Germans Gearing Up To Challenge Tesla.
“Germans have been working furiously to understand battery chemistry and electric vehicles. They are now convinced they can beat Tesla.”
Tesla Motors has blind-sided the traditional car makers with its audacious electric car gamble, but the German manufacturers are preparing to strike back with enough force to maybe spell doom for CEO Elon Musk’s dream.
Luckily for Tesla though, it still has plenty of time to prepare its defences.
In a report “Tesla vs Deutschland Inc – Can The Germans Disrupt The Disrupter”, Bernstein Research said when Tesla first hit showrooms with its Model S, the Germans were dismissive.
“Then they went very quiet. Now they appear to have a strategy. The Germans are setting out to match Tesla – and ideally, to try to kill it,” said Bernstein Research analyst Max Warburton.
“The German (manufacturers) have been working furiously to understand battery chemistry and electric vehicles. They are now convinced they can match or beat Tesla. In the next three years the premium (manufacturers) – Audi, BMW and Mercedes – will launch products that compete directly with the Model S and Model X,” Warburton said.
The evidence is mounting. Last week luxury sports car and SUV maker Porsche announced it would go ahead with its Mission E concept as its first all-electric car aimed specifically at the Tesla Model S. VW subsidiary Porsche joins its stable mate Audi, which unveiled the all electric e-tron Quattro SUV at the Frankfurt Car Show in September. This will be a direct challenger to the Tesla Model X SUV, just now starting to appear on the road. The VW parent brand has said its top-of-the-range Phaetan sedan will also be all-electric when it is renewed.
All these German pretenders to Tesla’s dominance though have one thing in common. They are promises for the future, compared with Tesla’s actual presence in the metal. There is no firm timetable for the German opposition to appear. And some huge promises have been made which need to be backed up. For instance, Porsche said the 600 hp Mission E will be “designed” to drive more than 310 miles on a single charge. Its battery will recharged to 80 per cent of its capacity in 15 minutes. That remains to be proven. Porsche said Mission E will appear at the end of the decade.
Tesla’s progress against the Germans in their home market has caused alarm and angst. The Model S has started taking sales from the flagship Mercedes S-Class, BMW 7 Series, Audi R8 and Porsche Panamera. Tesla’s green credentials are proving an overwhelming attraction in the high end of the market, where price is less important and image is all. Previously, about 75 per cent of German high end sales were powered by diesel engines, but the Volkswagen “dieselgate” scam has torpedoed that. Diesel can no longer brag about its environmental qualities, despite its ability to deliver impressive fuel economy.
Bernstein’s Warburton said the Germans have taken a different technical route than Tesla on batteries, but reckon that it will be superior in the end. Tesla uses Panasonic small multiple cell batteries which are simple and relatively cheap. The Germans are using larger batteries mainly from Koreans Samsung, with some from LG. These are more expensive, but manufacturers think they are better able to benefit from economies of scale, and have improved safety, cooling and durability.
In the report Warburton said Bernstein interviewed participants from all sides of the battle.
“While respectful of what Tesla has achieved so far, they criticized many aspects of Tesla’s approach – notably durability, battery build quality and safety – they insisted that large format batteries – mainly produced in Korea – offered better overall performance and ultimately could be made as cheaply once production is scaled up,” Warburton said.
“From our research, we are far from convinced that Tesla has a unique and durable lead in battery technology. But we have other worries about the company too. First we fear that Tesla is excessively vertically integrated – with everything from the gigafactory to owning all of its ‘dealers’,” he said.
Meanwhile, IHS Automotive said earlier this year that battery-only vehicles will still account for only just under one per cent of global auto sales in 2020, creeping up to 1.5 per cent in 2025. Hybrids and plug-in hybrids will win seven per cent of global sales in 2020, accelerating to 16 per cent in 2025.
But that survey took place before the Volkswagen scandal erupted and might have to be revisited if diesels are priced out of the market by new legislation. In Europe, without diesels, fuel economy standards will be impossible to hit. That could be the trigger to finally propel battery to the forefront, but would also wreck the bottom lines of most manufacturers.