When it comes to all-electric vehicles that you’d actually want to be seen behind the wheel of, the only real name that comes to mind is Tesla Motors (TSLA).
After all, the flagship Model S sedan is one of the best vehicles you can buy, and that’s not just among electric cars. Recall that in 2013, the Tesla Model S electric car was crowned Motor Trend Car of the Year, an honor that’s the envy of every auto maker.
Indeed, the success of the Tesla Model S electric car, and the incredible success of TSLA stock (up more than 1000% since it began trading four years ago), has caught the interest of Tesla’s much-bigger rivals. The thinking here is that if Tesla, a small-fry compared to major automakers, can develop an electric car of such quality, and with such a cool factor, then why can’t the bigger guys duplicate that success?
Moreover, at a base sticker price of $69,000, the Model S is the most expensive electric car for sale. So, could the bigger automakers come in with an electric car that goes as far as a Tesla on a single charge, but that costs half as much? Could other luxury automakers such as BMW come up with a luxury, high-performance electric car to rival Tesla? And what about newer technologies? Could other automakers come up with an even more fuel-efficient way, e.g. hydrogen, to power their vehicles?
All three of these factors — competition from other luxury brands, bargain electrics and newer technologies — represent potential threats to Tesla and the electric car throne, currently held by CEO Elon Musk. But potential threats to a juggernaut need to be really strong if you want to dethrone a king like Elon Musk.
So, do other automakers have what it takes to threaten Tesla’s electric car dominance? Admittedly, my bias is in favor of “Team Musk,” but that doesn’t mean I’d drive around in a Model S with blinders on. That’s why it behooves us to look at the possible threats facing TSLA — even if it’s only so we can step on the accelerator and leave the doubters in dust.
Tesla Threat #1: The BMW Factor
BMW likes to call itself the ultimate driving machine, and anyone who has ever driven one of the sexy German cars can attest to the fact that the BMW is tight, smooth, and in most models quicker than you’d expect. Given the company’s reputation for quality, it’s no surprise that when BMW revealed its i3 electric car, people took notice.
In fact, the i3 electric car is making a push to challenge Tesla for one influential town’s electric car crown — Hollywood. A recent story in film industry trade publication The Hollywood Reporter described the BMW’s electric car as “a masterful blend of performance and green aesthetics with a price — $41,000 — that could make it Hollywood’s next electric car du jour.”
While attractive cost, BMW quality and the “green” factor certainly will appeal to many buyers, I don’t think that this BMW model can really threaten the status symbol that the Tesla brand represents. Having lived in the Los Angeles/Hollywood area most of my life, I know that around here, image is everything, and the image that the Tesla Model S presents is über-cool, über-green, and most importantly, über-exclusive.
It’s a good showing from BMW, but it’s not a severe threat to TSLA.
Tesla Threat #2: Bargain Electric Vehicles
The Tesla Model S is priced well out of reach of the average consumer. The cost factor is one that could comeback to haunt Tesla, as other automakers already have come out with far less-expensive models. For example, General Motors’ (GM) Chevrolet Volt Plug-In Hybrid is priced under $40,000, and its Chevrolet Spark EV comes in under $28,000. Fellow U.S. automaker Ford Motor (F) has priced its Focus Electric model at a little more than $39,000.
As you might expect, there’s also bargain competition for Tesla out of Japan. The Nissan (NSANY) Leaf electric costs less than $29,000. The Toyota (TM) Prius Plug-In Hybrid is $32,000, and the Honda (HMC) Fit EV is priced just south of $37,000.
I suspect that the budget-conscious buyer intent on owning an electric car at the lowest price will be tempted to choose any one of the bargain electrics. And while the cost of these Tesla alternatives is appealing, what you don’t get for your money is, well, a Tesla. You don’t get Tesla power, Tesla technology, or membership in Tesla’s elite owner club — all X-factors that have put Tesla on top.
Tesla Threat #3: Hydrogen Fuel-Cell Vehicles
One potential threat to Tesla’s electric car throne doesn’t even come from electricity — it comes from hydrogen. In fact, the newest technology designed to power vehicles comes from hydrogen fuel-cells, a technology that hasn’t yet really been introduced to the market, but is coming soon.
Automakers such as Honda and Toyota have plans to sell hydrogen fuel-cell vehicles, as does Korean car maker Hyundai. A recent article on the website AutoblogGreen reported that German luxury auto maker Daimler (DDAIF) thinks 2017 is the right time to launch a hydrogen fuel-cell vehicle.
The zero-emission hydrogen fuel-cell vehicles, which are essentially powered by electricity that’s captured via pressurized hydrogen gas, have one big advantage over Tesla and other electric cars, and that is range between fueling. It’s estimated that hydrogen fuel-cell vehicles have about triple the range of electric cars. Moreover, the refueling time is exponentially faster than the long wait associated with recharging an electric car battery.
While hydrogen fuel-cell vehicles still are a long way out in terms of even small market adoption, I do think that if there is a serious challenge to Tesla and its electric car dominance, it is likely to come from this new technology. However, knowing Elon Musk and Tesla, I wouldn’t be surprised if there was a Tesla hydrogen fuel-cell model introduced that would blast past the competition.
As of this writing, Jim Woods was long TSLA.