Will BMW be the first automotive icon to fall to Tesla?

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EVANNEX

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#1
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.


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

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 by 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.


Above: 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 Go, ValueAnalyst characterized 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.


Above: 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.”

===

Note: Article originally published on evannex.com, by Charles Morris

Source: Seeking Alpha
 

@gravityrydr

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#2
They are definitely going to get hurt in the short term, but I really don't see them failing. They have EV designs in the pipeline, they already have the production capacity and knowledge as well as a very talented workforce. The next 2 years are going to be tough. If they actually hold to the plans they announced and produce a compelling EV option they have a dedicated fan base that will return. They should have shifted focus 2 years ago it's going to be an expensive mistake.
 

Jayc

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#3
I agree BMW are vulnerable and so are Mercedes and Audi simply because their current established fan base consists of the Clarkson generation of petrol heads who dream of tailpipes and useless badges. Take those away and these brands have little in the way of identity left.
 

Michael Russo

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Vulnerability will be a factor of what they accomplish in terms of turnaround within 2-3 years. Talking about bankruptcy for one of the higher margin generating OEM feels a bit extreme, particular if sales statistics shown are for the US only... not that America is not an important market for high end sedan.

Anyways, felt this was pushing it a bit far, IMHO.
 
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4701

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Pushing too far. Starting with comparison between Model S and 7-series, S-class, A8.
Like... really far.
And forgetting, that 330 thousand 5-series vehicle have been sold in 2016.
Even though 5-series is also hard to compare with Model S, it's close.
 

voip-ninja

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It's the BMW 3-series that is most vulnerable IMO. That's probably the #1 vehicle that people will be moving from to a Tesla Model 3.

While Tesla will not have the lease support that BMW has, they have a lower starting price for this entire year due to tax credits and they will more than likely have a lower maintenance cost than BMW.... which is one of the reasons that leasing BMW is more attractive in the US market.

Theoretically with the Tesla you could drive it for just under 4 years and the only thing you'd need to do is have the brake fluid swapped once.
 
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#8
In EU, BMW includes all maintenance (except tires) for 100 000km and warranty for 200 000km. BMW has that card to play in US, at will.

I agree, 3-series is close to Model 3. And, as 400-500k 3-series are sold each year... Tesla, with 350-400k Model 3's each year, can change things there. Though I estimate
only 15-20% will be covered by BMW. There is A4, C-class, etc... And of course, all EV-dreamers that have been waiting for Model 3 for ages, coming from all kinds of vehicle classes. And even from cheaper vehicles.

@Michael Russo Well, we have lots of Japanese vehicles in EU. But not US vehicles. Wonder why:rolleyes:
 

garsh

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Though I'm not Michael Russo my first guess is: gas prizes, import taxes, build quality.
The first two, true. That third one, should be re-stated as *perceived* build quality. That hasn't been an issue for American cars for the past two decades.

All cars nowadays tend to be very reliable, much more so than 20-30 years ago. It's now harder to differentiate brands on this. The American car companies are rated mid-pack now. The Japanese - long perceived as being the highest quality - have regressed to middle-of-the-pack. But that's all good news - it's not as much of an issue anymore when you're looking for a new car.

Consumer Reports: Which Car Brands Make the Best Vehicles? (subscription needed)
  • Buick ranks above Toyota
  • Chevrolet, Cadillac, Lincoln, and even Chrysler rank above Mercedes Benz.
http://www.jdpower.com/cars/articles/automotion-blog/5-car-quality-myths-busted
 
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Michael Russo

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#11
Konstantinos, I would not consider Opel as American more than I would view it as French now... ;)

@garsh , I think for lots of folks in Europe, and certainly in Germany, there was a perception of lower build quality... These things take time to change. The same can be said of how many view Alfa because of historical lackluster reliability, yet we have been delighted by my wifey’s Giuletta now over 6 years old...

And though I have been fortunate enough to drive more BMWs than any other brand up to now, none of this is going to stand in the way of my getting my dear Midnight S≡R≡NITY... except for too much success with my new company!! :)
 

Konstantinos Kostis

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#12
Konstantinos, I would not consider Opel as American more than I would view it as French now... ;)
Opel was German only until 1929, then GM bought them. They were not independent ever since. I'd call GM US American, and what they own is, too, don't you? Same goes to PSA now since they own Opel (and Vauxhall) and they are definitely French. Not that nationality really matters when it comes to international companies.

I almost forgot there are US american cars still pretty popular on European roads: Ford.

Some investors buy companies and do little changes like Geely did to Volvo or Tata did to Jaguar keeping them mostly intact and even improving them as far as I understand it but some investors make the decisions for the companies they bought and to me it looks like Opel will be integrated into PSA. It may even be a good thing.
 

Michael Russo

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Opel was German only until 1929, then GM bought them. They were not independent ever since. I'd call GM US American, and what they own is, too, don't you? Same goes to PSA now since they own Opel (and Vauxhall) and they are definitely French. Not that nationality really matters when it comes to international companies.

I almost forgot there are US american cars still pretty popular on European roads: Ford.

Some investors buy companies and do little changes like Geely did to Volvo or Tata did to Jaguar keeping them mostly intact and even improving them as far as I understand it but some investors make the decisions for the companies they bought and to me it looks like Opel will be integrated into PSA. It may even be a good thing.
You are right about some degree of influence from US carmakers ownership like GM-Opel and Ford. Though I would still argue that most European Ford’s (from Ford of Germany, I don’t mean the Mustang, which is essentially the only US Ford you see over here) and Opel (up to now) were German cars.
Interesting the Buick LaCrosse is really a rebadged Opel Insignia and the Focus, Ford’s attempt at a ‘world car’ was designed in Köln not in Dearborn... ;)