German automakers take on Tesla in electric cars

California-based start-up Tesla, a star on Wall Street, currently has no rival at the high end of the electric car segment, acco
California-based start-up Tesla, a star on Wall Street, currently has no rival at the high end of the electric car segment, according to Francois Jaumain, auto expert at PwC

Germany's mighty auto industry is stepping on the accelerator so it won't be left behind by a US upstart racing ahead in the market for luxury electric cars.

California-based start-up Tesla, a star on Wall Street, currently has no rival at the high end of the electric car segment, according to Francois Jaumain, auto expert at PwC.

Tesla sells the Model S four-door sedan, but is scheduled to release a long-awaited and heavily pre-sold Model X, a new gull-wing-door, all-electric SUV, at the end of the month.

Sought after by celebrities and other wealthy individuals, the two models are priced between $70,000 and $140,000 (61,000 and 124,000 euros).

But Tesla wants to broaden its appeal and founder Elon Musk has promised a cheaper "Model 3", costing around $35,000 in two years' time.

Electric cars are still very much a niche market, both in the United States and Europe, where they accounted for barely one percent of sales in the first six months of 2015.

But with double- and even triple-digit growth seen in some countries, German carmakers are gunning for a piece of the action and are not going to give in to being beaten by Tesla.

'Tesla killer'

At the IAA motor show in Frankfurt this week, Audi, the luxury brand belonging to Volkswagen, is scheduled to unveil its new "e-tron quattro" concept car, an urban 4x4 that could go into production in 2018 under the name Q6.

Porsche, also part of the Volkswagen Group, will also show off an electric concept car, the "Mission E".

It has the look of a 911 sports car, can accelerate from zero to 100 kilometres per hour in 3.5 seconds, has top speed of 250 kilometres per hour, a 600 horse-power engine and a range of 500 kilometres on a single charge.

Porsche says Mission E can be 80-percent charged in just 15 minutes.

Volkswagen boss Martin Winterkorn said Monday the group's commitment to electric mobility is "clear".

Already known as the "Tesla killer" in the specialised press, the Audi model is expected to have a range of around 500 kilometres (300 miles).

Tesla Motors CEO Elon Musk, pictured on April 30, 2015, has promised a cheaper "Model 3", costing around $35,000 in tw
Tesla Motors CEO Elon Musk, pictured on April 30, 2015, has promised a cheaper "Model 3", costing around $35,000 in two years' time

Audi "clearly wants to show that they're not going to let Tesla trample all over them," said Jaumain at PwC.

In fact, Audi will unveil its model just before Tesla launches a new crossover Model X, which will not be on display in Frankfurt.

After a roadster in 2008 and Model S in 2012, the Model X is Tesla's third car. Last week a high-performance version of the Model S, the P85D, earned the best marks ever given a car by the independent Consumer Reports group.

The US firm is convinced that demand for its future more affordable Model 3 will be sustainable and is building a new multi-billion-dollar "Gigafactory" in Nevada to produce the batteries for it.

CEO Musk said the company will be in a position to build 500,000 cars per year by 2020, 10 times as many as it hopes to sell this year.

Ambushed by BMW, Mercedes

Musk also predicted that Tesla would start turning in a profit in five years, after burning through $1.0 billion in the first half.

Tesla shares are investor darlings on Wall Street and its share price has soared eightfold since the start of 2013, currently valuing the company at more than $30 billion.

But there are also sceptical voices.

"Tesla is as insanely overvalued as any Internet stock in the late 1990s," before the bubble burst, warned Joe Nocera in a New York Times op-ed at the end of August.

"It's a start-up. A start-up's valuation is its business model," said Yann Lacroix, automobile sector analyst at Euler Hermes.

The Audi Quattro electric drive is presented at the Fraport arena prior to the 66th IAA auto show in Frankfurt am Main, western
The Audi Quattro electric drive is presented at the Fraport arena prior to the 66th IAA auto show in Frankfurt am Main, western Germany on September 14, 2015

"Without subsidy and without constraints, as long as the product isn't competitive, I don't see the market exploding," Lacroix added about its growth prospects.

Luca De Meo, head of global sales at Audi, predicted that electric powertrain technology and battery-charging infrastructure would have advanced so much by 2018 and 2019 that customers would no longer have to compromise when choosing between an electric car and traditional engines.

Without referring to Tesla directly, he said the new players were "helping to stimulate the sector" and speed things along. "That's good," De Meo said.

Daimler's Mercedes brand is also prepared to throw down the gauntlet to Tesla.

Its R&D chief Thomas Weber recently told the specialist magazine Auto Motor und Sport that Mercedes was working "on an intelligent concept for an extremely attractive electric car, with a range of 400-500 kilometres".

Visitors look at a Tesla car during the 16th Shanghai International Automobile Industry Exhibition in Shanghai on April 24, 2015
Visitors look at a Tesla car during the 16th Shanghai International Automobile Industry Exhibition in Shanghai on April 24, 2015

And rival BMW also seems to want to expand its electric models after the i8 and i3.

So, is Tesla's heyday already over?

"It's the big players' bonus," said Flavien Neuvy, auto expert at Observatoire Cetelem.

Tesla's "rivals have production capacity that allows them to build cars at more competitive costs".

Audi could "have an electric Q6 alongside a hybrid Q6 and a diesel Q6. All parts would be amortised across the whole line, aside from the powertrain," said Laurent Petizon at AlixPartners.


