BMW vs. Tesla: The electric car race heats up with the i3

  @FortuneMagazine July 25, 2013: 6:09 AM ET
gallery 2012 la auto show bmw i3 coupe concept

The 2014 BMW i3

(Fortune)

Until just recently, Elon Musk's Tesla had the market for electric luxury cars all to itself. It was building some 400 units a week of the Model S at its factory in Fremont, Calif. and selling them for upwards of $90,000 apiece. Early adopters raved about the sedan's style and performance, while Tesla went public and became a furious growth stock.

That's all about to change. A new competitor has arrived on the scene that has had considerable past success in selling to upscale customers: BMW. It has begun the global launch of the all-electric i3 that will begin reaching U.S. customers in 2014. Initial reviews of the car have been close to rapturous, with test drivers declaring that the i3 "drives just like a true BMW."

For now, Tesla (TSLA) and BMW aren't competing head-to-head. The Model S is a seven-passenger luxury touring car while the i3 carries just four passengers and is designed for quick trips around town. But as Tesla fills out its product line with less-expensive models and BMW rolls out the sporty i8 hybrid-electric coupe to go after high rollers, the automakers will increasingly be targeting the same customers.

To get an early sense of how the two sides will stack up -- and how other automakers might be affected -- here's a report card on the two companies.

1. History

Tesla has already become the most successful automotive startup since World War II, seeming to have simultaneously mastered the arts of design, engineering, and manufacturing. Musk, its co-founder and CEO, has forged a remarkable track record as an entrepreneur, having started three successful companies. His record at Tesla, however, is short, and he has not managed the company through a downturn.

BMW, which didn't get seriously into the auto business until after World War II, is the world's largest producer of luxury performance cars, and has a consistent history of success and growth. Although it is new to the world of electric cars, it is open to change (1-series, MINI) and has been testing alternatives to the internal combustion engine for more than a decade.

Advantage: BMW

2. Products

While the size and price of the Model S make it impractical for most people, it has been successfully launched, and Tesla expects to sell 21,000 of them this year at prices starting at $72,000 before any federal tax credit. If it succeeds, it would equal the combined volume of Jaguar, Bentley, Maserati, Lamborghini, and Rolls-Royce.

BMW's i3 is a tall compact hatchback that has two full front doors and two rear half doors, which makes it the strangest-looking car the company has sold since the three-wheeled Isetta of the 1950s. BMW will have the capacity to make 40,000 i3s at prices that start around $43,000, but until it actually starts production, the appeal of the car remains unproven.

Advantage: Tesla

Inside BMW's design lab

3. Range

In electric cars, what counts is how far you can go on a single charge, and the range numbers that are displayed on the instrument panel usually can't be duplicated in the real world. Tesla says the Model S can travel up to 300 with a beefy battery. But an Edmunds.com tester discovered he burned up 251 miles of indicated range after covering just 121 miles, which made his ride home a bit uncomfortable.

The i3 will have an optional range extender, a motorcycle-like gasoline engine that can power the car for 186 miles, BMW says, which should prevent embarrassing roadside breakdowns. Otherwise, the car is said to be able to travel about half that distance, 93 miles, on a single charge. But we won't know for sure until the cars are actually on the road.

Advantage: tie

4. Range anxiety reduction

Tesla will expand its network of fast-charge stations beyond California and the Northeastern states and expects to have about 200 charging stations nationwide when it is completed. In addition, at a demonstration of its battery swap technology in June, Tesla showed two Model S sedans having newly recharged batteries installed twice as fast as they could get filled up at a gas pump and without the driver getting out of the vehicle.

A display in the BMW i3 will show the location of nearby recharging stations and will also offer a roadside assistance program in some areas. The assistance vehicle will provide a jolt rather than a tow, so the i3 can scoot on to the next charging station.

Advantage: Tesla

5. Technology

The greatest technological achievement of Tesla has been its ability to successfully integrate all the components of the car, especially its 7,000-cell battery power system, without a glitch. At the same time, it has taken the unusual step of making in-house components that automakers usually outsource, like aluminum body panels and plastic pieces.

BMW is no slouch either in R&D. The chassis of the i3 is made of aluminum while the passenger compartment is formed largely of lightweight carbon fiber, a first for a mass-production car. As a result, BMW says the four-passenger car only weighs 2,800 pounds, about 1,000 fewer pounds than a Chevrolet Volt.

Advantage: tie

7. Distribution

Tesla has no dealers; it sells cars on its own and has faced court battles with auto retailers over state franchise laws that would restrict it from doing so. The system seems to work fine for now, but more lawsuits, as well as Tesla's own growth plans, may force it into a more conventional set-up.

BMW manages an established network of 339 independent dealers, and while they may not win many customer satisfaction awards, they know how to manage inventory, provide service, and move the metal.

Advantage: BMW

8. Future products

No auto company can survive by making just a single model, and Tesla has several more in the pipeline. The first is the Model X crossover, due in 2014. Built on the same platform as the Model S, it would feature "falcon-wing" doors that provide fuller access to a third row of forward-facing seats. Due to arrive at the end of 2016 are the first of the so-called "Gen 3" models, a small sedan and a crossover, which will cost half as much as a Model S.

Coming later in 2014 from the BMW "i" brand are the i8 coupe and convertible, extended-range plug-in hybrids that can go about 19 miles on electricity alone before the gas-powered range-extender kicks in. Also made of carbon fiber with an aluminum chassis, the sports cars will be capable of head-snapping acceleration -- zero to 60 in around five seconds -- and carry an equally head-snapping price, expected to be around $125,000.

Advantage: Tesla

9. Buzz

Few industrial companies have exploded from the starting line as quickly as Tesla. Plaudits have been showered on the Model S, its stock price has multiplied several times, and Musk has become an international celebrity of Jobsian proportions.

BMW is leader in alternative energy among established auto companies, and its risk-taking with the "i" cars is considerable. But even with signature dual-kidney grilles and Hofmeister kinks, the i line may get lost among the dozens of other high-profile cars and crossovers BMW already makes.

Advantage: Tesla To top of page



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