and BMWs play second fiddle.

Personally I am disappointed that BMW or MB didn’t try to go after the Tesla market directly. Just stuff an electric motor and 750kg of Lithiun cells into a 7 series, get rid of the combustion engine, call it i7, and charge $150.000 for it. Will many buy it? No! But a few will, and suddenly Tesla’s S has a competitor. And BMW buys some time until they get real electric BMW cars on the road, not i3s, but 3 Series and 5 Series like cars.

What is so hard about this?

Pushmi-Pullyu

“What is so hard about this?”

What you’re describing is a conversion car. No conversion car is ever going to compete with a compelling plug-in EV; one designed from the ground up to be a PEV.

What is so hard about that to understand?

cBeam

It’s not about being better, it is about offering something electric to keep the high end luxury crowd from switching to the competition and bridging the time it needs to develop a proper e-vehicle from the ground up.

Hope that is not too hard for you to understand.

Don Zenga

On and off, this type of hype article appears and this is not going to happen anytime soon. It will take at least another 6 months for Model 3 to hit the high sales. Until then the slow ramp up with this $44,000 Long Range version will certainly grab some market from the high end version of some models. The one that could be immediately impacted will be Cadillac ATS-V version of the sedan & coupe models because those performance version carry $60,000 + price tag and is yet slower than Model 3.

So let’s stay restrained at least until July-August timeline and enjoy the steady increase in # in the monthly dashboard.

arne-nl

“It will take at least another 6 months for Model 3 to hit the high sales.”

Uuhm, no. People look ahead and the Model 3 is already casting a big shadow on the car market.

I am sure that for every reservation holder there are 3 people on the fence and continue to drive their current car a bit longer to see “where this Model 3 is going”.

David Cary

I do agree. I mean why buy a 3 series today if you haven’t driven a Model 3 yet. You will be able to drive one in months or less so just wait.

Now – most BMW’s are (probably?) leased. Leasing will favor BMWs for a few years as they can use their legacy and long standing reputation to keep lease prices low. But somewhere around 3 years from now, BMW will be sitting on lease turn-ins with high residuals competing against used Model 3’s and that is where the world of hurt will come.

So they have 3 years as long as they can continue to lease with low MFs and .63 residuals.

Pushmi-Pullyu

Seriously, Evannex is citing a Seeking Alpha blog post as a source? What’s next, the National Enquirer? 🙄

I won’t say that every blog post (aka “article”) on SA is worthless; in fact, I once cited one as a reference. Once. But they are all pushing either a “short” or “long” stock position, so are highly unlikely to be a reliable source of information. Certainly the vast majority aren’t worth the time it takes to read them.

blabblubb

why are all the real comparable offers missing in the chart? The Tesla Model S is a great car, a pioneer in electric driving, and likely an offer to stay for the future. But please do not compare apples with oranges to draw conclusions

E Class ~50k units
5 series ~40k units
A6 ~16k units
x5 ~50k units
GLC ~50k units
GLE ~50k units
Q5 ~60k units