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Audi to unveil rival to Tesla X at Frankfurt Auto Show

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Sep 15, 2015
Musk wins again, and takes us with him. His entire idea was not to make a fortune, but to get the electric car industry started. That is why he made his patents available to the other companies for free. Their braggidocio is dependent on the generosity of Elon Musk.

Sep 16, 2015
That is why he made his patents available to the other companies for free.


He didn't. What he did was release the charging system patents, so that other companies would make their systems compatible to his cars and essentially provide the charging infrastructure for free.

Tesla's "rivals have production capacity that allows them to build cars at more competitive costs".


That depends entirely on lithium battery cost, which depends on whether the production capacity of both lithium and the batteries can keep up with the demand.

With massive demand rise from all over the market, mobile devices, grid energy storage, and various other electric vehicles, the prices of lithium batteries aren't going down anytime soon.

Right now, a Tesla battery in a Model S costs a third of the entire vehicle, which is about as much as the "Model 3" car is supposed to cost, which makes it quite implausible to pull off in just two years for Tesla or for anyone else.

Sep 16, 2015
Their braggidocio is dependent on the generosity of Elon Musk.


Ps: you're acolytizing.

Sep 16, 2015
So, is Tesla's heyday already over?

Probably not if other automakers are just now putting out concept cars (which never see market without major - read yearlong - overhauls...if at all). And in the mass market sectors no automaker has anything even remotely approaching the Model 3 regarding range in the pipeline.

Sep 16, 2015
I'll wait for Apple's all aluminium, space grey version, with Magsafe charger and 10hrs of battery life.

Sep 16, 2015
@ Eikka: The price of lithium batteries ARE to going down very soon! Like everything else the more you make the less it costs. Please look at https://www.mckin...s-ahead.

Sep 16, 2015
Like everything else the more you make the less it costs.


That's plain false.

https://en.wikipe...nal_cost

The economy of size in production only works up to a point. Making few of something is more expensive than making many, but making too many also becomes expensive because your processes don't scale up.

Here, because lithium production doesn't scale up fast enough with lithium demand - and lithium is in great demand because the Tesla Gigafactory alone eats up 17% of world production output - lithium prices go up, and therefore the drop in battery prices slows down, stops, or even reverses.

And even if the lithium production can keep up, if the battery production can't keep up with demand, again prices go up.

Simply making more of something doesn't make it cheaper, because you have to consider the entire supply and demand chain. For the business, selling more isn't even necessarily more profitable.

Sep 16, 2015
Please look at https://www.mckin...s-ahead.


The article suggests that batteries -could- drop in price if new manufacturing processes are significantly more efficient, and battery technology itself was 40% better from today, and the material supply prices drop. It's basically just a big IF. That isn't happening in 2 years. Their projections are for 2025 and onwards.

Besides - the adage "the more you make the less it costs" is actually getting it backwards. The reality is that the less it costs the more you make.

Sep 16, 2015
Nobody says we all be driving an electric car in two years! Lithium, anyway is not scarce neither precious. There is way more lithium than copper, for instance, and, if prices should soar (I don't think so) new lithium sources would be searched and, surely, found. And remember that we are not burning lithium, a dead battery could be recycled. A 40% improvement of batteries in ten years is quite easy, there are a lot of research and investments in this technology.

Sep 16, 2015
Here http://www.waste-...nge.html is written that the cost of raw lithium in a battery is just the 3% of the whole battery cost, and that is actually so cheap that, albeit 100% recyclable, is not recycled at all!

Sep 17, 2015
Nobody says we all be driving an electric car in two years!


But the article says Telsa is about to reveal an electric car that costs $35,000 in two years - even though the batteries in their existing electric cars alone cost about that much.

Lithium, anyway is not scarce neither precious.


Yes, but the capacity to dig it up and process it cannot be brought up overnight. It takes money, resources and time to prospect and start a mine, build a processing plant and set up shipping.

The industry can only grow so fast.

A 40% improvement of batteries in ten years is quite easy, there are a lot of research and investments in this technology.


Don't call it done before it's done. You don't know what sort of practical roadblocks there may lie ahead.

Sep 17, 2015
Here http://www.waste-...nge.html is written that the cost of raw lithium in a battery is just the 3% of the whole battery cost, and that is actually so cheap that, albeit 100% recyclable, is not recycled at all!


Yeah. That was five years ago.

Lithium prices have since tripled. As the other costs fall, the raw material costs catch up and basically stop any real reduction in cost.

Plus, it's not just lithium that goes into these batteries. High density batteries use compounds such as lithium cobalt oxide, which is by far many many times more expensive than just the lithium, and have their own supply and production issues.

Sep 17, 2015
Wrong, cobalt oxyde is not the best material for car's batteries. Fe PO is way better, and cheaper. About the cost of lithium, if it doubles some more times we can start recycling it.

Sep 17, 2015
The price of lithium carbonate in USA was $5,180 per metric ton in 2010 and $6,600 in 2014, see http://minerals.u...ithi.pdf . It's about 30% more, not tripled! And, if new mines will be evaluated as profitable, counting all the money and the equipment needed, new mines will be opened. Where is the problem?

Sep 20, 2015
Elon Musk has been preaching for competition in the electric car market, not shying away from it. Rather than the typical profit-first mindset of a billionaire entrepreneur, Musk seems to truly care for humanity as a whole and makes strides to better everyone before himself. We're all fortunate to have someone like that in his position.

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